- A large and expanding international tax treaty network with over 70 double tax treaties which are mostly based on the OECD model;
- Access to the EC Tax Directives;
- Certainty of tax treatment;
- Various tax benefits;
- Low formation and operational costs;
- Well educated multilingual workforce.
Malta tax considerations and benefits
What makes a holding entity, being setup in Malta, really attractive is basically (i) Application of the Participation Exemption; (ii) Taxation of the Holding company and tax refunds ; (iii) Capital gains tax exemptions.
Malta ITA governs the participation exemption which applies to dividends and capital gains derived from a qualifying participating holding or from the transfer of part, or all, of such holding. This exemption does not apply in cases where the holding entity holds, directly or indirectly, immovable property situated in Malta or rights over such property. Other conditions do apply.
As from basis year 2017, this exemption has been extended to include certain type of permanent establishment setups, i.e. The application, or otherwise, of such an exemption can also relieve income derived by a permanent establishment (or a branch) of a Malta Co where the PE (or branch) is situate outside of Malta.
Taxation – further considerations
Maltese registered companies are deemed to be resident and domiciled in Malta and thus subject to tax on a worldwide basis. Where the participation exemption cannot be applied, a standard corporate tax rate on chargeable income of 35% is levied, but it is reduced to an effective rate of 5% on the application of tax incentives that are available to non-resident shareholders on the distribution of dividends by the Maltese company.
There is an effective system of tax refunds to enable a shareholder to obtain a refund of the company tax, up to an equivalent of 6/7ths of trading income. Different type of refunds do apply depending on the activity of the Malta Company:
- 5/7ths refunds - this type of refund is generally due in respect of income derived from passive interest and royalties and income from participating holdings which do not qualify for the participation exemption; and
- 2/3rds refund - where the company has claimed double taxation relief.
No Malta tax is generally withheld on payment of dividends by a Malta company to its shareholders, whether they are resident or non-resident.
There are no capital gains for the disposal of shares in a Malta company by a non-resident shareholder.
A Malta company is a legal entity and has the same powers as a natural person. There are no restrictions on the activities of a company, providing the activities are permitted by the incorporation documents.
The company registers must be kept up-to-date and financial penalties will be imposed if in default. There is an obligation to prepare audited accounts stating the true financial position of the company. The audited accounts are to be submitted to the Malta Financial Services Authority.
It is possible to redomicile foreign companies to Malta, so that they may take advantage of Malta’s attractions. Rosemont is able to assist with this process.
Rosemont (Malta) Ltd provides a full service to individuals and their families, and can assist in structuring and administering a client's financial world in the best possible fashion. With partners in strategic locations the company is able to offer an integrated service covering the important areas of interest to clients such as:
- International tax planning;
- International estate and succession planning; and
- Business planning.
For more information, please visit our website www.rosemont.com.mt or contact Rishi Bonello at firstname.lastname@example.org