Why Malta? Malta enjoys excellent
credit ratings – Moody’s A3 stable,
Standard & P...
Acumum – Legal & Advisory | Company Focus
Corporate tax structuring
A company incorporated in Malta is
considered to be or...
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Malta a Fiscally Competitive EU Jurisdiction - Editorial Campden Wealth Directory 2014


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Malta - an EU jurisdiction aimed and structured for business and personal asset tax structuring

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Malta a Fiscally Competitive EU Jurisdiction - Editorial Campden Wealth Directory 2014

  1. 1. COMPANY FOCUS ACUMUM – LEGAL & ADVISORY Why Malta? Malta enjoys excellent credit ratings – Moody’s A3 stable, Standard & Poor BBB+/A-2 rating and Fitch A+ – whilst the World Economic Forum ranked Malta 13th out of 144 countries in terms of the soundness of its banking sector. Such growth is not solely the result of Malta’s tax and fiscal policies – there are other important factors such as a multilingual workforce, lower labour costs, a strategic location and a sound telecommunications infrastructure. As a result there has been an influx of interest from investors, high net worth individuals and corporations, who desire a stable, reputable environment in which to structure their personal and corporate affairs; as well as to reside. Malta’s legal system is a mix of civil and common law, with the commercial laws – companies, trusts, financial services – being modelled on English and now EU law. These are settled laws, providing comfort to clients. Personal & wealth tax structuring Trusts – both trusts and foundations may be used for personal, as well as commercial applications. Malta trusts, which do not have to be governed by Maltese law, offer protection, security and estate planning benefits and are transparent for tax purposes. In other words, trust income may be “looked through” and is exempt from tax in the hands of non-resident beneficiaries. Foundations – because foundations have a separate legal personality, for tax purposes they are treated as a company and are therefore subject to Malta’s corporate tax rules, such as use of the participation exemption provisions (holding companies). As a result beneficiaries may be entitled to claim a refund of all or part of the tax paid at the level of the foundation. Alternatively, for tax purposes, foundations can opt to be treated like a trust and enjoy the “transparent” tax rules of trusts, including the remit- tance rules. This is the case if all of the income of the trust arises outside Malta and all beneficiaries are persons who are either not ordinarily resident in or not domiciled in Malta. Such income is deemed to be derived directly by the beneficiaries of the foundation. A Maltese foundation is therefore highly advantageous in cases where it involves non-resident founders, beneficiaries and assets. Malta residency & citizenship Malta is a member of the Schengen Area, which allows for visa free travel in participating European Member states, and offers a number of options, for individuals and investors, that allow for residency in Malta, for both EU and non-EU nationals. Any person that is resident, but not domiciled, in Malta is subject to Malta tax only on income arising in or brought into Malta, whilst capital (income held for over a year) is not taxed in Malta. Residency – The Global Residency Scheme is aimed at non-EU nationals and features: no income or wealth criteria thresholds; low property renting or purchase requirements; allows for family members and staff to live in Malta; and no minimum stay requirements. The minimum tax liability in Malta of €15,000 and a 15% tax rate is levied on other income brought into Malta. Income not brought into Malta is not taxed. Citizenship – The Individual Investor Programme (IIP) for Maltese citizenship requires a contribution of €650,000 to the Maltese National Development and Social Fund. It also requires the holding of property in Malta (minimum €350,000 if purchased or €16,000 annual rental payments) and an investment of €150,000 in local stocks, bonds, debentures, special purpose vehicles or other investments for a period of at least five years. Individuals must satisfy a residency requirement of a minimum period of 12 months and will be subject to extensive due diligence checks, including a personal interview before naturalisation is granted. ACUMUM – LEGAL & ADVISORY International Law Firm and associated Barristers Chambers. Maltese, UK and international lawyers, advocates, tax advisers and accountants, providing cost efficient, expert, Malta- focused legal and taxation services. Through an associated Barristers Chambers we provide advocacy services in Malta, UK, at EU level and across The Commonwealth. Specialisms – aviation, energy, financial services, IP, gaming, maritime, personal and corporate tax structuring, wealth and estate planning. Acumum is managed by Geraldine Noel, a UK barrister registered in Malta with over 20 years international legal experience. Malta – a fiscally competitive European jurisdiction While other European countries’ economies have faltered in recent years, since joining the European Union in 2004 Malta’s economy has grown from strength to strength. The FSC Report 2014 116 If you would like further information on products or services access
  2. 2. Acumum – Legal & Advisory | Company Focus Corporate tax structuring A company incorporated in Malta is considered to be ordinarily resident and domiciled in Malta for tax purposes and is subject to Malta tax on its worldwide income at an effective corporate rate of 5% for trading income, reduced from the standard rate of 35% by the application of certain tax refunds. In addition, with limited capital gains taxes, no withholding, entry or exit taxes, and no transfer pricing or controlled foreign company rules, Malta provides a cost effective, tax efficient and highly flexible jurisdiction in which to structure corporate and commercial affairs. Tax refunds – In addition to a number of total tax exemptions for certain types of income, depending on the type of income generated, the standard corporate tax rate can be reduced to 5% in the case of trading income, 6.25% for narrowly defined passive income and royalties or in very limited circumstances 10%. Any overseas tax suffered by a Malta company would generally be eligible for relief as a credit against the Malta tax liability arising on the corresponding source of income. Tax paid should, by law, be refunded within four weeks. Imputation system – Malta is one of the few remaining countries to retain the imputation system, as opposed to the classical system of taxation. This means that once tax is levied on a Malta company on profits that it distributes as dividends, no further tax is levied on those dividends at the level of the shareholder – thereby completely avoiding double taxation. Remittance system – This provides significant tax planning opportunities for company income. Where a company incorporated outside Malta is deemed to be resident in Malta because its management and control is exercised in Malta, only income brought into or arising in Malta is subject to Malta tax. Malta Holding Companies – Subject to certain anti-avoidance rules, the application of the Participation Exemption for Malta companies with subsidiaries (including permanent establishments and branches) abroad, allows for income derived from a participating holding, or from the disposal of such a holding, to qualify for a participation exemption. This will result in the subsidiary’s dividends and gains being exempt from tax. Sectors In addition to numerous other grants and incentives, Malta has implemented a number of advantageous tax and fiscal regimes with the aim of attracting business across a variety of different sectors. Aviation – Malta has seen a surge in the registration of aircraft and the establishment of Aircraft Operating Companies. As private aircraft are by their nature used for private purposes, no income is generated and therefore no Malta tax obligations arise. For commercial operations, flexible rules apply through the application of reduced tax rules and generous deduction rules in respect of finance and operating leases. These can be combined with accelerated depreciation periods for aircraft, aircraft engines and related parts. Funds and financial services – Where a fund has 85% of its assets outside of Malta, income and capital gains will be zero-rated for tax purposes, as are distributions to non-resident investors. Maritime – Subject to registration as a shipping company and payment of the appropriate and advanced, set tonnage tax, a total tax exemption applies to any income of a licensed shipping organisation that owns, charters or operates a tonnage tax ship. Income, profits or gains derived from the (i) sale or other transfer of a tonnage tax ship or (ii) disposal of any rights to acquire a ship, which when delivered or completed would qualify as one, are exempt from Malta tax. The reduced VAT scheme for yacht leasing provides for reduced VAT rates to be levied according to the time spent in EU waters, which can then be paid over a three-year period. Income derived from a Maltese company engaged in such activities will be taxed at 5% in accordance with Malta’s corporate taxation rules following the application of appropriate tax refunds. Intellectual property – Royalties from patents, artistic copyright and trademarks are 0% taxed for three years (renewable), ensuring that Malta is a tax efficient jurisdiction for IP holding companies and royalty structuring. Amortisation over the life of the IP is allowed, as is a step up in value upon the transfer of IP to a Malta company from book to fair market value upon transfer, whilst capital gains may not be levied upon disposal in certain circumstances. Highly Qualified Scheme – Certain employees, both EU and non-EU nationals, engaged in the aviation, financial services or digital gaming sectors can benefit from a 15% income tax cap for a certain period of years, up to a maximum income of €5 million. Any excess is exempt from tax. MALTA TAX REFUND SYSTEM FOR TRADING COMPANIES Foreign Shareholder Malta Co Trading Profits of 100 35% tax paid to Maltese tax authority 30% tax refund (4 weeks) resulting in overall tax leakage of 5% Dividend of 65 The FSC Report 2014 117To receive your FREE copy of The FSC Report 2014 register now at