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Taxation

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Taxation

Mr. Robert Aquilina

Practitioner, Consultant

Confident Businessman

Confident Businessman

Confident Businessman

Taxation is a term describing the act of a government or other authority requiring that an involuntary or compulsory fee be paid by citizens and corporations, usually in connection with their income, assets or certain transactions. The primary purpose of taxation is for the Government to raise revenue, although it may serve additional purposes such as deterrence.


Examples of types of taxes in Malta are:


  • Income tax

  • Value Added Tax (VAT)

  • Duty on Documents and Transfers

  • Capital gains and Property Transfer Tax.


Malta offers favourable tax structures to individuals and corporations. Depending on the residence and domicile of the individual, liability to Maltese income tax and certain capital gains tax arises either on a worldwide basis, on a remittance basis, or on a territorial basis.


Individuals who are both ordinarily resident and domiciled in Malta are taxed in Malta (worldwide basis). This also applies to their spouses – they are also subject to a worldwide basis of taxation (and not on a source and remittance basis).


Any person who is ordinarily resident in Malta but not domiciled in Malta is taxable only on income and chargeable gains arising in Malta (territorial basis) and on any foreign income remitted to Malta (remittance basis). These persons are not taxable in Malta on income arising outside Malta which is not received in Malta, and on capital gains arising outside Malta (regardless of whether they are received in Malta or otherwise)


A non-resident individual is taxed only on income and chargeable gains arising in Malta (territorial basis)


The income tax rates vary depending on the tax status of the individual (single, married, single parent) and whether an individual is a resident or non-resident individual in Malta. Income tax rates are applied on progressively with a tax-free bracket which ranges from €9,100 to €12,700 and a tax rate which varies from a minimum of 15% to a maximum of 35%.


Corporations are taxed at 35% of their chargeable income, however, Malta offers what is known as the ‘full imputation system’ which prevents economic double taxation. Although companies are taxed at 35%, a shareholder of the said company would be entitled to a refund of any tax paid by the company depending on its source of income, ie. of 5/7ths (10% effective tax rate), 6/7ths (5% effective tax rate) or 7/7ths (0% effective tax rate) of income tax already paid by the said company.


Malta also has a double taxation treaty network with over 60 countries, which ensures relief from double taxation on certain types of income.


Malta offers specific schemes and programmes with fiscal advantages:


  • The Residence Programme (TRP)

  • The Global Residence Programme

  • The Malta Retirement Programme

  • The Highly Qualified Persons Rules

  • The Qualifying Employment in Aviation (Personal Tax) Rules

  • The Qualifying Employment in Maritime Activities and the Servicing of Offshore Oil and Gas Industry Activities (Personal Tax) Rules

  • The United Nations (UN) Pensions Programme


Benefits of the Maltese taxation system:


  • Full imputation system and refundable tax credit system for shareholders of corporations– resulting in 0% to 10% effective tax rate.

  • Full tax exemptions for holding companies and exemptions on duty on documents for companies which operate internationally.

  • No withholding taxes or duties on profit repatriation

  • No withholding tax on outbound royalty payments and dividends

  • Malta is an EU member State and a party to numerous double taxation treaties

  • No wealth/net worth/capital/property ownership tax


Lexvirtualis™ can assist you with the following services:


  • Tax planning, structuring and advice for individuals, corporations and their shareholders

  • Tax and financial planning for high net-worth individuals and residence/retirement schemes

  • Taxation of trusts and foundations

  • Advice on EU direct tax directives

  • VAT compliance obligations and VAT grouping

  • VAT rules and benefits in relation to lease structures of yachts and aircraft

  • Shipping companies and tonnage tax

  • Aviation companies and tax incentives

  • Tax objections and appeals

  • Tax advice relevant to specialised sectors

For further information about how LexVirtualis Advocates can help you with your law requirements kindly contact us on info@lexvirtualis.com.mt

Marsaxlokk Malta

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Our area of practice is vast, so feel free to see other types of law that we specialise in.

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