The corporate tax rate is 35%.
Malta’s tax legislation provides for a number of tax benefits which can lead to complete elimination or significantly reduced taxes. Malta operates a full imputation system of taxation for both residents and non-residents, which ensures the full relief of economic double taxation upon the distribution of taxed profits by companies resident in Malta. On the distribution of taxed profits, the shareholders may opt to claim a partial/full refund of the tax paid by the distributing company. As a general rule, the tax refund amounts to six-sevenths of the tax paid. The refund will be reduced to two-thirds if the shareholder claims double-taxation relief and five-sevenths in those cases where the distributed profits are derived from passive interest or royalty income being subject to foreign tax at less than 5%. Dividends and capital gains derived from participation holdings will qualify for a full refund (or exemption). The Malta tax suffered on distributed profits hence ranges between 0% and 10%. The tax paid on profits derived, directly or indirectly, from immovable property situated in Malta is not available for refund.
Article 5(6) of the Income Tax Management Act and Articles 2 and 12(1)(u)(2) of the Income Tax Act make reference to the Arm’s Length Principle. In the absence of specific domestic legislation regarding transfer pricing guidelines, reference is made to the OECD Transfer Pricing Guidelines. These however are not binding.