Regulations published by Malta’s government on 2 September 2025 (Legal Notice 188 of 2025) introduce a major shift: certain entities and trusts can now elect a 15% final income tax in lieu of the imputation system that has long characterised the country’s corporate tax regime. The Final Income Tax Without Imputation Regulations issued under article 22B of the Income Tax Act (ITA) set out the mechanics of the election, its binding nature, exclusions and important safeguards to ensure that the overall tax burden is not lower than under the imputation system.
While the election applies with effect from financial year 2024, given its late introduction in 2025, it is unlikely that many entities will not opt for the final 15% tax in its first year of implementation due to uncertainties on how the rule will apply in practice; the upcoming November tax return filing deadline being the last deadline for year of assessment 2025; and the fact some entities have already finalised and filed their annual financial statements.
Audrey Azzopardi
Karl Carabott
Luca Mizzi
Sara Farrugia
BDO in Malta
Key Features of the Election
- Scope of application
- The election may be adopted by companies, bodies of persons treated as companies and certain trusts that are treated as companies.
- Entities that opt to be subject to the final 15% tax rate must formally notify the Commissioner of the Tax and Customs Administration.
- Election mechanism:
- Entities may choose to be subject to the existing imputation system or a flat 15% final tax on chargeable income.
- The election may be applied to income derived in the fiscal year preceding year of assessment 2025 and for subsequent years.
- Once an entity elects the 15% final tax, it must remain under this system for at least five consecutive years. If the entity later opts out of the regime and back into the imputation system, it must remain under the latter rules for the next five years.
- Exclusions: The elective 15% final tax does not extend to all forms of income. Specifically, it excludes the following:
- Dividends derived from profits that have not been allocated to the Final Tax Account of another Maltese company; and
- Any income that has already been subject to a final tax under other ITA provisions and duly allocated to the Final Tax Account.
- Safeguards and limitations: Safeguards are included in the regulations to preserve fiscal integrity.
- The tax payable may not result in a lower overall liability than what would arise under the ordinary system after accounting for shareholder refunds under article 48(4) or (4A) of the Income Tax Management Act.
- The 15% tax is deemed final—it may not be credited or offset against the tax liability of any other person, nor can it generate refunds.
- Profits taxed under the 15% rate must be allocated to the entity’s Final Tax Account.
BDO Insight
The Final Income Tax Without Imputation Regulations are applicable only to the extent they do not result in a lower overall tax liability than under the refund system. In view of this, we are anticipating that the regime will be adopted on a case-by-case basis by entities that are currently eligible under the refund system but prefer the higher effective tax rate in lieu of the administrative burden and other implications associated with the current Maltese refund system.While the election applies with effect from financial year 2024, given its late introduction in 2025, it is unlikely that many entities will not opt for the final 15% tax in its first year of implementation due to uncertainties on how the rule will apply in practice; the upcoming November tax return filing deadline being the last deadline for year of assessment 2025; and the fact some entities have already finalised and filed their annual financial statements.
Audrey Azzopardi
Karl Carabott
Luca Mizzi
Sara Farrugia
BDO in Malta