Q & A – Taxation

International Trading Companies are supposed to be trading. This means that income from investments is not considered as trading income and therefore would not benefit for the tax rebates under the ITC regime

Once discovered by the Revenue that the company also has income from investments, this may also result in the withdrawal of the ITC status of the company, and hence even your trading income will lose the current tax benefits.

We therefore strongly suggest against such an action.

No, an objection is not valid against a PT claim form, but the Commissioner of Inland Revenue allows you to reduce such claim through a prescribed form, called the Provisional Tax Reduction form.

This has to be submitted before the prescribed payment date. The claimed tax can be reduced up to zero.

One has to note, however, that there is an anti abuse provision in the law.Β  If one claims a reduction in Provisional Tax and subsequently this request is proved to be overstated, then the tax authorities will charge interest at 1% on the under paid tax from the date that such tax was due.

The corporate tax rate on the profits of companies registered in Malta is 35%.

However, in view of the adoption of the IMPUTATION system of taxation, the profit earned by a company and the tax paid by such company are deemed to be earned and paid on behalf of the shareholders.

For non resident shareholders whose income from Malta is taxed at only 5%, the imputation system could result in substantial tax savings since, when receiving the dividends from their Malta company, they also receive a tax certificate of 35% representing the tax paid on that dividend.Β  Given that their own person tax liability on the Malta profit is only 5%, this means that they are entitled to a rebate of 30/35 of all tax paid by the company on their dividend.

This brings the effective tax suffered earned by their Malta company to just 5%.

Further information on this subject can be found in our article Tax Provisions for International Trading Companies.