Guide, not advice
Tax accounting rules in Malta: the five tax accounts
Updated
Whether a Maltese dividend carries a refund is decided before it is paid, by which account the profits were allocated to. That decides most real cases.
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How this calculator works
- The company rate is 35 cents on every euro of chargeable income for every company and body corporate, article 56(6) of the Income Tax Act (Cap. 123). There is no reduced Maltese company rate; the relief is entirely at shareholder level.
- The refund fractions are those in article 48(4) and 48(4A) of the Income Tax Management Act (Cap. 372). Six-sevenths of the Advance Company Income Tax applies on a dividend from the Maltese taxed account or the foreign income account.
- Five-sevenths where the profits are passive interest or royalties, or dividends from a participating holding that fails the article 12(1)(u) conditions. Two-thirds of the Malta tax where the dividend comes from the foreign income account and the company claimed relief of double taxation. A full refund where foreign income account profits derive from a participating holding or its disposal.
- The calculator applies the fraction to the tax pertaining to the profits actually distributed. Retained profits generate no refund until they are distributed, which is why the distribution percentage changes the answer.
- A statutory cap applies in both sub-articles: the refund shall in no case exceed the amount of tax actually paid by the company to the Commissioner on the distributed profits. Where double taxation relief reduced the tax paid, this tool's two-thirds figure can overstate the entitlement. Treat the 2/3rds line as an upper bound; have it computed on real numbers.
- The refund is a shareholder entitlement, claimable only by a person registered for the purpose in the prescribed manner. The Commissioner pays it not later than the fourteenth day after it becomes due. That can be extended by twelve months where further due diligence verification is required (article 48(8)).
- Not modelled: the company's own tax computation, allocation of profits between the five tax accounts, and tax accounted for under the investment income provisions. Nor the tax the shareholder pays in their own country of residence, or the EU global minimum tax for large groups. This tool computes a statutory fraction; not whether you qualify for it.
The five accounts
Article 2(1) of the Income Tax Act defines distributable profits as allocated to five accounts, and the definitions themselves set the order of allocation.
- Final tax account
- The account to which distributable profits that have suffered tax, calculated in such manner and amount as may be prescribed, are allocated before anything is allocated to any other taxed account. It takes first priority.
- Immovable property account
- The account to which distributable profits that have suffered tax and are not allocated to the final tax account are allocated, before any allocation to the other taxed accounts.
- Foreign income account
- Profits from royalties and similar income arising outside Malta, and from dividends, capital gains, interest, rents and other income derived from investments situated outside Malta, to the extent they result from taxable income and are shown as part of chargeable income.
- Maltese taxed account
- Profits of the company that are not included in the foreign income account and that have suffered tax.
- Untaxed account
- Total distributable profits, or accumulated losses, less the total allocated to the other accounts. It is the residual, not a category in its own right.
How the tax refund system in Malta uses the accounts
Article 48(4A) of the Income Tax Management Act attaches the six-sevenths and five-sevenths refunds to a dividend paid from the Maltese taxed account or the foreign income account.
Article 48(4) attaches the two-thirds refund, and the full refund on participating-holding profits, to a dividend paid from the foreign income account. Neither sub-article extends to a dividend paid out of the final tax account or the immovable property account.
| Account | Refund route | Fraction |
|---|---|---|
| Maltese taxed account | Article 48(4A) | 6/7ths, or 5/7ths on passive interest and royalties |
| Foreign income account, no double taxation relief claimed | Article 48(4A) | 6/7ths, or 5/7ths on passive interest and royalties |
| Foreign income account, double taxation relief claimed | Article 48(4) | 2/3rds of the Malta tax paid |
| Foreign income account, participating holding or its disposal | Article 48(4)(b) | Full refund, subject to the anti-abuse conditions |
| Final tax account | None in article 48(4) or (4A) | Not applicable |
| Immovable property account | None in article 48(4) or (4A) | Not applicable |
Why property profits sit outside the refund
Profits from Maltese immovable property go to the immovable property account. Profits taxed under a final withholding charge go to the final tax account. Article 5A(4)(a) and article 31D(6) of the Income Tax Act each direct a company to allocate the relevant profits to the final tax account.
Neither account appears in the refund sub-articles. That is why a Maltese property-holding company does not produce the effective rate that a trading company does.
Allocation is a computation made by the company's tax practitioner from the year's actual income, not something a website can infer from a description of a business. Treat this page as a map of the machinery and get the allocation done on your figures.