Maltese Government Defends Corporate Tax System

by Robert Lee, Tax-News.com, London

30 September 2004

Maltese Parliamentary Secretary Tonio Fenech was this week seen defending the island’s corporate tax system against claims that the 35% tax rate is too high.

"Malta's system is a system we will defend because it is advantageous to the country and those who receive dividends, whether Maltese or international trading companies,” Fenech told parliament during the second day of debate on new trust legislation on Tuesday.

“Eliminating this system, as some are suggesting, would mean undermining a very important sector for the country."

Malta operates a full imputation system regarding the taxation of corporate dividends, although the rules are somewhat complex.

Under this system, resident (tax-paying) shareholders have a full 35% tax credit in respect of taxed local or foreign income dividends. Non-resident shareholders can take the tax credit, or they can opt for refunds of either two-thirds or all of the domestic tax paid depending on whether the foreign income came through a 10% participation or not.

Mr Fenech argued that Malta’s system is more beneficial to taxpayers than systems in other EU states which tax both company and dividend income.

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