Optimizing taxes through Maltese tax policy

Business in Malta in 2023 is attractive because of the tax policy, which is great for cost optimization. The first advantage is that most of the fees can be recovered through deduction. All that needs to be done is to obtain the status of a resident taxpayer for the company. It is granted if the firm has been established in Malta or its governing bodies are located here.

What you need to know about the fees for businesses

The main taxes in Malta 2023 that a resident company pays are:

• VAT is 18%. For the sale of real estate, insurance and banking services - 0%. The same applies to goods that are sold off the island.
• Income tax is 35%. It affects all profits, including those made in another country, but a resident company can get a deduction.

There are no fees for profits from dividends and exports to the EU. The same applies to the authorized share capital of the organization, which was registered in Malta.

When an income tax deduction is available

A local organization is entitled to a deduction if the following conditions are met:

• The business has claimed an exemption from double taxation if it has paid tax in another state. It will get a refund of 2/3 of the amount paid.
• The company receives money for patents, copyrights, etc. In this case, most of the amount will be refunded (5/7 of the amount paid).
• The company will get a 6/7 deduction for tax on income from trade.
• 100% exemption from income tax are holding companies that meet certain conditions (eg, the parent company is located in another country and owns 95% of the shares of the Maltese company, etc.).

A deduction is available only after the company has paid the tax in full. When the inspectorate conducts an inspection (normally within 14 days), the money will be returned to a special account. The refund will be in the currency the firm paid the tax in, so the exchange rate won't affect the business.

What you need to know about double taxation

Malta has signed an agreement with 70 countries, including the U.S., China, and the U.K. If the company gets profits from interest, dividends, or royalties,it must pay no more than 15% to the state where it was received. Thus, if the money is credited to a bank account of a Maltese resident, you will not have to pay.

Tax optimization for non-residents

Malta is also attractive for investors who do not want to be island residents. If a foreigner lives there for less than six months within a year, it is the case. In this situation, he must pay taxes on income and capital gains obtained in the country. If an investor lives in Malta longer than this period, he automatically becomes a resident and must pay taxes.

The rate for a non-resident depends on the annual income:

• Up to €700 - 0%;
• €701 - €3100 - 30%, €140 deduction;
• From €701 - 35%, €840 deduction.

Non-residents do not pay tax on interest, dividends, and royalties.

How to lower your tax burden

Contact IT-OFFSHORE experts for tax optimization in 2023.