Malta’s 35% Corporate Tax and the 6/7ths Refund: How the Effective Rate Lands at 5%

Malta’s corporate tax rate is 35%. For most iGaming groups structured through Malta, the effective rate on trading profits is closer to 5%. The gap between those two numbers is the full imputation system, specifically the 6/7ths shareholder refund under the Income Tax Act (Chapter 123 of the Laws of Malta). Understanding exactly how that mechanism operates, at which legal entity it applies, and what Pillar Two does to the calculation is now a first-order compliance task for any group with a Maltese operating entity in its structure.

What Is Malta’s Full Imputation System?

Malta operates a full imputation system for corporate taxation. When a Maltese company pays tax at the statutory rate of 35% on its chargeable income, that tax is not simply a cost absorbed by the company. It attaches to the dividend as a tax credit when profits are distributed to shareholders. The shareholder is treated as having received the dividend together with the underlying corporate tax paid, and the tax credit is available to offset the shareholder’s own tax liability.

For non-resident shareholders, the typical profile for an iGaming group holding a Maltese operating entity through an offshore or European holding company, the mechanics go further. Malta’s Income Tax Act provides a refund entitlement to shareholders on distributions out of profits that have borne Maltese corporate tax. The quantum of that refund depends on the account from which the dividend is distributed. For trading income, which covers the operating profits of an MGA-licensed iGaming company, the applicable refund rate is 6/7ths of the tax paid by the Maltese company.

Where Does the Refund Actually Arise?

Compliance teams frequently mischaracterise the 6/7ths refund as a reduced corporate tax rate applied to the Maltese operating entity. It is not. The Maltese company pays 35% in full. The refund is a shareholder-level entitlement that arises only upon distribution of a dividend and a subsequent refund claim filed with the Malta Tax and Customs Administration (MTCA). The refund is not automatic on filing. It requires the shareholder to submit a claim, and MTCA processes refunds on a regular cycle, typically within a window of several months after the claim is submitted.

This sequencing has cash-flow implications. The Maltese company’s retained earnings, after paying 35% tax, are lower than the group’s effective tax cost would suggest. The group only recovers the 6/7ths refund once the dividend is declared, distributed to the shareholder entity, and the refund claim is processed and paid. For groups managing working capital from Malta-based entities, this timing gap between tax paid and refund received is operationally significant, particularly where the Maltese entity is also funding compliance obligations, licensing fees, and operational expenditure in Malta.

The Tax Account Architecture

Malta’s imputation system operates through a structured set of tax accounts maintained by the distributing company. Under standard Maltese tax practice, trading income of a Maltese company, comprising the operating revenues from gaming services, flows through the Maltese Taxed Account. Distributions from that account carry the full imputation credit and entitle the qualifying non-resident shareholder to the 6/7ths refund.

Passive income, including dividends received by the Maltese company from foreign subsidiaries and certain interest income, may flow through different accounts and attract different refund rates under the Income Tax Act. For royalties derived from intellectual property that does not qualify for preferential treatment, the applicable refund rate is lower than the 6/7ths available on trading income. The account categorisation of that IP income therefore determines the applicable refund fraction, and iGaming groups routing platform IP through the Maltese entity should confirm the classification with qualified Maltese tax counsel before assuming the trading income rate applies.

Income Type	Distributing Account	Shareholder Refund	Net Tax Retained by Malta
Trading profits (operating income)	Maltese Taxed Account	6/7ths of tax paid	~5% of pre-tax profit
Passive income (non-qualifying)	Maltese Taxed Account	Reduced rate (confirm with counsel)	~10% of pre-tax profit
Participating holding income	Foreign Income Account	Full refund (subject to conditions)	Potentially nil
Immovable property income	Final Withholding Tax Account	Nil	35%

Why Gaming Companies Are Held via International Structures

The 6/7ths refund is available to shareholders without restriction on their residence, provided the shareholder is not a Maltese tax resident. This is the structural reason almost every significant iGaming group holding an MGA licence places its shareholder entity, typically a holding company or intermediate parent, outside Malta. Common jurisdictions for the holding entity include Cyprus (EU member, tax treaty network, participation exemption on dividends received), Luxembourg (EU member, strong treaty network, IP-friendly), the Netherlands, and Alderney or the Isle of Man for groups that also hold licences from those regulators.

The holding entity receives the dividend from the Maltese operating company, claims the 6/7ths refund from MTCA, and nets the refund against the already-distributed dividend. In jurisdictions with participation exemptions on incoming dividends, such as Cyprus, Luxembourg, and the Netherlands, the net dividend received by the holding company is itself exempt from further tax, producing a total tax cost at group level of approximately 5% on the Malta operating company’s pre-tax trading profit. The MGA’s licensing documentation does not govern this holding structure. The regulatory requirement is simply that the MGA licensee itself is a Maltese company meeting the relevant fit and proper and capitalisation tests under the Gaming Act (Chapter 583 of the Laws of Malta) and associated subsidiary legislation.

Malta’s corporate tax regime, which features a refund mechanism that can reduce effective rates significantly for non-resident shareholders, has historically been scrutinised in the context of the OECD’s Pillar Two minimum tax framework. The MGA’s own licensing documentation does not address Pillar Two interaction, and the 2026 VAT amendments similarly do not reference GloBE.

The Gaming Tax Layer, Separate from Corporate Tax

Corporate tax and gaming tax in Malta are independent obligations, and the 5% effective corporate tax rate should not be conflated with Malta’s 5% gaming tax on player revenues. Under the MGA’s Guidance Note on Licence Fees and Taxation (February 2023, v2) and the Gaming Tax Regulations (Subsidiary Legislation 583.10), a licensee is subject to a gaming tax calculated at 5% of the gaming revenue generated from gaming services offered to players physically present in Malta. This gaming tax applies only to the Malta-resident player base. The overwhelming majority of MGA-licensed iGaming operators serve players in other regulated markets under the relevant point-of-consumption rules in those jurisdictions, not under Maltese gaming tax.

In addition to gaming tax, MGA licensees pay an annual compliance contribution calculated on qualifying activities by reference to gaming revenue generated during the licence period, as determined under Part A of the First Schedule of the Gaming Licence Fees Regulations (S.L. 583.03). The compliance contribution is tiered by gaming revenue across Type 1, Type 2, Type 3, and Type 4 game categories, with a prescribed minimum contribution amount. New operators are exempt from compliance contributions until a full licence period elapses, and qualifying start-ups under the Directive on Start-Up Undertakings receive a twelve-month moratorium. For a detailed breakdown of the MGA’s full fee and regulatory framework, the UKGC vs MGA in 2026 licence cost comparison models total cost of ownership including compliance contribution across a five-year horizon.

The 2026 Gaming Tax Reforms

Malta’s gaming tax architecture for services offered to players physically present in Malta is being restructured from 1 October 2026. The Malta Gaming Authority, working alongside the Malta Tax and Customs Administration, is replacing the current single 5% gaming revenue tax with a differentiated rate structure aligned to game type. Under the incoming framework, Type 1 games will attract a gaming tax of 15% on aggregate gaming revenue, while Type 2, Type 3, and Type 4 games will attract a rate of 10%. The existing gaming device levy is being consolidated into this unified structure.

The reform applies exclusively to gaming services provided to players physically present in Malta. Remote gaming services offered to players outside Malta are not subject to Maltese gaming tax under the MGA’s current framework. Those revenues are subject to point-of-consumption taxes in the player’s jurisdiction. The 2026 reform therefore has limited direct impact on operators whose Malta-licensed entity primarily serves international markets, but it is material for operators with significant land-based or hybrid operations serving Maltese residents. Compliance teams must update their tax provisioning models and regulatory return processes before the 1 October 2026 effective date.

How Does the Refund System Interact with Pillar Two?

The OECD’s Global Anti-Base Erosion (GloBE) Model Rules impose a minimum effective tax rate of 15% on the excess profits of multinational enterprise groups with consolidated annual revenue above €750 million. The GloBE rules compute a jurisdictional effective tax rate (ETR) by comparing Adjusted Covered Taxes to GloBE Income for each jurisdiction. Where the jurisdictional ETR falls below 15%, a top-up tax is triggered.

Malta’s 6/7ths refund system creates a direct and material interaction with the Pillar Two ETR calculation. The GloBE Model Rules distinguish between taxes that count as Adjusted Covered Taxes and taxes that do not. Under the relevant provision of the GloBE Model Rules governing taxes on distributions, “disqualified refundable imputation taxes” are explicitly excluded from Adjusted Covered Taxes. A refundable imputation tax is disqualified, and therefore excluded, when it is refundable to the shareholder rather than to the distributing company itself.

Under the GloBE rules, the Maltese operating entity’s corporate tax expense recorded at 35% is reduced by the 6/7ths refund entitlement when computing Adjusted Covered Taxes, because that refund is a disqualified refundable imputation tax. The result is that the Maltese constituent entity’s GloBE ETR may be computed at approximately 5%, squarely within the range that triggers a Pillar Two top-up tax obligation.

The PwC Pillar Two Data Input Catalog (January 2025) explicitly identifies “disqualified refundable imputation taxes accrued as an expense” as a separate line item in the GloBE Income or Loss computation (reference 2.042), confirming that this is a live data point in every Pillar Two compliance model. Groups with Maltese operating entities need to capture the Malta corporate tax paid, subtract the 6/7ths refund entitlement for GloBE purposes, and compute the residual ETR before applying any substance-based income exclusion.

Malta’s QDMTT Response

A Qualified Domestic Minimum Top-up Tax (QDMTT) allows a jurisdiction to collect the Pillar Two top-up tax domestically before the Income Inclusion Rule (IIR) or Undertaxed Profits Rule (UTPR) is applied by a parent jurisdiction. Malta has enacted QDMTT legislation, which means that for in-scope MNE groups, the top-up tax on low-taxed Malta profits is collected in Malta first, rather than by the parent entity’s jurisdiction. The OECD’s July 2023 Administrative Guidance introduced a QDMTT safe harbour: where a qualifying QDMTT is in place, the top-up tax for that jurisdiction is deemed zero for IIR and UTPR purposes, preventing double collection by both Malta and the parent jurisdiction.

In practice, a Malta-licensed iGaming entity within a group above the €750 million threshold will face a Maltese QDMTT charge that brings the effective tax rate from approximately 5% up to the 15% minimum on excess profits. The substance-based income exclusion, calculated by reference to qualifying payroll costs and the carrying value of tangible assets in Malta, reduces the quantum of excess profits subject to top-up tax. For iGaming operators, which are typically asset-light and IP-intensive, the substance carve-out is limited relative to profits, making QDMTT exposure a material line item in the group tax computation.

The OECD’s Minimum Tax Implementation Handbook (2023) confirms that a QDMTT does not singlehandedly resolve the policy tension between a jurisdiction’s tax incentive framework and the GloBE minimum. For Malta, the consequence is that the traditional 6/7ths refund structure, while legally intact, no longer delivers a 5% effective rate for in-scope MNE groups. Those groups pay an effective Maltese QDMTT surcharge that, together with the corporate tax net of the refund, produces a 15% jurisdictional ETR on excess profits subject to the minimum tax.

How Does the 5% Rate Work in Practice for Groups Below the Threshold?

For iGaming groups with consolidated annual revenue below €750 million, and therefore outside the Pillar Two threshold, the 6/7ths refund continues to operate as described, and the effective corporate tax rate on Malta trading profits remains approximately 5% at group level. These groups are not subject to QDMTT, IIR, or UTPR.

The practical compliance workflow for a below-threshold group runs as follows. The Maltese operating company files its corporate tax return with the MTCA, computing chargeable income on trading profits at the 35% statutory rate. Tax is paid. The Maltese company distributes a dividend to the non-resident shareholder entity from its Maltese Taxed Account. The shareholder entity files a refund claim with MTCA. MTCA processes the 6/7ths refund within the applicable cycle. The shareholder entity receives the net dividend plus the refund, and the total tax leakage on the cycle is approximately 5% of the original pre-tax profit. No further corporate tax applies in the shareholder jurisdiction to the extent that jurisdiction’s participation exemption applies to qualifying dividends received.

Groups approaching the €750 million threshold should model the Pillar Two impact in advance, since threshold breach in any one fiscal year triggers a full GloBE filing obligation for that year. The transition from a 5% effective rate regime to a 15% GloBE minimum is not gradual. It occurs at the threshold crossing, and QDMTT liability accrues from the first day of the fiscal year in which the threshold is met.

The EU Collective Gambling Tax Discussion

A separate but intersecting pressure point is the European Parliament’s proposal for a uniform 1% levy on gambling across EU member states, which gained momentum in mid-2026 as part of discussions around the EU Multiannual Financial Framework for 2028 to 2034. According to SBC News, reporting in June 2026, Malta’s Prime Minister Robert Abela stated publicly that fiscal sovereignty should remain within the competence of member states, and Malta joined the ‘Friends of Cohesion’ group of 16 nations cautious about EU-level tax harmonisation in this area. This position reflects Malta’s structural dependence on iGaming, with the sector accounting for approximately one-tenth of Malta’s annual GDP, and the significant revenue implications that any shift toward harmonised gaming taxation would have for the jurisdiction’s competitive positioning. Compliance teams at MGA-licensed operators should monitor this discussion, but as of mid-2026, no formal EU legislative instrument has been tabled that would override Malta’s current gaming tax framework.

For operators evaluating the full scope of the MGA’s regulatory obligations alongside the tax structure, including technical standards, player protection requirements, and AML obligations, the MGA system audit requirements article covers what your technology infrastructure must document to remain in good regulatory standing.

Key Takeaways for Compliance and Finance Teams

The 6/7ths refund is not a loophole or an anomaly in Malta’s tax framework. It is the deliberate architecture of Malta’s full imputation system, codified in the Income Tax Act (Chapter 123) and operating at the shareholder level through a structured claim and refund process administered by MTCA. The approximately 5% effective rate is the product of that system applied to trading income distributed from a qualifying Maltese company to a non-resident shareholder.

What has changed is the Pillar Two layer. For MNE groups above €750 million in consolidated revenue, the GloBE rules treat the 6/7ths refund as a disqualified refundable imputation tax, excluded from Adjusted Covered Taxes. Malta’s QDMTT captures the resulting top-up tax domestically. The effective rate for those groups is no longer 5% on excess profits. It is 15%, reduced only by the substance-based income exclusion. Groups below the threshold retain the traditional 5% outcome, subject to the ongoing accuracy of their tax account categorisation and refund claim filings.

The 2026 gaming tax reform adds a further variable for operators serving Malta-resident players. The increase from 5% to 10, 15% on gaming revenue from Malta-based players, effective 1 October 2026, must be modelled separately from corporate tax and captured in updated regulatory return processes under S.L. 583.10. Finance and compliance teams should consult qualified Maltese tax counsel to confirm entity-level account categorisation, refund claim timelines, QDMTT exposure modelling, and the interaction of all layers before the 1 October 2026 effective date. The architecture is well-established, but the interaction of multiple simultaneous changes, namely GloBE, VAT reform, and gaming tax restructuring, makes 2026 a year in which off-the-shelf assumptions about Malta’s effective rate should be retired in favour of entity-specific modelling. To ensure your compliance framework reflects these changes, download the 2026 MGA Compliance Checklist or contact a qualified Maltese tax advisor for a confidential entity-specific analysis.

Key Resources

Malta Income Tax Act, Chapter 123 of the Laws of Malta, the primary legislative basis for the full imputation system and shareholder refund entitlement. Available at legislation.mt.

MGA Guidance Note on Licence Fees and Taxation (February 2023, v2), sets out the 5% gaming tax on Malta-resident players and the compliance contribution framework. Published by the Malta Gaming Authority at mga.org.mt.

Gaming Tax Regulations, Subsidiary Legislation 583.10, the operative regulatory instrument for gaming tax liability and monthly reporting obligations under the MGA licensing framework.

OECD GloBE Minimum Tax Implementation Handbook (2023), primary reference for QDMTT mechanics, the IIR and UTPR rule order, and the substance-based income exclusion applicable to Malta-licensed constituent entities.

PwC Pillar Two Data Input Catalog (January 2025), practical data framework for computing GloBE Income or Loss, including the “disqualified refundable imputation taxes” line item (reference 2.042) directly relevant to Malta’s refund system.