Malta is an EU Member State (since 1 May 2004) and part of the Schengen Area (since 21 December 2007). English is an official language alongside Maltese, which matters for operating internationally. 

For globally minded founders, holding companies, and cross-border operators, the core appeal tends to come from:

  • an EU jurisdiction (useful for EU rules and market access), 

  • plus a corporate tax framework built around a full imputation system and shareholder refunds on distributed profits. 

Important: This article is educational, not tax or legal advice. Always validate your specific facts and eligibility with a licensed professional.

Malta’s Corporate Tax: 35% Headline Rate + Refund Mechanism

Malta companies are generally subject to a 35% income tax rate, and Malta applies a full imputation system—dividends carry a tax credit equivalent to the tax paid by the company on the profits out of which dividends are distributed. 

The refund concept (why people talk about “5%” and “10%”)

Under Malta’s refund framework (as described in official explanatory material), once the relevant tax is paid at company level, shareholders (including non-residents) may be entitled to refunds depending on the nature of the income and other conditions. 

Commonly referenced outcomes include:

  • 6/7ths refund (often associated with “active/trading” profits): the official explanation notes a refund set at 6/7ths of the tax paid by the company in the general case. 

  • 5/7ths refund (often associated with passive interest and royalties): the same official explanation references 5/7ths in that scenario. 

  • Full refund in participating holdings scenarios is also described in the official explanation. 

These mechanisms are the source of the widely cited “effective tax leakage” figures that may be achievable in certain setups—but the outcome depends on facts, classification of profits, and compliance steps. 

Withholding Tax: What Matters for Distributions

When people evaluate a jurisdiction for a holding or operating company, they often look at withholding taxes on outbound distributions. PwC’s Malta corporate withholding tax summary shows 0% withholding tax on dividends in the table of withholding taxes. 

(Always verify the exact conditions for your structure, shareholders, and income type.)

Participation Holdings: Dividends and Capital Gains Planning

Malta is frequently used in international structures because rules may allow tax-efficient treatment for qualifying holdings (often referred to as “participation” regimes), and the official explanatory material also discusses a full refund in participating holdings situations. 

In practice, participation planning is highly technical (ownership thresholds, anti-abuse considerations, nature of the underlying entity, and more). Treat it as a specialist design area, not a template.

Notional Interest Deduction (NID) in Malta

Malta has a formal Notional Interest Deduction regime in law (Subsidiary Legislation 123.176). 

Guidelines issued by the Malta Tax and Customs Administration explain how the NID reference rate is determined and how approvals and attribution mechanics work. 

NID is typically discussed as a way (in the right circumstances) to reduce taxable income by providing a notional return on certain “risk capital”/equity—again, very fact-dependent and best handled with professional support. 

Double Tax Relief and Malta’s Treaty Network

Malta maintains a broad network of double taxation conventions, and the Malta Tax and Customs Administration provides an official list of treaties and related details (jurisdiction, signature date, entry into force, etc.). 

If a treaty route is not available for a specific scenario, Malta’s system may provide alternative relief routes depending on circumstances (this is where bespoke advice becomes essential). 

Talent & Relocation: Two Programs Often Considered

1) Key Employee Initiative (KEI) – fast-track work/residence permits

Malta’s Identità site describes the Key Employee Initiative (KEI) as a fast track to the single permit procedure for highly skilled third-country nationals, with an expected processing time of five working days from submission (once documentation is complete). 

2) Highly Qualified Persons Rules – 15% flat tax (for eligible cases)

Malta Tax and Customs Administration guidance describes the Highly Qualified Persons Rules, including the 15% flat rate (subject to conditions such as minimum income thresholds and other eligibility requirements). 

Both programs are eligibility-driven—always confirm current requirements and whether your role, employer type, and contract qualify. 

Practical Checklist: What to Validate Before Using Malta in a Structure

  1. Purpose clarity: operating company vs holding company vs IP/royalty flows vs mixed.

  2. Profit classification: what is “active” vs “passive” in your fact pattern (this affects refund outcomes). 

  3. Distribution plan: timing and documentation for dividends and refunds. 

  4. Treaty mapping: check the treaty list for your counterparties and expected income streams. 

  5. Substance & operations: governance, management, and compliance (critical in modern cross-border planning).

  6. Hiring plan: whether KEI or HQP rules apply for key staff. 

Closing Note

Malta’s value proposition is not just a headline tax number. It’s the combination of EU/Schengen membership, an established imputation + refund framework, optional regimes like NID, and practical talent pathways—all of which require careful, compliant implementation