The Government of Malta has issued Legal Notice 188 of 2025 – the Final Income Tax Without Imputation Regulations, 2025, under Article 22B of the Income Tax Act. This legal notice introduces an option for companies and certain trusts to apply a final tax rate as an alternative to the long-standing imputation system that has defined Malta’s corporate tax framework.
- Scope
The regulations apply to companies, bodies of persons treated as companies, and certain trusts under the Act.
2. Taxation Without Imputation
- Entities may opt to be taxed at a flat rate of 15% on chargeable income.
- Excluded from this chargeable income are:
- Dividends received from profits not allocated to another company’s Final Tax Account (FTA) in Malta; and
- Income already subject to a final tax rate under other provisions of the Act.
3. Election and Duration
- An entity may apply FITWI in respect of chargeable income accruing or derived in the fiscal year preceding Year of Assessment 2025 onwards.
- Once chosen, the election remains effective until the entity opts out, with key conditions:
- A minimum of five years must pass before reverting to standard taxation.
- The notification must be filed in the form and timeframe set by the Commissioner, which is yet to be communicated.
- After opting out, standard taxation must also apply for at least five consecutive years.
4. Final Nature
- The tax charged under this system cannot be less than what would have been due under standard taxation, adjusted for refunds claimable by shareholders.
- Tax paid is final: it cannot be credited, set off, or refunded to individuals or entities.
- Profits taxed under this system are mandatorily allocated to the entity’s FTA.
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