Malta Introduces 15% Elective Final Tax Regime
Malta has introduced a new elective tax regime– Final Income Tax Without Imputation Regulations (FITWI).
This regime offers companies an alternative to Malta’s long-standing full imputation system, where corporate profits are taxed at 35% but shareholders can claim refunds, reducing the effective rate to as low as 5%.
Under the new rules, companies can opt to be taxed at a flat 15% on chargeable income, with the tax being final, non-refundable, and non-creditable. This option simplifies compliance and provides certainty, particularly for groups exposed to the OECD’s
Pillar Two global minimum tax rules, which require large multinational groups to pay at least 15% tax worldwide.
Key features include:
- A five-year lock-in once a company elects into the regime.
- A safeguard rule ensuring tax paid is not lower than under the traditional system after refunds.
- Certain exclusions, including some dividend income and income already taxed at a final rate.
The 15% regime suits businesses seeking simplicity and alignment with international tax obligations, while the refund system may
remain more attractive for those benefiting from lower effective rates.
Before electing, companies should:
- Model five-year tax outcomes under both systems.
- Assess global tax exposure, especially under Pillar Two.
- Consider cash flow impacts and group structure.
FITQI is intended to simplify the interaction of the domestic income tax system with specific elements of the global minimum tax ruleset. The enactment of FITWI is not tantamount to a revocation of Malta’s election to defer the Council Directive (EU) 2022/2523 (i.e., the Pillar Two Directive). Neither should it be construed as the introduction of a Qualified Domestic Minimum Top-up Tax (‘QDMTT’).
DANIEL CAMILLERI 1st Floor, Suite 3, Central Business Centre, Mdina Road, Zebbug 9015 MALTA Email : Daniel@cg.com.mt Ritianne@cg.com.mt Website : http://cg.com.mt/