Maltese Partnership Structures in 2026: The FITWI Regime and the Recalibration of International Tax Planning
The Maltese partnership has long occupied a distinctive position within the taxonomy of international tax planning vehicles. For nearly two decades, sophisticated investors and their advisors have exploited the structural flexibility inherent in Maltese commercial law, combined with the jurisdiction’s generous imputation-based refund mechanism, to achieve effective tax rates that few European Union member states could match. The year 2025, however, marks a watershed moment in this regulatory landscape. The introduction of the Final Income Tax Without Imputation regime—colloquially known as “FITWI”—pursuant to Legal Notice 188 of 2025 represents Malta’s strategic response to the Global Anti-Base Erosion Rules promulgated under Pillar Two of the OECD’s Inclusive Framework. For practitioners advising multinational enterprises and high-net-worth individuals alike, this development necessitates a fundamental reassessment of structures predicated upon Maltese partnership vehicles.
This analysis examines the legal architecture of Maltese partnerships, elucidates the critical election between fiscal transparency and corporate taxation, and evaluates the strategic implications of the bifurcated tax regime now confronting taxpayers in the post-Pillar Two era.
I. The Legal Framework: Partnership Typology Under Maltese Law
A. Foundational Principles
The Companies Act (Cap. 386) establishes the statutory foundation for commercial partnerships in Malta, recognizing two principal forms: the partnership en nom collectif and the partnership en commandite. A feature of considerable significance—and one that distinguishes Maltese law from numerous continental European jurisdictions—is that both partnership forms possess legal personality separate and distinct from their constituent partners. This attribute carries profound implications for cross-border tax analysis, particularly with respect to entity classification under foreign domestic law.
B. The Partnership En Nom Collectif
The partnership en nom collectif functions as the Maltese analogue to the general partnership recognized in common law jurisdictions. Its defining characteristic resides in the unlimited, joint and several liability borne by all partners for the partnership’s obligations. Capital contributions form the basis of each partner’s economic interest; notably, such interests are not represented by transferable shares. In the absence of contrary agreement, all partners participate in the management and administration of the partnership’s affairs.
C. The Partnership En Commandite
The partnership en commandite corresponds functionally to the limited partnership, incorporating the familiar bifurcation between general and limited partners. General partners—the commandités—bear unlimited liability and possess exclusive authority over partnership management. Limited partners—the commanditaires—enjoy liability circumscribed to their unpaid capital contributions but are precluded from participating in management decisions.
Of particular consequence for international structuring is the subdivision within this category. Maltese law permits the formation of partnerships en commandite in two configurations: the “simple” form, wherein capital remains undivided, and the form “with capital divided into shares,” wherein partnership capital is denominated in transferable securities. This latter variant constitutes what practitioners have termed the “partnership company”—a hybrid vehicle that combines the governance flexibility characteristic of partnerships with the capital market attributes of corporations.
D. The Strategic Significance of the Share Capital Election
The partnership en commandite with capital divided into shares merits particular attention precisely because it straddles the conceptual boundary between partnership and corporation. The general partner retains plenary management authority, yet the partnership may issue securities representing fractional ownership interests. This structural feature proves determinative for tax purposes: as discussed infra, such partnerships are automatically subject to corporate income taxation, thereby gaining access to Malta’s favorable imputation system and, now, the alternative FITWI regime.
II. The Taxation Regime: A Critical Bifurcation
A. The Default Rule: Fiscal Transparency
Maltese tax law treats partnerships en nom collectif and simple partnerships en commandite as fiscally transparent vehicles. Under this default regime, the partnership itself bears no tax liability; rather, profits are allocated to partners and subjected to taxation at the partner level according to each partner’s individual circumstances. Where the partner is a natural person, personal income tax rates apply; where the partner is a corporate entity, the tax treatment follows the rules applicable in that entity’s jurisdiction of residence.
This transparent treatment may prove advantageous in circumstances where look-through characterization is desired—for instance, in joint ventures structured to preserve the tax attributes of underlying income for each participant.
B. The Election for Corporate Treatment
The more consequential regime, from the perspective of international tax planning, arises when a partnership is treated as a body corporate for fiscal purposes. Two pathways lead to this result.
First, partnerships en commandite with capital divided into shares are automatically classified as companies under the Income Tax Act. No election is required; the mere adoption of this legal form triggers corporate tax treatment.
Second, other partnership forms may elect corporate treatment pursuant to Article 27(6) of the Income Tax Management Act. Once such an election is made, the partnership becomes subject to the full panoply of corporate tax rules.
Upon achieving corporate tax status, the partnership confronts a strategic choice of considerable moment: whether to remain within the traditional imputation system or to elect into the new FITWI regime.
III. The Traditional Imputation System: Mechanics and Efficacy
A. The Refund Mechanism
Malta’s longstanding imputation system operates through a distinctive pay-and-refund architecture. The company—or partnership taxed as such—initially remits corporate income tax at the headline rate of thirty-five percent. Upon distribution of profits to shareholders, however, the shareholders become entitled to claim refunds of a substantial portion of the tax paid at the entity level.
The quantum of the refund varies according to the character of the underlying income. For trading income and most active business profits, shareholders may claim a refund of six-sevenths of the tax paid, yielding an effective rate of approximately five percent. Passive income derived from interest and royalties qualifies for a five-sevenths refund, producing an effective rate of ten percent. Income benefiting from double taxation relief triggers a two-thirds refund.
B. The Fiscal Unit Innovation
The traditional system’s principal drawback—the cash flow burden occasioned by the requirement to remit thirty-five percent before obtaining a refund—has been substantially ameliorated since 2020 through the fiscal unit mechanism. Groups of related companies may elect to form a consolidated tax unit, filing a single return and, critically, remitting only the net tax liability ab initio. This innovation eliminates the working capital constraints that previously attended the refund system.
IV. The FITWI Regime: Malta’s Pillar Two Response
A. Genesis and Rationale
Legal Notice 188 of 2025 introduced the Final Income Tax Without Imputation regime as an elective alternative to the traditional system. Under FITWI, qualifying entities pay a flat fifteen percent tax on chargeable income. This payment is final: no refunds are available, and distributions carry no imputation credits.
The rationale underlying this innovation is inextricably linked to the Global Anti-Base Erosion Rules. For multinational enterprise groups with consolidated revenues exceeding seven hundred fifty million euros, the effective five percent rate achievable under the traditional Maltese system creates a “jurisdictional blending” problem. The parent jurisdiction—or, under the Undertaxed Profits Rule, another group member’s jurisdiction—becomes entitled to levy a top-up tax sufficient to bring the effective rate to fifteen percent. The practical consequence is that the tax benefit “leaks” from Malta to foreign treasuries.
The FITWI election permits affected groups to retain the full tax payment within Malta. The economic burden remains constant at fifteen percent; the policy question is merely which sovereign captures the revenue.
B. Strategic Deployment
For enterprises outside the Pillar Two scope—those with consolidated revenues below the threshold—the traditional system remains unambiguously superior on pure rate grounds. The five percent effective rate continues to represent a significant planning opportunity, subject to appropriate management of Controlled Foreign Company exposure in the shareholders’ home jurisdictions.
For in-scope multinationals, however, the calculus shifts materially. The FITWI election offers administrative simplicity, regulatory certainty, and the assurance that Malta—rather than a foreign jurisdiction applying the top-up mechanism—receives the tax payment.
V. The Participation Exemption: A Structural Cornerstone
Irrespective of the choice between the traditional system and FITWI, Maltese holding structures benefit from a robust participation exemption. Dividends and capital gains derived from “participating holdings” are wholly exempt from Maltese taxation. A participating holding generally requires equity participation of at least ten percent, or an acquisition cost exceeding €1,164,000, maintained for a minimum of one hundred eighty-three days.
The practical import of this exemption is substantial. A Maltese partnership en commandite with share capital, functioning as a holding vehicle, may receive dividends from subsidiaries in other jurisdictions—Cyprus, for instance—without incurring Maltese tax. Where the distributing jurisdiction provides relief under the Parent-Subsidiary Directive, the entire dividend stream flows to Malta unburdened by withholding tax at source and exempt from tax upon receipt.
VI. Redomiciliation: Continuity Without Liquidation
The Continuation of Companies Regulations (Legal Notice 344 of 2002) provide a mechanism whereby foreign corporate bodies—including partnerships with share capital—may migrate their legal domicile to Malta without undergoing liquidation in the jurisdiction of departure. The redomiciled entity preserves its legal continuity, corporate history, and existing contractual relationships.
This facility may prove particularly attractive for structures currently employing Luxembourg sociétés en commandite spéciale or United Kingdom limited partnerships that, for regulatory or commercial reasons, contemplate relocation to an EU member state.
VII. Implications for Polish Tax Analysis
From the perspective of Polish tax law, the partnership en commandite with capital divided into shares presents as an entity possessing legal personality separate from its partners—the functional equivalent of a foreign corporation for Polish corporate income tax purposes. This characterization eliminates the interpretive ambiguities that attend certain foreign partnerships whose transparent status creates classification mismatches.
For Polish-resident shareholders in structures falling below the Pillar Two threshold, the traditional Maltese system—with its five percent effective rate—retains considerable appeal. Careful attention must be paid, however, to Poland’s Controlled Foreign Company rules, particularly the effective tax rate test applicable to income derived from passive sources or intra-group transactions.
For Polish corporate groups of sufficient scale to fall within Pillar Two’s ambit, the FITWI election warrants serious consideration. The relevant comparison is not between five percent and fifteen percent, but between paying fifteen percent to Malta versus paying five percent to Malta followed by a top-up payment to the Polish treasury.
Conclusion
The Maltese partnership landscape in 2025 presents practitioners with a spectrum of structuring possibilities calibrated to diverse commercial objectives. At one pole lies full fiscal transparency, appropriate for joint ventures and structures requiring look-through treatment. At the other lies the FITWI regime, purpose-built for compliance with the global minimum tax framework. Between these poles, the traditional imputation system—with its remarkable five percent effective rate—continues to offer compelling advantages for enterprises outside Pillar Two’s reach.
The partnership en commandite with capital divided into shares remains the vehicle of choice for sophisticated international structuring, combining partnership governance flexibility with access to corporate tax preferences. The appropriate selection among available options requires, in each instance, careful analysis of group revenue thresholds, income characterization, shareholder residence, and investment time horizon.
What emerges with clarity is that Malta has demonstrated notable regulatory agility in adapting its fiscal framework to the post-BEPS environment. The FITWI regime represents not a retreat from tax competition but rather a recalibration—an acknowledgment that, in the era of global minimum taxation, the relevant question is no longer whether multinationals will pay fifteen percent, but to which jurisdiction they will pay it.
