Double Taxation Agreement between Portugal and Malta

What is the Double Taxation Agreement between Portugal and Malta and what are the benefits for portuguese Entrepreneurs?

As part of its growth strategy, Ancilia is strengthening its presence in the Portuguese market, providing specialised solutions for entrepreneurs looking to expand their business internationally in a safe, efficient and tax-compliant way.

In the context of globalisation and increasing business mobility, many Portuguese entrepreneurs have been looking for international jurisdictions that offer tax advantages, legal stability and European integration. One of the most attractive options in this scenario is Malta - a member of the European Union, with an efficient tax system and a well-regulated business environment.

A determining factor in Malta's attractiveness is the existence of a Double Taxation Agreement (DTA) with Portugal, in force since 2002. This treaty allows entrepreneurs resident in Portugal to enjoy specific tax benefits when setting up and operating a Maltese company.

What is a Double Taxation Agreement?

Double Taxation Agreements are bilateral treaties signed between countries with the goal of ensuring that the same person or company doesn't pay taxes twice on the same income - in the country where the income is generated and in the country where the beneficiary is fiscally resident.

The DTA between Portugal and Malta, signed on 26 January 2001 and in force since 5 April 2002, follows this principle. The treaty establishes clear rules on the distribution of taxation rights between the two states and mechanisms to eliminate double taxation, such as tax incentives.

What are the benefits for Portuguese residents with companies in Malta?

For a Portuguese entrepreneur who decides to set up a company in Malta, the agreement brings several advantages, both from the point of view of income taxation and legal enforceability: 

• Avoids double taxation 

The income earned by the Maltese company can be taxed in Malta, with the tax paid being deductible in Portugal through a tax claim. This prevents the same income from being taxed in both countries, ensuring better tax efficiency.

• Favourable taxation in Malta

Malta's corporate tax rate is officially 35%. However, through the tax refund system, foreign shareholders can benefit from a partial refund of up to 6/7 of the taxes paid, reducing the effective rate to around 5%, depending on the nature of the company's activity and structure.

• Clear rules for interest and royalties

The DTA establishes withholding tax limits of 10 per cent on interest and royalties paid between the two countries, creating a secure tax framework for activities linked to intellectual property or financing.

• Greater legal certainty and predictability

The DTA provides a stable legal framework, protecting entrepreneurs from unilateral changes and avoiding tax ambiguities. This is crucial for those looking to plan for the long term.

In the end…

The combination of Malta's attractive tax system, its European framework and the Double Taxation Agreement with Portugal makes this jurisdiction a strategic choice for Portuguese entrepreneurs looking to expand internationally safely and efficiently.

However, as with any international structure, it is essential that planning is carried out with technical support, ensuring full compliance with the tax rules in force in both Portugal and Malta.

At Ancilia, we have experience in structuring international companies with a focus on compliance, transparency and tax optimisation. If you're considering Malta as the next step for your business, talk to us.

Contact us for a free consultation.