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Taxation System in Malta

Corporate Income Tax of LLC

In Malta, the chargeable tax rate for companies is 35% (in which there will be no tax levied on municipal or provincial levels). On the other hand, the effective Malta tax rate would be just about 0% to 5% for the application of the membership exception; the overall accusation system and repayment scheme.

A 12% reduced tax rate is levied on the income obtained from the reassigning of immovable assets located in Malta. However, a reduced rate is payable on the higher of the received consideration or the market value of the transferred property.

null Malta Quick Tax Facts for Companies
Corporate income tax rate35% (for non-resident effective tax is 5%)
Branch tax rate35% (for non-resident effective tax is 5%)
Capital gains tax rate 0%/35%
Basis Worldwide
Abroad Participation ExemptionYes
Loss relief
- Carryforward
Indefinit
− CarrybackNo
Double taxation relief
Yes
Tax consolidation No, but group relief is available in certain cases
Transfer pricing rulesNo
Thin capitalization rulesNo
Controlled foreign company rulesNo
Withholding Tax
− Dividends0%
− Interest0%
− Royalties0%
− Branch remittance tax0%
Capital taxNo
Real estate transfer taxNo
Stamp Duty2%/5%
VAT
18% 

Withholding Taxes

Dividends

On dividends paid to an overseas resident of Malta, no taxes are suspended on a regular basis, even though this regulation can be exempted. A parent-subsidiary ordinance of EU has been implemented by Malta; below which domestic curbing of tax will be compressed to zero in case of distribution of dividends to qualifying EU shareholder that holds at least 10% of the subsidiary at the date of payment of the dividend.

Interest

In general, there will be no withholding tax on interest paid to non-residents.

Royalties

For the royalties paid to the non-residents usually, there is no withholding on tax.

Branch Remittance Tax

Branch remittance tax is not imposed in Malta.

Wage Tax/Social security Contributions

The employers are requested to take away tax from income and remuneration from the employees, and dispatch the same to the tax force in spite of employee being a resident or non resident.  The Income tax is withheld from salaries under the final settlement system.  For the sake of social safety the employer is liable for the own behalf and on behalf of the employee. The minimum and maximum tax rate is subjected, with the social security contribution of10%. In 2014 EUR 41.21 per week was the maximum social security paid.

Value Added Tax

In Malta, Value Added Tax is imposed on the supply of goods and services with certain omissions. VAT-registered persons in Malta can do the intra-Community acquisition of goods and the import of goods into Malta from outside the EU.

  • 18% is the standard VAT rate,
  • For the supply of hotel accommodation will be with the reduced 7% rate
  • On certain supplies like confectionary, medical accessories, electricity and printed matter the tax rate will be reduced to 5%
  • For the specified supplied goods such as the export of goods, pharmaceutical goods, the supply of qualifying sea vessels and aircraft and related transactions, food (except for catering), gold, international transport services and supplies related to international goods traffic only a 0% rate (an exemption with the right to deduct input VAT) is levied.

Every 3 months (quarterly basis) VAT filing and payment should be done. In case of incorrect VAT returns and any delayed payment of any Malta VAT due, late registration; late filing penalties will be imposed.

To obtain a safe and sound EU VAT number for our clients they should have the management and control of the company in Malta.

It is obligatory for an individual who is in the business or profession, producing chargeable income or exemption with credit supplies of products and services in Malta   is made compulsory   to register for VAT in Malta (standard registration) and to charge Malta VAT, where appropriate, at the applicable rates, subject to the right to recover input VAT incurred for the purpose of the supplies.

If their turnover does not go beyond 7,000 EUR for a calendar year then they are entitled to get exemption in registration requirements and taxable or zero-rated supplies.

Accounting, Filing and Auditing Requirements

The financial statements of the finance should satisfy the requirements of the Companies Act and the International Accounting Standards (IAS).

December 31 of the calendar year will be the default tax year end. In case of the companies who wish to change the end of a financial year, they can apply to the Director-General (Inland Revenue).

Filing of the tax returns should be done within 9 months from the conclusion of the financial year or 31 March of the subsequent year, whichever is later. By the due date of the tax return, one should pay any balance of tax due (following the set off of provisional tax paid).

The issue of the refund must be done within a period of 6 months from the return due date or within one year from the date the tax return is submitted. In case of non-payment of tax returns or any unsettled refunds and a part of any due balances by the payable date, then an interest rate of 1% is to be paid per month.

The following documents should be prepared by the directors of every company for each accounting period are;

  • Reports by Director
  • The profit and loss account,
  • On the last day of the accounting period, they should provide annual accounts including the balance sheet

At the annual general meeting, an auditor ought to be appointed to make a report on all annual accounts of the company.

The reports which should be submitted to the Registrar are a copy of the annual accounts, together with a copy of the auditor’s report and the directors’ report.

Private Company Regulation for Audit Exemption in LLC’s

Private companies not exceeding two of the three following criteria:

(1) Balance sheet total of EUR 46,587.47;

(2) Turnover of EUR 93,174.94; and

(3) During an accounting period, a usual number of two workers doesn’t have to be audited and might generate condensed balance sheets, design of profit and loss accounts and interpretation of the accounts.

Regulation for Small Limited Liability Company

A company which does not exceed any two of the three following criteria is a small company:

(1) Total of the balance sheet should be EUR 2,562,310.74;

(2)  EUR 5,124,621.48 must be the turnover and

(3) During the accounting period, it should have an average number of 50 employees.

Are endorsed to generate condensed balance sheets, layouts of profit and loss accounts and notes to the accounts

International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS), as well as General Accounting Principles for Smaller Entities (GAPSE), are adopted by Malta.

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