Malta boasts one of the most favourable tax regimes in Europe, approved by both the European Commission and the OECD
Malta's favourable fiscal regime, the lowest in Europe, has been approved by both the European Commission and by the OECD. Malta has signed close to 70 double tax treaties which are continuously increasing and as an EU Member State can avail of EU Directives. Tax suffered overseas on income received by a Malta company will be allowed as a credit against tax payable in Malta even with countries Malta has not entered into a double tax treaty.
Malta does not impose any withholding taxes and therefore can be used to extract profits outside of Europe.
Companies incorporated in Malta will be subject to tax on profits at the normal corporate tax rate of 35% however as a result of the combination of double taxation relief and Malta's refund system, the effective tax rate can range between 0-10% depending on the nature and source of income.
Refunds and Possible Structures
- An active company is subject to tax at the rate of 35% however upon a dividend distribution to its shareholders, the shareholders will be entitled to a 6/7th refund of the Malta tax payable. Profits arising outside Malta, excluding passive income such as interest, royalties (provided they are not exempt) and branch profits and will be subject to tax at 35%. However, upon a distribution of dividend to its shareholders, the shareholders will be entitled to claim a 2/3rd tax refund. Double taxation relief may be claimed.
- Royalty income from qualifying registered patents and copyright is exempt.
- In the case of a holding company, provided it meets certain conditions e.g. holds more than 10% of equity shares in the underlying company or an investment of 1.17m held for a minimum uninterrupted period of 183 days, the dividends received from the subsidiary company:
- may be exempt by means of a participation exemption
- the company may opt to pay tax at 35% and upon a distribution of dividend to its shareholders, the shareholders can claim 100% tax refund. In the event that none of the above-mentioned conditions are satisfied, other conditions may be applied. Furthermore this is subject to anti-abuse provisions.
Passive interest and royalties are subject to tax at 35%, however upon a distribution of dividend to its shareholders, the shareholders can claim a 5/7th refund of the Malta tax payable.
We have vast experience in setting up and re-domiciliating companies both into and outside of Malta as well as administering such companies and can provide the following services to our clients:
- Formulation of effective and tax-efficient cross-border strategies in relation to both corporate and personal tax planning solutions
- Proposal of transaction structuring from a VAT perspective
- Relief of double taxation solutions and advice on how to safeguard EC Treaty rights
- Tax and VAT costs optimisation
- Analysis of tax incidence of international transactions in multiple jurisdiction
- Reporting and filing with the relevant authorities
- Advice on local tax obligations and tax compliance services including but not limited to handling of VAT registration, VAT refunds administration, Tax refund applications, completion of Tax refunds.