Malta Tax & Business Guide - Deloitte

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Basic facts
Population 410,000 Inflation 3.2% (2006)
Main languages Maltese, English GDP per head US$14,150*
Currency Maltese lira (MTL) GDP growth 2.4% (2006)*
Economic communities European Economic Area, EU, WTO
GDP sources 3% agriculture, 22% industry, 75% services
*Economist Intelligence Unit estimates.
Political environment

Malta is a parliamentary democracy. Executive power rests with the prime minister and his cabinet. There are two main political parties: the centre-right Nationalist Party (PN) and the Malta Labour Party (MLP). There is currently a PN government.

Lawrence Gonzi of the PN is the prime minister. The next general election is due by 2008.
Foreign trade and investment
Exports US$2.7bn (2006)* Imports US$4.1bn (2006)*
*Economist Intelligence Unit estimates.

Leading export markets: France, the US, Singapore, the UK and Germany.

Major exports: Machinery and transport equipment, and other manufactures.

Malta promotes itself as an ideal trans-shipment location. The government favours foreign investment and offers a wide range of incentives, including tax reductions, soft loans, investment allowances and training assistance.

Malta is expected to adopt the euro on January 1st 2008.
Business and financing
Business forms Limited liability companies, single-member companies

The main form of doing business is the limited liability company, although single-member companies, unlimited and limited liability partnerships (en nom collectif and en commandite), investment companies with variable capital (SICAVs) and branches are also permitted. Limited liability companies may be public or private. A private company may not have more than 50 shareholders or raise funds from the public. The Registrar of Companies must be informed (in English or Maltese) within a month of starting operations that a branch has been established.
Labour environment
Unemployment rate 6.8% (2006) Minimum wage MTL 250.8 (monthly)

Malta has a well-educated labour force. Knowledge of foreign languages, particularly English, Italian and languages used in the tourism industry, is important for the labour force.

About 65% of MaltaÌs workforce is unionised. Foreign workers are treated the same as Maltese with regard to labour legislation and collective agreements.
Taxation
Corporate tax
Main rate 35%

Resident companies are taxed on worldwide income; non-resident companies are taxed only on Maltese-source income. Residence is determined by the place of effective management and control, but any company incorporated in Malta is regarded as resident. Tax is charged at 35%. Branches are taxed at the same rate of income tax as domestic companies. A number of incentives and concessional rates have been available for companies in Malta, but as a result of EU entry some incentives are being phased out.

Malta tax law applies an imputation tax system whereby the tax paid by a company is credited in full to the shareholder upon the payment of a dividend. Refunds of the applicable tax credit are available to both resident and non-resident shareholders in respect of profit distributions by all companies resident in Malta and registered on or after January 1st 2007 out of all sources of income (with the exception of profits derived from immovable property situated in Malta) and provided the tax-compliance requirements have been fully adhered to.
Individual tax
Progressive rates to 35%

Resident individuals are taxed on their worldwide income; non-residents are taxed only on Maltese-source income. There is no strict definition of residence, but residence will be based on where a person effectively lives and has a home. Staying in Malta for six months in a year would imply residence. Tax is charged at progressive rates to 35%. There is a favourable expatriate tax regime available to employees of investment services or insurance companies.
Capital gains
Generally taxed as income

Capital gains of companies and individuals are generally taxed as income. Gains on securities listed on the Malta Stock Exchange are exempt.
Indirect tax
Standard rate 18% Lower rate 5%

Value-added tax (VAT) applies to most transactions. The standard rate is 18% and a 5% rate applies to the supply of holiday accommodation, electricity, printed matter and confectionery. Zero rating applies to exports, international transport, domestic passenger transport, food, pharmaceuticals, and the supply and repair of ships and aircraft. Exemptions from VAT include the sale and leasing of immovable property, banking and insurance services, health, education and broadcasting.

Registration is compulsory for suppliers of goods with annual turnover over MTL 12,000 and suppliers of services with turnover above MTL 8,000.
Tax administration and compliance
Tax year Corporations: accounting year; Individuals: calendar year

Corporate profits are assessed on the basis of the accounting year immediately preceding the year of assessment. Companies make three advance payments of tax at four monthly intervals during the accounting period, and must typically file a tax return within nine months from the end of the accounting period. A final tax payment is due by the date the tax return is submitted. Individuals are taxed on a preceding-year basis. Employment income of individuals is taxed by withholding, and individuals must make advance payments of tax in respect of other income. Final tax is payable by June 30th in the year of assessment.
Additional tax information
Withholding taxes Dividends, Interest and Royalties 0%.
Tax treaties Malta has concluded 45 tax treaties.
Dividends Dividends are taxable, with a refundable imputation credit for the shareholder.
Revenue protection There is a general anti-avoidance rule.
Groups Loss transfer is possible between resident group companies.
Incentives Financial services; manufacturing; shipping; free port activities.
Other taxes Import duties, Insurance premium tax, Petroleum profits tax, Tax on transfer of securities, Tax on transfer of immovable property.