Maltas Corporate Tax System Under Scrutiny as 81 Firms Report Over 10 Million Euro in Taxable Income Without Employees

October 20 2026 14:01:41 by PCLMedia

Parliamentary figures raise questions about economic substance, multinational tax arrangements and Malta’s international reputation, as declared tax liabilities among Maltese entities linked to US multinationals rise to €118 million in 2024.

Malta’s corporate tax framework is facing renewed scrutiny after figures presented in Parliament revealed that 81 companies registered in Malta reported taxable income exceeding €10 million despite having no employees. Of these, 23 entities belonged to large multinational groups, highlighting the complexities of assessing corporate taxation, economic substance and the role of Malta-based companies in international business structures.

The figures were disclosed by Finance Minister Clyde Caruana in parliamentary replies to questions from Nationalist MP Adrian Delia. They also revealed a sharp increase in tax declared by Maltese entities belonging to US-based multinational groups, from €24.7 million in 2020 to €118 million in 2024.

The disclosures have renewed attention on how Malta’s tax system operates in practice, how corporate profits are attributed to local entities and whether the country’s existing oversight arrangements are sufficient to protect its reputation as an international business and financial services centre.

81 companies report more than €10 million in taxable income without employees

According to Caruana, 81 companies registered in Malta declared taxable income exceeding €10 million while reporting no employees. Separately, 23 Maltese entities belonging to 19 multinational groups reported taxable income above the same threshold without employees. The latter figures were derived from tax returns and country-by-country reports submitted under the European Union’s DAC4 framework. The multinational groups covered by these disclosures had consolidated annual revenue of at least €750 million.

The figures distinguish between companies registered in Malta and entities belonging to large multinational groups that fall within the scope of specific international reporting requirements. They should therefore not be treated as interchangeable categories.

Caruana cautioned against drawing conclusions about a company's activities or tax position solely from its reported headcount.

“The number of employees that an entity reports in a particular jurisdiction does not allow, on its own, conclusions to be drawn about its functions, activities or tax position,” the minister said.

That distinction is important in an economy where companies may operate through holding structures, intellectual property arrangements, financing entities or other specialised corporate vehicles. Such entities may have limited direct staffing requirements while relying on outsourced services, employees elsewhere within a group or professional service providers.

However, the absence of employees does not, by itself, establish that a company has sufficient economic substance, nor does it demonstrate that its tax arrangements are inappropriate. A proper assessment requires a broader examination of the entity's functions, assets, decision-making processes, contractual responsibilities and actual business activities.

Malta’s corporate tax system and the question of economic substance

Malta's corporate tax regime has long been a feature of its international business proposition. The standard corporate income tax rate is 35%, although the effective tax burden for some shareholders may be reduced through Malta's shareholder refund mechanism, subject to the applicable legal conditions.

Under the traditional imputation system, shareholders receiving dividends from Maltese companies may, in qualifying circumstances, claim refunds of some of the tax paid by the company. The resulting effective tax rate can vary depending on the type of income, the applicable refund entitlement and the circumstances of the shareholder.

This distinction between the statutory rate and the effective tax burden is central to understanding Malta's position within the European corporate tax landscape. The headline rate alone does not explain how much tax a company or its shareholders ultimately bear.

Malta's tax system also operates within a wider framework of EU law, international tax standards, anti-avoidance provisions and information-sharing obligations. Companies must comply with the rules applicable to their activities, while cross-border arrangements may be subject to additional requirements governing transfer pricing, controlled foreign companies, beneficial ownership and the allocation of taxable profits.

The central issue raised by the parliamentary figures is therefore not simply whether a company has employees. It is whether its declared profits are consistent with the activities and economic functions actually performed, the risks assumed and the assets used in generating those profits.

For multinational groups, these questions can be particularly complex. A Maltese subsidiary may legally own assets, receive dividends, provide financing or hold investments without employing a large workforce directly. Nevertheless, the relevant tax analysis must establish whether the arrangement complies with applicable Maltese and international rules.

Tax declared by US multinational groups reaches €118 million

The parliamentary replies also provided a breakdown of tax declared by Maltese entities belonging to US-based multinational groups with consolidated annual revenue of at least €750 million.

The figures show a substantial increase between 2020 and 2024, although the annual totals fluctuated during the period.

- 2020: €24.7 million
- 2021: €64.6 million
- 2022: €64 million
- 2023: €58.4 million
- 2024: €118 million

The €118 million declared in 2024 was almost twice the €58.4 million recorded in 2023 and represented an increase of approximately 378% compared with 2020.

These amounts refer to tax declared in returns filed by Maltese constituent entities identified through DAC4 notifications. The relevant multinational groups had ultimate parent companies resident in the United States and met the applicable consolidated revenue threshold.

Caruana said the tax was due under Maltese law and reflected the activities and economic substance of the entities concerned.

The figures demonstrate an increase in declared tax liability, but they do not, on their own, explain what drove the change. Differences in taxable profits, business activity, the composition of reporting entities and the timing of tax liabilities may all affect annual totals. Further information would be needed to establish the relative contribution of these factors.

It is also important to distinguish tax declared from tax ultimately collected, as well as from the wider question of how much tax multinational groups pay across all the jurisdictions in which they operate.

Why international tax rules matter

Malta's corporate tax framework cannot be assessed in isolation from the international rules governing multinational enterprises.

The EU's DAC4 framework implements country-by-country reporting requirements derived from the OECD's international tax transparency standards. These requirements are designed to give tax authorities information about the global allocation of a multinational group's income, taxes paid and certain indicators of economic activity.

The €750 million consolidated revenue threshold is particularly relevant because it determines which multinational groups generally fall within the scope of country-by-country reporting obligations.

Such reporting helps tax authorities identify potential inconsistencies between where profits are reported and where economic activities take place. It does not automatically establish that an arrangement is improper or that a particular company has breached tax rules.

The OECD's work on base erosion and profit shifting, commonly known as BEPS, similarly seeks to address arrangements that exploit gaps or mismatches between national tax systems to shift profits away from the jurisdictions where the underlying economic activity occurs.

For Malta, participation in these international frameworks brings both obligations and scrutiny. Maintaining compliance requires effective reporting systems, cooperation with foreign tax authorities and the capacity to examine whether corporate structures reflect genuine commercial arrangements.

The government has maintained that Malta is subject to regular reviews by EU institutions and the OECD, including assessments concerning business taxation, transparency and measures intended to prevent the erosion of tax bases and the shifting of profits.

Caruana described these reviews as part of Malta's ordinary international obligations, rather than evidence of specific failings. He also said the authorities maintained ongoing contact with European and US counterparts on tax rules and developments involving multinational companies.

Oversight, beneficial ownership and compliance

Delia's parliamentary questions also examined the government's safeguards against the potential use of companies with little or no genuine economic activity.

Caruana said Malta already had measures covering beneficial ownership, reporting and compliance under EU and international rules. He added that further legislative changes would be considered where necessary.

Beneficial ownership transparency is intended to help authorities identify the individuals who ultimately own or control corporate entities. Reporting requirements, meanwhile, provide tax administrations with information needed to evaluate corporate structures and assess compliance with applicable legislation.

Yet the effectiveness of these safeguards depends not only on the existence of legislation but also on how consistently it is implemented and enforced. Authorities must be able to verify information, identify potential inconsistencies and investigate arrangements where the reported tax position does not appear to match the underlying economic activity.

For a small jurisdiction that relies significantly on international business and financial services, this balance is particularly important. A credible tax framework must provide legal certainty for legitimate investors while ensuring that corporate structures are not used to circumvent tax obligations.

Malta's reputation remains an unresolved question

One of the most significant points to emerge from the parliamentary exchanges was Caruana's confirmation that no study or analysis had been carried out to assess the reputational risk to Malta arising from its tax arrangements for multinational companies.

The absence of such an assessment does not establish that Malta has suffered reputational damage. However, it leaves unanswered how the government evaluates the potential impact of international perceptions of the country's corporate tax system on investment, financial services and relations with other jurisdictions.

Tax policy is not judged solely by statutory rates or the amount of revenue collected. International investors, regulators and business partners also consider transparency, the predictability of tax administration, the effectiveness of enforcement and the extent to which a jurisdiction's rules align with international standards.

For Malta, reputational considerations have practical economic implications. A strong reputation for compliance and regulatory reliability can support investment and long-term business relationships. Conversely, persistent uncertainty about the operation or oversight of tax arrangements may increase scrutiny and compliance costs for businesses operating legitimately in the country.

A formal assessment could help establish the nature and scale of any potential risks, identify areas requiring further safeguards and clarify how Malta intends to balance its competitiveness with international expectations.

What the figures do — and do not — establish

The disclosures provide useful information about taxable income reported by companies without employees and the tax declared by a defined group of multinational entities. They also underline the importance of distinguishing between corporate structures that are commercially legitimate and arrangements that may warrant closer examination.

However, the figures alone do not demonstrate tax avoidance, evasion or non-compliance. Nor do they establish that companies reporting no employees lack genuine economic activity.

A fuller assessment would require information about the entities' functions, assets, income sources, outsourcing arrangements and decision-making processes, together with relevant tax filings and the outcomes of any compliance reviews.

The increase in declared tax among Maltese entities linked to US multinationals is similarly significant as a trend, but it cannot be interpreted as proof of a particular policy outcome without further evidence.

Ultimately, the questions raised in Parliament concern more than the number of employees or the amount of tax declared. They concern how effectively Malta can demonstrate that its corporate tax framework operates transparently, consistently and in line with the economic activities that generate taxable profits.

With 81 companies reporting more than €10 million in taxable income despite having no employees, and no government study yet assessing the potential reputational implications of multinational tax arrangements, the issue remains one of public accountability as well as tax policy.

The challenge for Malta is to preserve a competitive and predictable business environment while providing clear evidence that its tax system is robust, credible and capable of meeting both domestic and international expectations.