The corporate tax rate payable in Malta stands at 35%. Malta has a single imputation system that avoids double taxation on companies and shareholders respectively. In fact, individual shareholders receive a refund of 6/7th on any tax paid in Malta upon distribution of dividends. This makes the effective rate of tax in Malta at 5%.
A company in such sectors can claim tax credits equivalent to 30% or 50% (depending on its size) of either the cost of capital investment including plant, machine and equipment or of 2 years wages for employees engaged between now and December 2013.
Moreover, tax liability can be further reduced through a mechanism of tax credits that Malta Enterprise grants to enterprises in selected sectors.
Malta has tax treaties with more than 65 countries which enhance the incentives provided by Maltese domestic legislation. Most of these treaties ensure such profits generated in Malta are either exempt from tax in the country of residence of the investor, or that such a country will provide a tax credit for the Malta tax spared as a consequence of the incentives Malta provides. Agreements with another 15 countries are currently being finalised.
The incentive gives fiscal benefits to persons (individuals and enterprises) that own the rights to patented intellectual property and are receiving income in the form of royalties.
The objective of this initiative is to encourage researchers to exploit intellectual property through the licensing of patented knowledge. The scheme should also encourage investment in research and knowledge creation and exploitation of intellectual property.
Tax credits are available for enterprises investing in Industrial Research & Experimental Development. The tax credit percentage is related to the size of the enterprise. Additionally bonuses are provided to enterprise participating in collaborative projects with other industry partners or research organisations. Eligible costs include:
Investment Aid Tax Credits support enterprise in investment and job creation. The scheme is mainly focused on attracting new investment projects and promoting expansion or diversification of existing enterprises. This incentive is available to all sectors except specifically maritime, training and non-Maintenance Repair & Overhaul aviation services.
Eligible enterprises, as defined in the incentive guideline document, can benefit from tax credits calculated as a percentage of the value which is set according to the enterprise size. The principle beneficiaries are enterprises engaged in manufacturing, ICT development activities, call centres, pharmaceuticals, biotechnology, filming and audio-visual industries.
Tax credits are computed as a percentage of either the value of capital investment or the value of wages for 24 months covering new jobs created as a result of an investment project.
The tax credits which are not utilised during a particular year are carried forward to subsequent years.