The ITA makes provision for a number of exemptions, and in particular the following:
Interest, royalties, discounts and bonuses paid to non-residents in Malta
Interest, royalties, discounts and bonuses paid to non-residents in Malta, as long as the income is not linked to a stable establishment located in Malta and the body in receipt of this income is not owned or controlled, directly or indirectly, by individuals who are domiciled and resident in Malta.
Royalties from “Qualified Intellectual Property”
This income, when distributed to shareholders, is also exempt. Qualified intellectual property includes patents pertaining to inventions and copyright as defined in law.
This exemption is optional and not automatic. One needs to make a request to the Malta Enterprise Corporation
Once the exemption has been received, income from Qualified Intellectual Property will not be included in the company’s taxable profits.
The licensing of Qualified Intellectual Property to associated entities must follow an arm’s length principle and certified by an auditor.
Capital gains on the sale of shares by non-residents
Any capital gains obtained by non-residents on the sale of shares in companies whose main activity does not apply to property located in Malta, units in Collective Investment Schemes, units related with insurance, or shareholding in partnerships whose main activity does not apply to property located in Malta, are exempt from tax in Malta.
This exemption only applies if the entity that obtains capital gains is not owned or controlled, directly or indirectly, by individuals who are domiciled and resident in Malta.
Other exemptions that apply to capital gains
Maltese legislation provides for other capital gains exemptions which are described below:
- Transfer of assets between group companies, as defined for the special tax system for company groups or when both the companies are more than 50% controlled or owned, directly or indirectly, by the same shareholders or beneficiaries.
- Replacement of assets: the capital gains received from the sale of assets linked to the company’s activity are tax exempt, as long as the company has owned them for at least three (3) years and they are replaced by other similar assets within one (1) year.
- Exchange of shares in reorganisations: the exchange of shares in the restructuring of holdings due to mergers, spin-offs or other reorganisations, that do not make any changes to the beneficiaries of the companies involved, or the shareholding of each beneficiary, are exempt from capital gains tax.