Malta's Tax System and Structure in 2025

Malta's tax revenue is primarily derived from three sources: indirect taxes, direct taxes, and social security contributions. Indirect taxation includes value-added tax (VAT), import duties, service levies, and financial capital transaction taxes—with VAT being the largest contributor. Direct taxes are imposed on income and wealth, while social security contributions are mandatory payments made by both employers and employees, including self-employed individuals.

The main taxes in Malta include income tax, VAT, stamp duty, customs duties, and excise taxes. Both residents and individuals living in Malta are subject to taxation. For instance, Maltese residents who do not physically reside in the country are only taxed on income or capital gains earned within Malta. Non-residents must also pay tax on any income or capital gains generated within Maltese territory.

Key Taxes and Rates in Malta

Corporate Income Tax in Malta

Companies incorporated in Malta are considered taxable entities. Foreign-owned companies that are managed and controlled from within Malta are also treated as resident taxpayers. The standard corporate income tax rate stands at 35%. However, due to Malta’s unique refund system for distributed profits, effective tax rates can be significantly lower—often making it an attractive destination for international businesses seeking efficient tax structures. This mechanism allows shareholders to claim refunds of up to two-thirds of the tax paid when dividends are distributed, resulting in a net effective rate that may fall between 5% and 12%, depending on circumstances.

Personal Income Tax in Malta

Individuals classified as 'ordinarily resident' in Malta—typically those residing in the country for more than six months per year—are liable for personal income tax. Malta operates a progressive tax system with rates ranging from 15% to 35%. The first €8,500 of annual income is tax-free, with marginal rates increasing based on income brackets. Higher-income earners face the top rate of 35% on earnings above €69,000. Additionally, various tax credits and allowances are available, such as those for dependents, pensions, and specific investments, which help reduce overall liability.

VAT in Malta

Malta reintroduced its VAT regime in 1999. The standard VAT rate is 18%, applied to most goods and services. A reduced rate of 7% applies specifically to hotel accommodation, promoting tourism competitiveness. Other essential items and services are taxed at 5%, including electricity, art and collectibles, medical equipment, printed materials, repair services, entertainment tickets, and public transport. Basic necessities like food and pharmaceuticals are zero-rated, meaning no VAT is charged. These tiered rates aim to balance fiscal responsibility with consumer affordability and economic stimulation.

Customs Duties

Since joining the European Union on May 1, 2004, Malta has fully aligned its customs policies with EU regulations. Goods originating from other EU member states enter Malta duty-free under the principle of free movement. Imports from non-EU countries are subject to common external tariffs set by the EU. Additional controls and documentation may apply to restricted or regulated goods such as alcohol, tobacco, and agricultural products, ensuring compliance with health, safety, and trade standards.

Stamp Duty

Stamp duty is levied on certain legal and commercial documents. For real estate transactions, the standard rate is 5% of the property’s declared value. In contrast, stock transfers attract stamp duty at either 2% or 5%, depending on whether the shares are listed and held electronically. This tax plays a critical role in formalizing ownership changes and generating revenue from high-value asset movements. Exemptions exist for intra-group transfers and reorganizations under specific conditions.

Excise Taxes

Excise duties are imposed on selected goods deemed harmful or environmentally impactful. These include alcoholic beverages, tobacco products, energy-related commodities (such as fuel), and mobile phone services. The rationale behind these taxes extends beyond revenue generation—they serve public health and environmental policy goals by discouraging excessive consumption. Rates vary according to product type and volume, with higher duties typically placed on premium spirits and cigarettes.

Social Security Contributions

All individuals working in Malta contribute to the national social security system. Total contributions amount to approximately 20% of gross salary, split equally between employer and employee (10% each). Self-employed persons pay a combined rate based on their net profits. These funds finance pensions, unemployment benefits, healthcare access, and maternity/paternity leave. Contribution thresholds and caps are reviewed annually to reflect inflation and wage trends.

Environmental Levies

To support sustainability initiatives, Malta imposes environmental charges on products that pose disposal or ecological challenges. These include plastic bags, tires, batteries, used oil, refrigerators, washing machines, air conditioners, televisions, and electronic communication devices. Fees collected are often reinvested into recycling programs and waste management infrastructure. This aligns with broader EU directives aimed at reducing landfill use and promoting circular economy practices.

Vehicle Registration Tax

This tax is calculated based on engine displacement (cc) and, increasingly, carbon emissions. Vehicles with larger engines or higher CO₂ output incur greater charges, incentivizing greener transportation choices. Electric vehicles currently enjoy exemptions or significant reductions, reflecting government efforts to promote clean mobility and meet climate targets. Hybrid models may qualify for partial relief, depending on emission levels and battery capacity.

Travel-Related Consumption Tax

A 10% expenditure tax applies to all passenger tickets sold for journeys departing from Malta, including ferry and cruise ship travel. This levy supports local tourism infrastructure and maritime regulation enforcement. It does not apply to transit passengers or cargo-only shipments. Revenue from this tax contributes to port maintenance and visitor experience enhancements.

Digital Services Tax

As of 2025, Malta does not impose a standalone digital services tax. While discussions continue at the EU level regarding harmonized digital taxation frameworks, Malta has chosen not to unilaterally introduce such measures. Businesses engaged in online platforms, streaming, e-commerce, and digital advertising operate without additional digital-specific levies, maintaining a favorable environment for tech startups and remote operations.

Carbon Emissions Tax

Malta participates in the EU Emissions Trading System (ETS), which caps greenhouse gas emissions from power plants, industrial facilities, and aviation. Instead of a domestic carbon tax, regulated entities must acquire and surrender emission allowances annually. Companies exceeding limits face penalties, while those reducing emissions can sell surplus permits. This market-based approach encourages innovation and efficiency improvements across sectors. Future alignment with EU Green Deal objectives may lead to expanded coverage or stricter benchmarks.

Special Economic Zones and Regional Policies

Economic Zone Regulations

Malta’s special economic zone framework is governed by two primary laws: the Malta Freezone Act and the Malta Freeports Act. These provide tailored incentives for logistics, manufacturing, and export-oriented enterprises operating within designated areas.

Overview of Key Economic Zones

The Malta Freeport Terminal, located in Birżebbuġa, is one of the Mediterranean’s busiest transshipment hubs. It offers bonded warehousing and customs suspension benefits, enabling companies to store, process, and re-export goods without immediate VAT or duty obligations. Firms engaged in qualifying activities benefit from reduced corporate tax rates and investment allowances, particularly in technology, pharmaceuticals, and precision engineering sectors.

Across the island, there are 16 industrial parks managed by Malta Industrial Parks Ltd., offering plug-and-play facilities, shared utilities, and business support services. These zones foster clustering effects and supply chain integration, especially for SMEs and foreign investors.

Regional Development Initiatives

Gozo, Malta’s second-largest island, has been designated a priority development region. The Ministry for Gozo oversees strategic planning and implementation. The Gozo Regional Development Act of 2019 laid the foundation for targeted investment, improved connectivity, and sustainable growth. Complementing this, the Gozo Regional Development Strategy 2021–2030 outlines long-term goals in tourism diversification, cultural preservation, renewable energy adoption, and digital transformation. Special grants and tax incentives are available for projects contributing to Gozo’s balanced development.

SailGlobal offers comprehensive offshore human resource solutions for companies expanding into Malta, helping navigate complex labor and tax compliance requirements while optimizing workforce deployment across jurisdictions.