Resident companies are subject to corporate tax at the standard rate of 35% irrespective of whether the relevant income is distributed or retained. There are neither surtaxes nor an alternative minimum tax.

Certain types of investment income are taxed at either 10% or 15%, rental income is charged at 15% and gains on immovable property situated in Malta are charged at 12%.

Whilst the headline standard corporate tax rate is one of the highest in Europe, the effective tax rate can be substantially reduced by a number of key features of the Malta corporate tax system, and will generally be in the range of 0% to 10%.

The main key features of the corporate tax system referred to above include:

Remittance basis of taxation: under this rule, companies incorporated abroad but deemed to be resident in Malta by virtue of their management and control being exercised in Malta, are taxable in Malta on foreign source income only if the income is remitted to Malta. Further, foreign-source capital gains will not be taxable in Malta to such companies even if remitted to Malta. (See Sec. 5.1.)
Participation exemption: under the Malta participation exemption regime, dividends and gains on a participating holding are exempt from Malta tax. Alternatively, the taxpayer may apply the full imputation system (see refund Refund system below). In either case, the Maltese tax will normally be reduced to zero. (See Secs. 10.1. and 15.)
Foreign tax credit: Relief for double taxation is achieved through either bilateral relief available under an applicable tax treaty or unilateral relief available under Maltese domestic law. In both cases, the credit method is generally used. Two aspects of the unilateral relief scheme are particularly interesting, however: (i) the availability of a credit for underlying tax as well, and (ii) the flat-rate tax credit which grants a deemed credit for foreign tax equal to 25% of foreign income, and can thus be favourable where the foreign income suffered little or no foreign tax. Whilst the unilateral credit is theoretically available only where no bilateral relief applies, in practice taxpayers will be able to elect the more favourable scheme (See Sec. 9.)
Refund system: Maltese companies need to allocate their income to 5 different classes, known as tax accounts. Upon distribution of the income classes, shareholders may claim refund of a portion of the tax suffered by each class. The refundable portion varies, depending on the tax account, from 100% (in which case the effective tax rate is 0%) to 6/7 (which can be seen as the standard refund), 5/7 or 2/3. The effective corporate tax rate after application of the refund varies, therefore, from 0% to 10%. (See Sec. 15.)
Royalties and similar: Royalties and similar income derived from patents, copyrights and trademarks are, subject to conditions, exempt from tax in Malta under a specific regime (Patent or IP Box regime). In situations where the royalties are not eligible for the specific regime, the application of the Refund system above will normally result in an effective tax rate of 5%. (See Sec. 10.3.)

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