If you are looking to start a company in Malta, AE can offer a full range of company formation and structuring services. Alternatively, if you are already operating overseas, you may wish to re-domicile your existing company to Malta or open a Maltese branch of that company that will save time and administration costs.
Our experienced corporate legal team works with an extensive number of European and international businesses and takes a pro-active attitude towards our clients’ needs. It enables us to anticipate and overcome issues that may arise, and ensure that every solution has been designed to enhance opportunities within your business.
Our corporate department operates in close partnership with other practices within the firm, offering practical solutions for both standard and complex scenarios. These include Corporate Tax and Personal Tax, Immigration, Employment and Pensions Law, Financial Services and Banking Law, Shipping and Wealth Management, among others.
AE offers a range of Corporate Law Services covering everything from accounting to back-office administration services delivered through a network of field experts and approved partners. We seek to smooth the path for businesses that are new to Malta enabling them to concentrate on the growth and success of their enterprise.
Malta’s company law is very closely based on UK legislation albeit being a generally civil law jurisdiction. Both Maltese company and contract laws are greatly similar to the various common-law jurisdictions such as the UK.
Maltese corporate tax is charged at 35 per cent. However, in most situations that involve foreign ownership, it is possible to achieve an effective rate of 5% through a system of shareholder refunds, given the correct structuring is in place.
As previously detailed, trading income in Malta is taxed at 35 per cent. This tax must be paid and a receipt is provided. Following payment of tax, the shareholder is given the opportunity to apply for a refund of 6/7th of the tax previously paid by the company.
Malta enjoys a participation exemption which exempts gains derived from participating holdings of 10 per cent or more, and tax dividends, from capital gains duties. In most cases, dividends distributed from subsidiaries (EU or non-EU) and received in Malta will benefit from this exemption.
Alternatively, the company can elect to pay tax at the normal rate of 35% and offer, the shareholder a 100% discount. A 35 per cent tax rate is applied to dividends from holdings which do not qualify for a participation exemption. Nevertheless, The effective rate of tax can be reduced to less than 10% through a system of shareholder’s refunds.
Malta offers a comprehensive tax imputation system, which implies that dividends paid to a beneficial owner or parent company are not generally susceptible to further taxation in Malta. Dividends paid out of profits which have benefited from participation exemption are also tax exempt. Malta charges no withholding tax on outbound dividends.
TREATMENT OF TAX REFUND
The tax refund procedures directly to end shareholder as detailed above may, at times, attract adverse tax treatment in the hands of the shareholder in his/her country of fiscal residence. Additionally, this refund is only applicable to distributed profits, and such profits may in turn result as taxable for the shareholder in his/her country of residence. For these reasons, many clients prefer to form a two-tier structure rather than a single company in Malta whenever the tax refund system is considered.
In the case of Malta, a holding and trading company would be subject to a 35 per cent tax rate, of which the refund is made payable to the holding company that is exempt from further taxation.
Malta is part of the EU Value Added Tax (VAT) system and the local rate is fixed at 18 per cent. VAT is subject to the same rules as elsewhere in Europe with regards to reverse charging for instance. Having a company registered in Malta may, in most cases, prevent VAT leakage.
Malta is an excellent jurisdiction for the registration and holding of Intellectual Property and income derived from qualifying inventions may be exempt from tax in this jurisdiction.
DUAL TAXATION TREATIES
Malta enjoys an extensive network of dual taxation treaties with more than sixty-five countries. This network of tax treaties makes Malta an attractive jurisdiction for international trade. While Malta does not impose any tax on outbound royalties or interest, most of its double tax treaties either way or minimize withholding taxes on such payments coming from the other treaty jurisdiction. Malta’s double tax network has also made it a well-placed QROPS (Qualifying Recognised Overseas Pension Schemes) jurisdiction for British expatriates who move to countries with which Malta has a double tax treaty.