Malta: effective corporate tax of 5% through the refund system

Malta taxes company profits at a nominal rate, then refunds part of that tax to shareholders when dividends are distributed.

The effective rate therefore results from the combination of two successive operations, not from a rate set out in a statute. This is why the figure quoted varies from one presentation to another.

The portion refunded depends on the nature of the company’s income: trading income, passive income, royalties, capital gains. The effective rate therefore differs from one company to another.

We do not publish the Maltese nominal rate, the portions refunded by category of income or the refund timescales: they do not appear in the official sources we have been able to verify. They must be established with a Maltese adviser.

This gap is decisive: the figure in circulation applies only to a specific configuration, and using it without having assessed it leads to false projections.

The mechanism was designed to comply with the European principle of non-discrimination: rather than applying a reduced rate to foreign companies only, which would be prohibited, Malta taxes everyone at the same rate and then refunds shareholders.

This construction explains both its legal robustness and its complexity. It also explains why it is difficult to sum up in a single figure, and why the figures in circulation are often the result of a particular case turned into a rule.

The refund benefits the shareholder, not the company. It therefore requires an actual distribution of profits, which rules out a strategy of retaining earnings.

This is the opposite of the Estonian model, which does not tax undistributed profit — 0%¹ — and taxes it at about 22%² of the gross amount on distribution.

The mechanism also requires a precise, closely maintained structure: ownership may go through a holding company, and the handling of flows must be organised accordingly.

Finally, it requires cash: the tax is paid first and refunded later, and the time between the two ties up funds.

It is therefore not a rate but a scheme, with administration costs, delays and a working capital requirement. Comparing it with a simple rate makes no sense.

Maltese personal taxation follows a different logic: a person who is resident but not domiciled is taxed only on Maltese-source income and on foreign income remitted to Malta.

This remittance basis, inherited from British law, is a standard tax-base rule, not a preferential scheme. It is therefore more stable than the refund mechanism, which is regularly scrutinised at European level.

A resident non-domiciled company director therefore combines two separate schemes, and how they fit together is the real technical issue in a Maltese plan.

For a French national, freedom of movement also allows them to live in Malta without conditions: the residence programme, whose fees reach €60,000³ and €37,000⁴, does not concern them.

• The effective rate results from a refund, not a statute: it varies with the nature of the income.
• The mechanism requires an actual distribution: it rules out retaining earnings.
• It ties up cash between payment and refund.
• It requires a closely maintained structure, whose cost must be weighed against the gain.
• The remittance basis for individuals is a separate, more stable scheme.

Malta has seen several of its schemes challenged at European level, and its citizenship by investment programme was the subject of proceedings before the Court of Justice of the European Union. A Maltese plan is therefore built on the standard regime rather than on the mechanisms most exposed to this scrutiny.