Corporate Tax in Malta: 35% on Paper, 5% After the Refund

Malta applies a full imputation system to corporate taxation. This means the income tax paid by a Maltese company is credited to its shareholders when dividends are distributed, preventing double taxation on the same profits.

The process works in three stages. First, the Maltese company pays corporate tax at the standard rate of 35% on its chargeable income. Second, when the company distributes dividends, a tax credit representing the full 35% tax is attached. Third, the shareholders submit a refund claim to the Malta Tax and Customs Administration (MTCA) and receive back a portion of the tax paid — typically 6/7 for trading income.

On a profit of EUR 1,000,000, the company pays EUR 350,000 in tax. After the 6/7 refund of EUR 300,000 is returned to shareholders, only EUR 50,000 remains with the tax authorities. That is an effective rate of 5%.

The refund is paid to shareholders, not to the company itself. This distinction is important for structuring purposes. Many businesses use a two-tier Malta structure — a holding company that owns the trading company — so the refund stays within the Malta group and can be reinvested without cross-border movement.

Since September 2025, companies also have the option to elect a 15% final tax without imputation (FITWI) instead of the traditional refund system. This is primarily relevant for large multinational groups subject to OECD Pillar Two rules, where demonstrating a 15% effective rate simplifies compliance. For most businesses, the traditional 5% route remains more tax-efficient.

Malta’s 5% effective rate is substantially lower than what other commonly cited EU jurisdictions offer.

Ireland and Cyprus both apply a headline rate of 12.5%. There is no refund mechanism, so the effective rate is the same as the headline rate. On EUR 1,000,000 in profit, a Malta company saves approximately EUR 75,000 per year compared to either jurisdiction.

Hungary has the lowest headline rate in the EU at 9%, but it lacks the holding company benefits and treaty network that Malta provides.

The Netherlands and Luxembourg are established holding jurisdictions with participation exemptions, but their headline rates of 25.8% and 24.94% respectively apply to trading income. Neither offers a refund mechanism.

Estonia taxes only distributed profits at 24% (from January 2026), which can be attractive for retained earnings, but any distributed profit faces a higher rate than Malta’s 5%.

Malta also stands out for its 0% withholding tax on outbound dividends to shareholders in any jurisdiction. This is not conditional on treaty coverage or EU membership of the recipient. By comparison, the Netherlands imposes a 15% withholding tax on dividends (with conditional exemptions), and Germany applies 26.375%.