Malta is a popular EU jurisdiction for SaaS founders because it combines (1) an English-speaking, common-law-influenced corporate environment, (2) an EU VAT framework that works well for cross-border subscriptions, and (3) a corporate tax system that can be very efficient in certain shareholder structures.
This article is general information, not legal/tax advice. Malta outcomes depend heavily on your shareholders’ residence, substance, where management decisions are made, and where your customers are located – get professional advice before you implement a structure.
Picking the right Maltese entity for SaaS
For most SaaS startups, the default is a Private Limited Liability Company (Ltd):
- Separate legal personality (good for contracts, IP, investment).
- Share structure suitable for founders/investors (ordinary shares, preference shares, option pools, etc.).
- Recognized and understood by EU counterparties and banks.
Typical early decisions:
- Shareholding & cap table (founders, employee options, future investors).
- Board and “management & control” (important for tax residence and substance).
- IP ownership (do you assign software/IP into Malta, license it in, or keep IP elsewhere?).
Formation and ongoing compliance (what to expect)
A standard Malta formation usually involves:
- Choosing a company name, registered office, directors, company secretary.
- Drafting and filing the memorandum/articles, identifying beneficial owners (KYC/AML).
- Setting up accounting, annual financial statements, corporate tax filings, and (if relevant) VAT registration/OSS setup.
Ongoing obligations commonly include:
- Annual return and statutory filings.
- Bookkeeping and audited financial statements (many Maltese companies require an audit depending on size/type).
- Corporate tax return and maintaining the “tax accounts” system (explained below).
Corporate tax in Malta: the “35% rate” and what actually happens
The headline rate: 35%
Maltese resident companies are generally taxed at a standard corporate income tax rate of 35%.
The key concept: the full imputation + shareholder refund mechanism
Malta operates a full imputation system: when profits are taxed in the company and later distributed, shareholders can generally claim refunds of part of the Malta tax paid (depending on the nature of the income). The policy goal is to reduce/eliminate economic double taxation on distributed profits.
Common refund outcomes (illustrative):
- 6/7 refund (often associated with trading/active income) → can yield an effective tax cost around 5% in many standard cases.
- 5/7 refund (often referenced for passive interest/royalties) → can yield an effective tax cost around 10% in the typical description.
- 2/3 refund may apply where double tax relief is claimed in certain setups.
- In specific participation-exemption contexts, outcomes can differ substantially (see below).
Important reality check for SaaS founders: the refund is claimed at shareholder level and the effective result depends on who the shareholders are, how they’re treated in their home country (e.g., CFC rules), and whether the structure is properly supported with substance and documentation.
Malta’s tax accounts: why your profit classification matters
Maltese companies allocate distributable profits into different “tax accounts” (e.g., Maltese Taxed Account, Foreign Income Account, Untaxed Account, etc.). This impacts what can be distributed and how refunds may work.
For a SaaS company, this often shows up when you have:
- Customers in many countries (foreign-source income considerations),
- Foreign tax suffered (with possible relief),
- Group structures (IP companies, operating companies, holding companies).
Participation exemption: when Malta can exempt certain dividends/capital gains
If your Malta company is (or becomes) a holding company (e.g., owning shares in subsidiaries), Malta has a well-known participation exemption regime that can provide 100% exemption on qualifying dividends and/or capital gains from a “participating holding,” subject to conditions and anti-abuse rules.
For SaaS groups, this can matter if you structure as:
- Malta HoldCo owning OpCos in other countries, or
- Malta entity owning IP/operating subsidiaries.
Withholding tax: often a major advantage for cross-border groups
A commonly cited feature is that Malta generally does not impose withholding tax on outbound dividends (and, in many summaries, interest/royalties to non-residents may also be exempt subject to conditions).
Why it matters for SaaS:
- If you distribute dividends to non-resident shareholders, the Malta-side withholding friction may be low.
- But your shareholders’ home countries may still tax dividends and/or apply CFC rules.
New option introduced in 2025: 15% “Final Income Tax Without Imputation” (FITWI)
In 2025, Malta introduced regulations allowing qualifying companies to elect a 15% final tax on chargeable income instead of the traditional imputation/refund system – meaning no shareholder refunds/credits under that regime.
When it can be relevant:
- If your structure makes the refund system less useful (or administratively burdensome),
- If you prefer a straightforward final outcome in Malta (still needs case-by-case analysis).
VAT for SaaS subscriptions: the part you can’t ignore
SaaS is typically treated as an electronically supplied service, so place-of-supply and VAT collection depend heavily on whether you sell B2B or B2C, and where your customer is located.
Malta’s standard VAT rate is 18% (reduced rates apply to specific supplies, but most SaaS subscriptions will be standard-rated where VAT applies).
Selling B2C across the EU: VAT is usually where the customer is
EU rules generally tax electronically supplied services in the Member State of the consumer, which is why the One Stop Shop (OSS) can be critical for SaaS selling to EU consumers.
Malta provides an OSS route via the Malta Tax and Customs Administration.
Selling B2B: VAT usually follows the customer (reverse charge often applies)
For many B2B scenarios in the EU, VAT is accounted for by the customer under reverse charge (subject to status/valid VAT numbers and invoicing rules). You’ll want tight onboarding (VAT ID validation, evidence of customer status, correct invoicing).
Practical SaaS VAT checklist
- Capture evidence of customer location (esp. B2C).
- Validate EU VAT IDs for B2B.
- Decide early whether you’ll use OSS for B2C EU sales.
- Keep clean product taxonomy (digital service vs training vs consulting can change VAT treatment).
Tax residence, substance, and “where the company is really run”
A Malta-incorporated company is generally treated as Malta resident; non-Malta incorporated companies can be resident if management and control are exercised in Malta.
For founders, this is not academic:
- Where are board meetings held?
- Where are key strategic decisions made?
- Do you have real operational substance (people, premises, decision-making) consistent with your profile?
Substance also affects:
- Treaty access,
- Audit/compliance risk,
- How other countries (and investors/banks) view the structure.
What a “good” Malta SaaS structure often looks like (conceptually)
A common pattern (not the only one) is:
- Malta Co signs customer contracts, employs staff, runs product and support.
- Clear VAT setup (OSS if needed).
- Thoughtful dividend strategy (refund system vs FITWI election, depending on shareholders).
- Strong governance and substance aligned with where decisions are made.
If you’re considering an IP holding approach (IP in Malta or licensing into Malta), get advice early: IP location influences transfer pricing, nexus, and sometimes VAT/customs for certain deliverables.
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