A Maltese company pays tax at 35%. Its shareholders, in most cases, end up with a far lower Malta tax bill on the same profit. The bridge between those two numbers is the shareholder refund, the part of the Malta tax refund system that is talked about most and explained least.
The Malta Tax and Customs Administration describes it in one sentence on its corporate tax page: "When companies are taxed at the standard rate of 35%, following the distribution of dividends, shareholders are entitled to a refund of part or of all the tax paid by the company." Everything else, who can claim, how much, when the money arrives, sits in two statutes: the Income Tax Act, Chapter 123, and the Income Tax Management Act, Chapter 372. The process runs in seven steps, in the order they happen, each with an article of law behind it.
Why the refund exists at all
Malta runs a full imputation system. The tax a company pays on its profits is treated as paid on behalf of its shareholders. Under article 59(1) of the Income Tax Act, a Maltese company is entitled to deduct from a dividend "a tax at the rate paid or payable by the company" on the income out of which that dividend is paid. Under article 60, that tax is then set off against the shareholder's own tax on the dividend. The MTCA puts the purpose plainly: the system exists "to eliminate any double taxation that might arise on the distribution of such dividends."
The refund goes one step further. It hands part of the company's tax back to the shareholder once the profit is distributed. That is where the effective rates of 5% and 10% that the Malta corporate tax guide explains come from. The rates are not a special regime and not a ruling negotiated with the tax office. They follow from fractions written into article 48 of the Income Tax Management Act.
Step 1: The company pays 35% on its profit
The starting point is the ordinary charge. Article 56(6) of the Income Tax Act charges tax "at the rate of thirty-five cents (0.35) on every euro of the chargeable income" of every company. There is no refund without this payment: article 48(4A) caps any refund at "the amount of tax actually paid by the company to the Commissioner" on the distributed profits.
So the refund is never a discount on the company's tax return. The company files and pays in full, on the normal dates. For a calendar-year company that payment date is 30 September of the following year, as set out in our piece on when Malta company tax falls due. A late payment pushes the whole refund chain back.
Step 2: The profit lands in a tax account
Every Maltese company sorts its distributable profits into tax accounts, defined in article 2 of the Income Tax Act. Which account a profit sits in decides whether a refund exists and how large it is.
- Final tax account: the first account to which taxed profits are allocated, in the amount the rules prescribe. No shareholder refund.
- Immovable property account: the next taxed account in line, again filled as the rules prescribe. No shareholder refund under article 48(4A).
- Foreign income account: broadly, income from investments situated outside Malta, including foreign royalties, dividends, interest and rents, and income from participating holdings in companies not resident in Malta.
- Maltese taxed account: taxed profits that are not in the foreign income account. This is where most trading profit ends up.
- Untaxed account: what is left after the other allocations. Article 59(1)(a) excludes dividends from this account from any tax deduction, so there is no tax to refund.
The refund that matters for most founders applies to dividends from the Maltese taxed account and the foreign income account. If the accounts are allocated wrongly, the refund claim is wrong too.
Step 3: The company pays a dividend and issues a dividend certificate
The refund is triggered by a distribution, not by the tax payment alone. When the board declares a dividend out of taxed profits, two things follow.
First, the tax attached to that dividend becomes Advance Company Income Tax under article 42B of the Income Tax Management Act. Where the company has not yet paid all the tax on the distributed profits at the time of the dividend, article 42B(3) requires the balance to be paid "within sixty days" counted from the end of the month following the month in which the dividend is paid. In other words, distributing a profit early brings the tax on it forward.
Second, article 59(5) of the Income Tax Act requires the company to give every shareholder a dividend certificate, "whether tax is deducted therefrom or not." The certificate shows, for each tax account, the gross taxed profit, the Malta tax paid after any double taxation relief, the foreign tax for which relief was given, and the net dividend. Where the dividend is paid out of profits of the same accounting period, the certificate may follow later, but no later than the tax return date for that year.
The certificate is not paperwork for its own sake. Article 48(6) of the Income Tax Management Act says the Commissioner pays the refund "on being satisfied as to the correctness of the claim made and upon receipt of a certificate issued by the company paying the dividend". No certificate, no refund.
Step 4: The shareholder registers for refunds
The Malta shareholder refund is claimed by the shareholder, not by the company. Article 48(4A)(a) grants it to a person receiving the dividend "provided that such person is for such purpose registered in such manner as may be prescribed." Registration is therefore a condition of the claim, not a formality after it.
The statute ties the claim to registration and to the dividend, not to the shareholder's nationality. The same article covers a Maltese holding company, a foreign company and an individual. In most structures the shareholder is a Maltese holding company that sits above the trading company, so that the refund arrives as corporate cash rather than personal income. Why that two-tier layout is the norm, and how a fiscal unit can replace the wait for the refund, is covered in the guide to Malta holding structures.
The claimant must also have its own filings in order. Article 48(1A) blocks "any refund" to a person until that person has filed all the income tax returns the Act requires, and article 48(1B) does the same for VAT returns where the claimant is VAT-registered. A holding company that is behind on its own returns holds up its own refund.
Step 5: Work out the fraction
The amount of the refund depends on the character of the profit the dividend is paid from. Article 48 of the Income Tax Management Act sets four outcomes. The worked figures below assume a profit of 100 and the full 35 of Malta tax paid on it, with no other reliefs.
Six-sevenths (6/7): the standard case. Article 48(4A)(a) lets the shareholder claim "a refund of six-sevenths of the Advance Company Income Tax" on dividends from the Maltese taxed account or the foreign income account. On 35 of tax, six-sevenths is 30. The tax left with Malta is 5, which is the effective 5% that trading companies are known for.
Five-sevenths (5/7): passive interest, royalties and some holding income. The first proviso to article 48(4A)(a) cuts the refund to five-sevenths where the profits consist of passive interest or royalties, or of dividends from a participating holding that does not meet the anti-abuse conditions referred to in article 12(1)(u) of the Income Tax Act. On 35 of tax, five-sevenths is 25, and the tax left is 10, an effective 10%.
Two-thirds (2/3): foreign income with double taxation relief. Where profits in the foreign income account have had double taxation relief, article 48(4A) does not apply at all. The refund comes instead from article 48(4)(a): "two-thirds of the Malta tax paid by the company". For profits charged from year of assessment 2008 onwards, "Malta tax paid" includes the amount by which the relief reduced the Malta tax, but the refund can never exceed the tax actually paid. A simple example: foreign income of 100 that suffered 10 of foreign tax. Malta charges 35, credits the 10, and the company pays 25. For the refund, the Malta tax paid counts as 35, so two-thirds is about 23.33. That is below the 25 actually paid, so the full 23.33 comes back. Total tax on the 100: 10 abroad plus about 1.67 in Malta. The details of which treaty gives which relief are in our overview of Malta's double tax treaties.
Full refund: participating holdings. Article 48(4)(b) allows "a refund of all of the Malta tax paid" on dividends out of the foreign income account that come from a participating holding or from its disposal, subject to the same anti-abuse conditions as the participation exemption: the subsidiary is in the EU, or pays foreign tax of at least 15%, or earns no more than half its income from passive interest or royalties, or else two fallback tests are met. In practice the participation exemption under article 12(1)(u) usually makes the question moot, because the exempt income is never taxed in the first place. The participation exemption guide covers when the exemption or the full refund route applies.
Step 6: File the claim within four years
Article 48(5) of the Income Tax Management Act gives the shareholder four years from the date on which the tax becomes eligible for refund to make the claim. That window is generous, but nothing happens automatically: an unclaimed refund stays with the Commissioner.
Two more rules from article 48(7) shape the claim. A refund claimed under articles 48(4) or 48(4A) on profits shown in a dividend certificate closes the door to any further refund on the same profits under any other provision. And once the refund is claimed, the tax the company deducted from that dividend can only be set off against the tax charged on that dividend itself, even if the dividend is later passed up through another company. The refund and the imputation credit cannot be used twice.
Step 7: The Commissioner pays within fourteen days, or later
Article 48(8) turns a due refund into "a debt due by the Commissioner to the claimant which shall be payable not later than the fourteenth day following the day on which the refund becomes due." That is the rule. The proviso is the reality to plan around: the fourteen days "may be extended by another period of twelve (12) months if the Commissioner requires to carry out further verifications for due diligence purposes."
A structure that depends on the refund for its cash flow should therefore budget for the possibility of a long wait. Article 48(6) also says the refund itself "shall not be taxable", unless the Income Tax Acts provide otherwise. That is a statement about Maltese tax only. How the shareholder's country of residence treats a refund received from Malta is a separate question under that country's own law.
The Malta tax refund system at a glance
| Step | What happens | Where it is in the law |
|---|---|---|
| 1 | Company pays 35% on chargeable income | Income Tax Act, art. 56(6) |
| 2 | Profits allocated to the tax accounts | Income Tax Act, art. 2 |
| 3 | Dividend paid, tax on it due as Advance Company Income Tax, dividend certificate issued | Income Tax Management Act, art. 42B; Income Tax Act, art. 59(5) |
| 4 | Shareholder registered for refunds, own returns filed | Income Tax Management Act, art. 48(4A), (1A), (1B) |
| 5 | Fraction: 6/7, 5/7, 2/3 or all of the tax | Income Tax Management Act, art. 48(4), (4A) |
| 6 | Claim made within four years | Income Tax Management Act, art. 48(5), (7) |
| 7 | Refund payable within 14 days, extendable by 12 months | Income Tax Management Act, art. 48(8) |
When there is no refund: the 15% election
Since September 2025 a company can step out of the refund system altogether. Legal Notice 188 of 2025, the Final Income Tax Without Imputation Regulations, lets a company elect to pay tax "at the rate of fifteen cents (0.15) on every euro of the chargeable income", in place of the 35% rate. Regulation 3(4)(b) makes that tax final: it is not available "as a credit or set off against the tax liability of any individual or entity, or as a refund to any person."
The election runs for at least five years before the company can return to the ordinary system (regulation 3(3)). Regulation 3(4)(a) also sets a floor: the 15% tax may never be lower than the 35% tax minus the refunds the shareholders could have claimed under article 48(4) or (4A). Which route suits which company is weighed up in the corporate tax guide.
What the 2027 budget does and does not change
The Budget 2027 speech of 26 October 2026 announced a 25% rate for companies with a turnover of up to €1 million, on profits that are retained or reinvested, with conditions and limits to be set in rules that the speech did not publish. Our report on what the Budget 2027 speech announced sets out what is known. The refund provisions themselves are untouched so far: the consolidated text of article 48 on legislation.mt, in its version of 10 March 2026, still sets out the fractions and deadlines above.
Where the refund goes wrong in practice
The statute shows where claims fail, and none of these failures is exotic:
- Tax not yet paid. No tax paid, nothing to refund (article 48(4A), second proviso).
- Missing or wrong dividend certificate. The Commissioner pays only on receipt of the certificate (article 48(6)).
- Shareholder not registered. Registration is a condition of the claim (article 48(4A)(a)).
- Claimant behind on its own filings. Articles 48(1A) and 48(1B) block every refund until the returns are in.
- Wrong tax account. Profits in the final tax account, the immovable property account or the untaxed account carry no shareholder refund under article 48(4A).
- Home-country rules ignored. The Maltese refund does not decide how the shareholder's country of residence taxes the dividend or the refund. A move abroad can change that picture completely, as the case of a Malta company owner moving to the USA shows.
Work with Sebastian
If you run a Maltese company from abroad, or are deciding whether to set one up, and want the refund route checked against your residence, your home country's rules and your cash-flow needs, book a consultation. More on tax, residence and life on the island is in Malta Unlocked.
