🇲🇹Malta 6/7 refund: ~5% effective with a 5-year binding ruling

Lawyer, Family Office

Concept

Malta keeps a high headline corporate rate — 35%. But the company pays it, not the shareholder: Malta runs a full imputation system, so tax paid at company level is not lost. On a dividend the shareholder receives not only a tax credit but a cash refund of part of what the company already paid. The legal base is the Income Tax Act and the Income Tax Management Act.

The size of the refund depends on the nature of the income. On active (trading) profit, 6/7 of the tax is refunded — out of 35% the structure effectively keeps about 5%. On passive interest and royalties, 5/7 (about 10% effective). Where the company claimed double taxation relief, 2/3. And income from a participating holding is covered by the participation exemption or a 100% refund — effectively 0%.

Because the refund belongs to the shareholder, the classic design is two-tier: an operating TradeCo under a Maltese HoldCo. The refund then goes to the HoldCo (a Maltese resident), the cash stays inside the structure and inside Malta, and Malta charges no outbound withholding tax on dividends to non-residents.

How the 6/7 refund works

The logic is simple: the company pays 35%, distributes profit, and on a correct filing the shareholder claims the refund. The money usually arrives within about 14 days after the claim is filed and the tax has actually been paid.

The refund depends on the type of income

Four base scenarios:

• 6/7 — on trading profit; effective rate about 5%.
• 5/7 — on passive interest and royalties; about 10%.
• 2/3 — where double taxation relief on a foreign tax is claimed.
• 100% / participation exemption — income from a qualifying participating holding; effectively 0%.

Two-tier: TradeCo + HoldCo

Because the refund belongs to the shareholder, a Maltese holding company sits above the operating one. The refund reaches the HoldCo instead of leaving Malta straight to an individual: this keeps cash within the perimeter, simplifies reinvestment, and avoids an extra taxing point. There is no outbound withholding tax on payments from Malta to non-residents.

Fiscal unit: about 5% upfront, no cash-flow gap

Paying 35% and waiting for a 6/7 refund is a cash-flow gap of months. Consolidation removes it: under the Consolidated Group (Income Tax) Rules a group can form a fiscal unit and pay the net rate (around 5%) directly, without the overpay-then-refund cycle.

What changed: FITWI and Pillar Two

The refund system is alive, but a new context has grown around it — BEPS 2.0 pressure and the global minimum tax. Malta answered with two different things that are easy to confuse.

FITWI — a third path (Legal Notice 188 of 2025)

Final Income Tax Without Imputation (FITWI), introduced by Legal Notice 188 of 2025, is an option: a company may elect a final 15% rate with no refunds instead of the imputation system. The tax becomes final (no shareholder refunds), the election binds for at least 5 years, and a higher-of rule applies — FITWI must not produce an outcome below the ordinary system. Importantly, FITWI replaces nothing; it adds a third path alongside imputation and the participation exemption. It makes sense where refund mechanics are impractical: a diverse international shareholder base, or where simplicity and cash-flow predictability matter more than minimising the rate.

Pillar Two and the €750m threshold

The global minimum tax is a separate matter. For large MNE groups with consolidated revenue of €750m or more, Pillar Two logic applies: an effective rate below 15% is topped up. For such groups the about-5% story changes — it has to be computed together with the Pillar Two rules. For private structures below the threshold the classic refund regime stands. And again: the €750m threshold is about Pillar Two, not FITWI; the two should not be mixed.

Advance revenue ruling: locking the treatment

So that the regime does not depend on how the tax authority might view the structure a couple of years later, the Income Tax Act allows an advance revenue ruling. It can confirm that the domestic GAAR does not apply to a transaction carried out for bona fide commercial reasons; that a holding qualifies as a participating holding (and so the participation exemption is available); and the treatment of cross-border transactions and financial instruments.

A ruling is issued within 30 days; it binds the authority for 5 years (renewable) and — valuably — survives a change in the law: for up to 2 years from the date of the relevant statutory change, whichever is earlier. In effect, it is a way to lock the tax treatment in writing.

Use cases

Where the regime fits naturally:

• A holding company over international participations — participation exemption on dividends and gains from qualifying holdings.
• An operating or trading company inside the EU — effective about 5% on distributed trading profit via the 6/7 refund.
• A layer inside a fund or SPV structure — a Maltese HoldCo as the point to pool and reinvest profit with no outbound WHT.
• Groups that value simplicity — FITWI as a final 15% with no refund cycle.

Risks and limits

The regime is legal and tested, but it has honest limits — and one that is almost disqualifying for some clients.

The rest is manageable but takes discipline:

• Substance: real management and control in Malta, not a letterbox; otherwise the regime is exposed.
• EU perimeter: ATAD, GAAR and anti-hybrid rules apply — aggressive hybrids and empty structures will not pass.
• Refund timing: the refund comes only after a correct filing and the tax actually paid; bank onboarding also takes time.
• Pillar Two: groups at €750m or more must compute a top-up — a clean 5% no longer holds.