One of Malta’s key advantages is the extensive network of double tax treaties with almost all the important OECD countries. Malta grants relief from double taxation under the credit method on the source by source and country by country bases. The Maltese tax regime governing double taxation relief includes not only treaty relief but also unilateral relief, thereby ensuring that income arising from overseas is not subject to double taxation, even if there is no double taxation agreement in existence.
In addition, amendments to local tax legislation, made in agreement with the EU, have resulted in the extension of the refundable tax credit system for all companies distributing their revenues as dividends to their shareholders, both resident and non-resident, regardless of their legal form or status, the business activity exercised, their size, sector, and the source and type of the income derived by the companies. The interaction of Malta’s tax system with its double tax treaty network means that, with proper planning and structuring, fiscal efficiency may be achieved.
One of the key factors of Malta's tax system is that it is a full imputation system, and has been since 1948 when income tax legislation was first enacted. Malta is in fact the only member state of the EU with a full imputation system of taxation in force meaning that profits taxed at a corporate level are not subject to further tax in the shareholder's hands, and, depending upon the rate of tax applicable to the recipient of dividends, may trigger off the entitlement to a tax refund in the hands of the recipient. As a result of this, shareholders of a Maltese company should, upon a distribution of profits, be eligible to claim refunds of the Malta tax paid at the corporate level.
In terms of domestic legislation, no withholding taxes are imposed on dividends, interest and royalties paid to non-residents, as long as various conditions are complied with. In addition, no Maltese tax is imposed on gains realised from transfers of corporate securities by non-residents, again as long as the relevant conditions are complied with, particularly that the sole or main assets of the company whose securities are being transferred do not consist of Maltese immovable property.