Malta

Main » Jurisdictions » Malta

Malta

General information about the jurisdiction

The Republic of Malta is an island state in the Mediterranean, which has no rivers, lakes neither springs of fresh water. Despite the small area (316 km2) there are some huge high-tech enterprises in Malta. The beautiful nature attracts thousands of tourists. Moreover, Malta is the world center of English learning (English is a state language).

Malta is a parliamentary republic, a part of the EU.

Prestige and low taxes make Malta very attractive place to business. Malta may be used for registration of international trusts, holding companies and shipping companies.    

1. Legislation

Company activities in Malta are regulated by Companies Act 1996, Financial services Act, Trade shipping Regulations and Commercial Transportation Law.

Until 2007 it was possible to register International Trading Companies end International Holding Companies which were offshore companies, but now the legislator does not differentiate resident and non-resident companies and proposes tax benefits for all shareholders.

2. Company formation

2.1 Types of companies

The Malta law provides such corporate forms as partnerships with limited and unlimited liability, public and private companies, but the most preferable is Limited Liability Company (Limited, Ltd).

2.2. Limited Liability Company:

  • The minimum authorized capital – €1164.69, 20% of which must be paid by the moment of incorporation.
  • Shares – ordinary, privileged, with or without per value. Bearer shares are not allowed.
  • Director – at least 1, individual or legal person, no residency required.  
  • Members – 2 - 50, individuals or legal persons, no residency required (in some cases it may be 1 member). If there are ore than 50 members, the company must be public.
  • Secretary – is required, individual, no residency required (resident is preferable).  
  • An auditor should work in the company on a regular basis. 
  • Publicly available information: information about directors, members and secretary. Information about beneficiary owner may be hidden by using nominee service. 
  • Company is obliged to keep and submit an annual financial report. 
  • Annual meetings of members are required (in any country), the registered office is required.

3. Taxes

Corporate tax – 35% but when distributes an income the company receives tax credit in favor of shareholders which is equal to the sum paid by the income tax from which the dividends were distributed.

When distributes dividends, received from sources outside Malta, as well as passive income, received in Malta (this includes foreign income and Maltese taxable income), the shareholders will be able to demand to return 6/7 of the paid tax.  Thus, the total effective tax rate will be 5%.

If the company uses an agreement on avoidance of double taxation 2/3 of the paid tax will be return.

The table shows the way how to achieve a reduction of the effective corporate tax rate to  0-6,25%

The system of compensation of the tax credit

Tax credit (FRFTC)

Compensation of 6/7of the tax

Tax benefits from the agreements on avoidance of double taxation

Tax benefits from the unilateral and multilateral agreements 

Maltese company

 

 

 

 

Foreign income is exempt from taxation in the place of distribution

1,000

1,000

-

-

Foreign income – tax on the source 10%

-

-

1,000

-

Foreign income – tax on the source 15%

-

-

-

1,000

Foreign tax (amount)

-

-

(100)

(150)

Private foreign income

1,000

1,000

900

850

Add tax credit (FRFTC)

250

-

-

-

Whole sum for taxation

1,250

1,000

 

1,000

 

1,000

 

Maltese corporate tax 35%

(437.50)

(350)

(350)

(350)

Deduct a sum of tax credit (FRFTC)

250

-

-

-

Tax credit according to unilateral agreement on avoidance of double taxation

-

-

100

150

The sum of Maltese tax

187.50

350

250

200

The net amount of distributed dividends

812.50

650

650

650

 

 

 

 

 

Shareholders recipients

 

 

 

 

2/3 of the amount of paid tax returning

 (+ unilateral/multilateral agreement on avoidance of double taxation)

125

-

233.33

200

6/7 of the amount of paid tax returning

 

-

300

-

-

Whole sum of paid tax

62.50

50

16.67

0

The effective rate of corporate tax

6.25%

5%

1.85%

0%

Tax returning takes 14 days. After the returning the income is tax free.

Taxation of Maltese holding company

Capital gains – 0%

The income will be tax free if it has been received from non-resident subsidiary company which:

  • is the EU resident;
  • pays not less than 15% foreign tax;
  • has no more than 50% of passive income and royalty in its whole income;
  • pays foreign tax on the rate of 5% and share of equity in subsidiary is not a portfolio investment for the Malta company. 

4. Currency control

None

5. Agreements on avoidance of double taxation

Switzerland concluded more than 50 agreements on avoidance of double taxation, but not with Ukraine.

6. Features

Malta is a convenient jurisdiction for shipping companies: ships up to 1.000 tons are exempt from income tax; platforms, barges and ships under construction may be registered; no residency required for owner, crew, shareholders and directors; simple registration procedure.

Malta is the only jurisdiction in the EU which gives licenses for on-line casinos. Remote Gaming Regulations provides 4 classes of games that have to be licensed.

Moreover, there are new rules for obtaining residence permit in Malta to attract wealthy people (a person must owns real estate costs from €400 000, live in Malta for not less than 90 days a year – for beneficial owners, annual tax - €25 000, good English or Maltese language skills etc.)