Final Income Tax Without Imputation Regulations, 2025
Tax alert
By virtue of Legal Notice 188 of 2025 published on the 2 September 2025, the Minister responsible for finance has introduced the Final Income Tax Without Imputation Regulations, 2025 ( the ‘Regulations’) establishing an optional alternative basis of taxation applicable to the chargeable income of companies as well as other persons that are taxed in the same manner as companies in Malta.
Presently, the Income Tax Act, Chapter 123 of the laws of Malta, operates a full imputation system whereby the income tax paid by a company is imputed to the shareholder and set off against the latter’s income tax liability on any dividend distributed out of taxed profits. This mechanism fully eliminates economic double taxation.
The Regulations permit companies to apply a rate of tax of 15% on chargeable income, with any tax liability being deemed “final” (i.e., Final Income Tax Without Imputation, or ‘FITWI’). FITWI would not be available as a credit or refund at shareholder level.
Scope
These Regulations apply to:
- companies,
- bodies of persons that elect to be treated as a company or is deemed to be a company, and
- trusts that have elected to be taxed in the same manner as companies (the ‘Entity’ or ‘Entities’).
An Entity may apply FITWI in respect of chargeable income accruing or derived as of year of assessment 2025 (i.e., basis year 2024).
Election procedure
An Entity seeking to apply FITWI must notify the Commissioner for Tax and Customs (the ‘CfTC’) via a prescribed form. The form, and the deadline for its submission, will be communicated by the CfTC at a later date. Once elected for, FITWI applies for a minimum period of five consecutive years of assessment.
Following the expiration of the five-year period, the Entity may revert to the standard full imputation system by means of a notification to the CfTC. In this event, the Entity is locked out of FITWI for a minimum of five years.
Key features
Income tax chargeable under FITWI is final and is not available as a credit or set off against the tax liability of any individual or entity, or otherwise as a refund to any persons.
For the purposes of FITWI, chargeable income excludes:
- Dividends received from profits that are not allocated to the final tax account of another company registered in Malta; and
- Income that has been subject to tax at a final rate of tax in terms of any other provision and is allocated to the final tax account.
“Higher of” rule
FITWI can in no case be lower than the effective Malta income tax that would have otherwise resulted had the Entity (and its shareholders) applied the standard full imputation tax system, including the tax payment and refund system. The Regulations thereby guarantee that the Malta income tax liability will always be the greater of:
- The final income tax determined under FITWI, and
- The net effective tax payable under the ordinary ruleset.
Deloitte’s view
FITWI is intended to simplify the interaction of the domestic income tax system with specific elements of the global minimum tax ruleset. The enactment of FITWI is not tantamount to a revocation of Malta’s election to defer the Council Directive (EU) 2022/2523 (i.e., the Pillar Two Directive). Neither should it be construed as the introduction of a Qualified Domestic Minimum Top-up Tax (‘QDMTT’).
