According to Maltese tax legislation, a company registered in Malta must allocate its distributable profits to five (5) different tax accounts, depending on the source of the respective incomes:
Final Tax Account (FTA): profits, subject to a final withholding tax, are allocated to this profits account where they are tax exempt (and the exemption is passed onto the shareholder after distribution).
Immovable Property Account (IPA): profits, derived directly or indirectly from property located in Malta, are allocated to this account.
Foreign Income Account (FIA): profits derived from investments outside Malta, such as dividends, rents, royalties and other income from investments abroad, are allocated to this account. Profits from stable establishments abroad or dividends received from the FIA account of another company registered in Malta must also be allocated to this account.
Maltese Tax Account (MTA): profits subject to taxes in Malta that have not been allocated to the FTA, IPA or FIA accounts, are allocated to the MTA account.
This account includes taxable trading operating profits that are not attributable to a stable establishment abroad, other income obtained in Malta either from trading or property, as well as dividends received from the MTA account of another company registered in Malta.
Untaxed Account (UA): This is the account in which the difference between the total distributable profit and the sum of the profits allocated to the other four accounts is appropriated; it is the difference between book profit and taxable profit.
UA= distributable profits – FTA – IPA – FIA – MTA
The allocation of profits through these different accounts must be made in the sequence shown above.
These accounts are not part of the accounting plan and are only relevant for tax purposes. These accounts will govern how shareholder dividends are handled fiscally.