JNG - Malta – Jurisdiction Note

The Republic of Malta is an archipelago consisting of the three inhabited islands of Malta, Gozo and Comino. The Maltese islands are situated in the middle of the Mediterranean Sea, about 100 km south of Italy.

Factors contributing to and enhancing the status of the jurisdiction include:

• Malta is a member of the EU and therefore has access to European Union Conventions.
  
  
• It is a Sovereign Independent State, enjoying political, economic and social stability.
  
  
• Malta has friendly relations with the majority of countries across the world through its policy of non-alignment.
  
  
• Companies operating in Malta are subject to a corporate tax rate of 35%. However, shareholders enjoy low effective rates of Maltese tax as Malta’s full imputation system of taxation allows generous unilateral relief and tax refunds:
  
  Active income - in most instances shareholders can apply for a tax refund of 6/7ths of the tax paid by the company on the active profits used to pay a dividend. This results in an effective Maltese tax rate of 5% on active income.
  
  Passive income - in the case of passive interest and royalties, shareholders can apply for a tax refund of 5/7ths of the tax paid by the company on the passive income used to pay a dividend. This results in an effective Maltese tax rate of 10% on passive income.
  
  
• Holding companies - the dividends and capital gains derived from participating holdings are not subject to corporate tax in Malta.
  
  
• There is no withholding tax payable on dividends.
  
  
• Malta has an extensive network of Double Taxation Treaties.
  
  
• Advance tax rulings can be obtained. These relate to legislation currently in force in Malta. Advance tax rulings guarantee that if the basic legislation upon which the ruling was based changes adversely for the taxpayer, the terms of the ruling will survive for a further two years after the change in legislation. Advance tax rulings are given for a period of five years, renewable for a further five years.

General information is detailed below, outlining the formation and regulation of Malta companies as embodied in the Companies Act 1995.

1. Incorporation
Incorporation normally takes three to five days from the time that the necessary documentation is presented to the Maltese Registrar of Companies. Shelf companies are not available.

2. Authorised Share Capital
The minimum authorised share capital is € 1,170. A minimum of 20% of the authorised share capital must be paid up. The share capital can be denominated in any currency. It is Dixcart Group policy to form companies with a share capital of at least € 3,000.

3. Shares and Shareholders
Shares must be registered. The minimum number of shareholders for foreign owned companies is two. Single member companies can only be registered for locally owned businesses.

4. Nominee Shareholders
These are permitted but must be authorised. Dixcart can provide nominee shareholders.

5. Registered Office
A registered office is required in Malta.

6. Directors
The minimum number of directors is one. Directors may be of any nationality and do not have to be resident in Malta. Companies wishing to take advantage of Malta’s Double Tax Treaties would need to ensure that the company was managed and controlled from Malta.

7. Company Secretary
Every company must have a company secretary. The company secretary has to be an individual and cannot be a corporate entity.

8. Accounts and Year End
All companies have a year end of 31st December unless they elect for another date. Audited accounts must be presented to the members within ten months of the year end and filed with the Registrar forty two days after presentation to the members.

9. Taxation
Maltese companies pay tax at a rate of 35%. However, when a dividend is paid the shareholder is able to claim a refund. This refund equals 6/7ths of the Maltese tax paid on active profits from which the dividend distribution was made. Where profits emanate from passive income this refund is reduced to 5/7ths. It is reduced further to 2/3rds where the dividend is distributed out of foreign source income and where the Maltese company paying the dividend has claimed double taxation relief.

The tax refund is increased to 100% when the profits from which the relevant dividend is distributed are derived by the Malta company from a participating holding.

This means that the effective rate of tax in respect of dividends received from a participating holding is 0%, for dividends received from active income it is 5%, and for dividends emanating from passive income it is 10%.

If you would like additional information regarding the formation of companies in Malta and the fees that Dixcart charge, please contact: sean.dowden@dixcart.com.mt