Taxation
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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

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