Expatriating to Malta as a European entrepreneur: 35% CIT that becomes 5% — how it actually works
Malta's refund system is unique in the EU. The headline 35% CIT drops to approximately 5% effective after the shareholder refund. But the complexity and cash flow impact matter.
The Maltese tax framework in 2026
The refund system is clever but creates complexity. Here is how it works.
The 6/7ths Refund System
A Malta company pays 35% CIT. When dividends are distributed to shareholders who are not Malta residents, they can reclaim 6/7ths of the tax paid. This reduces the effective rate to approximately 5%. After distribution, the refund is paid within 14 days of a complete claim, a deadline the tax office can extend by 12 months for checks.
Non-Dom Remittance Basis
Malta's non-dom regime taxes foreign-source income only if remitted to Malta. Foreign income retained abroad is not subject to Maltese tax. This is powerful for entrepreneurs with significant international income streams.
Personal Income Tax
Progressive PIT up to 35%. Non-dom residents benefit from the remittance basis. Malta also offers flat-rate programmes such as the Global Residence Programme at a minimum EUR 15,000 annual tax.
VAT
Standard VAT rate is 18%, one of the lowest in the EU. Reduced rates apply to specific goods and services. Malta uses the euro and is both an EU and Schengen member.
Why entrepreneurs choose Malta
5% effective CIT
After the 6/7ths shareholder refund, the effective corporate tax rate is approximately 5%. This is one of the lowest effective rates in the EU and is fully legal and EU-approved.
English-speaking EU jurisdiction
Maltese and English are both official languages. The legal system is partly based on English common law. Malta is an established financial services hub with strong professional infrastructure.
Strong fintech and gaming sector
Malta is one of Europe's leading jurisdictions for online gaming, fintech, and crypto businesses. Regulatory frameworks for these sectors are well established.
Schengen member
Malta is a full Schengen member, offering free movement across Europe. Its Mediterranean location and lifestyle make it appealing for entrepreneurs seeking sun and proximity to both Europe and North Africa.
The real pain points of Malta
Refund within 14 days, extendable by 12 months
The 6/7ths refund is not automatic. It must be claimed after dividend distribution and is paid within 14 days of a complete claim, a deadline the tax office can extend by 12 months for checks. This creates significant cash flow complexity.
High administrative complexity
The refund system requires a holding structure (typically a Malta holding company and an operating subsidiary), regular accountants, and compliance filings. Administrative costs are meaningfully higher than in Latvia.
Substance requirements
Post-BEPS, Malta companies must demonstrate genuine economic substance. This means real employees, physical offices, and management decisions made in Malta — all of which add cost.
Island isolation
Malta is a small island with limited flight connections compared to continental hubs. Infrastructure constraints and traffic congestion on the island itself can be frustrating for active entrepreneurs.
Latvia achieves 0% CIT without any refund application, holding structure, or waiting period
Malta's 5% effective rate sounds attractive but requires upfront payment of 35%, a holding structure, and a refund claim (paid within 14 days once complete, a deadline the tax office can extend by 12 months for checks). Latvia's SIA model achieves 0% on retained profits immediately, with no application required. For growing businesses, Latvia's simplicity is a significant operational advantage.
Full Malta vs Latvia comparisonMalta vs Latvia at a glance
| Malta | Latvia | |
|---|---|---|
| Effective CIT | 5% (after refund) | 0% (reinvested) |
| CIT cash flow impact | Pay 35%, wait 12m for refund | No upfront tax |
| VAT | 18% | 21% |
| Administrative complexity | High (holding structure needed) | Low |
| EU & Schengen | Yes | Yes |
Frequently asked questions
No. You do not need to live in Latvia full-time to own an SIA. For your personal tax, Latvian law counts you as resident if your declared place of residence is in Latvia or if you spend at least 183 days there in any 12-month period. If you mainly live in another country, that country will usually tax you as a resident too, and the tax treaty, where one exists, decides based on your permanent home and then on where your personal and economic ties are closest. The SIA itself stays under Latvian corporate tax as long as it is genuinely managed from Latvia, not from your country of residence.
A Malta company pays 35% CIT on its profits. When it distributes dividends to shareholders, those shareholders can apply for a 6/7ths refund of the tax paid at company level. This brings the effective corporate rate to approximately 5%. The refund is paid to the shareholder within 14 days of a complete claim, a deadline the tax office can extend by 12 months for checks.
Yes. Malta taxes non-domiciled residents on a remittance basis: foreign-source income is only taxed if brought to Malta. Income kept offshore is not subject to Maltese personal income tax. This is attractive for entrepreneurs with significant foreign investments or income streams.
Malta's 5% effective CIT is higher than Latvia's 0% on retained profits. Malta requires a holding structure, upfront payment of 35% CIT, and a wait for the refund (paid within 14 days of a complete claim, a deadline the tax office can extend by 12 months for checks). Latvia's model is immediate, simple, and requires no holding company. Both are EU and Schengen members. For growing businesses that reinvest profits, Latvia is clearly simpler and more capital-efficient.