The Maltese tax system is based on UK tax principles and it distinguishes between income and capital. This is important as while all income is generally taxable, only specific capital gains are taxable.
The full imputation system is applied in Malta to resident and non-resident individuals ensuring that there is no economic double taxation. To further minimize the risk of double taxation, Malta also applies the refundable tax credit system which can reduce the tax burden to between 0 and 6.25%. This system, which has been vetted by the EU Commission, extends to both resident and non-resident shareholders, and applies to all profits derived from local and foreign sources with the exclusion of profits derived directly or indirectly from immovable property situated in Malta.
Basis of taxation and applicable tax rates
Maltese tax liability is based on the principles of domicile and residence. Individuals who are both resident and domiciled in Malta are taxable on their worldwide income and certain capital gains. While individuals who are resident but not domiciled in Malta are taxable only on income and certain capital gains arising in Malta and income arising abroad but received in Malta. It should be noted that resident but not domiciled individuals would not be taxable on capital gains arising abroad even if such gains are remitted to Malta.
Tax rates applicable to individuals are as follows: