Time of establishment of the company
Malta – a small island located in the Mediterranean Sea – a paradise for tourists, which additionally offers favourable tax solutions and has been a member of the European Union since 2004. In addition to financial benefits for foreign companies, it guarantees a serious image of the potential company.
Malta is also well known for the ease with which it is possible to obtain an online gambling licence. Maltese companies are also engaged in holding and trading activities (“double tier structure”).
Despite the status of a country applying favourable tax solutions, it is not considered a typical tax haven, due to the initial rate of 35% of corporate income tax, which may be reduced up to 5% by the tax refund system.
Malta is a member state of the European Union with a low tax rate system. Malta offers the possibility of favourable tax planning, achievable through the use of an extensive network of double tax treaties, as well as systems of qualification of individual sources of income for individual, friendly tax regimes.
Considering that English is a common language, also used by authorities, and the legal system is mainly based on British Common Law, Malta has all the advantages to be an international business centre.
The particular advantages of establishing a company in Malta:
- Low corporate tax (maximum 5% or lower effective tax rate for commercial companies);
- Strategic geographic location in the centre of the Mediterranean Sea;
- Stable economy and government;
- Ensuring stable investment conditions for investors;
- Unrivalled tax benefits for investors.
Company registration procedure
Registration of the company:
- Carrying out the AML procedure of the real beneficial owners;
- Reservation of the company name;
- Signature of registration forms;
- Preparation of the articles of association and the company’s statute;
- Payment of the required minimum capital (EUR 1165);
- Registration of the company in the register of companies and obtaining the taxpayer’s identification number and VAT number.
A minimum of one shareholder is required to establish a company. The maximum number of shareholders is 50. Foreign shareholders and service nominated are allowed.
It is necessary to appoint a director in order to exercise the management board. Directors can be either individuals or companies. It is also required to appoint a company secretary, who may (but should not) be a client.
The company must have a registration address in Malta, which will appear on the company documents and postal data of the company. It is possible to use the services of a virtual office with a dedicated telephone number.
Time to set up the company:
The time of establishing a company is about 48 hours.
The minimum capital is EUR 1165, of which at least 20% must be paid during the registration of the companies.
Taxes and finances
Advantages of the Maltese tax system:
- The effective tax rate for commercial and service companies is 5%;
- There are no withholding taxes on dividends, interest and royalties for non-residents;
- No CFC, Transfer Pricing or Thin-Capitalisation Rules;
- An attractive ordinary residence program is available.
- More than 60 double taxation treaties have been concluded;
- No foreign exchange restrictions;
- No capital profit tax;
- No tax on capital profit made by non-residents on the disposal of shares in a Maltese company (provided that the asset does not consist of real estate situated in Malta).
Maltese tax refund – lowest EU tax
In addition to the 35% corporate tax, Malta offers tax relief to shareholders which results in a 5% – or even lower – effective corporate tax rate. This makes Malta’s jurisdiction attractive, which is why Forbes has made Malta one of the most tax friendly countries in the world.
The main benefits offered to non-resident shareholders are based on the corporate tax refund system referred to above.
This is combined with the use of a full tax relief imputation system, under which company profits are taxed only at company level and are not taxed again at shareholder level. There are no withholding taxes on dividends.
In short, there is a tax refund:
- granted to a shareholder (including a shareholder of a legal person) of a Maltese company as a tax credit;
- calculated as a percentage of the corporate tax (at 35%) payable by the company – the shareholder will therefore receive a tax refund as a percentage of the tax paid at company level;
- available after the payment of final (not provisional) dividends by the Maltese company – a document entitling to dividend must be submitted to the tax office in order to obtain a refund;
- available if the shareholder is registered in Malta for tax purposes;
- paid by the tax authorities within 14 days at the end of the month in which the refund became due.
The types of tax refunds available under the Maltese tax regime are listed below:
- A 6/7th corporate tax refund of 35% of the corporate income tax paid by the Maltese company is available to the shareholder of the commercial company;
- a 5/7th corporate tax refund of 35% of the corporate tax paid by the Maltese company is available to the shareholder of companies generating income from passive interest and royalties;
- a 2/3 refund of the corporation tax of 35% paid by the Maltese company is available to the shareholder of companies which have declared themselves to be relieved of double taxation.
Maltese trade structure – effective taxation at 5%.
Advantages and use of the Maltese trading company
The Maltese commercial company provides the most efficient tax structure among European jurisdictions and is particularly suitable for triangular trade within the European Union as well as for imports and exports worldwide.
Basic commercial structure
- The Maltese company earns income from commercial activities;
- The company’s income is taxed at a rate of 35% (income after deduction of operating expenses);
- After the payment of dividends, the shareholder is entitled to a 6/7th corporate income tax refund in Malta, paid by the commercial company;
- No withholding tax on dividends paid to foreign shareholders;
- Effective tax rate of 5%;
- Please note that depending on the type of business, registration for VAT may be required.
Dual Tier Structure of Trade
The two-level trade structure combines a commercial company and a holding company in order to limit the tax liability risk at shareholder level in relation to the tax refund received, as well as to preserve confidentiality, as the foreign shareholder will not be obliged to register for tax purposes in Malta.
This structure is characterised by the following features:
- The Maltese company derives income from commercial activities;
- The corporate tax in Malta is 35% of the company’s income;
- Once dividends have been paid out to the Maltese holding company, the holding company can claim reimbursement of the 6/7th corporate tax paid by the Maltese commercial company;
- Dividend income and tax refunds received by the Maltese holding company are no longer taxable in Malta;
- A Maltese holding company may fully pay the tax refund and dividend income to its foreign shareholders;
- No withholding tax on dividends paid to foreign shareholders.
Maltese holding company – 100% tax exemption
Advantages and use of the Maltese holding company
In addition to the preferential taxation offered to commercial companies, Malta grants preferential tax treatment to holding companies. A holding company may benefit from a full corporate tax exemption in Malta, provided that the following criteria are met.
Qualification as a participating holding company (participating holding)
The special position of the Maltese holding company is to provide a choice between full refund of tax (i.e. 100% of the tax paid will be refunded to the shareholder) or full tax exemption (there is no need to carry out the tax payment procedure) on each income from dividends or capital gains, provided the company qualifies as a “participating holding company”.
By opting for a tax exemption instead of a tax refund, you can count on a number of benefits, including cash flow and non-disclosure to the Maltese tax authorities in your tax returns.
Holding for foreign companies
Due to its very favourable tax regime and the application of the EU Parent-Subsidiary Directives and the wide network of double taxation treaties, the Maltese holding company is widely used as a holding company for foreign investment (acquisition of venture capital / business angels of companies around the world.
The holding company is characterised by the following characteristics:
- Assuming that the investment in a foreign subsidiary qualifies as a participating holding company, then
- There are no (or low) withholding taxes on dividends received from a Maltese holding company in application of EU directives;
- Dividend income is either exempt in Malta or subject to full refund of tax paid on dividends received;
- No withholding tax on dividends paid to a foreign parent company;
- A foreign parent company can reside in any country;
- No capital gains tax on potential sales of investments;
- Effective taxation in Malta is 0%.
Introduction of capital into the EU
The following structure can be used to inject capital into European holding companies without tax losses (or they are minimal).
The above structure is characterised by the following characteristics:
- If a Company 1 benefiting from low taxation is not subject to at least 5% taxation, or more than 50% of its income comes from passive interest or royalties, a Company 2 benefiting from low taxation may be introduced as holding shares does not qualify as passive interest or royalties.
- An investment in a company benefiting from low taxation will therefore qualify as a participating holding company.
- 100% tax exemption in Malta applies to dividend income from Company 2 benefiting from low taxation.
- No withholding tax on dividends paid to EU shareholders.
- The effective tax rate in Malta is 0%.
Removal of capital from the EU
The following structure can be used to transfer capital from the European Union without tax losses (or they are minimal).
The above structure is characterised by the following characteristics:
- An investment in an EU subsidiary qualifies as a participating holding company;
- No withholding tax on dividends distributed by an EU subsidiary to a Maltese holding company, provided that the conditions required under the Parent-Subsidiary Directive are met;
- Income from dividends received by the holding company from its EU subsidiary is exempt in Malta;
- No withholding tax on dividends paid to a shareholder outside the EU;
- The effective tax rate in Malta is 0%.
Corporate income tax is 35%. If the shareholders are not Maltese residents or the licensee is a Maltese company which is 100% owned by non-residents, then the shareholders are entitled to a refund of 6/7 of the tax paid. As a result, the real tax rate (as also indicated above) should be 5%.
Accounting is compulsory. Costs of accounting vary depending on the number of transactions – monthly cost of accounting presents itself similarly to the costs of full accounting in Poland.
A company’s registered office should be registered in Malta and its address should appear on company documents and postal data of the company. It is also possible to use the services of a virtual office with a dedicated telephone number.
Your company will have a multi-currency bank account with Internet access to your account, VISA or ATM MasterCard (multiple cards possible) at a Maltese bank. Opening an account is an additional service and requires meeting a number of conditions, i.e. presentation of planned monthly and annual turnover through a company account, location of contractors, often presenting a business plan, i.e. answering the question why a company is established, as well as presenting references and statements of a private bank account.
Avoidance of double taxation
The extensive network of double taxation treaties makes the use of companies in Malta an ideal and valuable tool in International Tax Planning.
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