Malta offers one of the most comprehensive systems for double taxation relief in Europe, ensuring that income is not taxed twice — once in Malta and again in another jurisdiction. This framework enhances Malta’s reputation as an attractive hub for international business and investment. The relief mechanisms are enshrined in the Income Tax Act (Cap. 123 of the Laws of Malta) and are designed to eliminate or mitigate double taxation on the same income.
The various forms of relief from double taxation are the following:
1. Treaty Relief
Malta has an extensive network of Double Taxation Agreements (DTAs) with over 70 countries. These treaties allocate taxing rights between Malta and the treaty partner and provide for tax credits or exemptions to prevent the same income from being taxed twice. Typically, income earned abroad by a Maltese resident is taxed in Malta, but the foreign tax paid is credited against Maltese tax under the applicable treaty.
2. Unilateral Relief
Where no DTA exists, Malta grants unilateral relief to residents for foreign tax paid on income that is also taxable in Malta. This relief mirrors treaty relief and allows a credit for foreign tax suffered, ensuring equitable treatment even in the absence of a bilateral agreement.
3. Commonwealth Relief
Malta provides Commonwealth income tax relief for taxes paid in another Commonwealth country, in cases where unilateral or treaty relief does not apply. This relief recognises the historical and economic links among Commonwealth nations and reduces the risk of double taxation for Maltese taxpayers earning income from these jurisdictions.
4. Flat Rate Foreign Tax Credit (FRFTC)
For companies receiving foreign-source income, Malta also offers the Flat Rate Foreign Tax Credit (FRFTC). This mechanism allows a notional tax credit — typically equal to 25% of the net foreign income — against Maltese tax, provided certain documentation requirements are met. The FRFTC is particularly attractive for international trading and holding structures, contributing to Malta’s competitive corporate tax regime.
Malta’s multiple layers of double taxation relief — including treaty, unilateral, Commonwealth, and FRFTC options — ensure that taxpayers are protected from the burden of double taxation. This comprehensive approach strengthens Malta’s position as a leading international financial centre, promoting foreign investment, tax efficiency, and cross-border business growth.
Disclaimer
The above does not constitute tax or legal advice and is up to date on the date it was published. Please ensure that you take appropriate advice from tax or legal professionals before making any decisions based on the above.
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