MALTA COMPANY FORMATION

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The Maltese Company is a top mark European Jurisdiction Company that has specialized in offering numerous tax and investment gains for different beneficial tax planning structures.

Specifically, the company takes pride in:

  • Corporate tax of as low as 5% and  below;
  • Located at the heart of the Mediterranean ;
  • A well stabilized economy and effective government ;
  • An  investment viable environment ;
  • Exceedingly great investor tax benefits.
 

KEY BENEFITS

Malta Company Formation and Its Advantages

  • Efficient taxation systems such that taxation of corporate taxes is only done at the company level; This implies that in the distribution of profits to shareholders, taxation paid is credited to shareholders;
  • Trading  company  tax rate is 5% at its maximum ;
  • Non citizens are exempted from tax withholding  in  their, share profits, royalties and interests;
  • Exemption of CFC rules, Thin Capitalization Rules and Transfer Pricing;
  • Presence of Group Relief;
  • Reliable Double Taxation  Relief  strategies ;
  • More than 60 Double Taxation Treaties;
  • Removal of exit and or entry taxes;
  • Scrapping off of  Capital duty and  or taxation on net worth ;
  • Exemption of taxation on capital gains by non-residents. This is in line with Maltese share disposal (This is only in situations where the company does not have any immovable assets in Malta).
 

MALTA TAXES

 

Despite the fact that Malta has a 35% corporate tax,  it offers shareholder tax credits, a strategy that results  in 5% and below corporate tax rate.This has  helped a great deal in Malta receiving accreditation by Forbes  as one of the best tax friendly states  allover the world.

Non-resident shareholder tax benefits are affected through the Inland Revenue system that grants the benefits after corporate tax settlement.

This system is complemented in its efficiency by the exclusive Full-Imputation Tax Credit System. It is under this system that taxation of company taxes is done only once (at the company level) and the shareholder exempted from any taxation. Basically, dividends are exempted from the imposition of withholding taxes.

In summary, tax refund is:

  • 35% of the company’s corporate  tax and thus the shareholder  gets a  tax refund equal to the tax percentage paid at  the company level;
  • Shareholder’s tax credit with inclusion of  corporate tax of the company in consideration ;
  • Available once the final dividend distribution  has been done by the company. The Inland Revenue is provided with a dividend warranty to act as proof of the dividend distribution;
  • Only available for shareholders registered with Maltese Revenue ;
  • Refund payments done within a timeframe of 14 days at end month within the month that the refund is due. Payment falls under the jurisdiction of  the Inland Revenue;

Available tax refunds in the current Maltese tax regime:

6/7 (six-sevenths): Refund of corporate tax (35%) paid by the Maltese Company. The refund is available to Trading Company shareholders;

5/7 (five-sevenths): Refund of corporate tax (35%) paid by the Maltese Company. This refund is available  to shareholders  of companies that derive their income from Royalties and Passive Interest;

2/3 (two-thirds): Refund of corporate tax (35%) paid by the Maltese Company. The refund is available to shareholders of companies that have placed their double taxation relief claim.

MALTESE TRADING COMPANY’S USES AND BENEFITS

The Maltese Trading Company takes pride in the provision of the best and most reputable tax scheme within the European Union. Further, the company provides a very effective platform and avenue for global imports and exports.

 

BASIC TRADING STRUCTURE

Maltese Basic Trading Structure
 

Components featured in the structure:

  • Generation of income by the Maltese Trading Company  is from the trading activities of the company;
  • The Maltese Trading Company is subject  to  corporate tax that stands at 35% of the total net profits;
  • Foreign shareholder enjoy entities to 6/7 refund of the company’s corporate tax. This is after distribution of the company’s dividends among the shareholders;
  • Effective tax rate at 5%;
  • VAT  registration may or may not be required;
  • Dividends distributed  to foreign shareholders  not subject to withholding taxes.

TWO-TIER TRADING STRUCTURE

A two-tier trading structure is achieved through the combination of a Maltese Holding Company and a Maltese Trading Company. This combination is done for the generation of tax liability risk on total refund received by a shareholder. The generation is done at the shareholder’s level. The combination is also done so as to confidentiality maintenance as foreign shareholders are not subject to registration from Malta’s Tax Authorities.

 
Maltese Two-Tier Trading Structure
 

Components of the structure:

  • The income of the Maltese Trading Company is  generated from the company’s trading activities;
  • Net profits of the Maltese Trading Company are  subject to corporate tax that stands at 35%  of the net profits;
  • Foreign shareholders are free to lay claim on a 6/7 refund of the corporate tax paid by the Maltese company;
  • Tax refunds and Dividends  are not subjected  to  additional taxation in Malta;
  • The Maltese  Company is free  to fully distribute   dividend incomes and tax refunds to the company’s foreign shareholders;
  • Foreign shareholder’s dividends are exempted from any withholding taxes.

MALTESE HOLDING COMPANY USES AND BENEFICIAL GAINS

Other than the outstanding taxation scheme on trading companies, Malta also offers a very economically viable environment for the thriving of holding companies. In general, a Maltese Holding Company stands to benefit a great deal from total corporate tax exemption based on the criteria outlined below.

Malta goes a step further by ensuring that there are no tax withholds on dividends distributed to shareholders of the company in context. Additionally, the introduction of Parent-Subsidiary Directives and their consequent use coupled with the extensive double tax treaties network has helped in attracting more holding companies in Malta.

 

THE EASE OF QUALIFYING AS A PARTICIPATING HOLDING

A Maltese Holding Company is provided with two unique choices: Full-refund or total tax exemption. Under the full refund option, shareholders get 100% of the total tax paid by the company. On the other hand, tax exemption mainly revolves around no tax payment on capital gains and or dividend income. These choices are only applicable if the company in context qualifies to be a participating holding.

Qualification standards for participating holding status for a Maltese Company in respect to foreigner’s entity include:

  • The company should directly hold not  less than 10% of the total equity shares in the company; or
  • The company should be an equity shareholder  in a company and it should be viable to acquire the share’s entire balance; or
  • The company holds equity shares in a business entity that  requires the company to either be a member of the Board of Directors or have a representative  to sit in the Board as a director; or
  • The company holds equity shares in a firm whose investment portfolio is worth 1,164,000 Euros. The shares should be held by the company  for a consistent period of 183 days; or
  • The company holds equity shares meant for business expansion/furtherance as opposed to purpose of trading. For the full income refund and or tax exemption   to the Maltese Holding Company, it is important that the non- residents to whom dividends are to be paid to meet any of the three set conditions. The conditions are such as:

– The company should be  based in Malta  or has received incorporation  in the EU ; or

– The company should be subject to  not less than a 15% foreign tax ; or

– The company does not get more than 50% of its total income   using passive interests and royalties among other avenues (the company needs to be a trading entity).

In the event that none of the above conditions is met, then it is required that both conditions outlined below need to met. The conditions are:

  • The  Maltese  Company  equity holdings  in the non-resident persons’ body  should not be a portfolio  investment; and
  • The company’s non-resident person’s body’   or the company’s interest /royalties need to be subjected to foreign tax at a rate of a minimum of 5%.

The structure below clearly outlines the exceedingly great benefits got from a Maltese Holding Company.

 

Overseas Investments Holding

The Maltese Holding Company is widely used for holding overseas investments mainly due to the highly advantageous tax regime as well as EU Parent-Subsidiary Directive application.

 
Maltese Holding Company
 

Features of the Structure are as:

  • Foreign Subsidiary investment qualifies to  be a Participating Holding;
  • Low or no withholding  taxation  on  dividend receipts by the Maltese  Holding company through the use  of EU directives treaty networks;
  • Exemption of   dividend income from taxation  or  full refund made  for taxes levied on  all dividends  received;
  • Dividend payments made to Foreign Parent are exempted from withholding taxes;
  • Foreign Parent  is free to be resident in any part of the world;
  • 0% Malta effective tax rate;
  • No capital gains taxation on the investment’s potential sale.
 

MALTA COMPANY CORPORATE AND LEGAL FEATURES

SHARE CAPITAL

Minimum paid up share capital on incorporation: 20%

SHAREHOLDER

Minimum number of Shareholders required: One shareholder (if the company director is a natural person) or two shareholders (if the director is corporate). (At least one non-resident shareholder). Nominee Shareholders are permitted.
At least one General Meeting each year, in addition to any other company meetings.

DIRECTORS

Minimum number of directors is one. In certain cases the director of the Company may also act as the Secretary. Corporate directors permitted. There is no requirement to fold board meetings in Malta.

SECRETARY

A Secretary needs to be appointed.

REGISTERED OFFICE

Yes. Registered office services are provided.

EXCHANGE CONTROL

No exchange control regulations – may conduct business in any currency.

DISCLOSURE AND REPORTING REQUIREMENTS

Disclosure of beneficial owner to Company Registrar: No (when using nominees)

Government register of directors: Yes

Government register of shareholders: Yes

Annual return: Yes

Submission of accounts: Yes

Audit: Yes

CONFIDENTIALITY

Malta Companies shareholder’s identity is not concealed (identity public) at the Register of Companies .However, the confidentiality of shares of the shareholders is upheld by both our trust and fiduciary company.

Confidentiality standards in Malta are supported by the exclusive Professional Secrecy Act .The act has helped in the establishment of high standard confidentiality that covers professional practitioners. Those found in violation of the professional secrecy may be legally prosecuted under the Criminal Code, Section 27.

All disclosures of confidential details are only ordered by the Court and can only be accessed by the parties in context and the court.