For those who establish a company in Malta, the country not only offers favorable tax policies that guarantee tax deductions but also provides access to EU tariff subsidies, making it a world-class "low-tax" haven.
There are two main types of enterprises subject to taxation in Malta: first, those incorporated in Malta and residing there, with actual management and supervision carried out in Malta; and second, those incorporated outside of Malta but with actual management and operations conducted in Malta.
The corporate income tax rate is 35%. However, Malta has established a series of fiscal incentive policies for Maltese companies engaged in investment and commercial activities, implementing a partial or full tax refund system (since 1994). Shareholders can apply for a refund of 6/7 of the tax paid by the company in Malta (including taxes paid overseas), which can reduce the effective corporate tax rate to 5%.
1. Corporate income tax as low as 5%;
2. Tax refunds available for new project investments;
3. Companies may enjoy investment deduction policies;
4. Income tax rate on reinvested profits as low as 19.25%;
5. Companies can apply for subsidies of up to 120%.
Examples of how the tax refund policy operates: In addition to low taxes, the Maltese government has introduced a series of tax incentive policies. The "Business Promotion Regulations" are used to incentivize eligible companies in specific industries, such as: pharmaceuticals, plastics, biotechnology, and electronics and electronic equipment.
Incentive Policies
A. Investment Tax Credits (this incentive applies to companies meeting corporate income tax refund requirements): 50% of the cost of investment in equipment, or 50% of costs incurred in the first two years to create job opportunities. Small and medium-sized enterprises (SMEs) can receive a 65% incentive.
B. Investment Subsidies: 50% on investments in plants and machinery, and 20% on investments in industrial buildings or structures.
C. Profit Reinvestment Tax Incentives: Tax reductions ranging from 19.5% to 35% on profits derived from the reinvestment of project earnings.
D. Tax Treaties: Malta has signed tax treaties with many countries (major European countries, Canada, Australia). These treaties protect the corporate profits earned in Malta from being taxed again in the investor's country of residence, or allow them to enjoy favorable tax rates.
Who is eligible for tax refunds?
Tax refunds are available to foreign resident shareholders or holding company shareholders who do not reside in Malta. If the shareholders are Maltese, they are not eligible for tax refunds.
Which accounts are eligible for tax refunds?
According to Maltese tax law, all companies registered in Malta must allocate their profits to five different accounts based on the source of profit:
◆ FIA (Foreign Income Account): Foreign Income Account.
◆ MTA (Maltese Taxed Account): Maltese Taxed Account: Any profits not attributable to the FIA, nor considered payable profits in the FTA or IPA.
◆ FTA (Final Tax Account): Final Tax Account: Accounts subject to specific tax rates or particular exemptions.
◆ IPS (Immovable Property Account): Immovable Property Account.
◆ UA (Untaxed Account): Untaxed Account: Such as initial capital investment, debt repayment funds, etc.
Note: Only the FIA and MTA accounts are eligible for the tax refund system.
6/7 refund: Generally applies to 6/7 of trading and commercial profits.
5/7 refund: Applies to passive income, royalties, etc.
2/3 refund: For profits not classified under the 6/7 or 5/7 categories.
When to file taxes?
Tax returns must be filed by March 31st each year, or within 9 months after the end of the previous financial year, whichever is earlier. It should be noted that FS3 and FS7 forms must be submitted to the tax authorities at the beginning of the year.
Example: FS3 and FS7 forms for 2017 must be submitted before February 25, 2018.
How to file taxes?
Declarations are made to the domestic Tax Department. SMEs with fewer than 30 employees can choose to file taxes manually or electronically. Companies with more than 30 employees are required to file electronically.
There are two methods for tax filing:
a. Online filing via the official website of the Malta Tax Department
b. Completing the required electronic forms, saving them to a disk/CD, and mailing it to the Tax Department
With a developed economy, a broad market, favorable policies, and a business-friendly government, investing in Malta allows you to enjoy unlimited benefits. On February 24, it was reported that the international credit rating agency Moody's maintained Malta's sovereign credit rating at A3 and adjusted its rating outlook from stable to positive, further demonstrating Malta's sound economic environment. Investors using a €100,000 financing model can achieve immigration to Europe for four generations of family, enjoying multiple benefits including investment, education, and healthcare. It is one of the most suitable countries for investors looking to build their dream overseas "second home." The Malta financing method is currently offering discounts of up to 430,000, with limited spots available. For details, please consult: 400-138-2929.
