The combination of an advantageous tax regime coupled with an extensive network of double tax treaties puts Malta in a favorable position relative to other jurisdictions. In Malta, with proper planning and structuring, investors can achieve considerable fiscal efficiency and an effective tax rate of 5%. |
| |
| Malta’s tax regime |
The Malta tax system is the only remaining full imputation system in the European Union. It eliminates the economic double taxation of company profits. Maltese companies are taxed at a flat rate of 35% and their shareholders are entitled to receive a 6/7 refund of the tax paid by the company in Malta upon a dividend distribution. The said income is not taxable in Malta and will result in an effective rate of tax for the Malta company of only 5%.
Another pillar of the Malta’s fiscal system is the Participation Exemption which exempts from tax any gains or income derived from a participating holding or from the transferring of such holding. The company has an option not to declare said income or gain in the company’s tax return or may opt to pay tax at the standard corporate tax rate of 35% and the shareholders will have an option to apply for a full refund of the Malta tax paid by the company.
Another advantage of Malta’s tax regime is its extensive network of Double Taxation Treaties which amount to over 55 signed and ratified treaties.
Specific tax incentives offered to investors engaged in specific activities such as the following
: |
- Aircraft
> Possibility of tax exemption on income arising from owning, leasing or operating aircraft or aircraft engines;
> VAT exemption when aircraft is used primarily for the international transport of passengers or goods;
- Patents: tax exemption on income derived from patents related to inventions;
- Shipping activities are subject to tax on tonnage instead of tax on income (resulting in lower tax leakage);
- Permanent residents – subject to 15% tax on income remitted to Malta subject to certain conditions;
- Lower VAT paid on the purchase of pleasure yachts subject to certain conditions;
|
Other general tax related aspects which one should take into consideration when setting up shop in Malta are the following: |
- No withholding tax on interest, dividends and liquidation proceeds paid to non-residents;
- No thin capitalization rules;
- No transfer pricing rules;
- No controlled foreign company legislation;
- No capital or wealth taxes in Malta;
- No tax on interests and royalties paid to them from Malta subject to certain conditions;
- No duty payable on transfers of shares in companies having the majority of their business interests situated outside Malta;
- No general capital gains tax, subject to certain conditions;
- Possibility of obtaining advance revenue rulings from the Maltese tax authorities on international transactions that guarantee the tax position for a minimum of five years;
- Possible exemptions from the requirement of preparing consolidated financial statements at the level of the Maltese Parent company;
- Access to the European Parent-Subsidiary and the Interest-Royalties Directives;
- Re-domiciliation or continuation of foreign companies to or from Malta;
|
| Trusts |
Trusts in Malta are regulated by the Trusts and Trustees Act which incorporates the Hague Convention on the Law Applicable to trusts and on their recognitions, which Malta has ratified. Some of the main features of a trust set up in terms of Maltese laws are: |
- The trust can be treated as a company for tax purposes and would then qualify to take advantage of the Malta’s tax regime including access to the Double Taxation Treaties;
- The perpetuity period for Maltese trusts is 100 years;
- The settlor may be a beneficiary under the trust;
- Powers of the trustee are wide and flexible;
- The office of Protector is allowed for;
- No legal requirement for foreign trusts to be registered in Malta even if they are administered from this jurisdiction.
|
Management team
