The Malta alternative


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Презентация с международной налоговой конференции «Жизнь после Кипра: налоговый апгрейд» (

Сессия 3: Деофшоризация: глобальный тренд

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The Malta alternative

  1. 1. The Malta alternativeTax planning opportunities usingMaltese corporate structuresMoscow 4 June 20131
  2. 2. About Malta• Malta is located 93 km south of Sicily and 288km to the north of Africa• Population around 415,000• English is an official language in Malta and isthe language of business.• EU Member since 1 May 2004 and part ofEurozone since 1 January 2008.2
  3. 3. Characteristics of Maltese companies• Companies Act of Malta based mostly on English Law andEU directives• Main form: the Limited Liability Company.• Also partnerships en commendite and en collectif• Incorporation time: two to three working days• Full due diligence required• Minimum authorised share capital is €1200 or equivalent inany convertible currency• Shares may have different classes and rights• Must have at least one director which can be a bodycorporate• Must have a company secretary• Annual accounts and audit required3
  4. 4. Basis of Taxation• Taxation on a world-wide basis- Companies that are incorporated in Malta are deemed resident and domiciledin Malta and are taxable on their world-wide income at the flat rate of 35%.• Source and remittance basis of taxation- Companies that are incorporated outside Malta but are managed andcontrolled in Malta or vice versa (resident but not domiciled) are taxable onincome arising in Malta and income arising outside Malta that is remitted toMalta. Capital and capital gains arising outside Malta are not taxable even ifremitted to Malta. Rule applies also to individuals. This creates various taxplanning opportunities.• Source only basis- Persons who are neither resident not domiciled are taxable only on Maltesesource income• Full Imputation system- Income tax paid by the company is a prepayment of tax due by the shareholder4
  5. 5. Double Taxation Relief• Treaty or Unilateral Relief based on an Ordinary Credit- Applies to foreign taxes suffered on foreign income – for resident companiesand registered branches- Credit for withholding and underlying tax (for dividends) of direct subsidiariesand 10% sub-subsidiaries.- If foreign taxes ≥ Malta tax charge (35%), Malta tax is NIL• Flat Rate Foreign Tax Credit (FRFTC)- Applicable to foreign income account (FIA) income deemed to have sufferedforeign tax of 25% of foreign income received- Reduces tax suffered to between 7.47% and 18.75% (note interaction with2/3rds refund)- FIA: royalties and similar income arsing outside Malta; income/gains derivedfrom a participating holding, dividends, interest, rents, capital gains and otherincome derived from investments situated outside Malta; PE profits; profitsfrom foreign assets/liabilities of Malta licensed banks and financial institutions;profits of Malta licensed insurance companies related to risks situated outsideMalta.5
  6. 6. The Special Tax Refund System• Malta operates a unique tax refund systemunder which the Maltese tax authority refundsgenerally 6/7ths of the corporate tax to (dulyregistered) shareholders upon request followinga distribution of dividend by the Maltesecompany.- This results in an overall effective tax rate of 5%.- This is the lowest effective tax rate on tradingprofits in the EU6
  7. 7. Example: 6/7ths Tax RefundTaxation of MaltaCoChargeable Income 100Tax at 35% (35)Distributable profits 65Taxation of the ShareholderGross Dividend 100Tax at 35% (35)Full Imputation Credit forTax Paid by MaltaCo 35Net Dividend 65Refund of 6/7ths of MaltaTax Paid 30Income from MaltaCo(Dividend + Refund) 95Overall Malta Effective Tax 5%ShareholderMaltaCoIncome fromMaltaCo(95)6/7ths Tax Refund(30)Tax (35)Income(100)Dividend(65)7
  8. 8. The Special Tax Refund System• If underlying profits of the Maltese company are generated from certainpassive interest or royalties, the tax refund is 5/7ths.- Overall effective tax rate is 10%.• 2/3rds refund applies where double tax relief has been claimed oncertain foreign source income.- Malta tax suffered reduced to between 2.49% and 6.25% when FRFTC isclaimed, or to zero when other type of DTR claimed is 11.67% or more• Applications for tax refunds may be made within up to four years fromthe date of the distribution of profits.• Tax refunds are guarantied by law and must be paid within 14 days ofthe filing of a request for refund.• The tax is paid in the currency in which the share capital of thedistributing company is denominated and tax refunds are also paid in thesame currency.8
  9. 9. Malta two-tier trading structureForeignShareholdersIncome from Internationaltrading activities ex. Provisionof services, intermediation,active financing activities,purchase and sale of goods.EquityDividendsMalta tax atcompany level :35%Tax treatment:• Malta Trading Co taxed at 35%• Foreign Shareholders may claim6/7ths refund (effective overall taxburden reduced to 5%)• 2nd Malta Holding may beinterposed, in case of taxationrefunds in shareholder’s country ofresidence, to collect dividends andrefunds.• Malta Holding is not taxable ondividends received from MaltaTrading Co (imputation credit). Taxrefunds are exempt from tax.• Malta Holding may hold on or re-invest money or distribute dividendto Foreign Shareholders.• No withholding taxes apply ondistribution of dividends from MaltaTrading or Malta Holding.6/7ths taxrefundMaltaHold CoMalta Trading Co9
  10. 10. Malta Holding CompaniesBenefits of Malta as a holding jurisdiction: (60+) double tax treaties based on OECD Model Treaty with Russia signed not yet in force Effective system of double taxation relief Efficient participation exemption regime with light anti-abuse provisions No withholding tax on outbound dividends, interest orroyalties to any country No CFC, transfer pricing or thin-cap legislation Access to EU treaty freedoms and EU Directives Excellent international reputation and relations withOECD Not restricted to holding activities10
  11. 11. The Participation ExemptionParticipation exemption applies on income or gains derived by aMaltese company from a participating holdingi.e. a holding in another company (or the transfer thereof) which confers at leasttwo of the following:1. The right to vote;2. The right to profits available for distribution;3. The right to assets available for distribution on a winding upand:(a) it is a direct holding of at least 10% of shares of company; or(b) holding company entitled to entire balance of the shares not held; or(c) holding company entitled to first refusal on shares not already held;or(d) holding company entitled to a seat on the board of directors; or(e) investment is equivalent to €1.2 M and held for 183 days; or(f) shares held for the furtherance of business (not held as tradingstock).11
  12. 12. Participation Exemption (anti-abuse)One of the following criteria must also be satisfied by companyheld in the case of a dividend:1. It is an EU company; or2. it is subject to foreign tax of at least 15%; or3. it does not have more than fifty per cent (50%) of its incomederived from passive interest or royalties;Where none of the above conditions are satisfied the participationexemption would still apply if :a. the holding by the Malta company in the non-Maltese residentcompany is not a portfolio investment; andb. the non-Maltese resident company or its passive interest orroyalties have been subject to any foreign tax of at least 5%:12
  13. 13. Holding w. Participation ExemptionForeign Hold CoDividends and gainsderived from aparticipating holdingParticipating Holding DividendsMalta tax: 0%participationexemptionNo withholding taxon dividend paid toForeign Hold Co(even if offshore orlow tax jurisdiction)Malta Hold Co13
  14. 14. EU Exit Route via MaltaParticipating HoldingDividendsMalta tax: 0%participationexemptionNo WHT on dividendpaid toOffshore/Non-EU CoMalta Hold CoEU CoOffshore/Non-EUCoDividendsNo WHT: applicationof Parent SubsidiaryDirective14
  15. 15. Resident non-Domiciled companiesRemittance basis of taxation:A foreign incorporated company that has shiftedits residence / effective management to Malta(becomes resident but not domiciled) is only subjectto Malta tax on:• Income and gains arising in Malta;• Income arising outside Malta which isremitted (received) in Malta; andNo Malta tax on:• Foreign source Capital Gains• Foreign source Passive Income not remitted toMaltaApplications: Financing/Passive foreigninvestments/Aircraft leasing or operationForeignHold CoForeign co.managed andcontrolled in MaltaForeign PassiveIncome orGains/Financingactivities15
  16. 16. Substance requirements• Company incorporated in Malta is deemedresident in Malta• No formal substance requirements from aMaltese perspective/Required from foreigncountry perspective• Management and control in Malta: Meetings ofBOD held in Malta. Directors with sufficientexperience based in Malta• Employees/premises/technical resourcescommensurate with activities of the company16
  17. 17. Professional Investor Funds (PIFs)PIFs are non-retail funds aimed at financiallyliterate, high-net-worth-investors.Subject to quicker regulatory procedure and lessinvestment restrictions than retail fundsMay take form of a limited liability company SICAVor INVCOPIFs may be self-managedMay take form of an umbrella fund with multiple-sub funds with different investment objectives andsegregated patrimonies17
  18. 18. Self-managed PIF (SICAV) StructurePIFFundAdministratorSPVBOD18InvestmentCommitteeForeign TargetCompany/InvestmentPromoter(controllingsharesUnitHoldersInvestorsAdvantages:• PIF income is exempt from tax• Redemption and transfer ofunits in the Fund quicker andsimpler than transfer ofshares in normal company• Investors can invest throughregulated financialintermediaries• PIF may be divided into sub-funds held by differentinvestors and pursuingdifferent investmentobjectives• PIF is a regulated entity: Addssubstance to the structureDisadvantages:• More expensive to run thannormal holding company• Subject to regulatoryoversight and restrictionsCustodianDividendsDividends
  19. 19. Redomiciliation of Companies to Malta• Malta allows the re-domiciliation of companies (including funds) toMalta from approved jurisdictions.• A company established in another jurisdiction may be transferred andcontinue to exist in Malta without having to wind up in its country ofincorporation.• The assets, rights, obligation and liabilities the company had in itsoriginal country of registration are retained• A fund can also move to Malta without having to re-negotiate contractswith service providers in the country of origin (provided these areapproved by MFSA).• Likewise, companies incorporated in Malta may redomiciled out ofMalta to another jurisdiction.• Possibility of ‘step-up’ of base-cost of assets situated outside Malta19
  20. 20. Other Reasons to Choose Malta Its proximity to most European and Middle Eastern capitals withmany direct flights available Convenient time zone (GMT+1) English is the language of business. A sophisticated, European business environment Highly educated and productive local work force Reasonable set-up and operational costs A solid banking system largely unaffected by global financial crisis A stable political situation State-of-the art communications infrastructure Good weather and high standard of living Well-equipped ports and Freeport Excellent international schools20
  22. 22. Dr Silvio Jonathan 1, Blue Harbour Business Centre,Ta’ Xbiex Yacht Marina, Ta’ Xbiex XBX1027 MaltaTel: (+356) 21491840/1 Fax (+356)|Contacts22