OECD approves Malta as a tax compliant jurisdiction

Malta's tax system is an efficient fiscal regime which offers a number of benefits to companies domiciled in Malta, particularly when used in combination with Malta’s network of double tax treaties. In recent years, Malta's tax system has received much criticism with the country being labeled as a potential 'tax haven’. As a result, the country underwent an investigation by the European Investigative Collaborations (EIC).

However, in 2017 the OECD evaluated Malta’s tax regime and approved Malta as a tax compliant jurisdiction. 

Quick overview of Malta's tax system

• Malta companies are taxed at a rate of 35%, however a full imputation system applies. When the beneficial owner is non-resident in Malta, shareholders are entitled to claim a tax refund of 6/7ths of the relevant tax paid in respect of trading income and 5/7ths of the relevant tax paid in respect of passive interest and royalties
• Malta offers an attractive regime that avoids double taxation on taxed company profits, distributed as dividends
• Income and gains from a participating holding (where a company holds directly at least 10% of the equity shares of a non-resident company, and/or meets certain other criteria) are exempt from tax.

OECD approval and the International Tax Co-Operative Report

The OECD reviews a jurisdiction’s tax regime in relation to its compliance with Exchange of Information on Request (EOIR), Automatic Exchange of Information (AEOI), and Base Erosion and Profit Shifting (BEPS) tax planning strategies. Furthermore, these are considered in relation to intellectual property, finance and leasing, banking and insurance, distribution and service centres, shipping, holding company and fund management regimes.

The 2017 OECD International Tax Co-Operative Report confirmed that Malta follows all EU tax directives and that there are no “harmful features” within its tax regime for the purpose of base erosion and profit shifting. The Minister of Finance, Edward Scicluna responded to the report as follows: “Indicators just published by the OECD portray Malta as a tax-compliant jurisdiction […] Thus, while we intend to continue to be one of the competitive choices in the Mediterranean for investors, we are resolute to keep to the best international standards on taxation matters”.

As part of continued efforts to extend transparency, Malta complies with EOIR and has signed the Multilateral Competent Authority Agreement for Country-by-Country Reporting (CbCR MCAA), an information exchange network which enables signatories to automatically exchange Country-by-Country Reports with each other that relate to multinational enterprises.

For more information on Malta's tax regime

Contact Henno Kotze in Malta.