Cyprus or Malta: Two EU Routes to a Similar Outcome

Two routes to a similar destination

Cyprus and Malta reach broadly comparable effective outcomes through very different mechanics, and the mechanics are what a founder lives with.

Cyprus charges 15 percent on taxable profit and that is the end of the matter at company level. The figure on the return is the figure paid.

Malta charges 35 percent, then refunds a proportion to the shareholder once a distribution has been made. The refund is real and long established, but it arrives after the tax has been paid and after a dividend has been declared, and it is ordinarily received by a holding company placed above the trading company rather than by the founder directly.

The differences that show up in practice

None of these decides the question alone. Together they describe a real difference in operating burden, and that burden recurs every year rather than once at formation.

Malta's elective 15 percent, and the floor written underneath it

Since the Final Income Tax Without Imputation Regulations 2025, a Maltese entity may elect to be charged at 15 cents for every euro of chargeable income instead of the 35 percent in article 56(6) of the Income Tax Act. The election is available for income of the fiscal year preceding year of assessment 2025 and after, and it is made by notice to the Commissioner.

It is widely reported as Malta moving to 15 percent. That is not what the regulations do.

Regulation 3(4)(a) provides that the tax charged under the election shall in no case be lower than the tax charged under the ordinary basis, reduced by the refunds claimed or claimable by all the shareholders under article 48(4) or (4A) of the Income Tax Management Act. The elective charge therefore cannot produce a better outcome than the refund system it replaces. Malta's own drafting treats the refund result as the benchmark and prevents the election from going below it.

What the election does buy is sequence. Fifteen percent is paid once, rather than 35 percent being funded and a proportion reclaimed after a distribution. For a group inside the scope of the global minimum tax it also presents a single charge at the tested rate rather than a charge and a refund. Both are real advantages and neither is a reduction in tax.

The election binds. Under regulation 3(3) it continues until the entity notifies otherwise, and that notification cannot be given before five years have run. Reverting then commits the entity to the ordinary basis for at least five consecutive years of assessment.

The personal question, which changes in Malta on 1 January 2027

The comparison is usually framed at company level, but for a founder relocating rather than only incorporating, the personal regimes differ more than the corporate ones.

Malta consolidated its individual residence schemes into the Individual Tax Programme Rules 2026, made under articles 56(23) and 96 of the Income Tax Act and in force for new applications from 1 January 2027. The programme charges 15 percent on income arising outside Malta and received in Malta, with a minimum tax of 35,000 euro for each year of assessment on the principal routes. Income not charged at 15 percent is charged separately at 35 percent.

Three features of the Maltese programme have no Cyprus equivalent and are easy to miss:

• The charge follows remittance. Foreign income is taxed when received in Malta, so the regime rewards leaving income outside the country and taxes bringing it in.
• The minimum tax is payable whether or not income is remitted, by 30 April of the year preceding the year of assessment, and rule 5(4)(c) provides that it is not refundable.
• A professional intermediary is compulsory. Rule 11 requires the individual to act through an authorised registered mandatary, being an advocate, legal procurator, notary or warranted accountant, or a body at least 75 percent held by such persons.

The Cyprus position is built differently. Special Defence Contribution is charged on an individual who is both resident and domiciled in Cyprus, so an individual who is resident without being domiciled is outside it on dividends and interest, with no minimum charge and no remittance test. Cyprus non-dom status runs until the individual has been resident for 17 of the previous 20 years.

When Malta is the better answer

Malta is not the weaker option, and there are situations where it is clearly right:

• groups already running a Maltese structure, where migration costs exceed the benefit
• sectors where Malta has specific regulatory depth, including remote gaming and certain shipping and aviation activities
• structures where the refund cycle is already established and running smoothly

Where a founder starts from nothing, the question is simpler. One company charged 15 percent is easier to fund, easier to administer and easier to explain than two companies operating a refund cycle to arrive at a comparable place.

What both jurisdictions share

The similarities matter as much as the differences, and they are the reason this comparison comes up at all.

Both are EU member states, so both offer the participation exemption on qualifying foreign dividends, access to the Parent-Subsidiary and Interest and Royalties Directives, and freedom of establishment. Both operate in English, both have common law influences in their corporate legislation, and both have extensive treaty networks.

Both also require genuine management and control locally. Neither regime is available to a company directed from somewhere else, and in both jurisdictions the residency question is settled on evidence of where decisions are actually taken.