At E&S, we offer the full array of Corporate Services required Maltese Companies as well as companies incorporated in other Jurisdictions. Every Company in Malta requires a variety of corporate services from a simple registered office in Malta to a variety of complex corporate services. As a Licensed Corporate Service Provider in Malta, E&S Group’s main focus is solely on the provision of Corporate services. We are thus in a position to the full array of corporate services the client would require, being it a small Malta Company to the Multinational Group which has a Maltese Corporate element in their group structure.
The use of a limited liability company incorporated in Malta offers flexibility and favourable taxation albeit in a highly regulated onshore environment. A limited liability company may be incorporated in Malta for the purpose of carrying on any activities in Malta or internationally, and whether such activities are of a ‘trading’ or ‘holding’ nature. Such limited liability companies can therefore trade in any sector and may hold assets whether tangible or intangible, and whether movable or immovable.
Jurisdiction to Tax
In terms of Malta law, a company which is incorporated in Malta is deemed to be resident for tax purposes (ordinarily resident and domiciled) in Malta and would be taxable in Malta on a worldwide basis, irrespective of whether its management and control is situated in Malta or elsewhere.
A company incorporated outside of Malta may still be considered tax resident in Malta where it is management and controlled in or from Malta (ordinarily resident but not domiciled). Such company’s liability to tax would be limited to chargeable income or gains earned in, derived from or realized in Malta, or income remitted to Malta. Foreign source gains would not be taxable in Malta even if remitted to Malta.
Rate of Tax
There is no corporate taxation in Malta and therefore companies are subject to income tax at a flat rate of 35% (equal to the marginal rate at which individuals are taxed). The combined overall Malta effective tax rate can however be lowered by virtue of the refundable tax credit or by application of the participation exemption.
A Malta company’s taxable income would include gains or profits derived from a trade or business, dividends, premiums, interest or discounts; rents, royalties and other profits arising from property, any charge, annuity or annual payment, and certain chargeable capital gains.
A Malta company in receipt of income derived from a ‘participating holding’ (typically an equity shareholding of 10% in a non-resident entity, although other alternative conditions may be fulfilled), or gains derived from the disposal of shares in such a participating holding, such company may at its option exempt such profits (participation exemption).
Shareholders of Malta Companies
Dividend income – The Full Imputation System
Malta operates a full imputation system for the taxation of dividends whereby a shareholder (whether an individual or a corporate entity) in receipt of a dividend distributed by a Malta company would suffer no further tax and would not be required to declare such dividend in his, her or its tax return.
It follows that Malta therefore has no withholding tax on dividends in terms of its domestic law.
Shareholders of a company registered in Malta are generally also entitled to a refund of all or part of the tax paid on the profits out of which such dividend was distributed. Such refunds of tax are applicable to all shareholders in Maltese companies regardless of their legal form of status, or tax residence or otherwise of the shareholders, to the extent that they are registered for this purpose.
Refunds of Tax
A shareholder in receipt of a dividend paid out of profits of a company registered in Malta would be generally be entitled to claim a refund of part or all of the tax suffered by the company on the said profits.
Such refund would typically be of 6/7ths of the Malta tax paid on the profits out of which the company has distributed the dividend. The refund can however be reduced to 5/7ths based on whether the dividend is distributed out of profits derived directly or indirectly from ‘passive interest or royalties’ as defined. Furthermore the amount can in certain cases be reduced to 2/3rds where double taxation relief has been claimed by the company on certain profits.
It is also possible for income derived from a participating holding or gains derived from the disposal of shares in a participating holding to be declared for tax purposes as opposed to being exempt from tax in terms of the participation exemption. In such a case, upon a subsequent dividend distribution a shareholder would be entitled to claim a full (100%) refund of tax on such the profits out which such dividends would have been distributed.
It should also be noted that subject to certain conditions, in Malta there is no withholding tax on outbound interest or royalty payments.
Disposal of shares in a Malta company by person not ordinarily resident and domiciled in Malta would also be exempt from any form of capital gains tax in Malta as well as any applicable stamp duties.
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The Provision of Corporate Services in Malta is regulated by the MFSA (Malta Financial Services Authority) and each Corporate Service provider in Malta is required to pass a strict application process as well as strict background and capability checks. This gives added comfort to clients considering using Malta Company as part of their International Group Structure, E&S Group has 3 Corporate Service licenses which allows the group to offer the full array of Corporate Services.