Malta is an island located in the heart of the Mediterranean Sea. It lies in the archipelago consisting of Malta, Gozo and Comino. Malta is the largest island. In view of its strategic position, it facilities trade with the Euro zone, north African markets and others promotes Malta as a very attractive to international business opportunities. Its infrastructure has made it accessible via sea, air and telecommunications. The official languages are Maltese and English, with Italian and French being the second mostly used.
Malta became a member of the European Union with effect from May 2004. Following which on January 2008, it became a member of the Economic Monetary Unity, and adopted the Euro (€) as its local currency. Furthermore, it allows any Maltese-registered company to freely trade under the "passport" system; any license issued by the Maltese government is automatically recognized in the other EU member states.
The Income Tax Act (ITA) is the law governing the taxation of taxable persons. It sets out the income streams that are chargeable to tax. These include gains or profits from any trade, business, profession or vocation, dividends, premiums, interest or discounts, rent, royalties and other profits arising from property, charges, annuities, annual payments, and certain chargeable capital gains.
The corporate income tax rate (CIT) is a flat rate of 35%. Malta operates a full imputation system to relieve the economic double taxation where a recipient of a dividend is subject to tax on such income, but has the possibility for a relief of the underlying tax paid by the distributing company. A dividend may not actually be paid out, but profits can be capitalized by way of a bonus issue or credited to the shareholders.
The imputation system is further strengthened via the participation exemption regime and refund tax credit mechanism, that would normally reduce Maltese effective corporate taxation to between 0% and 10% in most situations. The size of the refund depends upon the nature of the profits being distributed and whether double tax relief was claimed in Malta thereon. Tax refunds are the fundamental basis of international tax structuring using Malta.
Under Maltese domestic tax law, dividends, interest, discounts, premiums and royalties paid to nonresidents are not subject to withholding tax.
Malta has 68 tax treaties that are currently in force.
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