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Malta is recognised as a leading jurisdiction of choice for a number of industries, mainly due to models and structures developed with the intention of attracting business to the Island. Malta is also renowned for its robust legal and regulatory framework and taxation structures, while also having a highly skilled workforce, incentives for specific industries such as gaming, aviation and shipping, and generally, a business-friendly environment. This has led to a significant growth in Malta’s financial services industry and has led to Malta becoming the jurisdiction of choice for many international businesses looking for a link to the EU.
Tax Refund Model
Companies in Malta pay 35% tax on their income, however structures which are owned by individuals who are non-domiciled in Malta can usually benefit from Malta’s tax refund system, which leads to a refund in taxes which is most commonly of 6/7ths of the amount paid, resulting in an effective tax rate of 5%. When the distributed profits are derived from passive interests and royalties, the tax refund is reduced to 5/7ths of the taxes paid, whereas a 2/3rds tax refund is applied to dividends distributed out of profits allocated to the Foreign Income Account, where the company has claimed double tax relief on such amounts.
For a company to benefit from a tax refund, the company must have declared dividends to its shareholder(s), following which a refund claim form must be submitted to the International Corporate Taxation Unit (ICTU) on behalf of its shareholder(s). The full tax payment must be made prior to a refund of these taxes being issued and paid by the ICTU, and the company must be compliant with all tax regulations. Shareholders claiming such a refund must be duly registered with the ICTU to be entitled to claim a refund. Refunds are usually processed in a number of months, although refunds of larger amounts (generally over €1m) are fast-tracked by the ICTU.
Fiscal Unit Model
Since 2020, a new tax model has been introduced in Malta – that of the ‘fiscal unit.’ A group of companies can apply this model when the parent company fulfils at least two of the following criteria:
Should at least two of these three criteria be satisfied, the group can proceed as a fiscal unit, where the subsidiaries become members of the fiscal unit and are referred to as ‘transparent’ for tax purposes. Entities within a fiscal unit are required to prepare consolidated financial statements and subsequently, chargeable income is computed and taxed as a whole, rather than as separate legal entities. With this model in place, companies in the fiscal unit are no longer required to pay the 35% income tax and subsequently follow the tax refund model. Instead, the tax refund mechanism is taken into consideration when calculating the final tax liability of the fiscal unit. The profit of the fiscal unit is effectively taxed at the rate that would apply after considering potential refunds, often resulting in an effective tax rate of 5%. This can be applied even if the members of the fiscal unit do not distribute any dividends.
Participation Holding Exemption
A company that has received dividends from an investment which qualifies as a participating holding may apply the participation exemption in Malta, which would mean that such income is fully exempt from tax in Malta. For an investment to qualify as a participation holding, a company which is tax resident in Malta should hold at least 5% equity in another entity, with such rights entitling the holder to any two of the following:
The participation exemption may also be applied when a Company:
The subsidiary in which the investment is held must be in a company, not having any rights, directly or indirectly, over immovable property situated in Malta, that confers any two of the three rights listed above.
Dr. Ciantar-Barbara is an experienced lawyer specialising in corporate and commercial law. She graduated with a Doctor of Laws degree from the University of Malta in 2012 and went on to obtain a Master of Laws (LL.M.) in Corporate and Commercial Law from Queen Mary, University of London in 2014.
With over a decade of experience at a leading Big Four firm, Dr. Ciantar-Barbara has advised a wide range of local and international clients on complex company law matters. Her practice covers all stages of a company’s lifecycle, including formation, continuation, restructuring, cross-border mergers and divisions, acquisitions, and liquidations. She also assists clients with their day-to-day corporate governance and compliance obligations, including beneficial ownership requirements and statutory reporting.
In addition to her core focus on corporate law, Dr Ciantar-Barbara has handled various employment law matters, offering guidance on issues such as employment contracts and workplace policies.
Proud member of the Chamber of Advocates and the Institute of Financial Services Practitioners.
As the Office Administrator at Vaia Legal, Valeriia ensures that the firm’s operations run smoothly and efficiently. She specializes in administrative coordination, office management, and business support, allowing the legal team to focus on delivering top-tier services to clients.
Holding a degree in Marketing from Kyiv University, she brings strong organizational and communication skills to her role. Since moving to Malta in 2022, she has been actively involved in office administration, supporting the firm with structured processes and strategic planning. Her ability to anticipate operational needs and implement effective solutions makes her an invaluable part of the Vaia Legal team.
Giovana Cauchioli joined Vaia Legal as a Legal Administrator, bringing a strong background in legal operations and compliance. She graduated with a Bachelor of Law degree from Universidade Presbiteriana Mackenzie in 2019 and was admitted to the Brazilian bar in the same year. With several years of experience in litigation and general contracts, Giovana has developed a solid understanding of legal frameworks and regulatory processes.
Her professional experience covers various legal sectors, allowing her to provide valuable support in legal administration, contract management, and compliance-related matters. Throughout her career, she has refined her ability to assist in structuring efficient legal processes and ensuring that regulatory requirements are met.
At Vaia Legal, Giovana plays a key role in facilitating legal operations, ensuring that the firm’s work is carried out smoothly and efficiently. Her analytical approach, attention to detail, and commitment to excellence contribute to the firm’s ability to deliver high-quality legal services to its clients.
Seasoned Lawyer, specializing in Maritime and Aviation Law, having graduated from the University of Malta in 2013. Experienced in yacht and aircraft sale and purchase transactions as well as ownership structures, customs importations, and registration. Successfully assisted several companies in acquiring a Maltese Air Operator’s Certificate, as the key link between the applicant and local authorities, while also consulting on regulatory matters.
Specialties: Commercial Agreements, Sale and Purchase Transactions for Vessels and Aircrafts, Regulation of Aircraft Customs and VAT Status, Importation and Registration matters, AOC applications, Ownership structures and others
Proud member of the Chamber of Advocates, Malta Business Aviation Association, Malta Maritime Law Association and the Advocacy Committee of the European Business Aviation Association.