Malta is a well regulated yet flexible jurisdiction with elaborated legislation covering different forms of legal entities and specific business activities, e.g. online gaming (gambling), maritime services, financial services, registering and holding intellectual property rights. Due to its tax system Malta is a perfect location for registering companies holding shares in the entities within or outside the EU. Maltese holding companies are excellent gateways to and from the EU as, if certain conditions are met, no tax is paid on incoming dividends from subsidiaries situated outside Malta.
Uses of a Maltese Company
- VAT Registration
- Asset Management and Holding
- International Trading Activities
- Ronaldsway Freeport Access
- E-commerce Services
- Aircraft Registration
- Marine Registration
Benefits of a Malta Private Limited Company
- No withholding of tax generally levied on outbound dividends interest or royalties
- No tax on capital gains generally levied on a disposal of shares in a Malta company
- Absence of CFC legislation, thin capitalisation or transfer pricing rules
- No exit or entry taxes upon a shift of domicile or residence to or from Malta
- No wealth or capital taxes
- Competitive fees for company formation and administration
- Low capital requirements
- Strong legal system based on English common law and Continental civil law
- Access to the EU Parent-Subsidiary Directive and EU Interest and Royalty Directive (no withholding taxes are due over dividend, interest and royalty payments from companies resident in other EU-countries to a Malta company)
Internet Gaming licenses available
- Excellent Yacht Registry and VAT solutions available
Our Malta Company Incorporation Services
- Registration, maintenance and administration of Maltese Companies
- Registered Office, back-office and virtual office services
- Company secretarial services
- Provision of directors and procurement of fiduciary services
- In-house accounting and tax administration
- Bank introductions and account administration
||Private Limited Liability Company|
||Civil (strong Common Law influence)|
||Yes but credits / refunds should apply to shareholder(s).|
||Two / One|
|Recurring Government Costs|
||Must be maintained in Malta.|
||Two to Three working days.|
||A company may have different classes of shares.|
MALTA COMPANY INFORMATION
Procedure to Incorporate
This entails the deposit of the paid-up issued share capital into a bank account and the filing of the Memorandum and Articles of Association with the Registrar of Companies. Non-EU/ non-EEA resident shareholders are also required to submit a bank reference besides an identification document for the immediate shareholder (e.g. passport copy or certificate of incorporation).
Restrictions on Trading
There are no specific restrictions on trading imposed on Maltese Companies. However, companies involved in particular spheres of economic activity may require a licence before commencing their activities. Such activities would include investment services, insurance business, other financial services and also gaming activities, to mention a few.
Powers of Company
A Maltese company may exercise all those powers outlined in the Memorandum and Articles of Association of the Company.
Anything identical or similar to the name of a company already incorporated or reserved; anything that in the opinion of the Registrar of Companies is offensive or otherwise undesirable.
Language of Name
Names can be expressed in any language using the Latin alphabet.
Suffixes to Denote Limited Liability
The name of the company must end with the word “Limited” or “Ltd” in the case of private limited companies and “p.l.c.” in the case of a public limited company.
Disclosure of Beneficial Ownership to Authorities
The identity of the beneficial owners of a Maltese company may remain confidential if a trustee company authorised by the Malta Financial Services Authority is engaged to act as shareholder on behalf of the underlying beneficial shareholders. This confidentiality is maintained as long as the company and its beneficial owners are not involved in any money laundering activity.
Authorised and Issued Share Capital
The minimum authorised share capital of a private limited liability company is of €1,165. The minimum issued share capital of a private limited liability company is €1,165, 20% paid up. The share capital may be denominated in any convertible currency.
A one-time minimum fee of €245, for an authorised share capital of up to €1,500. The minimum annual return filing fee is of €100 with effect from the second year.
Full Imputation System
Malta operates the ‘full imputation’ system of taxation so that any tax paid by the company is imputed to the shareholder in the event of a dividend distribution. The tax withheld by the company from the dividend it ditributes is, therefore, no more than a payment on account of the shareholder’s own liability.
Income Tax is the only tax imposed on the profits of companies. The standard rate of income tax is 35% of taxable income, which is the net profit (accounting profits) as reported in the companies’ audited financial statements, subject to certain adjustments. All expenses incurred wholly and exclusively in the production of the income are considered deductible.
Allocation of a company’s profits to the individual Tax Accounts.
The distributable profits of a company registered in Malta (which includes Maltese branches of foreign companies) are required by tax law to be allocated to five different accounts, or reserves, namely:
- The Immovable Property Account consisting of a company’s distributable profits that have suffered tax and that are derived, directly or indirectly, from immovable property situated in Malta;
- The Final Tax Account which incorporates a company’s distributable profits normally arising from transactions that are taxed at source under a final witholding tax regime, such as investment income, certain property transfers and profits that have been relieved from tax under Malta’s incentive legislation;
- The Foreign Income Account consisting of a company’s distributable profits arising from overseas income, such as dividends, capital gains on disposal of shares and property, interest, royalties and similar income and rents. This account also comprises profits of banks and financial institutions from investments, assets and liabilities situated outside Malta, profits of insurance companies on risks situated outside Malta, profits attributable to a permanent establishment situated outside Malta and dividends paid out of the Foreign Income Account of another company registered in Malta;
- The Maltese Taxed Account which comprises a company’s distributable profits from Maltese sources which includes profits on international trading activities;
- The Untaxed Account into which are allocated the amounts not allocated to the other four accounts. This is the only account which may have a negative amount allocated to it.
Double Taxation Relief
Malta generally operates an ordinary credit system for relieving double taxation. There are four different types of double taxation relief, namey:
- Double Taxation Relief in respect of tax charged in a country with which Malta has a double tax treaty. Generally, the tax payable in the treaty country on income that is also subject to tax in Malta is allowed as a credit against that person’s Maltese company.
- Commonwealth Income Tax Relief is a tax credit afforded to relieve double taxation where Commonwealth income tax has been paid on the same income that is subject to tax in Malta. In practice, this type of relief is rarely, if ever, used.
- Unilateral Relief is a system of relieving double taxation that operates in exactly the same way as double taxation relief. Tax payable in a country with which Malta does not have a double tax treaty is allowed as a credit against the Malta tax payable on that income. Underlying tax suffered by the overseas company on the distributed profits may also be claimed as a credi insofar as the overseas company paying the dividend is owned, directly or indirectly, as to more than 10% by the Maltese company.
- Flat rate foreign tax credit is available to a Maltese company in respect of income allocated to its Foreign Income Account. This method of relieving double taxation is available if none of the other three systems applies. A Maltese company’s income from overseas, net of any foreign tax, if any, is grossed up by 25% and after the deduction of any expenses, tax is chargeable at 35% of the resultant net profit. The amount by which the income is initially grossed up is allowed as a credit against the tax due.
Refunds to shareholders of tax paid by Maltese companies
The payment of a dividend by a Maltese registered company to a shareholder entitles such shareholder to a full or partial refund of the tax paid by the Maltese company on the profits out of which the dividend was distributed.
A tax refund arises from the full imputation system of taxation referred to above. In addition, another entitlement to a tax refund arises on certain distributions made by Maltese companies, in certain circumstances as explained below:
- No entitlement to tax refunds arises on dividends paid from the company’s profits allocated to the Final Tax Account or the Immovable Property Account;
- An entitlement to a refund of 6/7ths of the tax paid by the Maltese registered company arises when the dividend is paid from the company’s Foreign Income Account or Maltese Taxed Account;
- An entitlement to a refund of 5/7ths of the tax paid by the Maltese registered company arises when the dividend is paid from the company’s Foreign Income Account or Maltese Taxed Account where such dividends constitute the distribution of passive interest or royalties;
- An entitlement to a refund of 2/3rds of the Malta tax paid arises where the dividend is paid from the Maltese registered company’s Foreign Income Account on which the company distributing the dividend has claimed relief of double taxation;
- An entitlement of a full refund of the tax paid by the Maltese registered company arises when the dividend is paid out of profits derived from a ‘participating holding’ or the disposal of such holding.
Participating Holdings and Participation Exemption
A company registered in Malta would have a ‘participating holding’ in a subsidiary company where the following conditions are satisfied:
The shares held by the Malta company in the subsidiary company qualify as ‘equity shares’ i.e. shares in a company which does not own immovable property situated in Malta (or rights over such property) and does not hold, directly or indirectly, shares or interests in a body of persons which owns immovable property situated in Malta (or rights over such property) and which entitle the shareholder to at least two of the following rights: (i) a right to votes; and/or (ii) a right to profits available for distribution; and/or (iii) a right to assets available for distribution in the event of a winding up; and
At least one of the 6 additional qualifying criteria are met:
- A minimum direct shareholding of 10% of the equity shares in the subsidiary, or
- A minimum equity investment of €1,164,000 in the subsidiary, held for an uninterrupted period of 6 months, or
- The right of the Malta company to, at its option, call for and acquire the balance of equity shares in the subsidiary not held thereby, or
- The entitlement of the Malta company to first refusal in the event of the proposed disposal, redemption or cancellation of the equity shares in the subsidiary not held by it, or
- Entitlement of the Malta company to sit on the board or appoint a person to sit on the board of the subsidiary as a director, or
- An equity shareholding in the subsidiary for the furtherance of the Malta company’s own business and provided that the equity shares are not held as trading stock.
The Participation exemption would always be available in respect of capital gains derived from a ‘participating holding’ – even upon a disposal of a participating holding (in whole or in part) in a Malta resident company.
On the other hand, the participating exemption would only be available in respect of dividends derived from a participating holding in a non-resident subsidiary and if any one of the following additional conditions is satisfied:
- The distributing company is resident or incorporated in a country or territory which forms part of the European Union; or
- It is subject to foreign tax at a rate of 15% or more; or
- It does not have more than 50% of its income derived from ‘passive interest or royalties’.
- Where none of the above three conditions are satisfied, then both of the following two conditions must be met to avail of the participation exemption: The equity holding in the non-resident subsidiary is not a portfolio investment and;
- The non-resident subsidiary is subject to any foreign tax at a rate which is not less than 5%.
Payment of tax and refunds
Tax is payable by a Maltese company on profits allocated to the foreign income account and Maltese taxed account by not later than sixty days from the end of the month in which a dividend is paid. If no dividend is paid, tax is payable on profits allocated to the Foreign Income Account within eighteen months from the end of the accounting period.
A tax refund due from the Maltese revenue authorities is payable to the shareholders within 14 days from the end of the month in which a valid refund claim is submitted, provided the company has paid the tax on the distributed profits.
No tax is withheld on the payment of dividends by a Maltese registered company to its shareholders, whether such shareholders are resident or non-resident in Malta. Non-resident persons are exempt from tax on interest or royalties accruing or derived from Malta except where such interest or royalties are derived from a permanent establishment that the non-resident has in Malta. As a result no withholding tax is levied on the payment of interest or royalties to non-residents.
Maltese companies trading from Malta may be registered for VAT purposes and the VAT prefix will be ‘MT’.
Double Taxation Agreements
Malta’s has a large and expanding network of double tax agreements comprising 62 treaties in force to date. Malta’s double tax treaty network as well as other domestic methods for relieving double taxation on cross border transactions, and Malta’s full imputation system and its refundable tax credit system provide an excellent base for establishing tax efficient structures.