About Malta Company Registration

Posted by Josephine Martin on June 1st, 2018

A business could consider Malta company registration for several reasons but more often than not it is because of the favourable and quirky tax system Malta has adopted. Malta is unique as it offers a full imputation of a taxation system that sees’s profits taxed in the hands of the company but when the profits are distributed to the shareholder an imputation credit on the tax paid. This differs greatly from the more traditional classical system that most countries adopt for their taxation system.

The tax system in place within Malta makes it an ideal place to set up a holding company or a trading entity as it offers several potential tax planning opportunities. A trading company in Malta would be subject to corporate tax at 35%, which by European standards is quite a high rate of taxation. However, if the trading company in this example is owned by foreign shareholders upon a distribution of a dividend to the shareholders, the shareholders would be entitled to a tax refund of 6/7ths on the tax paid. This means the effective taxation of the trading entity would equate to 5% Malta tax.

If a holding company based in another European Union Member state is used to hold the shares in the Malta trading company, all dividends should in effect be tax free as a result of the EU Parent-Subsidiary Directive, which ensures that if profits in a subsidiary are taxed in one member state and then distributed by means of a dividend to a parent company in another European Union member state that no further taxation should be suffered by the receiving parent company. This is managed by either exempting the income in its entirety in the receiving European Union member state or by issuing a credit for the tax suffered by the subsidiary. This allows for efficient tax planning strategies to be implemented by larger group companies using approved EU directives and taxation legislation.

Malta is also very well connected and has several double taxation treaties in place with other countries all over the world. These include most of the European Union member states but also key business jurisdictions such as the United States of America, Canada, Australia and the United Arab Emirates to name a few. Most of the double taxation treaties have been in place for several years and are based on the well-known OECD model, which is adopted in most countries. This also allows for several tax planning opportunities by using clear taxation legislation.

Malta has indirect taxation such as value-added taxation and this initiative was based on the UK model of taxation, but now is adopted from European Union Directives that have been transposed into Maltese legislation. However, at 18% Malta has one of the lowest VAT rates in the European Union and is another reason it is an attractive place to do business in.

Finally, all legislation is drafted in Maltese and English, with the latter being an official language of Malta. Naturally, this article should not be taken as advise and that one should always engage a professional for your own specific requirements.

About The Author:

The author has a great deal of knowledge on the set up of businesses in Malta and writes about the financial services industry on the Maltese islands. Her specialist subjects are with regards to Malta company registration and the technicalities of the Malta tax system.

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