Opening a Company in Malta

The Maltese Islands enjoy the reputation of being an excellent hub for international business, investment and financial services.   As a full EU member state since May 2004, with a highly-skilled and educated workforce, solid regulatory framework, and one of the most advantageous tax regimes for European onshore business and investments, Malta-registered companies are ideal vehicles for business owners and shareholders.

The new company taxation system rolled out from 2007 onwards allows onshore companies registered in Malta to pay tax on earnings generated anywhere around the world at the normal corporate tax rate of 35%.   Additionally, there are significant tax opportunities for shareholders to obtain statutory tax refunds, which are legally guaranteed and paid by the Inland Revenue Department usually within two weeks (with a maximum of six months) from lodging a refund request. When used correctly, these tax refunds drastically reduce the effective corporate tax rate in Malta to only 5%.   Tax benefits available for shareholders of onshore companies registered in Malta include:

Malta is one of the last few countries to operate a full imputation system.  This system allows the tax paid by companies registered locally to be available as credit to shareholders. This credit is made available to shareholders when they receive dividends from the company.  This credit serves to eliminate the double taxation which the shareholder would suffer from upon declaration of the dividend.

Shareholders of a dividend-paying trading company registered in Malta are entitled to claim a refund of six-sevenths of the tax paid by the company.

However, when the income which has been charged with foreign tax arises from a fixed establishment or a branch abroad (outside Malta) the maximum tax refund that can be claimed is 2/3rds of the Malta tax paid.

When dividends are paid out of the profits made from passive interest and royalties, the shareholders of a Malta-registered company can claim a refund of five-sevenths of the tax paid by the company.

A participating holding is when a company registered in Malta will have a minimum of 10% shares in a company incorporated in the EU (excluding Malta).  The latter shares have to come with the normally attributed rights such as the right to voting in the AGM.  This company has to have less than 50% of its income attained from passive income and/or royalties and subject to a tax of 15%.

If the participating holding clause is satisfied the income and capital gains made by that company are qualified for a full refund of the tax paid when dividends are distributed to their shareholders.  If the participating holding also qualifies as being ‘participation exempt’ by virtue of having certain anti-abuse provisions implemented, then a Malta-registered company can opt not to declare its income when filing tax returns as no taxes are being paid.

Double taxation takes place when income is taxed twice due to it passing through two different jurisdictions.  Malta has in place a large multitude of double taxation treaties in order to ease the cost of convenience of holding business in Malta.

Malta has an active double taxation treaty with the following countries:
Andorra, Albania, Australia, Austria, Azerbaijan, Bahrain, Barbados, Belgium, Botswana, Bulgaria, Canada, China, Croatia, Cyprus, Czechia, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Greece, Guernsey, Hong Kong, Hungary, Iceland, India, Ireland, Isle of Man, Israel, Italy, Jersey, Jordan, Korea, Kuwait, Latvia, Lebanon, Libya (The Great Socialist People’s Libyan Arab Jamahiriya {2010} & Libyan Arab Republic {1995}), Liechtenstein, Lithuania, Luxembourg, Malaysia, Mauritius, Mexico, Moldova, Montenegro, Morocco, Netherlands, Norway, Pakistan, Poland, Portugal, Qatar, Romania,  Russia,  San Marino, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Syria (Syrian Arab Republic), Tunisia, Turkey, Ukraine, United Arab Emirates, United Kingdom, USA and Uruguay and Vietnam.

Malta has no withholding taxes on dividend payment, interests and royalties paid to non-residents, no stamp duties, and no capital duties or wealth taxes.

Malta has a comprehensive Global Residence Program which gives the opportunity to foreign people to reside in the Maltese Islands.  This residence program brings with it a multitude of benefits.

Firstly, the residence program is very fast in implementation with the process usually only taking four months.  There is no minimum presence in the country required.  Furthermore, it includes residence for family members and domestic staff and it also opens the door to a potential work permit.  As a result, EU and Schengen long term residency will be obtained and any remitted income to Malta will not be taxed at source (in the presence of a double taxation treaty) and will be taxed at only 15% in Malta.  Income sourced from abroad will not be taxed if it is not remitted.  The minimum tax per family is €15,000.

To qualify for the Global Residence Program a number of eligibility criteria have to be satisfied.  The applicants must be non-EU, non-EEA and not Swiss nationals.  The application will cover the applicant, spouse, and any children under 25.  Applicants must have their own health insurance package as they will not be eligible for the state’s free health system.  In order to qualify candidates must buy property at the minimum value of €275,000 in Northern or Western Malta and €220,000 for Gozo or the Southern Region of Malta.  An alternative to the latter is renting property in Northern or Western Malta to a minimum of €9,600 per year or €8,750 per year in Gozo or Southern Region of Malta.

Residents under the Global Residence Program must not reside more than 183 days in a foreign jurisdiction in any year.  However, the programme does not require evidence to be shown to prove any minimum residence requirement.