MALTA TRADING COMPANIES

Malta Trading Companies

Maltese Registered Companies and Trading Operations in Malta

Malta, an EU Member State since May 2004, has developed into a leading and reputable financial centre and offers an
attractive and competitive environment for international business and investment. Its culture, multilingual population,
geographical position, qualified professionals, opportunities for efficient tax planning, relatively low costs for management
and administration, and its state of the art telecommunications, gives the added advantage over other jurisdictions.

Taxation of Companies
Companies registered in Malta are in principle subject to tax at
the standard rate of 35% on income chargeable to tax. However,
Malta operates a full imputation system of taxation. In the event
of a dividend distribution, the tax paid by a company on its profits out of which a dividend has been distributed, is credited in
full to the shareholder in order to avoid the economic double
taxation of profits. Refunds of the applicable tax credit are available to shareholders in respect of profit distributions by Maltese companies out of all sources of income (with the exception
of profits derived from immovable property situated in Malta)
and provided that tax compliance requirements have been fully
adhered to.
As Malta operates a full imputation system of taxation, the dividend and refund received by the shareholder would not be
subject to any further tax in Malta.

Tax Accounting
The allocation of a Maltese companys distributable profits between the five accounts being the Final Tax Account, the Immovable Property Account, the Foreign Income Account, the
Maltese Taxed Account and the Untaxed Account is an important aspect of the Maltese tax system as this determines the
possibility of tax refunds upon a distribution of profits.

Payments and Refunds of Tax

A company is assessed and must pay tax due in the currency in
which its share capital is denominated. Refunds of tax are made

in the same currency as the tax payment, thereby eliminating

foreign currency exchange exposure.
Shareholders making a refund application are required to be
registered with the Inland Revenue and refund applications
must be made within 4 years from the date on which the shareholder becomes entitled to the refund.
The tax authorities are bound to issue refunds of tax within 14
days from the tax payment date, provided that all compliance
requirements have been adhered to.

Advance Revenue Rulings

The International Tax Unit within the Inland Revenue Department is responsible for providing advance revenue rulings.
Revenue Rulings give the comfort of legal certainty to international investors. A Revenue Ruling may be requested to confirm the tax treatment of income received by companies based
in Malta.
Revenue Rulings may be obtained for a period of 5 years and
are renewable every five years thereafter. The Revenue Rulings
survive a change in legislation giving a grace period of 2 years
from the date of entry into force of any such new law.
Other important considerations:
No withholding taxes on dividend, interest or royalty payments to non-residents
No thin capitalisation rules

Malta has no specific transfer pricing regulations

No stamp duties on disposals/ acquisitions of securities in
companies owned by non-residents
Under re-domiciliation provisions it is possible to migrate
companies into and out of Malta
No exchange control regulations and business may be conducted freely in any currency
Maltas financial services legislation and tax laws are compliant with EU Directives
Malta has strong and effective Anti-Money Laundering Laws
and Regulations
Malta is tax efficient but not a tax haven

Tax Treaties
In order to encourage the growth of international trade, including that of financial services, double taxation treaties have
been concluded by Malta with important trading partners as
well as with emerging countries. This network of tax treaties is
constantly being expanded. The treaties are generally based on
the OECD model tax convention.

C O N S U L C O

Table 1.1 illustrates the treaty and nontreaty withholding tax

rates when dividends, interest and royalties are paid from treaty
countries to Maltese residents.

Dividend, Interest and Royalty

payments from Malta
Unlike many other countries, Malta does not levy withholding tax on dividend, interest and royalty payments or similar
payments by a Maltese company. In addition, in many tax
treaties Malta has negotiated low withholding tax rates with
third countries, adding to the attractiveness of the Malta tax
treaties.

National legislation to eliminate

double taxation Unilateral Relief
The Maltese tax system governing double taxation relief includes treaty relief and also unilateral relief. Malta allows relief
from double taxation on a unilateral basis where overseas tax
is suffered on income received from a country with which Malta
does not have a double taxation treaty.

I N T E R N A T I O N A L

TABLE 1.1

Country

Albania
Australia
Austria
Bahrain
Barbados
Belgium
Bulgaria
Canada
China
Croatia
Cyprus
Czech Republic
Denmark
Egypt
Estonia
Finland
France
Georgia
Germany
Greece
Hungary
Hong Kong
Iceland
India
Ireland
Isle of Man
Israel
Italy
Jersey
Jordan
Korea(R.O.K)
Kuwait
Latvia
Lebanon
Libya
Lithuania
Luxembourg
Malaysia
Montenegro
Morocco
Netherlands
Norway
Pakistan
Poland
Portugal
Qatar
Romania
Russia
San Marino
Saudi Arabia
Serbia
Singapore
Slovakia
Slovenia
South Africa
Spain
Sweden
Switzerland
Syria
Tunisia
Turkey
United Arab Emirates
UK
Uruguay
USA

Major
shareholding

Dividends
Minor
shareholding

Percentage for
major shareholding

Interest

5
15
15
0
5
15
0
15
5
5
15
5
0
10
5
5
0
0
5
5
5
0
5
10
5
0
0
15
0
10
5
0
5
5
5
5
5
0
5
6.5
5
15
15
0
10
0
5
5
5
5
5
0
5
5
5
0
0
0
0
10
10
0
0
5
5

15
15
15
0
15
15
0
15
10
5
15
5
15
10
15
15
15
0
15
10
15
0
15
15
15
0
15
15
0
10
15
0
10
5
15
15
15
0
10
10
15
15
15
10
15
0
5
10
10
5
10
0
5
15
5
5
15
15
0
10
15
0
0
15
15

25
N/A
N/A
N/A
5
N/A
N/A
N/A
25
N/A
N/A
N/A
25
N/A
25
10
10
N/A
10
25
25
N/A
10
25
10
N/A
10
N/A
N/A
N/A
25
0
25
N/A
10
25
25
N/A
25
25
25
N/A
N/A
10
25
N/A
N/A
20
25
N/A
25
N/A
N/A
25
N/A
25
10
10
N/A
N/A
25
N/A
N/A
25
10

5
15
5
0
5
10
0
15
10
0
10
0
0
10
10
0
5
0
0
8
10
0
0
10
0
0
5
10
0
10
10
0
10
0
5
10
0
15
10
10
10
10
10
5
10
0
5
0
0
0
10
7/10
0
5
10
0
0
0/10
10
12
10
0
10
10
10/15

Royalties

5
10
10
0
5
10
10
10
7/10
0
10
5
0
12
10
0
10
0
0
8
10
3
5
15
5
0
0
10
0
10
0
10
10
5
5
10
10
15
5/10
10
10
10
10
5
10
5
5
0
0
5/7
5/10
10
5
5
10
0
0
0
18
12
10
0
10
5/10
10

The overseas tax suffered may be allowed as a credit against the

tax chargeable in Malta on the gross amount, limited to the total
tax liability in Malta on the particular income.
When claiming unilateral relief, the recipient of the income must
prove the following to the satisfaction of the Commissioner of
Inland Revenue:
a) That the income arose from overseas;
b) That the income suffered overseas tax; and
c) The amount of that tax.

Financing, Licensing and Similar Activities

International groups often find it useful to have financial flows of
individual group companies managed by a central treasury unit.
Withholding taxes on interest and royalty payments to a Maltese company are often reduced in terms of Maltas double tax
treaties the end of the sentience. As mentioned, Malta does not
itself levy withholding taxes on interest and royalty payments,
making Malta an ideal location for group financing and licensing activities.
No foreign Tax Foreign tax
suffered
@ 5%
EUR
EUR
Interest/ Royalty Income 10,000
10,000
Foreign tax
(500)
Net income received
in Malta
10,000
9,500
Chargeable income
10,000
10,000
Tax @ 35%
3,500
3,500
Credit for foreign tax paid
(-)
(500)
Malta tax payable
3,500
3,000
Refund
(3,000)
(3,000)
Net tax cost
500
Net tax cost expressed
as a percentage
5%
0%

Foreign tax
@ 15%
EUR
10,000
(1,500)
8,500
10,000
3,500
(1,500)
2,000
(2,000)
0%

At the same time, interest on group financing activities and

royalty income is taxed at the standard rate of 35% less any
available credits for foreign tax. Upon a dividend distribution
by the Maltese company, the shareholders may generally
apply for a refund of 6/7ths of the tax levied on those profits
out of which the dividends have been distributed.
The provision of banking services, deriving rent and premiums from assets held abroad, leasing and managing overseas
assets.

Trade, Marketing, Distribution and Service

Activities
Malta has some considerable advantages as a location from
which to establish a trading base. Companies that do not opt
to use Malta as a regional base for trading and distribution
may use a Maltese company to conduct the following activities:
Ecommerce activities for retail or wholesale distribution
of material or nonmaterial goods

Licensed online gaming activities

Licensed investment services
Central management or consultancy services
Perform reinvoicing
Yacht management services
Active IP management
Property Management
Aircraft Leasing

A Maltese companys income arising from trading activities is

included as part of the companys income for the year and
charged to tax at the rate of 35%. Upon a distribution of a
dividend, the shareholders may generally apply for a refund
of 6/7ths of the tax levied on those profits out of which the
dividends have been distributed. The following example illustrates the mechanics of the full imputation system and tax
refunds:
Profits derived by a Maltese company may be distributed as
a dividend to a Maltese corporate shareholder, which corporate shareholder would not be subject to any further tax on
the refund or dividend received.
No foreign Tax suffered
EUR
Profits before tax
10,000
Chargeable income
10,000
Tax @ 35%
3,500
Credit for foreign tax paid
(-)
Malta tax payable
3,500
Refund to the shareholder on a dividend distribution (3,000)
Net tax cost
500
Net tax cost expressed as a percentage
5%

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