• Final Tax on Investment Income

Interest 

The new regime introduces a final tax of 15% deducted at source on certain categories of investment income paid to Maltese individuals and companies (excluding banks, insurance companies and offshore companies).  Interest paid by Maltese banks (in whatever currency), the government and Maltese public corporations are examples of investment income to which the final tax provisions apply. 
Interest received from overseas deposit accounts remains taxable at normal rates.  Interest paid to non-residents is exempt from withholding tax (see Section 3.10). 

Dividends 

The final tax regime is also extended to dividends paid by Maltese companies.  Maltese companies are required to collect tax on behalf of the Inland Revenue in respect of dividends paid by them to Maltese individuals.  Dividends paid out of untaxed income to a Maltese individual suffer deduction of tax at source of 15% which is withheld by the company and paid to the Revenue.  Consequently, all Maltese dividends received by Maltese individuals will have suffered "full" tax and do not bear any further tax. 

Disclosure 

Where tax has been deducted at source, Maltese taxpayers have no further tax liability on the interest or dividend income received and individuals are not required to disclose such sums on their tax returns unless they wish to do so, in which case they are taxed at normal rates with a credit for the tax deducted at source. 
 Where the interest is disclosed on the tax return of an individual, he remains entitled to the Lm30 annual allowance currently available under the provisions of the Income Tax Act. 

Election 

All Maltese taxpayers, however, have the right to elect to have interest paid to them gross,  in which case they are required to disclose such sums on their tax returns and to pay tax on the interest received at the normal applicable rates.  An election may only be made on opening ail account or 14 days prior to when the investment income falls due and the bank (or other paying agent) has to keep a list of all taxpayers who have made an election to receive investment income gross. These lists are maintained by the payor and made available to the Inland Revenue Department on request. 

An election needs to be made with respect to each account on which the taxpayer wishes to receive interest gloss.  A taxpayer may choose which, if any, bank accounts and other loans will be subject to election. 
There can be no election to receive dividend payments gross of tax. 
Interest and dividend income received from overseas remains taxable at normal rates.   

Collective investment schemes 

The application of the final tax regime to Maltese individuals investing in collective investment schemes is set out in Section 3.5.