By
October 21, 2026
What Are the Tax Benefits of Setting Up a Company in Malta?
Malta has become an attractive European jurisdiction for international entrepreneurs, investors and businesses seeking a competitive and flexible corporate tax environment. As a member of the European Union, Malta offers a distinctive taxation framework that combines shareholder tax refunds, double taxation relief, participation exemptions and investment incentives.
One of the main reasons businesses consider establishing a company in Malta is the possibility of achieving an effective corporate tax rate of approximately 5% on qualifying distributed trading profits.
Although Malta's standard corporate income tax rate is 35%, eligible shareholders may receive refunds of a substantial portion of the corporate tax paid by a Maltese company.
In addition, Malta offers an optional 15% final corporate tax regime for eligible companies, tax exemptions for certain holding company activities, relief from international double taxation and tax credits for qualifying business investments.
These advantages can make Malta particularly relevant for international trading businesses, consultancy companies, technology firms, holding companies and entrepreneurs seeking to establish operations within the European Union.
However, Malta's tax benefits are not automatically available to every company. The actual advantages depend on the nature of the business, the source of income, shareholder eligibility, tax residency and compliance with applicable legislation.
This article explains the main tax benefits of setting up a company in Malta, how the corporate tax refund system works and what entrepreneurs should consider before establishing a Maltese business.
One of Malta's most widely recognised tax advantages is the possibility of achieving an effective corporate tax rate of approximately 5%.
Malta's standard corporate income tax rate is 35%.
However, the country operates a shareholder tax refund system that allows eligible shareholders to recover part of the corporate income tax paid on qualifying distributed profits.
The most commonly discussed refund is the six-sevenths refund, which generally applies to qualifying trading income.
Under this mechanism, a Maltese company initially pays corporate income tax at 35%.
When the company distributes qualifying profits as dividends, eligible shareholders may claim a refund equal to six-sevenths of the relevant tax paid.
This can reduce the combined effective Maltese tax burden from 35% to approximately 5%.
Consider a Maltese company generating €100,000 in taxable trading profits.
The company initially pays €35,000 in corporate income tax.
After paying tax, €65,000 remains available for distribution.
If the company distributes these qualifying profits as dividends, an eligible shareholder may receive a refund of €30,000.
After accounting for the refund, the combined Maltese tax burden is €5,000.
This represents an effective Maltese tax rate of 5% on the original taxable profits.
The calculation assumes that all relevant requirements are satisfied.
The refund is not automatic, and additional taxation may arise in the shareholder's country of residence.
Another important tax benefit of establishing a company in Malta is its full imputation system.
In some countries, corporate profits are taxed at company level and then taxed again when distributed to shareholders as dividends.
Malta's full imputation system is designed to address this economic double taxation.
When a Maltese company distributes profits on which corporate income tax has already been paid, shareholders may receive a tax credit reflecting the underlying corporate tax.
This allows the tax paid by the company to be taken into account when determining the shareholder's tax position.
The full imputation system operates alongside Malta's shareholder refund mechanisms.
Together, these provisions form an important part of the country's corporate taxation framework.
Malta offers several shareholder tax refund mechanisms, depending on the type of income and the applicable conditions.
The six-sevenths refund commonly applies to qualifying trading income.
Where all relevant requirements are satisfied, it can result in an effective Maltese tax burden of approximately 5%.
The five-sevenths refund may apply to certain passive interest and royalty income.
In qualifying circumstances, this can produce an effective Maltese tax burden of approximately 10%.
A two-thirds refund may apply where the Maltese company has claimed certain forms of double taxation relief.
The final effective tax burden depends on the underlying income, foreign taxes and applicable relief calculations.
In certain circumstances involving qualifying participating holdings, shareholders may be entitled to a full refund of the relevant Maltese corporate tax.
Each refund category is subject to specific conditions.
Businesses should not assume that all company profits qualify for the same refund percentage.
Malta has introduced an optional corporate taxation regime known as Final Income Tax Without Imputation, or FITWI.
Under this regime, eligible companies may elect to pay a final corporate income tax of 15% on qualifying chargeable income.
Unlike the traditional corporate tax system, the final tax paid under this regime does not generate the usual shareholder tax refund.
The regime is subject to specific eligibility requirements and generally involves a minimum five-year commitment.
It also contains provisions intended to ensure that the final tax is not lower than the effective tax that would otherwise apply under the traditional system after relevant shareholder refunds.
The optional regime may appeal to companies seeking a different corporate taxation structure or greater certainty over their tax obligations.
However, it is not necessarily more beneficial than the traditional shareholder refund system.
Companies should compare the available options based on their income, profit distribution strategy and shareholder circumstances.
Malta offers participation exemption provisions that may be particularly relevant to international holding companies.
A holding company typically owns shares in other businesses and may receive dividends or realise capital gains from those investments.
Under Malta's participation exemption regime, qualifying dividends and capital gains derived from certain shareholdings may be exempt from Maltese corporate income tax.
For example, a Maltese holding company receiving dividends from a qualifying foreign subsidiary may be eligible for an exemption, provided the relevant conditions are satisfied.
Similarly, gains arising from the disposal of qualifying participating holdings may benefit from favourable tax treatment.
However, the participation exemption is subject to ownership requirements, anti-abuse provisions and other statutory conditions.
Not every shareholding qualifies.
International entrepreneurs considering a Maltese holding company should assess the relevant requirements before establishing the structure.
Malta maintains a network of double taxation agreements with numerous countries.
These agreements are designed to reduce or prevent double taxation where income may otherwise be taxable in more than one jurisdiction.
Depending on the applicable agreement and the circumstances, treaty provisions may provide relief concerning dividends, interest, royalties and business profits.
Malta also provides domestic mechanisms for relieving certain foreign taxes.
These provisions can be particularly relevant to companies conducting international business or receiving income from overseas operations.
However, treaty benefits are not automatically available simply because a company is incorporated in Malta.
Eligibility may depend on tax residency, beneficial ownership, the nature of the income and applicable anti-abuse rules.
Businesses should review the relevant treaty and domestic legislation before relying on a particular tax benefit.
Malta may be considered for international holding company structures because of its participation exemption provisions, corporate tax system and double taxation agreements.
A Maltese holding company may own shares in subsidiaries operating in different jurisdictions.
Depending on the nature of the investments and applicable rules, qualifying dividends and capital gains may benefit from exemptions or other tax relief.
This can make Malta relevant for entrepreneurs managing international investments or corporate groups.
However, holding company structures must comply with applicable tax residency, economic substance, beneficial ownership and anti-abuse requirements.
The treatment of dividends and capital gains may also be affected by the tax laws of the jurisdictions where subsidiaries operate.
Malta provides various incentives designed to encourage business investment, innovation and economic development.
Certain qualifying businesses may be eligible for tax credits, grants or other forms of financial assistance.
These incentives are administered through specific programmes and are subject to eligibility conditions.
The Micro Invest programme supports qualifying small businesses, including certain startups, family businesses and self-employed undertakings.
Under the 2026–2030 framework, eligible undertakings may qualify for tax credits based on specified expenditure, including certain investments in tangible assets and wage costs.
The programme provides support calculated at up to 65% of eligible costs, with an increased rate of up to 85% for qualifying businesses operating from Gozo.
Maximum support amounts and additional conditions apply.
The availability of the incentive depends on the applicable programme rules and application procedures.
Malta also provides investment support for qualifying projects involving new establishments, business expansion, diversification and certain other eligible activities.
Depending on the programme, support may take the form of tax credits, grants, interest subsidies or other assistance.
The availability and amount of support depend on the nature of the project, business size, location and applicable state aid rules.
Qualifying businesses undertaking research, development or innovation projects may also be eligible for tax credits or financial assistance.
These measures are intended to encourage investment in new products, processes, technologies and business capabilities.
Eligibility depends on the particular incentive scheme and the nature of the expenditure.
Another potentially attractive feature of Malta's taxation framework is the general absence of Maltese withholding tax on dividends paid to non-resident shareholders.
In many jurisdictions, dividend distributions to foreign shareholders may be subject to withholding tax.
Under Malta's domestic tax rules, dividends paid to non-residents are generally not subject to Maltese withholding tax, subject to applicable conditions and exceptions.
This can be relevant for international shareholders receiving distributions from Maltese companies.
However, shareholders may still be liable to tax on the dividends in their countries of residence.
The absence of Maltese withholding tax should therefore not be interpreted as a worldwide exemption from dividend taxation.
Malta's corporate tax framework may be relevant to companies engaged in international trading activities.
These businesses may include companies providing professional services, consultancy, software development, technology solutions or other commercial services to international customers.
Where qualifying trading profits are distributed to eligible shareholders, the six-sevenths refund may reduce the combined effective Maltese tax burden to approximately 5%.
However, the location of customers alone does not determine whether a company qualifies for a particular tax treatment.
Businesses must consider where their operations are managed, where services are performed and whether activities create taxable presence in other jurisdictions.
International trading companies should therefore assess both Maltese taxation and any foreign tax obligations.
Malta generally permits foreign individuals and corporate entities to establish and own Maltese companies.
Foreign ownership does not automatically prevent a company from benefiting from the Maltese corporate tax framework.
Where the applicable conditions are satisfied, foreign shareholders may qualify for shareholder tax refunds.
This can make Malta relevant to international entrepreneurs seeking to establish an EU-based company.
However, the shareholder's country of tax residence may impose additional taxes on dividends, refunds or related income.
The overall tax outcome therefore depends on both Maltese legislation and the rules applicable in the shareholder's home jurisdiction.
A reduced effective Maltese tax rate does not necessarily mean that the total international tax burden will be equally low.
Malta's membership of the European Union provides additional considerations for businesses operating internationally.
Companies established in Malta operate within the EU legal and commercial environment and may benefit from relevant European directives and treaty provisions where the applicable requirements are satisfied.
For example, certain cross-border dividend distributions within qualifying corporate groups may benefit from the EU Parent-Subsidiary Directive.
The directive is designed to reduce double taxation of qualifying profit distributions between parent companies and subsidiaries established in different EU Member States.
However, the benefits are subject to ownership conditions, anti-abuse rules and other legal requirements.
EU membership does not automatically exempt Maltese companies from taxes imposed in other Member States.
One important consideration when establishing a company in Malta is whether profits will be retained or distributed.
Under the traditional corporate tax system, a Maltese company generally pays tax at 35% on its taxable profits.
The shareholder refund mechanism usually becomes relevant following the distribution of qualifying taxed profits as dividends.
Consequently, a company that retains all its profits may not obtain an immediate shareholder refund.
This can affect businesses that intend to reinvest earnings in employees, equipment, technology or expansion.
Entrepreneurs should consider how their profit distribution strategy influences the timing and availability of tax refunds.
The optional 15% final tax regime may also be relevant when comparing different approaches to corporate taxation.
Malta can offer tax benefits to qualifying startups and small businesses, but the advantages depend on their circumstances.
A startup generating qualifying trading profits and distributing dividends to eligible shareholders may potentially benefit from the six-sevenths tax refund.
Certain small businesses may also qualify for investment-related tax credits.
However, startups that retain most of their profits for expansion may not obtain the same immediate benefits from shareholder refunds.
Businesses should also consider accounting expenses, audit requirements, corporate administration costs, VAT obligations and other compliance requirements.
The most appropriate tax structure depends on the business model, expected profitability, financing requirements and shareholder circumstances.
Malta provides certain exemptions and reliefs that may apply to capital gains realised by companies.
One important example is the participation exemption, which may apply to gains arising from the disposal of qualifying shareholdings.
However, Malta does not provide a general exemption from corporate tax on all capital gains.
The tax treatment depends on the nature of the asset, the circumstances of the disposal and the relevant statutory provisions.
Capital gains arising from immovable property, securities and other investments may be subject to different rules.
Businesses should review the applicable tax treatment before selling investments or restructuring corporate assets.
Businesses establishing companies in Malta should consider economic substance, tax residency and the location of management and commercial activities.
Incorporating a company in Malta does not automatically guarantee that all its profits will be taxed exclusively in Malta.
Other jurisdictions may assert taxing rights where a company is effectively managed or maintains a permanent establishment.
Relevant considerations may include the location of directors, management decisions, employees, offices and actual business operations.
The appropriate arrangements depend on the company's activities and the applicable legal framework.
International entrepreneurs should ensure that their corporate structures reflect genuine commercial arrangements and comply with relevant tax obligations.
Although Malta offers several potential tax advantages, businesses should understand the limitations.
Under the traditional system, companies generally pay corporate income tax at 35% before qualifying shareholder refunds are received.
Refunds are subject to statutory requirements and are not automatically available to every shareholder.
The nature of the company's income can affect the applicable refund percentage.
Companies must also comply with accounting, auditing, corporate reporting and tax filing obligations.
Foreign shareholders may face additional taxation in their countries of residence.
International anti-abuse provisions, tax residency rules and permanent establishment considerations may also affect the overall tax outcome.
Furthermore, certain large multinational groups are subject to international minimum tax frameworks that require separate consideration.
For these reasons, businesses should evaluate the potential tax advantages alongside the legal, financial and administrative requirements of operating in Malta.
The main potential benefits include shareholder tax refunds, a possible 5% effective Maltese tax rate on qualifying distributed trading profits, participation exemptions, double taxation relief, an optional 15% final tax regime and investment-related tax credits.
The standard corporate income tax rate is 35%. However, eligible shareholders may qualify for refunds that reduce the combined effective Maltese tax burden.
In qualifying circumstances, a six-sevenths shareholder tax refund can reduce the effective Maltese tax burden on distributed trading profits to approximately 5%.
No. Eligibility depends on the nature of the income, dividend distributions, shareholder circumstances and applicable legal requirements.
Yes. Foreign entrepreneurs may establish Maltese companies and potentially benefit from the available tax mechanisms where the relevant conditions are satisfied.
Malta generally does not impose withholding tax on dividends paid to non-resident shareholders, subject to applicable rules and exceptions.
It is a tax exemption that may apply to qualifying dividends and capital gains arising from certain participating holdings.
Certain qualifying startups and small businesses may benefit from investment-related tax credits and other incentive programmes, depending on eligibility.
It is a mechanism allowing eligible shareholders to recover six-sevenths of the relevant Maltese corporate tax paid on qualifying distributed profits.
Yes. Malta offers an optional 15% final corporate income tax regime for eligible companies, subject to specific conditions.
Yes. Maltese companies may conduct international business activities, subject to applicable licensing, regulatory and tax obligations.
No. Tax refunds, exemptions and incentives depend on eligibility and compliance with the relevant legal requirements.
Malta may be suitable for certain holding structures because of its participation exemption provisions and international tax framework. However, the appropriate structure depends on the investments, shareholder circumstances and applicable tax rules.
Under the traditional corporate tax system, taxable profits are generally subject to the standard 35% rate. Shareholder refunds generally arise following qualifying dividend distributions.
Malta operates within the European Union's legal framework and is subject to applicable EU tax legislation, transparency requirements and anti-abuse measures.
Malta's corporate tax framework offers several potential advantages for entrepreneurs, investors and international businesses.
Although the country's standard corporate income tax rate is 35%, qualifying shareholder refunds can significantly reduce the combined effective Maltese tax burden on distributed profits.
The six-sevenths refund mechanism can produce an effective Maltese tax rate of approximately 5% on qualifying trading income.
Malta also offers participation exemptions, double taxation relief, an optional 15% final corporate tax regime and investment incentives for eligible businesses.
These provisions can make Malta relevant for international trading companies, consultancy businesses, technology firms, holding companies and other commercial enterprises.
However, the tax advantages are not universally available.
The final tax outcome depends on the company's activities, income classification, shareholder eligibility, dividend distributions, tax residency and international obligations.
Businesses should also consider compliance costs, economic substance requirements and the taxation of shareholders outside Malta.
For entrepreneurs considering establishing a company in Malta, understanding the available tax benefits and their eligibility requirements is essential for making informed business and financial decisions.
Disclaimer: This article provides general information about Malta's corporate taxation framework as of October 2026. Tax benefits, refunds, exemptions and incentives depend on individual circumstances and applicable legislation. The examples are simplified and do not constitute tax or legal advice. Professional advice should be obtained before establishing a company or implementing an international tax structure.
