The scope of taxation in Malta depends on the company’s residence and domicile.
In case of a company, it is deemed to be ordinarily resident and domiciled in Malta if it has been incorporated in Malta. A Malta resident and domiciled company is subject to income tax in Malta on its worldwide income irrespective of whether such income is received in Malta or not. One should, however, take into account the credit that the company might be granted for taxes paid abroad.
A company that is incorporated abroad is deemed to be resident in Malta if its management and control is exercised in Malta. A company resident but not domiciled in Malta is subject to tax in Malta in respect of Malta source chargeable profits or gains and on income (not gains) arising abroad and remitted to Malta.
No income is subject to tax in Malta if the company is not ordinarily resident and domiciled in Malta. This exemption does not apply for income arising in Malta.
The chargeable income of a Malta company is taxed at 35%, however, due to Malta’s Participation exemption and the application of the imputation system and the refund process, the effective tax rate can be reduced to approximately 0% to 5%. Certain type of income is exempt from tax in Malta and the Income Tax Act does exempt specific entities from paying tax in Malta such as retirement funds, Collective Investment Schemes (where at least 85% of its assets are situated outside Malta) and cooperative societies.