This question is not particularly relevant for foreign business owners who establish a company in Malta to reduce their own tax burden. The question of fairness is more important when it comes to the evaluation of the tax system with regards to EU laws. The EU laws have clear principles, stating a national tax system cannot discriminate against certain groups of people, as this would not be in line with anti-discrimination laws.
If you are an international entrepreneur and establish a limited company in Malta you may be able to profit from the 6/7 tax refund. For this, you will need to plan ahead in the long-term. Let us look at the Maltese tax system now.
Tax equity in Malta
It is generally possible for Maltese citizens to get a tax refund. However, Malta has a flat-rate system for income tax, and the refund would be taxable income and therefore income tax would have to be paid. This is different when a company pays the full 35% corporate tax. The taxes have already been paid then, and the income would not be taxed again. For this reason, the tax refund is simply not useful for a Maltese entrepreneur. The tax would merely be shifted and there would not be any savings.
This is the principle that ensures tax equity in Malta, and the system is conform with EU laws.
When I compare the Maltese tax system with other systems in the EU, I find that many things are much simpler. There are less exceptions with the taxations, which makes the system much clearer. A foreign owned company that moves their operations to Malta has the opportunity to reduce their corporate tax burden to an effective 5%. This is effectively the lowest rate in the whole of the European Union. The office of Dr. Werner & Partner has helped many clients to establish a company in Malta and take advantage of the tax benefits. If you would like more information, please feel free to contact us.
