A new 15% final tax has been introduced in Malta through the publication of the legal notice entitled Final Income Tax Without Imputation Regulations, 2025.
Under the new Regulations, as from basis year 2024, any body of persons qualifying as a company or opting to be treated as a company under the Income Tax Act, may opt to have its chargeable income taxed at the rate of 15% instead of being taxed under the standard provisions of the Income Tax Act.
The new Regulations make it clear that the15% tax is final and not refundable or creditable to any person, thereby disabling any possibility of shareholders or any other person to access the tax refund system under the standard provisions of the Income Tax Acts.
Any profits taxed in terms of the new Regulations are allocated to the Final Tax Account (‘FTA’), the distributions from which are not eligible for tax refunds. In any event, the 15% tax cannot be lower than the tax amount net of refunds under the refund system tax provisions.
The 15% final tax is not applicable to certain dividends and other income that is already subject to a final rate of tax.
In order to be subject to the final tax of 15%, a company must make an election through the submission of a form to the Malta Tax and Customs Administration (yet to be published) and once such election is made, the 15% final tax will apply for a minimum period of five consecutive years, after which the taxpayer may request to be taxed under standard provisions of the Income Tax Act.
KPMG observations
The introduction of the final tax of 15% is enacted in terms of the enabling provision passed through the Budget Measures Implementation Act earlier this year. It may be of interest to large groups falling within the OECD Pillar Two Tax Rules with operations in Malta which had low taxed income in Malta, as well as companies suffering from a cash flow disadvantage in Malta due to the operation of the tax refund system.
The final tax of 15% is not in the nature of a domestic top-up tax and the new Regulations do not alter previous announcements made of Malta’s intentions to defer the imposition of top-up tax mechanisms under the said Pillar Two Rules.
