Malta corporate tax : Taxation & Double Tax Treaties

Malta’s corporate tax system is one of the most attractive in the European Union for entrepreneurs, holding companies, and investors looking for tax efficiency. With a combination of competitive rates, generous refund systems, and extensive double taxation agreements in Malta, the jurisdiction delivers substantial advantages for both domestic enterprises and international investors seeking efficient tax planning.

In this comprehensive 2025 guide, we will explore how Malta corporate tax works, the applicable Malta corporate tax rate, the specifics of corporate income tax in Malta, and how Malta offshore company tax rules apply for international business structures. We will also discuss the Malta corporate income tax rate refund mechanism, its impact on real effective tax rates, and how to legally optimize your tax position with professional assistance from Offshore Company Services.

Understanding Malta Corporate Tax in 2025

The Malta corporate tax regime is based on a full imputation system, where tax paid at the company level is credited to shareholders upon the distribution of dividends. This structure prevents double taxation of company profits and shareholder dividends, a major reason Malta remains attractive to investors.

In practice, Malta levies a headline corporate tax rate of 35%. Shareholders who meet the conditions (resident or non-resident) can claim the 6/7, 5/7 or 2/3 refund depending on the nature of profits; Malta-resident individuals may be taxed on any refund received. This means that in many cases, the effective corporate income tax in Malta can be as low as ~5% effective leakage is achieved at the shareholder level after the company pays 35%, distributes a dividend, and the shareholder receives the applicable refund.

Why this matters: In a world of increasing global tax transparency, Malta offers a compliant yet competitive tax system aligned with EU and OECD standards.

Overview of the Malta Corporate Tax System

The Malta Corporate Tax Rate: Headline vs Effective

When investors first hear that the Malta corporate tax rate is 35%, they may think it’s high compared to other EU jurisdictions. However, the refund system completely changes the picture.

Refund Scenarios:

• 6/7 Refund → Effective tax rate: 5%
• 5/7 Refund → Effective tax rate: 10% (applies to passive interest and royalties)
• 2/3 Refund → Effective tax rate: ~11.67% (applies where the underlying profits were already relieved by double tax relief (treaty, unilateral or FRFTC))

Example Calculation:

If your Maltese company earns €1,000,000 in trading profits:

• Tax paid at 35% = €350,000
• Shareholder refund (6/7) = €300,000
• Net tax burden = €50,000 (5% effective rate)

Corporate Income Tax in Malta: Scope and Application

The corporate income tax in Malta applies based on both residence and source principles:

• Resident companies (incorporated in Malta or managed and controlled from Malta) are taxed on worldwide income.
• Non-resident companies are taxed only on income arising in Malta.

Malta uses a calendar-year “Year of Assessment” based on the prior accounting period. Companies may adopt a non-calendar year-end; corporate returns are due by 31 March for year-ends between 1 January and 30 June, and otherwise within nine months after year-end.

Taxable Income Includes:

• Trading profits
• Passive income (interest, royalties)
• Capital gains from the sale of assets
• Foreign-source income (for resident companies, with credit relief or refunds available)

Corporate income tax in Malta is based on both the residence and source principles

Malta Offshore Company Tax: International Structuring Benefits

A Malta offshore company is not a legal term in Maltese law, but is often used to describe international business companies incorporated in Malta but conducting most or all of their activities abroad.

Key benefits of Malta offshore company tax treatment include:

• Low effective tax rates via the refund system.
• Malta generally does not levy withholding tax on outbound dividends, interest or royalties under domestic law (subject to limited exceptions). Treaties mainly help reduce foreign (source-state) withholding on payments flowing into Malta.
• EU member states have credibility with robust compliance standards.
• Flexibility to hold global assets, intellectual property, or act as a trading hub.

This makes Malta particularly popular for holding companies, e-commerce businesses, and intellectual property structures.

Malta Corporate Income Tax Rate Refund Mechanism

The Malta corporate income tax rate is reduced in practice through the shareholder refund system. This process works as follows:

1. The company pays tax at 35% on taxable profits.
2. The company distributes dividends to shareholders.
3. Shareholders apply for a refund of the tax paid, based on the applicable percentage.
4. By law, a refund due becomes a debt of the Commissioner and is typically payable within 14 days from the end of the month in which it becomes due; timelines can be longer where additional verification is requested.

Refund Rates Overview:

• 6/7 – Active trading income.
• 5/7 – Passive interest and royalties.
• 2/3 – Income benefiting from foreign tax credits.
• 100% Refund – for dividends and capital gains from a qualifying participating holding where the company does not apply the participation exemption at the company level.

Note: Participation Exemption (company level): Qualifying dividends and capital gains from a participating holding can be fully exempt at company level; if the exemption is claimed, no shareholder refund is needed.

Double Taxation Agreements in Malta

Malta has an extensive network of double taxation agreements (over 70 jurisdictions) that prevent businesses from paying tax twice on the same income. These treaties often reduce or eliminate withholding taxes on dividends, interest, and royalties. However, access to Malta’s DTAs is subject to meeting beneficial ownership and substance requirements.

Example:

A Maltese company receiving dividends from a treaty country may enjoy reduced foreign withholding tax and still benefit from Malta’s refund system, significantly lowering the overall tax burden.

Common Treaty Benefits:

• Reduced dividend withholding rates (often 0–15%).
• Exemption or reduction of withholding on interest and royalties.
• Clear rules on tax residency and permanent establishment.

Malta’s Corporate Tax System Supports International Business

Malta’s tax system is tailored for cross-border trade, holding structures, and global investment. The combination of a high headline rate (for international credibility) and a generous refund mechanism (for competitiveness) makes it ideal for:

• Group headquarters managing EU and global subsidiaries.
• Trading companies with multiple international markets.
• IP holding companies leveraging EU protections and treaties.

The Malta corporate tax system is beneficial for international businesses

Compliance and Reporting Requirements

While Malta offers tax efficiency, compliance is taken seriously. Companies must maintain proper accounting records, file annual returns, and submit audited financial statements.

Key Requirements:

• Annual corporate tax return to the Commissioner for Revenue.
• Most companies require an audit; however, small/micro entities meeting thresholds may be exempt from a full audit or eligible for a review engagement under the 2025 Audit Exemption Rules (Legal Notice 139 of 2025) and earlier regulations.
• VAT obligations depend on place-of-supply rules and your registration type. Cross-border B2C supplies can be reported via OSS/IOSS. Non-established or exempt persons may need Article 12 registration. Not every EU sale requires Maltese VAT registration.

Common Tax Planning Strategies in Malta

Malta’s corporate tax framework allows for legitimate tax planning strategies such as:

• Holding structures to manage foreign subsidiaries.
• IP structures to benefit from treaty protection and refund systems.
• Trading hubs for EU and non-EU cross-border transactions.

Malta vs Other EU Corporate Tax Jurisdictions

Compared to other EU countries:

• Ireland – 12.5% corporate tax rate but no refund system; limited to certain income types.
• Cyprus – 12.5% flat rate but smaller treaty network than Malta.
• Netherlands – Higher compliance costs and substance requirements.

Malta strikes a balance between compliance, reputation, and effective tax savings.

Recent and Upcoming Changes in Malta Corporate Tax (2025)

As of 2025, Malta has transposed elements of the EU Minimum Tax Directive but elected the derogation to defer IIR, UTPR and QDMTT; no domestic top-up tax is levied in Malta for 2024, and the deferral can run for up to six years. In-scope MNEs may still face top-up taxes in jurisdictions that apply IIR/UTPR.

Upcoming Changes in Malta Corporate Tax

Reduce Your Malta Corporate Tax Burden Legally

To optimize Malta corporate tax exposure:

• Choose the right corporate structure (trading, holding, or IP company).
• Leverage double taxation agreements in Malta.
• Ensure proper documentation for shareholder refunds.
• Work with licensed tax advisors.

Role of Offshore Company Services in Malta Company Formation and Tax Planning

Offshore Company Services specializes in setting up and managing Maltese entities for international clients. Their services include:

• Company incorporation in Malta for trading or holding purposes.
• Tax planning to leverage the Malta corporate income tax rate refund system.
• Structuring advice for Malta offshore company tax benefits.
• Compliance assistance for annual reporting and audits.

If you’re looking to establish a Malta-based entity that takes full advantage of the jurisdiction’s tax benefits while remaining fully compliant, Offshore Company Services provides end-to-end solutions.

Final Thoughts

Until 2025, Malta’s corporate tax system remains a smart and legitimate way to reduce your global tax bill. Although Malta maintains a statutory corporate tax rate of 35%, its refund mechanism and extensive double taxation treaty network allow shareholders to achieve highly competitive effective tax rates, often as low as 5%. Essentially, businesses can reduce their tax rate to around 5% and still be considered creditworthy in the EU.

So, if you are a large company, a holding company, or simply an individual trying to expand internationally, Malta is an ideal place to save tax and grow your business, especially if you get support from experts like Offshore Company Services.