SHELTONS INTERNATIONAL GROUP
A New Chapter in Corporate Taxation
Introduction
Malta has taken a bold step in modernising its tax framework with the introduction of the Final Income Tax Without Imputation (FITWI) regime. This new system, which came into effect through Legal Notice 188 of 2025, offers businesses an alternative to the long-standing full imputation model and tax refund system. FITWI introduces a flat 15% tax rate on chargeable income, treated as final—meaning no shareholder refunds or credits apply. This marks a significant departure from Malta’s traditional approach and signals a shift towards simplicity and global compliance.
Maltese companies may continue to be registered for the tax refund system (allowing a tax refund to the shareholder on tax paid) and may also opt to form a fiscal unit allowing for the payment of the equivalent effective tax rate (i.e. the net tax as if a refund was received). FITWI introduces another option, that of paying a flat 15%.
Why the Change?
For decades, Malta’s full imputation system allowed companies to pay tax at 35%, with shareholders receiving refunds that often reduced the effective tax rate to as low as 5%. While attractive, this system became increasingly complex and less aligned with international standards, particularly following the OECD’s Pillar Two rules and the EU Minimum Tax Directive. These latter developments impacted companies which form part of a multinational group with more than EUR 750 million consolidated revenue. FITWI addresses these challenges by ensuring a minimum effective tax rate of 15%, making Malta competitive while meeting global transparency requirements.
Here are some of the core features of FITWI:
- Optional Regime: Companies, certain bodies of persons, and trusts taxed as companies can elect to join.
- Flat 15% Tax: Applied to chargeable income and considered final—no refunds or credits.
- Align with global tax standards, reducing exposure to top-up taxes under Pillar Two. This makes FITWI particularly attractive for multinational groups and businesses seeking predictability in cross-border tax planning.
- Final Tax Account: Profits taxed under FITWI are allocated here; dividends from this account carry no refund entitlement.
- Five-Year Commitment: Entities opting in must remain under FITWI for at least five consecutive years. Reverting to the old system also requires a five-year lock-in.
- Exclusions: Income already taxed at a final rate and dividends from profits not in another company’s Final Tax Account are excluded.
There are specific limitations to the application of the 15% tax option. Firstly, the reduced rate applies only to income that is not already subject to a final tax, meaning it excludes income streams that have already been taxed on a final basis, such as certain interest or royalties. Additionally, dividends received from other Maltese companies that have been distributed from their final tax accounts are not eligible for this 15% rate, as these profits have already borne their full tax liability within the Maltese tax system. Importantly, there is a safeguard in place to prevent abuse or unintended tax advantages, basically the total amount of tax paid under this system cannot be less than the tax that would have been due under the standard imputation system, after considering shareholder refunds. This ensures that the election does not result in a lower effective tax burden than what would have been payable under the current rules, preserving revenue neutrality and fairness within the system.
Conclusion
The FITWI regime represents Malta’s proactive response to international tax developments. By offering simplicity, certainty, and compliance, FITWI positions Malta as a competitive and transparent jurisdiction. Furthermore, the approach aligns with the global push for international tax fairness by ensuring compliance with the OECD’s Pillar Two rules and the EU Minimum Tax Directive. This makes it particularly advantageous for large multinational groups, as it enables them to automatically satisfy the global minimum tax requirement without the need for additional adjustments or top-ups in other jurisdictions.
How to apply?
Should an entity be interested in applying, particularly as from basis year 2024 (YA 2025) an election form is required to be completed by not later than 28 November 2025.
For personalised guidance, reach out to our tax team at Sheltons Malta or write to us on [email protected]
