Corporate Tax Optimisation in Malta

  Company Formation in Malta
Corporate Tax Optimisation in Malta

How do I reduce my corporation tax to an effective 5% rate?

Malta has a corporation tax rate of 35%. However, with a tax rebate of 6/7ths for non-resident shareholders, the effective corporation tax rate reduces to 5% on distribution of the dividend.

In a simple example it looks like this:

Company

Company profits before tax100
Tax paid at 35%(35)
Profits after tax65

Shareholder

Net dividend65
Tax @ source35
Gross dividend100
Tax on gross dividend35
Full imputation credit(35)
Rebate (tax refund)(30)
Amount received by shareholder95

How does it work?

The corporation tax rate in Malta is 35%. However, when the shareholders of a Maltese company are non-resident in Malta they are entitled to a 6/7ths rebate on the tax paid when the profit is distributed as a dividend. Thus an effective tax rate of 5% is paid.

The 35% corporation tax must be paid before the rebate can be claimed. Provided all deadlines are met in a timely manner, the rebate should be received 3 to 4 weeks after the tax is paid. This is where timing is crucial.

For most companies with non-resident shareholders, the process to receive the tax rebate can be illustrated as follows:

  • 2019 accounts audited and submitted alongside the tax reclaim form to the International Tax Unit (ITU) by October 31st 2020
  • 2019 audited accounts need to be submitted to the Maltese Financial Services Authority by 1st December 2020
  • Corporation tax of 35% for the 2019 accounts must be paid by June 30th 2021
  • Tax rebate expected by 31st July 2021

This can also be beneficial from a cash flow perspective as tax needs to be paid 18 months after the financial year has finished.

Examples of timing:

COMPANY A DATE

2019 Audited accounts completed31/3/2020
Tax reclaim submitted to ITU1/6/2020
Accounts submitted to MFSA1/6/2020
2019 Corporation Tax paid30/6/2021
Tax Rebate Paid31/7/2021

COMPANY B DATE

2019 Audited accounts completed31/8/2020
Tax reclaim submitted to ITU15/10/2020
Accounts submitted to MFSA15/10/2020
2019 Corporation Tax paid30/6/2021
Tax Rebate Paid15/11/2021

So, as you can see, timing is everything.

I want to reduce my corporate tax

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