The EU membership gave Malta a green light to become a competitive jurisdiction for tax planning and corporate structures.
Typical uses of Malta include:
International Trading Company is a company registered in Malta, which does business solely with non-residents. However there are certain complementary activities in Malta that are allowed, namely:
- purchases for export of Maltese goods that are not made from a 15% shareholder in the buying company;
- trade with companies registered in Malta under the Financial Services Centre Act 1988
- trade with other International Trading Companies.
The International Holding Company is similar to the International Trading Company except that as its name implies it holds participations in foreign companies.
The profits of the International Trading Company are passed on to the International Holding Company in the form of dividends where, due to the full imputation system, they are not taxed any further.
- Gaming companies
- Captive Insurance
Requirements for incorporation
- Memorandum and Articles of Association;
- Directors, Company Secretary, Registered Office;
- VAT number, PE number, tax number
- Satisfied necessary due diligence
The standard tax rate for companies incorporated in Malta is 35%, 6/7 of which is refunded on distribution of profit and payment of tax to a holding company or to non-resident shareholders. Tax incurred by the trading company on dividend income is allocated as a deduction on tax due by the Holding.
Full imputation system
Distribution and Refunds
|Tax paid by company||350|
|Effective tax paid||50|
0% on dividends from participating holding if definition of equity holding and of participating holding is satisfied:
- Subject to a foreign tax of at least 15% or
- No more than 50% of its income is derived from passive interest or royalties
In case the said conditions can not be fulfilled, dividends from participating holding can still be exempt from tax if an equity holding is not a portfolio investment AND is subject to tax of at least 15%.
0% on capital gains made from the disposal of a participating holding.
Flat Rate Foreign Tax Credit (FRFTC) is available to companies, which operate a Foreign Income account.
Foreign passive income is allocated to this account and is grossed up at 25%. A credit equal to the FRFTC is then allowed against Maltese tax
Non- resident shareholder
|Tax at 35%||350|
|Credit for T.A.S||350|
|2/3 refund of company tax||125|
5% on dividends from non-participating holdings;
5% on trading income
10% on passive income (interest and royalties)
- low registration and annual costs
- no duty on documents
- no exchange control restrictions
- no exit costs upon liquidation
- extensive treaty network
- no thin capitalization rules
- no debt to equity rules
- no CFC rules
- no withholding taxes
- no capital gains tax on disposal of shares held by a non resident in a Maltese company
- Minimum capital for a set up of a company in Malta, namely Euro 1250, may be denoted in any currency.
- The accounts shall be, therefore, kept in the same currency in which share capital is denominated.
- Tax payment and refunds effected in same currency
- Audited financial statements shall be submitted to Registrar of Companies and tax authorities within stipulated deadlines
- Refunds are usually effected within 3 weeks from end of month in which it becomes due
At Grech and Ghaznavi Advocates we offer result-oriented services and efficient implementation of corporate dealings through the combination of expansive knowledge of corporate law matters and experience in key sub disciplines.
With our wide-ranging understanding of a variety of business challenges and the associated legal practices, we endeavor to enable our clients to meet successfully the constant challenges and impending opportunities.
Through every stage of growth of our client's business, we assist business owners, shareholders and management teams involved in making the important decisions that help determine long-term success.