Foreign investors who open companies in Malta are mainly attracted by the country’s taxation system. However, they can also benefit from other tax incentives in Malta, through their companies or as shareholders in these businesses.

To benefit from these incentives, foreign business owners are encouraged to work with professionals who can assess their companies and prepare the necessary paperwork to apply for available tax incentives.

What are the tax incentives available in Malta?

The Maltese taxation system is highly flexible, but in order to fully benefit from the available incentives, companies must be aware of these schemes and whether they qualify.

Here are the main tax incentives in Malta:

• Tax refund on corporate tax, which is charged at a standard rate of 35%
• Participation exemption, which applies to holding companies that meet specific requirements
• Double taxation relief, available through Malta’s network of agreements to avoid double taxation
• High Net Worth Individuals schemes, designed for foreign citizens relocating under special programs
• Company re-domiciliation scheme, allowing foreign companies to relocate to Malta and continue their activities
• Investment incentives, provided under the Malta Enterprise Act, Business Promotion Act, and Business Promotion Regulations

For official details on Malta’s taxation policies, you can visit the Office of the Commissioner for Revenue.

Tax refund scheme in Malta

The tax refund system is one of the most attractive fiscal incentives in Malta. It applies to dividends distributed by a Maltese company to its shareholders, who may claim a refund of the tax paid by the company on the profits.

Refund types include:

• 6/7 refund on trading activities, reducing the effective corporate tax rate to 5%
• 5/7 refund on passive income, royalties, and participation holdings, reducing tax to 10%
• 2/3 refund for companies claiming double taxation relief
• 100% refund, granting full exemption under the participating holding regime

The participation exemption in Malta

Another important tax incentive is the participation exemption regime, which applies in two different cases:

1. Participating holding, where a company owns at least 10% of the equity shares in another company. This grants:
   • Voting rights
   • Profit distribution rights
   • Asset distribution rights upon liquidation
2. Even without participating holding, the Maltese tax authorities can grant the exemption if at least two of the above conditions are met.

The participation exemption applies when:

• The investment in the foreign company is at least €1,164,700 for 183 days
• The Maltese company has pre-emptive rights over share disposals
• The Maltese company has a seat on the Board of Directors of the foreign company
• The investment is for business continuation, not trading purposes

Under the double taxation relief, Maltese companies can benefit from unilateral relief, Commonwealth relief, and a flat-rate foreign tax credit.

Tax incentives under the Enterprise Act in Malta

Beyond tax refunds, Malta offers investment incentives under the Enterprise Law, particularly for manufacturing-related industries. Businesses in these sectors can benefit from:

• Investment tax credits deductible from chargeable income
• Credits calculated based on:
  • Tangible asset expenditure (e.g., real estate, equipment)
  • Acquisition of intangible assets (e.g., patents, software)
• Salary cost incentives for newly hired employees (up to two years)

If the tax credit is not fully utilized, it can be carried forward. In certain cases, companies that make substantial contributions to the Maltese economy can convert tax credits into financial grants or direct subsidies.

For more details, visit Malta Enterprise.

Tax incentives for various industries in Malta

Malta provides financial benefits to companies in various sectors. Among the most valued incentives are those for innovation and research & development (R&D). Companies involved in R&D projects can qualify for tax credits related to:

• Development of new products, services, or processes
• Investments in creative and cultural industries
• Support for technology-driven enterprises

Special tax credits for small businesses in Malta

Malta is one of the best countries in Europe to start a small business. Micro-enterprises can qualify for tax credits covering costs related to:

• Business expansion
• Innovation projects
• Employee wages
• Machinery and equipment purchases

For small business eligibility requirements, check out Malta Small Business Support.

Employment-related tax incentives

Malta has one of the lowest unemployment rates in the EU, thanks to its skilled workforce. The government supports job creation through employment tax incentives, such as:

• Up to 100% wage cost coverage for newly created jobs
• Tax deductions on employee training programs
• Payroll incentives to streamline salary and tax reporting

Tax incentives for holding companies in Malta

Holding companies enjoy special tax exemptions under the EU Parent-Subsidiary Directive. The participation exemption applies when:

• A Maltese holding company owns at least 10% of a subsidiary
• The subsidiary is in the EU or a country with a minimum tax rate of 15%
• The company is not engaged in trading activities

Profits derived from a qualifying holding can be fully exempt from taxation. If conditions are not met, the holding company can opt to pay corporate tax and receive a 100% shareholder tax refund.

Tax incentives for foreign investors in Malta

Malta is a leading investment destination in Europe, offering several tax advantages to foreign investors, including:

• Double tax treaties with 70+ countries
• Unilateral tax relief for foreign-sourced income
• Flat-rate foreign tax credit (25%) for income from:
  • Investments
  • Royalties
  • Interest and dividends
  • Rental income

For a full list of double taxation treaties, visit the Maltese Tax Authority.

Other benefits for businesses in Malta

Malta also provides non-tax incentives, such as:

• Cash grants for businesses in tourism and hospitality
• Soft loans, interest subsidies, and financial aid
• Childcare subsidies for employees’ families

For guidance on how to access these incentives, contact us for expert assistance.

By leveraging Malta’s tax and investment incentives, companies can enjoy significant financial benefits, a strategic business location, and a stable economic environment for long-term growth.