A New Elective Corporate Tax Regime
Malta has introduced a significant new corporate tax option through the Final Income Tax Without Imputation Regulations, 2025 (Legal Notice 188 of 2025). The regime, applicable from the basis year 2024, allows companies and bodies of persons to elect to be taxed at a flat rate of 15% on chargeable income.
This represents a notable shift from Malta’s traditional full imputation system and aims to simplify compliance, increase predictability, and align the jurisdiction with evolving international standards such as the OECD’s Pillar Two framework.
Key Features of the Regime
The new 15% rate is final, meaning that tax paid under this system is not creditable, refundable, or offsetable at the shareholder level. Profits taxed at this rate must be allocated to the Final Tax Account (FTA), from which any subsequent distributions will not give rise to shareholder refunds. The system is entirely elective, but once a company opts in, it becomes binding for a minimum period of five consecutive years. Similarly, a company that later reverts to the ordinary imputation system must remain there for at least five years before electing again.
Certain income types are specifically excluded from the new regime. These include profits already subject to a final tax under other provisions of Maltese tax law, dividends derived from profits not allocated to the Final Tax Account, and any income expressly excluded by regulation. This ensures that the new system operates as a self-contained alternative rather than a hybrid of both tax models.
To prevent the regime from being used to achieve a lower effective tax rate, the regulations introduce a “higher-of” safeguard rule. Under this mechanism, the Commissioner for Tax and Customs will compare the liability arising under the 15% final tax with the liability that would have applied under the ordinary imputation system (after taking shareholder refunds into account). The taxpayer will be required to pay whichever amount is higher. This ensures that the new system cannot produce a lower overall tax burden than the existing framework.
Administrative and compliance requirements are formalised through a notification process to the Commissioner, using the prescribed form recently published on the MTCA website. Companies will also need to maintain proper tracking of profits and distributions through the Final Tax Account to ensure compliance with the regulations.
Policy Rationale and Practical Implications
Malta’s full imputation system has been central to its corporate tax framework for decades, offering refund entitlements that ensured shareholders were not taxed twice on company profits. However, the system’s refund mechanism has grown increasingly complex, particularly for multinational groups operating within global minimum tax rules. The new 15% Final Income Tax regime provides an alternative that is simpler, transparent, and more compatible with international tax standards, especially under Pillar Two.
For businesses, the regime offers clarity and administrative ease by eliminating refund claims and cash flow mismatches. It delivers a fixed, non-refundable effective tax rate and may be particularly appealing to companies seeking a straightforward, globally recognised model of taxation. However, the election carries a five-year commitment, and the absence of shareholder refunds means companies should carefully evaluate the long-term implications before opting in.
Conclusion
The Final Income Tax Without Imputation Regime marks a significant development in Malta’s tax framework, offering companies a simpler and more predictable system of taxation. While the 15% flat rate provides transparency and administrative efficiency, it also removes the flexibility and refund potential of the traditional imputation model. Companies should therefore undertake a detailed assessment of their tax position and long-term objectives before deciding whether to adopt the new regime.
How NCMB Can Assist
At NCMB, we help businesses navigate Malta’s evolving tax environment with clarity and confidence. Working closely with our international network, we guide clients through the practical and strategic implications of reforms such as the 15% Final Income Tax Without Imputation Regime. Our team supports organisations in assessing eligibility, modelling comparative tax outcomes, and ensuring full compliance with the new regulations. If you would like to understand how this development may affect your business or explore whether this regime is right for your company, please get in touch with our tax team.
