Malta dividend tax: 0% at the border and the refund that turns 35% into 5%
Malta withholds nothing on dividends. The company pays 35%, the shareholder claims 6/7ths back, the effective rate lands near 5%. The catch is cash flow.
Features writerSeptember 20268 min readMalta's corporate rate is 35%. Malta's effective rate on distributed trading profits is about 5%. Both numbers are true, they refer to the same profit, and the machinery between them is the reason people incorporate there. It is also the reason a Maltese company is a poor idea for anyone who cannot fund the gap.
Nothing is withheld on the way out
Start with the simple part. Malta imposes no withholding tax on dividends, to residents or to non-residents, to individuals or to companies, treaty or no treaty. There is no withholding on interest or royalties paid to non-residents either. Nothing is deducted at the border and no clearance is needed to pay a dividend abroad.
That alone is unusual in the European Union, and it is why Malta appears in holding structures that have nothing to do with the refund system.
Full imputation: the dividend is never taxed twice
Malta runs a full imputation system, one of the last in Europe. When a Maltese company pays tax on its profits and then distributes them, the tax already paid is imputed to the shareholder as a credit. A shareholder whose own rate is below 35% is refunded the difference; a shareholder at 35% pays nothing more. The dividend does not carry a second layer of tax in Malta at all.
For a Maltese-resident individual on the top rate, that is the end of the story. For a shareholder of any other kind, the refund system starts.
The refunds, and which one you get
The refund belongs to the shareholder, not the company, and it is claimed after the dividend has been paid and the company's tax settled. Which fraction applies depends on the character of the profit distributed:
| Profit distributed | Refund of Malta tax paid | Effective rate |
|---|---|---|
| Trading income | 6/7ths | about 5% |
| Passive interest and royalties | 5/7ths | about 10% |
| Profits where double-taxation relief was claimed | 2/3rds | varies |
| Profits from a participating holding, or its disposal | Full, or exemption claimed up front | 0% |
The 6/7ths case is the one the brochures quote. A company earns 100, pays 35, distributes 65, and the shareholder recovers 30 of the 35 — leaving about 5 in Malta on the original 100.
The participation exemption is the quieter and often better route: dividends and gains from a qualifying participating holding can be exempted at company level, so there is no 35% to pay and no refund to wait for. Where it is available it is strictly superior to the refund, because it never ties up the cash.
The catch nobody quotes: the float
The refund is not a rate. It is a cash-flow arrangement. The sequence is fixed and cannot be shortened by agreement:
- the company pays the full 35% to the Commissioner for Tax and Customs;
- the company distributes the dividend;
- the shareholder, who must already be registered with the tax authority, files the refund claim;
- the refund is paid after the tax has been received and the claim processed.
Between step one and step four the money is with the Maltese treasury. The statutory position is that the refund is due within fourteen days of the end of the month in which it becomes payable, but "becomes payable" depends on the company's tax return and payment being complete and correct. In practice a company should plan for its 35% to be out of reach for a period measured in months, not days, and a first-year company with a single large distribution feels this most.
That float is the real cost of the structure, and it is what makes the arrangement unsuitable for a business with thin working capital, however attractive the 5% looks in a spreadsheet.
Tax accounts decide the answer before you do
Maltese companies allocate profits to five tax accounts, and the account a dividend is paid from determines whether a refund is available at all:
- Maltese Taxed Account and Foreign Income Account — refunds available, at the fractions above;
- Immovable Property Account — profits from Maltese property; no refund;
- Final Tax Account — already finally taxed, no further tax and no refund;
- Untaxed Account — distributions from here to a resident individual can trigger a separate charge.
Structures built without regard to the accounts distribute from the wrong one and discover the refund is not there. This is bookkeeping, not planning, and it has to be right from the first year.
Who the shareholder is still matters
A non-resident shareholder pays no Maltese tax on the dividend and receives the refund in the currency in which the tax was paid. Whether the dividend is then taxed at home is a question for home: a shareholder in a country with controlled foreign company rules may find the Maltese profits attributed to them before any dividend is paid at all, which is the point at which the 5% stops being 5%.
A Maltese-resident non-domiciled shareholder is taxed on the remittance basis for foreign income, but a dividend from a Maltese company is Maltese income and is inside the charge. The non-dom advantage described in our Malta tax profile does not extend to it.
What is changing
The 35%-and-refund system is a domestic mechanism and has survived every round of European reform so far. The pressure now comes from the global minimum tax: groups with consolidated revenue above EUR 750m are in scope of the OECD Pillar Two rules as implemented in the EU, and an effective rate near 5% is exactly what those rules are designed to top up. Malta used the derogation open to member states with very few in-scope groups to delay applying the main charging rules, and has signalled a domestic top-up tax in due course. Nothing in this affects a company below the EUR 750m threshold, which is every company any reader of this page is likely to own.
Verdict
For an operating business with real substance in Malta and shareholders outside it, the refund system remains one of the most efficient arrangements in the European Union — and, unusually, one that is written into the statute rather than negotiated in a ruling.
Budget for the float, not just the rate. A structure that cannot survive its own 35% sitting with the treasury for two quarters is not a 5% structure; it is a 35% structure with a receivable.
Check the participation exemption before building the refund. Where the income is dividends or gains from a qualifying holding, exempting at company level beats reclaiming at shareholder level every time.
Details of setting the company up, and what it costs, are on our Malta company formation page.
The full, dated reference for this: Malta: tax at a glance.
Frequently asked
What is the dividend tax rate in Malta?
Zero at source. Malta imposes no withholding tax on dividends paid to shareholders, whether they are resident or non-resident, individual or corporate, and regardless of whether a tax treaty applies. Malta also withholds nothing on interest or royalties paid to non-residents. The tax that exists is at company level: profits are charged at 35%, and Malta's full imputation system credits that tax to the shareholder so the same profit is not taxed twice. A shareholder taxed below 35% is refunded the difference, and on distributed trading profits a further shareholder refund of six-sevenths of the Malta tax brings the effective burden on those profits to roughly 5%.
How does the Malta 6/7ths refund work?
The company pays corporate tax at 35% on its profits and then distributes a dividend. The shareholder, who must be registered with the Commissioner for Tax and Customs, claims a refund of six-sevenths of the Malta tax the company paid on the distributed trading profits. On 100 of profit the company pays 35, distributes 65, and the shareholder recovers 30, leaving about 5 in Malta. Other fractions apply to other kinds of income: five-sevenths on passive interest and royalties, giving about 10%, and two-thirds where the company claimed double-taxation relief. The refund belongs to the shareholder rather than the company, is claimed only after the tax has been paid and the dividend distributed, and is payable within fourteen days of the end of the month in which it falls due.
How long does it take to receive a Malta tax refund?
Longer than the statutory wording suggests. The refund becomes payable within fourteen days of the end of the month in which it falls due, but it only falls due once the company's tax return has been filed, the 35% has actually been received by the tax authority, the dividend has been distributed and the shareholder's claim has been processed. Each of those steps has its own timetable, and a shareholder who is not already registered adds another. A company should plan on its 35% being unavailable for a period measured in months rather than days, and should not commit that cash to working capital in the meantime. Where the participation exemption applies, the tax is never paid in the first place and the delay disappears.
What is the effective corporate tax rate in Malta?
About 5% on distributed trading profits, 10% on distributed passive interest and royalties, and 0% on income covered by the participation exemption. The headline rate is 35% and it is paid in full before any refund; the effective figures describe the position after the shareholder refund has been received. Profits that are retained rather than distributed stay taxed at 35%, because the refund is triggered by the distribution. Profits allocated to the Immovable Property Account, which holds income from Maltese real estate, carry no refund at all and remain taxed at 35%.
Do non-resident shareholders pay tax in Malta on dividends?
No. Malta does not withhold on dividends and does not tax a non-resident shareholder on a dividend received from a Maltese company. The shareholder can claim the refunds on the same basis as anyone else, and the refund is paid in the currency in which the underlying tax was paid. What Malta does not decide is the treatment at home: the dividend may be taxable in the shareholder's own country, and controlled foreign company rules there may attribute the Maltese profits to the shareholder before any dividend is paid at all. That is the point at which a 5% Maltese rate stops describing the real burden.
Does the global minimum tax affect Malta's refund system?
Only for very large groups. The OECD Pillar Two rules, as implemented across the European Union, apply to groups with consolidated revenue above EUR 750m, and an effective rate near 5% is precisely what those rules are designed to top up to 15%. Malta made use of the derogation available to member states hosting very few in-scope groups, delaying application of the main charging rules, and has signalled that a domestic top-up tax will follow. None of this reaches a company below the EUR 750m threshold, which covers essentially every privately held Maltese company. The refund system itself has not been repealed or restricted for those companies.
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