At the crossroads of the Mediterranean, halfway between Europe and North Africa lies the Maltese archipelago consisting of three main islands. Malta (the largest island) can be considered to be the hub of administrative and commercial activities.
Because of its strategic geographic location and its excellent harbours, Malta has always been a major attraction to the world’s maritime powers. As a result, Malta was ruled by many foreign powers, starting with the Phoenicians and ending with the British.
But…Now?
Today, Malta’s relaxed lifestyle, its climate and sea make it a favourite holiday destination. The Maltese Islands also boast of a number of natural attractions, from its unique limestone walls and natural harbours to its clear crystalline waters and beautiful coastline as well as a number of folklore and traditions ingrained deep.
The Maltese economy has experienced a shift over the years – from a manufacturing based economy the islands have moved towards a more service-oriented industry. The growth in the services sector is mainly due to great human resource potential found in Malta and its strategic location in a very important region. In the past few years steady growth has been registered in the provision and development of niche financial, ICT and tourism services. Malta is thus strengthening its position as a major hub for the provision of transhipment, financial services and Information and Communication Technology and pushing to become a leader in the region.
Malta has two official languages, Maltese and English, a legacy of British rule that lasted over 160 years. Malta became independent in 1964, a republic in 1974 and joined the European Union in May 2004.
Malta is fast becoming a significantly important financial centre within the European Union. A long history of fiscal an
d investment incentives
for foreigners wishing to set up shop in Malta have led to an very attractive package for both investors as well as for non residents wishing to use Malta in their international tax planning structures.
In 2006 Malta reached agreement with the European Commission that effectivelypreserves intact its competitive imputation tax system for business in Malta. Theproposal, which was developed by the Maltese Government, extends the refundable tax credit system to all Maltese companies and shareholders. Under the agreement the proposals came into effect on 1 January 2007, while the outgoing system will be
retained up to 2010 for beneficiaries existing as at 31 December 2006. This important agreement ensures Malta’s future ability to continue to be an attractive and competitive environment for international business and investment.
Essentially the logic of the imputation tax system has remained unaltered: Under the new system companies are taxed at 35% and upon a distribution the shareholder is entitled to the tax refunds. The differences of substance are that the tax refunds are now available to all shareholders in respect of the distribution of all profits other than those derived from immovable property. Upon distributions of profits a company will pay an advance company income tax “ACIT” which satisfies the company’s tax liability and is also available for refund to the shareholder. This change will not essentially affect the tax refund as it is operates today.
As a result of these changes companies need not restrict their activities to international activities in order to be eligible for the tax refunds, as was the case under the old system.
Here we can find a short list of advantages:
- NIL tax payable on incoming dividends from subsidiaries situated outside Malta (subject to certain conditions);
- A Maltese Company can act as both a holding company and a trading company with no negative tax consequences thus eliminating the need to open separate companies;
- Net tax payable of 5% on company profits;
- Net tax payable of 10% on passive income received from outside Malta (such as interest and royalties);
- Non resident company carrying out activities in Malta will be treated in the same way as a resident company with resultant tax planning opportunities, and benefitting from the same net tax rate;
- No Withholding taxes on outbound dividends, interest or royalties;
- Three or more tier Malta companies are now possible;
- Possibility to claim relief on Malta tax payable on income received from outside Malta even if such income has not been subject to tax abroad or if such income has suffered tax at a lower rate;
- Full exemption on stamp duty and capital gains upon the transfer of shares between non residents;
- Possibility of re-organization relief, wherein a company can be amalgamated, split, or merged without loosing any accumulated tax losses;
- Malta currently has over 50 double taxation agreements in place including with all EU countries and with the US;
- Possibility to hold shares under fiduciary (nominee).
- …and much more.
For detalled informations contact us.
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