(LEGAL NOTICE 188 OF 2025)

On 2 September 2025, the Maltese government introduced Legal Notice 188 of 2025, establishing the Final Income Tax Without Imputation Regulations, 2025. These Regulations provide an optional new tax framework for entities, allowing them to be taxed at a flat 15% final rate on chargeable income, instead of using Malta’s traditional full imputation system.

Key Features of the New Elective Regime

Who Can Apply: The following entities may opt in for the regime starting from basis year 2024 (year of assessment 2025) and onwards:

• companies registered in Malta;
• bodies of persons that elect to be treated as a company or are deemed to be a company; and
• trusts electing to be taxed in the same way as companies.

Flat 15% Final Tax:

Tax is final, that is, it cannot be credited, set off against the tax liability of any individual or entity, or refunded to shareholders.

Exclusions:

The new elective regime does not apply to:

• Income already taxed under final withholding rules under any other provisions of the Income Tax Act,
• Dividends from profits not allocated to the Final Tax Account.

5-Year Lock-in Period:

Entities that opt in must remain in the regime for at least five yearswhich period shall start to run from the beginning of the first year of assessment from when the entity opted for such election. If they revert to the imputation system, they must stay there for another five consecutive years of assessment before re-electing.

Final Tax Account Allocation:

Profits taxed under this regime are allocated to the Final Tax Account.

Why This Matters ?

This introduction reflects Malta’s response to international tax reform pressures, especially in light of the OECD’s Pillar Two developments and the trend towards simplified, minimum taxation. Businesses can now choose between:

• Staying under the imputation system, whereby the 35% corporate tax paid is imputed to the shareholder and offset against their own tax liability, often followed by partial refunds to non-resident shareholders, reducing the effective tax burden, or

• Electing into the 15% final tax system, which may be more attractive for certain structures, especially those with international investors or presence.

While this dual system provides greater flexibility and aligns with global minimum tax expectations, it does not equate to full implementation of the OECD’s Pillar Two framework.

Strategic Considerations

The new regime may simplify tax reporting and improve international alignment, but it comes with limitations, including the inability to benefit from refunds and a five-year commitment. Entities should carefully assess the potential impact on their effective tax rate, distribution strategy, and, where applicable, their group tax position before opting into the 15% final tax regime.