Guide, not advice
Malta corporate tax and the 6/7ths refund: an overview
Updated
Malta's headline corporate tax rate is 35%. The reason companies form there anyway is the shareholder refund system, which can bring the effective rate on distributed trading profits to around 5%. It is real, statutory and widely used; it is also precisely the kind of mechanism on which nothing should be assumed without regulated advice.
This page is a general overview, not tax advice. Whether any refund applies, and what you owe where you live, depends on your circumstances, your residence and rules that change. Take advice from a licensed tax practitioner before forming a structure on the strength of it.
How the full imputation and refund system works
- The company pays tax at 35% on its chargeable profits, Malta's standard corporate rate.
- Profits are distributed as dividends to the shareholders. Malta operates a full imputation system, so the company-level tax is credited against the shareholder's Malta tax on the dividend.
- Shareholders claim a refund of part of the Malta tax paid, from the Malta Tax and Customs Administration. For most active trading income the refund is 6/7ths of the tax, leaving an effective Maltese burden of roughly 5%. Passive interest and royalties carry a 5/7ths refund (roughly 10% effective), profits from a participating holding can carry a full refund, and the refund is reduced where the distributing company has claimed double taxation relief (MFSA: tax system for companies resident in Malta).
- The refund is paid to the shareholder, not the company, after the tax is settled, the dividend is made and the claim is filed; allow for the cash-flow gap in any modelling.
Why structures usually have two companies
Because the refund lands with the shareholder, a personal claim can create tax consequences in the shareholder's home country. The common arrangement is therefore a two-tier structure: a Maltese trading company owned by a Maltese holding company, so that refunds arrive at the holding level. This is standard practice, but it doubles formation and running costs (see annual costs) and whether it works for you is exactly the question a licensed adviser must answer.
The caveats that decide whether any of this helps you
- Your home country taxes you too. Controlled foreign company rules, dividend taxation and management-and-control tests can pull the company or its profits into your home tax net, and a company managed from your kitchen table may be tax-resident there, not in Malta. This is the caveat that most often changes the answer.
- Substance matters. Structures with no real activity in Malta attract challenge, from home-country authorities and under EU anti-abuse rules; the refund system rewards genuine businesses, not letterboxes.
- Large groups face the global minimum tax. The EU's Pillar Two rules impose a 15% minimum effective rate on groups with consolidated revenue of €750 million or more in at least two of the four preceding years (Council Directive (EU) 2022/2523), and Malta's implementation continues to evolve; groups near any of these thresholds need specific advice.
- Rates and procedures change. Verify the current position with the Malta Tax and Customs Administration and your adviser before relying on any figure here; refund fractions, deadlines and administrative practice are all subject to revision.
Independent guide. Figures reflect the long-standing statutory framework as generally described at the time of writing; they are not a prediction of your tax outcome. Licensed Maltese CSPs and tax practitioners, the kind this site introduces, exist precisely to apply these rules to real facts.