Avoid Business Tafazzite: Why Malta is a Smarter Choice

September 16, 2024
by MBS Editorial Team
MBS Insights

Italy has a term that perfectly encapsulates self-sabotaging behavior: tafazzite. Derived from the comical antics of the character Tafazzi, who hilariously but painfully hits himself repeatedly, the term has come to symbolize making life unnecessarily difficult. Nowhere is tafazzite more evident than in the world of taxes.

If you’re an Italian entrepreneur still clinging to the Italian tax system, you might be practicing tafazzite. Why? Because the tax structure in Malta offers a much smarter, more efficient alternative. So let’s explore why Malta could save you from metaphorical groin punches.

1. Corporate Tax Rate: Italy vs. Malta

In Italy, the IRES (Imposta sul Reddito delle Società) stands at 24%, plus IRAP, which adds another 3.9%. That brings your total corporate tax burden to nearly 28%.

Now, let’s compare that to Malta, where the headline corporate tax rate is 35%. But wait—thanks to Malta’s tax refund system, non-resident shareholders can reduce that rate to an effective 5%.

Here’s a quick breakdown:

In Italy: On €1 million in profit, you’d pay around €280,000 in taxes.
In Malta: On that same €1 million, after the refund, you’d pay only €50,000.

Why practice tafazzite when you could make the smart move to Malta and keep more of your profits?

2. Withholding Taxes: Italy’s Tax Trap vs. Malta’s Freedom

Italy’s tax system loves its withholding taxes, with rates on dividends, interest, and royalties ranging from 15-26%. So if you’re running a successful business and want to repatriate profits, you’ll get hit with tafazzite-like penalties.

In Malta, on the other hand? Zero withholding taxes. Yes, zero. No self-imposed financial hurt here.

3. Operating Costs

Besides taxes, let’s talk about the actual cost of running your business. Italy often brings huge overheads, with higher rent, salaries, and utilities.

In Malta, you’ll enjoy:

Affordable office rent in prime locations, averaging €12,000 annually.
Competitive salaries (local directors cost around €12,000-€18,000 annually).
Low utilities and technology costs (around €6,000 annually).

Compare this to Italy’s higher operating costs, and it becomes clear that sticking with Italy’s setup is pure tafazzite.

4. Double Taxation Treaties and Global Expansion

Let’s talk about expansion. Italy may have double taxation treaties, but Malta’s network of over 70 treaties ensures your profits flow freely between countries without getting taxed multiple times. Combine that with Malta’s location between Europe, Africa, and the Middle East, and you’ve got the perfect platform for global growth.

Staying solely in Italy is like standing still—tafazzite at its finest—while competitors expand.

Why Keep Practicing Tafazzite?

The beauty of Malta isn’t just in its low tax rates or cost-effective operations—it’s the fact that your business can grow and thrive without unnecessary tax pain. Italy’s system, while comprehensive, often feels like tafazzite—self-sabotage in action.

It’s time to stop practicing tafazzite and make the smarter move. Set up in Malta, save big, and scale your business faster and smarter. After all, why keep hitting yourself when you could be winning?

Ready to stop the pain and start saving? Contact us today and let us guide you to business success!