MALTA Law and Practice Contributed by: Donald Vella and Kirsten Debono Huskinson, Camilleri Preziosi Advocates
2. Corporate Tax Regime 2.1 Taxable Profits
• Married rates: (a) up to EUR15,000: 0% (subtract nothing); (b) EUR15,001 to EUR23,000: 15% (subtract EUR2,250); (c) EUR23,001 to EUR60,000: 25% (subtract EUR4,550); and (d) EUR60,001 and over: 35% (subtract EUR10,550). • Married rates with one child: (a) up to EUR17,500: 0% (subtract nothing); (b) EUR17,501 to EUR26,500: 15% (subtract EUR2,625); (c) EUR26,501 to EUR60,000: 25% (subtract EUR5,275); and (d) EUR60,001 and over: 35% (subtract EUR11,275). • Married rates with two children or more: (a) up to EUR22,500: 0% (subtract nothing); (b) EUR22,501 to EUR32,000: 15% (subtract EUR3,375); (c) EUR32,001 to EUR60,000: 25% (subtract EUR6,575); and (d) EUR60,001 and over: 35% (subtract EUR12,575). • Parent rates: (a) up to EUR13,000: 0% (subtract nothing); (b) EUR13,001 to EUR17,500: 15% (subtract EUR1,950); (c) EUR17,501 to EUR60,000: 25% (subtract EUR3,700); and (d) EUR60,001 and over: 35% (subtract EUR9,700). • Parent rates with one child: (a) up to EUR14,500: 0% (subtract nothing); (b) EUR14,501 to EUR21,000: 15% (subtract EUR2,175); (c) EUR21,001 to EUR60,000: 25% (subtract EUR4,275); and (d) EUR60,001 and over: 35% (subtract EUR10,275). • Parent rates with two children or more: (a) up to EUR18,500: 0% (subtract nothing); (b) EUR18,501 to EUR25,500: 15% (subtract EUR2,775); (c) EUR25,501 to EUR60,000: 25% (subtract EUR5,325); and (d) EUR60,001 and over: 35% (subtract EUR11,325).
The accounts of a Maltese company are drawn up in accordance with the accounting standards set out in the International Financial Reporting Standards (IFRS). Before arriving at the taxable income for a certain year of assessment, a determination of profits made according to the IFRS principles may be subject to adjustments as imposed by the ITA, such as fis - cally deductible expenses and elements of the profits deemed to be exempt from income tax by virtue of a specific exemption contemplated by the ITA. A number of expenses that may reduce the profits of a Maltese company from an accounting perspective may not be allowable or deductible from a tax per - spective and would therefore need to be added back to the profit figure in order to calculate the chargeable income for Maltese tax purposes. This mainly applies in respect of provisions, unrealised expenses and for - eign exchange differences, as well as gratuitous pay - ments (such as donations). Conversely, Maltese tax law may allow for certain deductions to the taxable profits of a company that are not contemplated by the applicable accounting principles. One of the more notable adjustments relevant from a tax perspective is that expenses that are wholly and exclusively incurred in the production of the income of the business are allowable deductions for income tax purposes. On the other hand, expenses that are not business-related, are of a capital nature, are recover - able from any insurance or are of a gratuitous nature are, in principle, not deductible for income tax purpos - es. That being said, the ITA does present a number of specific instances where it explicitly departs from the general principle that only expenditure of a revenue nature is allowable as a deduction against chargeable income, as is evident from the permissible deductions for certain capital allowances in terms of wear and tear of specific categories of fixed assets. Expenses or amounts that have not actually been incurred, such as unrealised exchange differences or provisions, are not deductible for Maltese income tax purposes.
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