MALTA Law and Practice Contributed by: Donald Vella and Kirsten Debono Huskinson, Camilleri Preziosi Advocates
tain persons, including any Maltese-resident individu - als and any non-resident persons who are owned and controlled by, or act on behalf of, an individual ordi - narily resident and domiciled in Malta. As the payor of the dividend, the Maltese company would need to withhold tax at the rate of 15% upon any such divi - dend distribution. The participation exemption detailed in 2.7 Capital Gains can also be applied to dividend income; how - ever, this is subject to the satisfaction of certain anti- abuse provisions, as detailed in 6.3 Dividends From Foreign Subsidiaries . Capital Gains Maltese tax-resident persons are subject to income tax on capital gains derived from the transfer of cer - tain chargeable capital assets, as contemplated by the ITA, at the progressive rates detailed in 1.4 Appli- cable Corporate and Individual Tax Rates , which go up to 35%. It may be pertinent to note that persons who are resi - dent but not domiciled, or domiciled but not resident, in Malta are not subject to tax on foreign source capi - tal gains, regardless of whether or not they are remit - ted to Malta. 3.5 Taxation of Individuals on Shares in Public Corporations The receipt by individuals of dividends from a publicly traded company is treated from a tax perspective in the same manner as when such dividends are paid by closely held companies (ie, the full imputation system applies). The same applies to capital gains; however, it is pertinent to note that gains or profits derived from the transfer of securities listed, or in consequence of a listing, on a stock exchange recognised by the Com - missioner for Tax and Customs (not being securities in a collective scheme) are not subject to tax in Malta. 4. Taxation of Inbound Investments 4.1 Application of Withholding Taxes Subject to any applicable provisions in double tax trea - ties, distributions of dividends and payments of inter - est or royalties from a Maltese company to a resident
or non-resident person are not generally subject to any withholding tax. However, a 15% withholding tax may apply where profits are distributed to a resident person of the payer company’s “untaxed account”, and on certain investment income as defined under the ITA. Moreover, payments of any income chargeable to tax under the provisions of the ITA to non-resident per - sons (other than a company or other person deriving income from entertainment activities exercised in Mal - ta), or to persons resident in Malta on behalf of such non-resident persons, shall be subject to a withhold - ing tax at the rate of 25%. Where the payment is made to a non-resident company or to resident persons on behalf of such non-resident company, a withholding tax at the rate of 35% shall apply. 4.2 Key Treaty Jurisdictions for Inbound Investment Malta has concluded bilateral double tax treaties with more than 70 jurisdictions, both within and outside the EU. The majority of these double tax treaties are based on the OECD Model Tax Convention and have also been modified as a result of the implementation of the OECD Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, commonly referred to as the “MLI”, in Malta. 4.3 Tax Authority Scrutiny of “Treaty Shopping” Practices The local tax authorities in Malta do not specifically challenge the use by non-treaty country residents of corporate entities established in countries that have concluded a double tax treaty with Malta. Maltese tax law does not impose any specific rules or require - ments on the entitlement to treaty benefits of non- treaty country residents when such non-treaty country residents have established an entity in a country with which Malta has concluded a treaty. However, company activities and transactions from and to Maltese companies are subject to a corpo - rate general anti-abuse rule contemplated by the ITA. The tax authorities have the power to disregard any structure or scheme that reduces the amount of tax
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