Malta Ranks Third in EU for Corporate Tax Revenue

VALETTA, Malta - July 19, 2024 - PRLog -- Despite having one of the highest statutory corporate tax rates in Europe at 35%, compared to Portugal's 31.5% and Germany's 29.9%, Malta offers significant tax rebates. These rebates result in an effective tax rate of 5% for companies owned by non-residents or by residents without domicile in Malta.

Several small European jurisdictions, including Liechtenstein, Gibraltar, and the Isle of Man, report a high number of companies per adult, indicating their role in profit shifting from high-tax regions to lower-tax countries. Within the EU, Estonia, Luxembourg, and Cyprus, along with Malta, have high numbers of limited liability companies relative to their populations.

Multinational enterprises (MNEs) often utilize complex tax structures to shift profits to these jurisdictions, where they face lower tax rates. A 2022 study cited in the EU report identifies Puerto Rico, Ireland, Luxembourg, Hong Kong, Switzerland, Singapore, and the Netherlands as key profit-shifting destinations.

Over the past 14 years, Malta has refunded over €13 billion in income tax to corporate shareholders through its refundable tax credit system. Since 2008, the country has returned an average of 14.2% of the taxes owed by eligible companies. Currently, 8,012 companies are actively registering for these tax refunds.

The number of companies benefiting from tax refunds has increased significantly since 2008. That year, taxes owed were reduced from over €276 million to €39 million after refunds. By 2022, €1.5 billion in taxes was reduced to €216 million after refunds.

Tax revenues accounted for 40.4% of the EU's GDP in 2022, highlighting the importance of effective tax administration in the European business environment. The European Commission is aiding Malta in improving data quality by supporting the introduction of real-time reporting for payroll and VAT.

The EU's taxation report emphasizes that simplifying revenue administration will reduce the administrative burden, improve tax compliance, increase tax revenues, and enhance the business environment, particularly through digital VAT reporting and real-time tracking of "gig economy" income.

Malta's tax rebate system has significant implications for its economy, business environment, and international reputation. More information at https://www.imexmalta.com