What is Full Imputation System and Shareholder Refunds?
Under full imputation, shareholders receiving a dividend can claim a refund of part of the Malta tax paid by the company. The refund is 6/7ths on trading profits, 5/7ths on passive interest or royalties, 2/3rds on foreign-income-account profits and 100% on participating holding profits.
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Current Rate (Claimed after the dividend is paid)
6/7ths (about 5% effective), 5/7ths (about 10% effective), 2/3rds, or 100%
Example
A dividend is paid out of €100,000 of trading profit on which the company paid €35,000. The shareholder claims 6/7ths, which is €30,000, and Malta keeps €5,000.
How Full Imputation System and Shareholder Refunds works in Malta
The refund can never exceed the tax the company actually paid. It is governed by article 48 of the Income Tax Management Act, Cap. 372.
The company must pay the 35% first and the shareholder claims afterwards, so there is a cash-flow gap. A fiscal unit achieves the refund-adjusted result at source.
Finn shows the effective position after refunds instead of presenting 35% alone. The refund is claimed on the shareholder's side, so confirm the mechanics with a practitioner.
Related terms
Maltese corporate income tax is 35% on the worldwide income and capital gains of Maltese companies. Under the full imputation system, shareholders can reclaim part of it on distribution, so the effective rate is often far lower.
From year of assessment 2025, a Maltese company may elect the Final Income Tax Without Imputation, a flat 15% final tax on chargeable income instead of the 35% tax and shareholder refunds.
A Maltese parent may form a fiscal unit with subsidiaries in which it holds at least 95%. The unit files one consolidated return and achieves the shareholder-refund benefit at source.
Income and gains of a Maltese company from a participating holding, or its transfer, are exempt from tax. A participating holding generally needs at least 5% of the equity.
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