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Malta is reputed as an ideal choice for prospective investors and is constantly described as one of the best places to live in worldwide. Malta has been a member state of the European Union since 2004 and was admitted to the United Nations back in 1964.  Malta is an archipelago which lies virtually in the centre of the Mediterranean, 93 km south of Sicily and 288 km north of Africa. With a very low crime rate, a sound banking system and excellent political stability, it has been lauded as an ideal European hub that possesses strong connections to both North Africa and the Middle East. The country also enjoys sunny weather, attractive beaches, a thriving nightlife and 7,000 years of intriguing history.

Malta thrives on foreign investment and has, over the years, created the ideal environment for foreign investors. Malta has a bilingual workforce, fluent and proficient in the Island’s official languages; English and Maltese. Furthermore, the majority of its inhabitants also speak a third language. This has facilitated business with other countries throughout the years. An ex-colony of Britain, Malta boasts a strong legislative infrastructure which has evolved to incorporate the most efficient systems from various other jurisdictions to facilitate and promote foreign investment.

In fact, Malta has proved to be an ever-growing financial centre in the past decade introducing, for the first time world-wide, new legislation to regulate emerging niche markets such as iGaming. In

turn, combined with the high productivity of its professional workforce, Malta has become a major player in the EU’s financial services sector servicing major industries such as Yachting and Shipping and now has, amongst other achievements, the largest ship registrar in Europe.

Company Formation

The process of company formation and incorporation is set out by the Malta Companies Act.  A company is set up through the drafting and registration of its Memorandum of Association. All shareholder/s must subscribe thereto and a certificate of registration is issued in respect thereof.

The Maltese Companies Act states that the share capital of a new company may be denominated in any foreign currency and not necessarily Euro (€).  There is a minimum capital requirement amounting to €1,165 in private companies with only 20% of the issued share capital necessary to be paid up.  The number of shareholders is usually two, however a single member company may also be registered.  In addition, the shares of a Maltese holding company may be held by a trustee who is duly authorised to act as a trustee in accordance with Maltese Law.

A registered Malta company is required by law to submit an annual return to the Registrar of companies, and to have all annual financial statements audited. 

Malta has become an ideal jurisdiction to establish an EU holding company which would have the purposes of holding shares in one or more entities.  Typically, the holding company itself does not trade, but it is used to hold the assets or shares in the trading company itself.  Malta’s attractiveness as a holding jurisdiction has increased significantly following Malta’s accession to the EU and the recent amendments to the Income Tax Act (ITA), thus giving full access to applicable EU Directives. 

One of the most convenient Malta based corporate structures involves a two tier structure.  Through the two-tier structure, profits made by the Malta Trading Company are distributed as dividends (or bonus shares) to the Malta Holding Company which in return would be in a position to apply for the tax refunds. 

The corporate tax rate in Malta is set at 35%, depending on the type of income generated by the Company.  However, non-residents opting for the aforementioned structure may benefit from numerous Malta tax benefits, reducing the said effective tax rate to a final rate ranging between 0% and 6.25% through the Malta tax refund system.  In addition, Maltese law also provides for a highly attractive Participation Exemption which eliminates any Maltese taxation in a parent-subsidiary relationship.  Thereby meaning that companies registered in Malta deriving dividend income or capital gains from its corporate shareholding or from the disposal of such a holding may benefit from a 100% exemption.  Furthermore Malta has over 60 double taxation treaties with numerous jurisdictions under which double taxation can be reduced or eliminated.  Nonetheless, apart from Treaty Relief, the Maltese taxation system provides for numerous ways how to avoid double taxation.  Particularly,  a company may opt for Flat Rate Foreign Tax Credit which is a deemed credit on tax paid on foreign source income which can be applied even if no actual foreign tax would have been paid.  In this regard, a Company is free to opt for the double taxation relief system which suits its needs the best.

In addition, Malta does not impose any withholding taxes on interest, outbound dividend, discount, premium or royalty payments.  Malta also does not have any thin capitalization rules, CFC rules or transfer pricing rules. 

The versatile structuring possibilities and tax benefits under Maltese law allows for Maltese companies to be used for a number of purposes.   

Banking in Malta

Malta’s international banking centre has transformed itself from one having four retail banks serving the local population to a reputable international banking centre.  As growth continues, so do the range of banking products and services being offered in and from Malta. These include retail banking, private banking, trust business, investment banking, trade finance, treasury operations and syndicated loans.

Malta’s accession to the EU in May 2004 and the adoption of the Euro in January 2008 inspired confidence and led to easy access to European markets. 

The Malta Financial Services Authority (MFSA) is the country’s single regulator for all banking, investment and insurance business.  Banking business in Malta is regulated by the Banking Act.

Apart from its ideal geographical location, the benefits of EU membership and euro adoption, and a prompt, efficient and accessible Regulator, Malta offers many other advantages as a domicile for international banking business.  Costs are lower than other European centers, operating costs are likewise competitive and excellent office space and housing are available at reasonable rents.

The Maltese fiscal regime has also been one of the main drivers in creating an attractive investment environment.

iGaming

The relationship between Malta and remote gaming is very strong as Malta was the first EU jurisdiction to regulate iGaming. Malta’s legal, fiscal and non-fiscal systems have made the island one of the most competitive locations for establishing of remote gaming operations. Today Malta is officially the world’s largest online gaming jurisdiction and is estimated to host around 10% of the world’s on line gaming companies.

There are many reasons for considering Malta as the ideal base for gaming operations such as: 

  • an efficient and relatively inexpensive licensing process;
  • low Malta Gaming tax;
  • the lowest effective corporate tax rate in Europe (at 5%) and the availability of a highly attractive participation exemption; 
  • a stable political environment;
  • a modern and continuously improving legal and tax framework;
  • a gaming sector characterized by an accessible and flexible regulator;
  • an excellent telecommunications infrastructure;
  • equipped with modern hosting and co-location facilities; 
  • knowledgeable, flexible and multi-lingual labour force.

The Lotteries and Gaming Authority (LGA), is Malta’s regulator for remote gaming. The LGA may issue licenses to all types of providers of remote gaming, including those involved in casino style games, poker, sports betting, betting exchanges, P2P, skins and lotteries through all types of technological media including the internet, mobile, telephone and fax, among other media operators, excluding the licensee himself.

Concluding Remarks

KSi Malta is one of Malta’s leading audit, tax and advisory firms providing a wide range of services to both local and international clients.  KSi Malta specialises in tax advice, and has several tax consultants assisting clients in this regard both in Malta and also on an international scale.  In addition to tax planning, our team of auditors, accountants and tax advisors can also provide you with company formation and management services in Malta. 

This article has been prepared by Kristine Scerri, Senior Tax Advisor at KSi Malta.  Kristine Scerri joined KSi Malta’s tax section in October 2014 wherein she assists local and international clients with their direct tax concerns.   Kristine obtained the Bachelor of Honours in Accountancy from the University of Malta in 2012.  She is currently furthering her studies in taxation and reading for the Advanced Diploma in International Taxation.

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