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Kristine Scerri

KSi Malta’s Managing Partner, Joseph Gauci, participated in the Bosco Conference, Wealth Pro Poland on 2nd December 2014. During this conference he presented the benefits of Company Formation in Malta.

One of the most convenient Malta based corporate structures involves a two tier structure. Through the two-tier structure, profits made by a Maltese Trading Company are distributed as dividends (or bonus shares) to another Maltese 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.  The said effective tax rate is reduced 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, 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.  Other benefits include: 

  1. No thin capitalisation rules, CFC rules or transfer pricing rules;
  2. No withholding taxes on interest, outbound dividend, discount, premium or royalty payments. 

A Trading Company such as that mentioned above would be able to carry on other business functions including manufacturing, R&D, logistical, transhipment, marketing and selling etc, without any particular limitations.  The versatile structuring possibilities and tax benefits under Maltese law allow for Maltese companies to be used for a number of purposes.

Companies incorporated outside Malta which shift the company’s effective management (fiscal residence) to Malta are taxed on the remittance basis of taxation, thereby meaning that foreign income which is not brought into Malta and foreign capital gains even if brought into Malta can accrue entirely free of Maltese tax. 

Partnerships of which capital is not divided into shares are considered transparent entities for tax purposes hence business income of these entities is considered income for the partners at an individual level (could also be corporate partners).  Foreign income which is not brought into Malta, foreign capital gains even if brought into Malta and director fees received by the Maltese Partnership as being director of a foreign company can accrue entirely free of Maltese tax.  The combination of such partnerships with a number of jurisdictions with which Malta has double taxation treaties is likely to offer possibilities of double non-taxation.

Interesting Points:-

  • Director Fees paid from Maltese companies are taxed in Malta.  However, non-executive directors who receive other remuneration in respect of other services rendered to the company (e.g. advisory fees); would not be taxable in Malta if they are neither resident nor domiciled in Malta.
  • The Dividends clause in the DTT provides for a 0% withholding tax rate on dividends paid by a Polish company to a Maltese company holding at least 10% of the capital thereof, whereas in other circumstances, the maximum Polish tax to be withheld shall not exceed 10%;
  • The Interest clause sets a maximum rate of WHT of 5%, when payable from Poland to Malta;
  • The Royalties clause sets a maximum rate of WHT of 5%, when payable from Poland to Malta;

In addition, Malta offers a number of residence schemes for individuals who wish to take up residence in Malta.

For more info contact our Tax Manager, Benjamin Griscti, on bgriscti@ksimalta.com or our Tax Advisor, Kristine Scerri on kscerri@ksimalta.com.