Malta Taxation of Resident non-Doms: Entities

Dr. Jean-Philippe Chetcuti co-authored with Magdalena Velkovska | 14 Feb 2021

Malta Taxation of Resident nonDoms Entities

Origins of Malta's Res Non-dom Taxation for Entities 

A legacy of the British influence and the Commonwealth legal system in Malta is the concept of remittance basis of taxation, forming a part of the Maltese tax system since the middle of the last century. The remittance-based tax system applies to persons (legal and natural entities) who are resident, but are not domiciled in Malta.

Defining Domicile for Entities

The concept of “Domicile” is not defined under the Income Tax Act, however a place of domicile is deemed to be the country the legal system of which gives the person its legal personality, and therefore means to be the jurisdiction under the laws of which the entity has been incorporated or established.  Legal entities incorporated in Malta are deemed to be ordinarily resident and domiciled in Malta.  Such companies are taxed on their worldwide income in Malta.

Defining Tax Residence for Entities

In accordance with the Maltese Income Tax legislation , a body of persons "resident in Malta" refers to "any body of persons the control and management of whose business are exercised in Malta, provided that a company incorporated in Malta on or after 1st July 1994 shall be resident in Malta and any other company incorporated in Malta shall be resident in Malta from 1st January 1995 where the management and control of the business of the company is exercised outside Malta".  Subsequently, entities incorporated outside of Malta are deemed to be resident, but not domiciled in Malta if the place of its effective management and control is in Malta.

Worldwide vs Remittance Taxation of Malta Entities 

In accordance with the Maltese Income Tax Act, legal entities domiciled and ordinarily resident in Malta are subject to corporate tax at the rate of 35% on their worldwide income and gains.   Entities incorporated outside of Malta carrying out business activities in Malta are subject to tax in Malta only on the income arising in Malta (non-resident, and non-domiciled companies).  Entities resident, but not domiciled in Malta are subject to a corporate tax at 35% on the remitted income, and the local source income and capital gains. 

Remittance Based Taxation, Income vs Capital Gains

Income arising outside of Malta falls outside of scope of the Maltese tax, insofar this is not remitted to Malta, for entities resident, but not domiciled in Malta.  The remitted income is subject to a corporate tax in Malta at 35% . Income arising in Malta and capital gains generated in Malta are also subject to tax in Malta at the corporate rate of 35%.

 


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