Once a company acquires fiscal residence in Malta tax will be due on the entire year. However it should be noted that companies moving their residence during the tax year will not be subject to tax on income generated by such companies when they were neither resident nor domiciled in Malta. Malta tax will be due only on income sourced from the date that company acquired fiscal residence in Malta.

Maltese income tax law provides for a step up of the market value of the assests that is calculated on the market value at the time the company acquired its fiscal residence in Malta. As a consequence of the recognition of positive income realized only from the date of setting up residence in Malta, losses generated by a company when it was not a resident of Malta will be disallowed for tax purposes.

As explained in 3.4. above, Malta follows the incorporation theory in that a company incorporated in Malta does not lose tax residence if its management and control is exercised in another jurisdiction. Malta adheres to its international obligations and under the premise of “Pacta sum Servanda”, Malta will relinquish its jurisdiction to tax under the tie-breaker rule of an applicable tax treaty, therefore any impact suffered due to the application of a tax treaty will be only limited to such treaty. Once a Malta company loses its jurisdiction to tax then any deductible expenses to be deducted against any income for which treaty application was claimed will be lost also from a Matese tax perspective. It will be up to the Contracting State that has jurisdiction to tax to allow any expenses suffered to be taken into account under its domestic laws.

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