Business expenses in Malta: what you can deduct and which structure fits you

Last reviewed: November 2026 · Reviewed by Stéphane Gombauld, tax expert, technologist and digital nomad

You freelance or run a company from Malta and want to know which costs cut your tax bill, and whether the structure changes that. This guide gives you the 2026 rules, the depreciation periods, the traps, and a comparison of structures so you pick the right one.

Malta business expenses in 2026: the key figures

Is this guide for you?

Read on if you…

• are a self-employed professional in Malta and want to know what you can deduct;
• run or plan to set up a Maltese limited company and need the capital allowance and interest rules;
• are choosing between sole trader, partnership and company and want the expense angle covered.

Probably not your case if you…

• are an employee with no business income – employees get almost no deductions, see personal tax deductions in Malta;
• want the corporate rate and refund mechanics – see corporate income taxes in Malta.

What can you deduct in Malta?

Article 14 of the Income Tax Act (Chapter 123) sets one test for everyone, sole trader or company: the expense must be wholly and exclusively incurred in the production of income. Article 26 then lists what is never deductible. If a cost passes the first and avoids the second, it is deductible.

Operating expenses, deductible in full

• rent of an office or co-working desk, and the business share of a home office;
• salaries, employer social security and the maternity fund contribution;
• professional fees: accountant, lawyer, registered agent, MBR fees;
• software subscriptions, hosting, domain names, cloud services;
• marketing, advertising, website costs;
• travel for business, including flights and hotels, but not your commute;
• insurance for the business, bank charges, payment-platform fees;
• interest on money borrowed to earn income, even for capital purposes, within the EU anti-avoidance limit (30% of tax-EBITDA for net borrowing costs above EUR 3 million). Interest linked to Maltese immovable property is restricted;
• bad debts once proved irrecoverable; general provisions are not deductible;
• pre-trading expenses incurred up to 18 months before you start trading, such as incorporation and market research.

Capital expenditure, deductible through capital allowances

You cannot deduct the laptop or the van in the year you buy it. Instead you claim capital allowances, Malta's word for tax depreciation, on a straight-line basis over a minimum period:

Here's the catch for cars. Allowances and lease payments on a company car are capped by reference to a cost of EUR 14,000. A EUR 40,000 car gives you EUR 2,800 a year for five years and nothing on the remaining EUR 26,000.

Intellectual property and the notional interest deduction

Capital expenditure on IP, such as a patent or acquired software rights, is deductible in full in the year incurred or spread over at least three years. The patent box gives a formula-based deduction on qualifying IP income. Separately, companies and partnerships can claim a notional interest deduction: a deemed interest on risk capital at the risk-free rate plus 5%, capped at 90% of chargeable income. It is a way to deduct a return on equity as if it were debt interest.

What is never deductible?

Article 26 and the Commissioner's practice exclude:

• fines and penalties, including parking fines and late-filing additional tax;
• charitable donations, unless the law expressly allows them; cash donations to registered voluntary organisations in certain fields give a tax credit of up to 35% of the donation, capped at EUR 500;
• bad debt provisions and general reserves;
• taxes suffered, including Maltese income tax, subject to the Commissioner's practice where no double tax relief is claimed;
• goodwill, unless it qualifies under the IP rules;
• private and domestic costs: clothes, your own meals, the family share of the car;
• entertainment, unless wholly and exclusively for producing income and documented; client dinners are often challenged.

Keep invoices and bank statements for nine years; without them the Commissioner can estimate your profit and disallow expenses. See tax fraud in Malta for what that costs.

Which business structure deducts best for what you do?

The deduction rules are the same across structures, but the rate they save you, your liability and your admin differ.

The management-and-control warning. A Maltese company is resident because it is incorporated in Malta, but if you run it from Lisbon or Dubai, that country can treat the company as resident there, or as having a permanent establishment there. Your expenses then follow two sets of rules and your refunds may be challenged. Keep board decisions, directors and substance where you say they are. Full comparison in business forms and independent professional statuses in Malta, and get the structure checked at Heavnn business setup.

For most solo consultants under about EUR 60,000 of profit, the sole-trader route is simpler and the 0% to 25% bands beat a company. Above that, or with retained profits, a company with the refund system or the 15% election usually wins. Compare in corporate income taxes in Malta.

How do losses and VAT interact with your deductions?

Losses. Trading losses carry forward indefinitely against future income. There is no carry-back. Unabsorbed capital allowances can only be used against the same source of income, so a loss-making side activity does not shelter your consulting profit.

VAT. If you are VAT-registered under Article 10, input VAT is recovered through your VAT return and is not an income tax expense. If you are exempt under Article 11 (turnover under EUR 35,000), the VAT you pay becomes part of the cost and is deductible with it. Details in specific taxes applicable in Malta.

Common mistakes (and what they cost)

• Expensing a EUR 3,000 laptop in year one → the Commissioner spreads it over four years, recomputes your tax and charges interest at 0.6% a month on the difference.
• Putting a EUR 50,000 car through the company → only EUR 14,000 of cost ever earns allowances, and the private-use fringe benefit is taxed on you personally.
• Deducting client dinners without a business note → entertainment is disallowed, with additional tax on the undeclared profit.
• Claiming a bad debt provision → not deductible until the debt is actually irrecoverable; you lose the deduction and pay interest.
• Running a Maltese Ltd from abroad with no Maltese substance → your new country taxes the profit, and the Maltese refund may be denied: the 5% becomes 25% or more.

Frequently asked questions

What business expenses are deductible in Malta?

Any expense wholly and exclusively incurred in producing your income: rent, salaries, professional fees, software, marketing, business travel, insurance, interest within limits, bad debts once irrecoverable, and pre-trading costs up to 18 months before you start. Capital costs such as computers, vehicles and furniture are deducted through capital allowances over set periods, not in one year.

What are the depreciation rates in Malta?

Malta uses minimum straight-line periods called capital allowances: 4 years for computers, electronics and software, 5 years for motor vehicles and machinery, 6 years for catering, medical and communications equipment, and 10 years for furniture, fixtures and other plant. Industrial buildings get 2% a year plus a 10% initial allowance. Cars are capped at a EUR 14,000 cost.

Can I deduct my home office in Malta?

Yes, the business share. If one room of a four-room flat is used only for work, a quarter of rent, electricity and internet is deductible under the wholly-and-exclusively test. Mixed-use areas such as a kitchen table are harder to defend. Keep the lease, bills and a floor plan, because home-office claims are frequently questioned in audits.

Are charitable donations deductible for a Maltese company?

Generally no. Donations are not deductible unless a specific law allows it. Instead, cash donations to registered voluntary organisations active in certain fields, such as social, environmental or cultural work, give a tax credit of up to 35% of the donation, capped at EUR 500 a year. Sponsorship with a genuine advertising return can be treated as a marketing expense.

Is it better to be self-employed or set up a company in Malta?

For profits up to roughly EUR 60,000, self-employment is usually cheaper and simpler: the progressive bands stay at or below 25% and there is no company admin. Above that, or if you retain profits, a limited company taxed at 35% with the 6/7 refund, or the elected 15% final rate, generally wins. Liability protection and client expectations also push founders toward a company.

Related guides

• Business forms and independent professional statuses in Malta
• Corporate income taxes in Malta: 35%, refunds and the 15% option
• Specific taxes applicable in Malta: VAT and social security
• Personal tax deductions in Malta
• Your complete tax guide to Malta
• Business expenses in Portugal
• Business expenses in Spain
• All country tax guides

Sources

• Income Tax Act, Chapter 123 of the Laws of Malta (articles 14 and 26)
• Malta Tax and Customs Administration – capital allowances and deductions
• Malta Business Registry – company and partnership registration
• Business First – starting a business in Malta
• PwC Worldwide Tax Summaries – Malta, Corporate: Deductions

This guide is general information, not personalised tax advice. See how we research and review.