Malta now gives companies an important choice. The traditional system remains unchanged: a Maltese company pays 35% corporate tax, and qualifying shareholders may later claim a refund. For typical trading income, the 6/7 refund can reduce the effective Malta tax burden to around 5%.
The alternative is the newer 15% final corporate tax regime. Qualifying companies may elect to pay 15% directly, with no shareholder refund afterwards.
So why choose 15% instead of 5%?
Because the lowest effective tax rate is not always the most practical option.
5%: lower final tax
On €1 million of qualifying profit:
- tax paid initially at 35%: €350,000
- potential shareholder refund: €300,000
- final effective Malta tax: €50,000
The result is highly attractive, but the company must first fund the full 35% payment and then complete the refund process.
15%: simpler cash flow
Under the final-tax regime:
- tax on €1 million profit: €150,000
- shareholder refund: none
- final Malta tax: €150,000
The overall tax cost is higher, but only €150,000 leaves the business instead of €350,000 upfront.
For some companies, that difference in working capital may justify the higher final tax cost.
For groups: 5% directly through a Fiscal Unit
Where a Malta company forms part of a qualifying group, a Fiscal Unit may provide another route. Instead of paying 35% first and claiming a refund later, the group may in suitable cases achieve an effective 5% Malta tax directly at group level, subject to the applicable fiscal-unit conditions and eligibility requirements.
For groups, this can combine the lower effective rate associated with the refund system with a more streamlined cash-flow position.
Which regime is more appropriate?
There is no universal answer. The traditional refund system may remain preferable where minimising the final effective Malta tax burden is the primary objective.
The 15% final-tax regime may be more suitable where the business places greater weight on cash-flow efficiency, predictability and a simpler tax position.
For qualifying groups, the Fiscal Unit should also be considered, as it may allow the group to access an effective 5% rate without the traditional refund cycle.
The correct analysis should therefore consider more than the headline rate. Profit levels, ownership structure, dividend policy, the nature of the income and expected cash requirements can all influence the outcome.
At 1st Step Solution, we assess the available Malta tax routes in the context of the wider corporate structure and model the expected tax and cash-flow impact before implementation.
For businesses establishing or reviewing a Maltese structure, the choice between the traditional refund mechanism, the 15% final-tax regime and, where applicable, the Fiscal Unit should be treated as a structuring decision rather than simply a tax-rate comparison.