Malta

Item TP Country Holdco (Malta) Rate/Base Remarks

no. imposing tax
1 HoldCo Malta CIT Rate for Dividends Exempt Maltese HoldCos that are in receipt of dividend income from a “participating
holding” may benefit from participation exemption. Participation exemption
applies to income and gains derived by a company registered in Malta that
are attributable to a permanent establishment outside Malta.

A holding in another company is considered to be a participating holding if a

company:

a. Holds directly at least 5% of the equity shares of a company whose

capital is wholly or partly divided into shares, and such holding confers
an entitlement to at least 5% of any two of the following:
► Right to vote;
► Profits available for distribution;
► Assets available for distribution on a winding up; or
b. Is an equity shareholder in another company, and the equity
shareholder company may at its option call for and acquire the entire
balance of the equity shares not held by that equity shareholder
company to the extent permitted by the law of the country in which the
equity shares are held; or
c. Is an equity shareholder in a company, and the equity shareholder
company is entitled to first refusal in the event of a proposed disposal,
redemption or cancellation of all of the equity shares of that company
not held by that equity shareholder company; or
d. Is an equity shareholder in a company and is entitled to either sit on
the board or appoint a person to sit on the board of that company as a
director; or
e. Is an equity shareholder that holds an investment representing a
total value, as of the date/s on which it was acquired, of a minimum of
EUR1,164,000 (or the equivalent sum in a foreign currency) in a
company and that holding in the company is held for an uninterrupted
period of not less than 183 days; or
f. Is an equity shareholder in a company, the holding of such shares is
for the furtherance of the equity shareholder’s own business, and the
holding is not held as trading stock for the purpose of a trade.
2 HoldCo Malta CIT Rate for Interest 35% Interest is chargeable to tax under the provisions of Article 4(1)(c) of the
Income Tax Act. Interest received from sources situated outside Malta is
taxable in Malta and does not benefit from an exemption related to income
from participating holdings under the Income Tax Act or under any other
law. (Source: Officer of the Commissioner for Revenue)
3 HoldCo Malta Available exemption for Foreign tax relief Under tax treaty provisions and the domestic law, a tax credit is granted for
foreign income/tax foreign tax suffered, the amount of which is the lower of Maltese tax on the
credits foreign income and the foreign tax paid.

Maltese companies may also reduce their tax payable in Malta by claiming
double tax relief with respect to British Commonwealth income tax.

Another form of double tax relief, unilateral tax relief, may apply if treaty is
not available and if the taxpayer has proof of the foreign tax suffered.

Another form of double tax relief is a flat-rate foreign tax credit (FRFTC).
The FRFTC, which is equivalent to 25% of the net income received (before
any allowable expenses), applies to all foreign-source income that may be
allocated to the Foreign Income Account. The FRFTC is added to
chargeable income and credited against the Maltese tax charge. The credit
is limited to 85% of the Maltese tax due before deducting the credit.

Note: The interaction of the above four types of double tax relief not only
ensures that tax is not paid twice on the same income; it also reduces the
overall effective rate of the Maltese tax.
4 EDC PH Malta Dividends WHT 0% No tax is withheld upon the distribution of dividends irrespective of the
residence and nationality of the shareholders.
5 EDC PH Malta Interest WHT 0% No tax is withheld upon the distribution of interest to non-resident beneficial
owners of such income.
6 EDC PH Malta Royalties WHT 0% No tax is withheld upon the distribution of royalties to non-resident beneficial
owners of such income.
7 EDC PH Malta Management / 0% The rate is 0%, provided such fees are not sourced in Malta.
Technical Services
WHT
8 EDC PH Malta Sale of Maltese shares 35% Taxable capital gains*** are included in chargeable income and are subject
to income tax at the normal income tax rates.

***Income tax is imposed on capital gains derived from the transfer of

ownership of the following assets only:
► Immovable property. However, gains on transfers of immovable property
 or rights over immovable property that are subject to the new property
transfer tax are exempt from income tax.
► Securities
► Goodwill, business permits, copyrights, patents, trademarks, trade
names and any other intellectual property
► Beneficial interests in trusts
► Full or partial interests in partnerships

For purposes of the capital gains rules, “transfer” has a broad definition that
is not restricted to sale. It also includes any assignment or cessation of any
rights, reduction of share capital, liquidation or cancellation of units or
shares in Collective Investment Schemes and other types of transactions.

Additional Notes:

Corporate Income Tax Rate 35%

Capital Gains Tax Rate 35%
Branch Tax Rate 35%
Withholding Tax 0%
Net Operating Losses (Years)
Carryback 0
Carryforward Unlimited

Corporate income tax

 Companies that are ordinarily resident and domiciled in Malta are subject to income tax on their worldwide income;
 Companies incorporated outside Malta, whose management and control are exercised in Malta, are considered to be resident, but not
domiciled in Malta and are subject to tax in Malta under the remittance basis of taxation.

Capital gains

 Taxable capital gains are included in chargeable income and are subject to income tax at the normal income tax rates.
 Income tax is imposed on capital gains derived from the transfer of ownership of the following assets only:
a. Immovable property
b. Securities
c. Goodwill, business permits, copyrights, patents, trademarks, trade names and any other intellectual property
d. Beneficial interests in trusts
e. Full or partial interests in partnerships
 “Transfer” is not restricted to sale. It also includes any assignment or cession of any rights, reduction of share capital, liquidation or cession of
any rights, reduction of share capital, liquidation or cancellation of units or shares in Collective Investment Schemes and other types of
transactions.

Allocation and distribution of profits

 The distributable profits of a company are allocated to the following five tax accounts:
a. Final Tax Account
b. Immovable Property Account
c. Foreign Income Account
d. Maltese Taxed Account
e. Untaxed Account

 Final Tax Account – contains distributable profits that have been subject to a final tax;
 Immovable Property Account – contains profits connected with immovable property located in Malta;
 Foreign Income Account – contains foreign-source passive income and foreign-source active income attributable to a P.E. located outside
Malta;
 Maltese Taxed Account – contains profits that are not included in the Final Tax Account, Immovable Property Account, or Foreign Income
Account;
 Untaxed Account – contains an amount of profits or losses that is calculated by deducting the total sum of amounts allocated to the other
accounts from the total amount of profits shown in the profit-and-loss account for that year.

 The Full Imputation System applies to distributions from the Immovable Property Account, Foreign Income Account, and Maltese Taxed
Account. Under this system, the tax paid by the company is imputed as a credit to the shareholder receiving the dividends.

 Refundable Tax Credit System

 A person receiving a dividend from a company registered in Malta from profits allocated to its Maltese Taxed Account or its Foreign
Income Account that do not consist of passive interest or royalties may claim a refund of six-sevenths (6/7) of the tax paid by the
distributing company on the profits out of which the dividends were paid.
 Distribution of profits derived from passive interest or royalties or profits derived from a participating holding in a body of persons that does
not satisfy the anti-abuse provision do not qualify for the 6/7 refund. Instead, they qualify for a refund of five-sevenths (5/7) of the tax paid
by the company.
 The 5/7 refund also applies to distributions made by companies that do not claim any form of double tax relief.
 Dividends paid out of profits allocated to the Foreign Income Account with respect to profits for which the distributing company has
claimed any form of double tax relief are entitled to a refund equal to two-thirds (2/3) of the tax that was suffered by the distributing
company gross of any double tax relief.

 Persons must register with the Commissioner for Revenue to benefit from the tax refunds.

Participation exemption and participating holding system

 Effective 01 January 2007, the Maltese income tax system exempts from tax income and capital gains derived by a company registered in
Malta from a participating holding or from the disposal of such holding;
 Effective 2013, the participation exemption is extended to branch profits. This applies to income and gains derived by a company registered
in Malta that are attributable to a P.E. (including a branch) located outside Malta, or that are attributable to the transfer of such P.E., regardless
of whether such P.E. belongs exclusively or in part to the particular company, including a permanent establishment operated through an entity
or relationship other than a company.

 The application of participation is subject to an anti-abuse provision. The participation exemption applies to participating holdings if the
body of persons in which the participating holding is held satisfies any one of the following three conditions:

a. It is resident or incorporated in a country or territory that forms part of the EU;

b. It is subject to a foreign tax of at least 15%; or
c. It does not derive more than 50% of its income from passive interest or royalties.

 If none of the above conditions is satisfied, both of the following conditions must be met:
a. The equity holding by the company registered in Malta in the body of persons not resident in Malta is not a portfolio investment; and
b. The body of persons not resident in Malta or its passive interest or royalties has been subject to a foreign tax of at least 5%.

 Participation exemption on dividends does not apply if the relevant profits were deductible to the distributing company in the other EU
member state.