Trading and Holding Companies

• A full imputation system;

• Refunds upon distribution of dividends result in an effective tax rate of 5% for trading companies and 0% for holding companies;

• Possibility of redomiciliation of companies to Malta, thus avoiding winding-up and starting afresh.

In line with an agreement reached with the European Union Malta has introduced a revised tax system. This new system retains the present full imputation system whereby tax paid by a company in Malta is, on distribution of dividends, imputed to the shareholder as a tax credit against the shareholders’ tax liability.

The system of refunds of Malta tax to shareholders upon distribution will be retained which refund will generally be equal to 6/7ths on the Malta tax paid on the distributed profits or 2/3rds of the Malta tax paid when the distributing company claims double taxation relief. When the profits distributed are derived by the distributing company from a participating holding the refund is increased to 100%.

In the case of distributions from profits consisting of passive interest or royalties or where profits are allocated to the Foreign Income Account, and no claim for double tax relief has been made, the refund is limited to 5/7ths. Within the new system the refundable tax credit system is now available to dividend payments out of all sources of income (with the exception of profits derived from Maltese immovable property).