MALTA Law and Practice Contributed by: Rosanne Bonnici and Rebecca Diacono, Fenech & Fenech Advocates
funds presumed to be income in nature would thus be taxed in Malta at this reduced rate. Beneficiaries under the GRP are also issued a residence card, which serves as a Schengen visa. The GRP, TRP and MRP shall remain open to applications till 31st December 2026. Individuals who submit an application by 31st December 2026 shall be in a position to benefit from either of the TRP, GRP or MRP for five years and up until 31st December 2031 at the latest. Effective 1st January 2027, the Individual Tax Pro - gramme Rules (the “ITPR”) shall come into force. The ITPR have effectively consolidated the GRP, TRP and MRP (amongst other programmes) into one set of rules. The key changes are the following: • whilst the flat rate of tax of 15% on foreign-sourced income remitted to Malta remains unchanged, the minimum annual tax has been increased as fol - lows: • GRP and TRP from EUR15,000 to EUR35,000; • MRP from EUR7,500 to EUR15,000; and • a beneficiary shall hold his status under the ITPR for a five-year period, subject to renewal. A transition period for those beneficiaries who already hold TRP, GRP or MRP status under the current rules has been introduced. Beneficiaries under the current programmes may continue to benefit from these rules for a further five years, until 31st December 2031 at the latest. While not a tax programme per se, effective 1 January 2024, Malta introduced the Nomad Residence Per - mits (Income Tax) Rules, which apply to third-country nationals who hold a Nomad Residence Permit issued by the Residency Malta Agency. These Rules provide for a reduced flat rate tax of 10% on authorised work carried out by the nomad worker in Malta. The Rules further contemplate that the nomad worker would benefit from an exemption from tax on authorised work carried out in Malta during their first 12 months, subject to the nomad worker’s stay in Malta being of a casual nature. Companies A Maltese company, as defined, is deemed to be resi - dent and domiciled in Malta by reason of its incor -
poration in terms of Maltese law and, accordingly, is taxable in Malta on a worldwide basis, subject to any applicable double tax treaties. A foreign company that is effectively managed and controlled in Malta is tax-resident in Malta and, accordingly, is taxable on a remittance basis. For income tax purposes, the term “company” includes other entities, such as part - nerships and foundations, either by operation of the law or upon registration by the entity concerned to be taxed as such. The standard corporate tax rate is 35% when applied to taxable income (ie, income minus a generous range of tax deductions, including the recently introduced notional interest deduction that intends to provide for equivalent tax treatment of debt and equity financing by allowing an additional deduction for the amount of return on equity financing, such as retained earnings). When a company distributes dividends out of profits on which it has paid tax at 35%, no further tax is due from the shareholders and a credit for the tax paid by the distributing company is available to the sharehold - ers against their tax liability in terms of the full impu - tation system of taxation applicable to companies. Subject to statutory conditions, a dividend payment may trigger a right in the shareholder’s hands to a tax- exempt refund of part or all of the Maltese tax paid by the company on the distributed profits. The standard The ITA also includes an attractive participation exemption, covering holdings of as little as 5% of equity, subject to various other conditions. The exemption applies, inter alia, to any gains or profits that a resident corporate taxpayer may derive from a holding (covering shareholdings, partnership interests, interests in investment funds, etc) that qualifies as a “participating holding”, subject as always to statutory conditions. Tax grouping More recently, Malta introduced tax grouping rules that apply to companies (as defined) and allow a group to be treated as a “fiscal unit” for income tax purposes. Where a group exercises this option, the parent com - pany (which may be non-resident) shall become the “principal taxpayer”, with the underlying subsidiaries tax refund is six-sevenths. Participation exemption
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