We at Dr. Kresse International Law Firm and its consulting arm KME Consulting specialize in corporate taxation advisory – from income and value added (VAT) tax compliance to special tax regimes, such as I-Gaming taxation.

We also advise private clients on tax optimisation via Malta specific residency tax schemes.

The Maltese Company Taxation

Malta’s Corporate Tax System is based on a well-regulated jurisdiction and conforms to international best practice.

Maltese Company Taxation for Small and Medium Sized Firms - The Benefits of the 'Fiscal Unit'

Company taxation in Malta is based on clear legal principles and practice, with the Maltese tax authorities fully complying with international best practice principles.

Since 2021 (the first time being for the year of assessment 2020), the tax model preferred by most clients is usually the so-called 'Fiscal Unit'. This offers simplified and faster tax processing in the regular Maltese 'holding - trading structure'.

In the event that the parent company chooses the fiscal unit option, each subsidiary becomes a member of the fiscal unit. The subsidiaries are from then on referred to as 'transparent entities' within the tax unity.

Under these rules, a company that is a member of a tax unit is no longer required to pay the 35% income tax that could be recovered in whole or in part (usually 6/7 = 30%) from its shareholders at a later date (Tax Refund Model). Rather, the tax refund due to the company is taken into account when calculating the final tax liability of the fiscal unit and is settled by the main tax payer of such unit, namely the holding company.This attractive consolidated tax rate is applied even if the members of the fiscal unity do not distribute the dividends. As a result, the profit of the entire tax unit is then taxed at the lower tax rate of 5%.

What are the requirements for the 'Fiscal Unit'

In order to form a tax unit for the consolidation of company taxes, the parent company must be resident in Malta. In addition, all companies must have the same financial year. Furthermore, all companies must be companies registered in Malta.

Besides this, the parent company has to fulfil at least two of the following requirements:

  • hold 95% of the shares in the subsidiary;
  • be entitled to at least 95% of the profits;
  • in the event of liquidation - be entitled to 95% of the assets.

At this point, it is important to emphasize a further mandatory prerequisite: For the establishment of the 'Fiscal Unit' it is of decisive importance that all tax liabilities from the past have been settled and that in particular, the quarterly VAT payments have been made regularly and on time.
With the Fiscal Unit, Malta offers a legally secure, efficient and highly attractive way of handling corporate taxation within a group of companies.

The Maltese Holding Regime

Participating Holding

A special treatment is offered to Maltese Holdings, giving the choice of a full tax refund or a total tax exemption on any dividend income or capital gains, provided it qualifies as a “participating holding”.

The introduction of the participation exemption in 2007 has enhanced Malta’s position as a premier EU holding company location.

A company registered in Malta would have a “participating holding” in a company incorporated abroad, where the following conditions are satisfied:

The shares held by the Malta company in the non-resident company qualify as ‘equity shares’, i.e. shares which carry the right to any two of the following:

  • Right to vote
  • Right to dividends
  • Right to surplus assets in the event of the winding up of the resident and non-resident company.

The definition of participating holding as included under Article 2 of the Income Tax Act provides six alternative situations in which a holding would be treated as a Participating Holding.

The most common being where a company holds directly at least five (5) per cent of the equity shares of a company not resident in Malta and whose capital is wholly or partly divided into shares.

Details and conditions concerning the other five alternatives, in the cases of which a shareholding of less than 5% may still qualify as a “participating holding”, will be discussed with interested clients on an individual case to case basis.

Participating Exemption

Malta Double Taxation Treaties (DTT)

The fact that Malta has meanwhile entered into over 70 Double Taxation Treaties leads to the result that the use of Maltese Companies is considered as a valuable tool in International Tax Planning.

List of countries, Malta has signed a DTT with as of January 2016:

(* Treaty signed, but not yet entered into force)

European Union

Austria, Belgium*, Bulgaria, Cyprus, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, U.K.


Albania, Croatia, Guernsey Iceland, Norway, Isle of Man, Jersey, Lichtenstein, Moldova, Montenegro, Norway, San Marino, Serbia, Switzerland, Ukraine*

Outside of Europe

Australia, Bahrain, Barbados, Canada, China, Curacao*, Egypt, Georgia, Hong Kong, India, Israel, Jordan, Korea (Rep.), Kuwait, Lebanon, Libya, Malaysia, Mauritius, Mexico, Morocco, Pakistan, Qatar, Russia, Saudi Arabia, Singapore, South Africa, Syria, Tunisia, Turkey, U.A.E., Uruguay, U.S.A.

DTT Germany – Malta

Double Taxation Treaties (DTT) have been concluded between Malta and important trading partners, in order to avoid the double taxation of income and provide low withholding taxes on dividends, income and royalties for companies where foreign investors are not resident in Malta, but their business is located here and produces profits.

Germany is one of Malta’s major trading partners

In 2014, the volume of Malta’s bilateral trade with Germany for imports from Germany amounted to EUR 314 million, and for Maltese exports to Germany to EUR 300 million. Germany thus ranks fourth as a supplier of imports and second as a buyer of exports.

The DTT between Malta and Germany was concluded in March 2001 and has been in force since 17th December 2001; in June 2010 a new protocol regarding information exchange and transparency was added.

Meanwhile Malta has become one of the important hubs for German investment in the Mediterranean region. This applies particularly to the financial services, aircraft services, pharmaceutical and gaming industries. Over 150 “German” companies (companies with a majority of German shareholders) are currently registered in Malta.

Scope of the DTT

The DTT, which follows OECD standards, applies among others to income tax, corporation tax, capital tax and trade tax. It is structured into the following sections:

  • Applicability (Art. 1,2,28)
  • General definitions (Art. 3 – 5, such as Resident and Permanent Establishment)
  • Taxation of income (Art. 6 – 21)
  • Taxation of capital (Art.22)
  • Avoidance of Double Taxation in the State of Residence (Art. 23)
  • Specific provisions (Art. 24 – 27, 28, such as non-discrimination, mutual agreement procedure, exchange of information and limitation of benefits)
  • Final provisions (Art. 29 – 32)

We at Kresse International advise German clients on a case to case basis about their specific needs when it comes to the DTT.