Malta: Taxation

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    Tax benefits:

    When creating a new taxation system, Malta was assisted by a global tax consultant, whose expertise allowed to create an EU-compatible, but yet pro-business environment.

    5% effective corporate profit tax, if companies are owned by non-residents or by residents without domicile in Malta. The unique structure complies with “subject to tax” regulations of double tax treaties: companies pay a profit tax of 35% and the recipient of dividends receive 30% or 6/7, if it is a corporation whose beneficial owners are not both resident and domiciled in Malta.

    Application of the Parent-Subsidiary Directive of the EU, according to which dividends from a subsidiary company can be received tax-free in the parent company, even across borders, if some conditions are met. Also the refund from dividend tax remains tax free in the receiving company. If the mother company is situated in a country that has rather unpredictable tax authorities, a corporate structure with an operative company, with a dividend feeder holding in Malta and with beneficial owners outside of Malta is an option. The holding might also be a limited partnership (k.s.) in Slovakia, which can receive dividends tax free from the Maltese subsidiary. Then private owners can legally and tax free take out the money from the Slovak structure, and such owners can reside in many countries outside Slovakia. However, it is important to make sure that the Slovak company has real activities by itself, so foreign tax authorities cannot qualify it as transparent.

    The concept of “Residence without Domicile” offers tax advantages: In current practice, foreigners generally are deemed to have residence but not domicile in Malta (there are 3 concepts of domicile: domicile of origin, if someone is born as a Maltese, domicile of dependence, if a foreign woman marries a Maltese, and domicile of choice that requires an active declaration).

    Residents without domicile are only taxable on: income arising in Malta, income arising outside Malta and remitted to Malta, and profits from real estate in Malta. There is no tax on capital and residents without domicile can receive capital gains arising outside Malta and remit them to Malta (therefore separate bank accounts for income and for capital are recommended). Income created outside Malta that remains outside Malta is not subject to tax (if you use your foreign income to buy an apartment from a Maltese seller, ask him to open a bank account abroad, then it is him who remits the money to Malta and not you). However, capital gains arising in Malta are subject to tax for natural persons residing in Malta.

    According to Maltese tax law, a corporation also can have the status of “Resident without Domicile” and therefore be subject to tax only on income earned in Malta or remitted to Malta. This is the case for example, if a company is registered in Cyprus and has management and control in Malta. Such a structure is favorable for passive income (interest or royalties), which are tax free if not remitted to Malta, because they are deemed to arise where the payer is located.

    Similar benefits are possible using a partnership, a silent partnership or an EEIG- structure.

    According to The Residence Programme Rules for citizens of the EU and Switzerland and according to the Global Residence Programme for non-EU citizens can transfer their residence to Malta and benefit from tax incentives, if they buy real estate for at least 275000€ or if they rent real estate for at least 9600 € per year. In addition, a fit and proper test is required. Then the tax on income earned outside Malta and remitted to Malta is 15%, and there is a minimum tax of 15000 € per year. There is also a program for high qualified individuals who then pay only 15% on their income earned in Malta.

    Easy relocation of residence: Malta is a member of the EU, therefore EU citizens are entitled for a residence permit. Also, within the EU exit tax is not effective and a tax residence certificate is issued quickly.

    Redomiciliation Rulesaccording to Maltese legislation, it is possible to apply the concept of residence without domicile to legal entities. If a foreign company (e.g. offshore) re domiciles to Malta, this offers additional tax advantages, because such an entity has limited tax liability in Malta and income arising outside Malta is not taxable in Malta. In addition, this structure creates credibility and opens the door to the EU, EU- directives and double tax treaties.

    EU subsidies and Tax Credits as Investment incentive: under certain conditions, a percentage of the total amount that is invested in the first 3 years can be received as a tax credit.

    (updated March 2017)