Malta’s Tax System Explained: Why the Island Nation Attracts Expats, Businesses, and Investors

Introduction: The Mediterranean Magnet

Nestled in the heart of the Mediterranean, Malta is much more than a sun-soaked tourist hotspot. Over the last two decades, it has emerged as a premier tax-friendly jurisdiction inside the European Union.

Despite its small size, Malta offers a unique combination: EU membership, access to the single market, double taxation treaties, and a remittance-based tax system for non-doms (non-domiciled residents). This cocktail has turned Malta into a magnet for expats, entrepreneurs, and international corporations.

👉 For similar EU options, see our guide on Cyprus taxes and Ireland’s corporate magnetism.

1. Personal Income Taxes: A Progressive but Manageable System

Malta applies progressive income tax rates:

• 0% up to €9,100.

• 15–25% on middle brackets.

• 35% top rate above €60,001 (for individuals).

Compared to Western Europe’s 45–55% rates (see Germany or France), Malta’s 35% cap is moderate.

But the real advantage lies in non-domiciled status: residents are only taxed on income earned in Malta and foreign income remitted (brought) into Malta. Income earned abroad and kept offshore is not taxed.

Optimization for Individuals

• Use non-dom status: Keep foreign income outside Malta to avoid taxation.

• Global Residence Program (GRP): Special flat tax regime for wealthy foreigners.

• Retirement schemes: Pensions transferred to Malta enjoy favorable treatment.

👉 Many expats strategically live in Malta while holding assets abroad, enjoying EU residency without EU-level taxes.

2. Residency and Citizenship by Investment

Malta is famous for its residency and citizenship programs:

• Permanent Residence Program (MPRP): Grants permanent residency with investment in property or government contributions.

• Individual Investor Program (IIP): One of the few EU schemes offering citizenship by investment, though reformed under EU pressure.

Residency confers tax advantages plus visa-free EU mobility.

Residency Optimization

• Expats often use Malta as a base while continuing business abroad.

• Ideal for digital nomads with global income streams.

• Non-doms can combine Maltese residency with offshore structures.

3. Corporate Taxation: The Refund System

Malta officially has a 35% corporate tax rate, one of the highest in the EU on paper. But in practice, thanks to its imputation and refund system, effective tax rates drop dramatically:

• Shareholders of Maltese companies can claim refunds of 6/7ths of the corporate tax paid.

• This results in an effective tax rate of 5–10% for most trading companies.

This makes Malta one of the most attractive EU corporate jurisdictions.

Optimization for Businesses

• International Trading Companies (ITCs): Classic structure for global entrepreneurs.

• Holding Companies: Used for dividends and royalties — double tax treaties eliminate withholding taxes.

• IP & Gaming Industries: Malta is a hub for online gaming and fintech, offering tailored incentives.

👉 Compare this with Ireland’s 12.5% corporate tax and Cyprus’s 12.5% system for perspective.

4. Capital Gains, Wealth, and Property Taxes

• Capital Gains Tax: Generally aligned with income tax, but exemptions exist for transfers between family members or for main residences.

• No wealth tax: Unlike France or Spain, Malta does not levy annual wealth taxes.

• Property tax: No annual property ownership tax, only stamp duty on transactions.

These factors make Malta attractive for wealthy individuals looking to preserve assets.

5. VAT and Consumption Taxes

Malta levies VAT at 18%, slightly lower than the EU average. Reduced rates apply to specific goods and services.

6. Expats and Double Tax Treaties

With over 70 double taxation agreements, Malta ensures residents avoid being taxed twice on the same income. Combined with the non-dom regime, this makes it exceptionally favorable for global expats.

7. Criticism and EU Pressure

Malta’s tax system has drawn criticism from Brussels:

• The 5% effective corporate tax is seen as unfair competition.

• Citizenship by investment programs were scrutinized as “selling passports.”

• The EU continues to pressure Malta to tighten rules, though reforms have not diminished its core attractiveness.

8. How to Pay Less in Malta: Legal Pathways

• Establish residency with non-dom status.

• Structure businesses via Maltese companies to access the refund system.

• Use international trusts and foundations for estate and asset planning.

• Leverage double taxation treaties to minimize withholding taxes on cross-border dividends and royalties.

• Retain offshore earnings and avoid remitting them into Malta.

Conclusion: A Sunlit Tax Haven with an EU Passport

Malta manages to combine the best of both worlds: the credibility of EU membership and the flexibility of a tax haven. Its unique system rewards those who structure their affairs intelligently, making it a magnet for expats, retirees, and multinational companies.

High earners may still face 35% rates if not careful, but with non-dom residency, corporate refunds, and offshore strategies, effective rates can plummet to single digits.

👉 For alternatives, explore our articles on Cyprus, Ireland, and Australia to compare other Tier-1 tax strategies.