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Malta has become a highly attractive jurisdiction for corporate tax planning in Europe, offering companies the opportunity to plan taxation through the creation of a Fiscal Unit. This structure allows groups of companies to submit a single consolidated corporate tax return and pay a flat 5% corporate tax on the group’s profits, bypassing the traditional 35% corporate tax and the need to wait for refunds. This simplifies cash flow, reduces administrative burden, and provides greater certainty for international businesses.
To qualify for a Fiscal Unit in Malta, certain conditions must be met. The group must include at least one Maltese company, the parent company must own at least 95% of the subsidiary, and the Fiscal Unit must be formally registered with the Malta tax authorities.
Three Practical Options for Forming a Fiscal Unit in Malta
1. Two Maltese Companies
This is the most straightforward scenario. Both companies are incorporated in Malta, with the parent holding at least 95% of the subsidiary.
Example:
Malta Inc A owns 100% of Malta Inc B. One company serves as the holding entity, while the other is trading. Both are registered into a Fiscal Unit.
Advantages:
- Consolidated tax return for the entire group – simplified and straightforward, as both companies were registered locally from the ground up
- Flat 5% corporate tax on profits – no refunds required
- Minimal cross-border complications
2. Foreign Parent + Maltese Subsidiary
In this scenario, a foreign company acts as the parent, while a Maltese company serves as the trading subsidiary included in the Fiscal Unit.
Example:
ForeignCo Ltd (UK) owns 100% of Malta Sub Ltd. The Maltese subsidiary joins the Fiscal Unit with the foreign parent.
Advantages:
- Access Maltese tax benefits for profits generated locally
- Flat 5% corporate tax on the group’s profits, avoiding the 35% upfront tax and refund process
- Consolidated reporting for the Group
- Cost-efficient: there’s no need to register the parent company in Malta if your foreign holding is already established
Important Note:
If you already operate a company abroad and intend to use it as the parent of a Fiscal Unit, it must function as a holding company to own shares of the Maltese subsidiary. The Maltese company must be actively trading, generating all taxable income for the group. The reporting periods for both companies should be aligned.
3. Private Foundation + Maltese Company
A Maltese private foundation holds 100% of a Maltese limited company, forming a Fiscal Unit.
Example:
Malta Foundation owns Malta Tech Ltd., acting as the parent company.
Advantages:
- Protects assets and intellectual property (IP)
- Flexible governance and succession planning
- Flat 5% corporate tax on Fiscal Unit profits, with no refunds required
This structure is ideal for families, investment groups, and founders seeking a combination of tax efficiency, asset protection, and operational flexibility.
How a Fiscal Unit Works in Practice
- Assess the Group Structure
Identify which companies or foundations will be included and verify that the ownership threshold of 95% or more is met. If your Private Foundation acts as the parent company of a group, ensure that the taxation mode “as a company” is selected for the Malta Foundation. - Register Maltese Entities
Ensure all Maltese subsidiaries or entities are properly incorporated. - Register the Fiscal Unit
Submit the Fiscal Unit registration with the Malta tax authorities via a local representative. - Submit Consolidated Reporting
File tax returns as a group, applying the 5% flat corporate tax to all profits. - Maintain Compliance
Ensure ongoing adherence to registration, reporting, and local compliance obligations.
Real-Life Examples of Fiscal Units in Malta
- A German entrepreneur launches a Malta Ltd to serve EU clients with software services. By forming a Fiscal Unit linking his German holding company with the Maltese trading subsidiary, the group benefits from a 5% corporate tax rate, avoiding the 35% standard tax and cumbersome refund procedures.
- A BVI family holding establishes a Malta company to manage its European investments and subsidiaries. The Malta structure allows the group to consolidate dividends, enhance tax efficiency, and benefit from Malta’s extensive network of double taxation treaties. With transparent reporting and a flat 5% tax on profits through a Fiscal Unit or strategic dividend planning, the Malta company simplifies administration while maximizing returns for international shareholders.
- A fintech startup forms a Maltese foundation and operating company. The Fiscal Unit ensures low tax, asset protection, and consolidated compliance.
How 1st Step Supports Fiscal Unit Formation in Malta
Forming a Fiscal Unit can be complex, particularly with mixed international structures. 1st Step provides end-to-end guidance, ensuring compliance and maximising tax efficiency:
- Expert advice on optimal Fiscal Unit structuring
- Incorporation of Maltese companies and private foundations
- Handling all registrations and filings with Maltese tax authorities
- Drafting shareholder agreements and internal documentation
- Preparing consolidated reporting templates and guidance
- Ongoing support for compliance, updates, and group changes
With 1st Step, businesses can establish Fiscal Units efficiently, reduce administrative burdens, and improve tax planning and cash flow across their corporate groups.
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