DOCSLIB.ORG

Doing Business in Malta

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Doing Business in Malta DOING BUSINESS IN MALTA DOING BUSINESS IN MALTA INTRODUCTION The aim of this publication, which has been prepared for the exclusive use of BDO Member Firms and their clients and prospective clients, is to provide the essential background information on setting up and running of a business in Malta, in compliance with legislation in force as at 31 May 2016. It is of use to anyone who is thinking of establishing a business in Malta as a separate entity, as a branch of a foreign company or as a subsidiary of an existing foreign company. It also covers the essential background tax information for individuals considering coming to work or living permanently in Malta. This publication describes the business environment in Malta and covers the most common forms of business entity and the taxation aspects of running or working for such a business. For individual taxpayers, the important taxes to which individuals are likely to be subject are dealt with in some detail. The most important issues are included, but it is not feasible to discuss every subject in comprehensive detail within this format. If you would like to know more, please contact the BDO Member Firms with which you normally deal, who will be able to provide you with information on any further issues and on the impact of any legislation and developments subsequent to the date mentioned below. BDO is an international network of public accounting , tax and advisory firms, the BDO Member Firms, which perform professional services under the name of BDO. Each BDO Member Firm is a member of BDO International Limited, a UK company limited by guarantee that is the governing entity of the international BDO network. Service provision within the BDO network is coordinated by Brussels Worldwide Services BVBA, a limited liability company incorporated in Belgium with its statutory seat in Zaventem. Each of BDO International Limited, Brussels Worldwide Services BVBA and the member firms of the BDO network is a separate legal entity and has no liability for another such entity’s acts or omissions. Nothing in the arrangements or rules of the BDO network shall constitute or imply an agency relationship or a partnership between BDO International Limited, Brussels Worldwide Services BVBA and/or the member firms of the BDO network. BDO is the brand name for the BDO network and for each of the BDO Member Firms. Founded in Europe in 1963, the BDO network has grown to be the fifth largest in the world . The fee income of the member firms in the BDO network, including the members of their exclusive alliances, was USD 7.02 billion in 2014. These firms have representation in 151 territories, with almost 60,000 people working out of 1,328 offices worldwide. Our distinctive reputation for building close personal relationships with our clients is built upon our commitment to all our stakeholders that what matters to them matters to us. We work with our clients to define what exceptional client service means to them and we aim always to bring insight and up to date thinking to help them meet their objectives. BDO Member Firms give you effective support as you expand into new areas of the world. To help them grow in an ever- evolving economic environment, businesses need a global network that provides exceptional, tailored service combined with local knowledge and expertise. BDO are uniquely positioned to serve this demand, providing effective support and a truly global service. BDO is committed to a long term partnership as your trusted adviser and looks for sustainable relationships and to help grow the businesses of all clients, regardless of your location, size or international ambitions. The information in this publication is up to date to 31 May 2016. Doing Business in Malta 2016 has been written by BDO Malta, the Maltese Member Firm of BDO. Its contact details may be found at the end of this publication. © BDO Malta, May 2016 Brussels Worldwide Services BVBA The Corporate Village, Elsinore Building Leonardo Da Vincilaan 9 – 5/F 1935 Zaventem Belgium Tel: +32 2 778 0130 Fax: +32 2 778 0143 [email protected] http://www.bdointernational.com Contents INTRODUCTION THE BUSINESS ENVIRONMENT 1 1. GENERAL INFORMATION 1 1.1 Geography 1 1.2 History 1 1.3 Government and law 1 1.4 Language and currency 2 1.5 International time 2 1.6 Competitive advantage 2 2. BUSINESS ENTITIES 2 2.1 Forms of business enterprise 2 2.2 Partnerships en nom collectif and en commandite 2 2.3 Public and private companies 3 2.4 Registration and annual costs 3 2.5 Capital structure 4 2.6 Debentures 4 2.7 Relationship of shareholders, directors, and officers 4 2.8 Relocation of companies to/from Malta 5 2.9 Branch of a foreign corporation 5 2.10 Sole proprietorship 5 2.11 Reporting requirements 5 3. LABOUR RELATIONS AND WORKING CONDITIONS 5 3.1 Availability of labour 5 3.2 Employer/employee relations 5 3.3 Trade unions 5 3.4 Employee participation 5 3.5 Equal opportunities 6 3.6 Working conditions 6 FINANCE AND INVESTMENT 7 1. REGULATORY AGENCIES 7 1.1 Regulation of business 7 1.2 Monopolies 7 1.3 Import controls 7 1.4 Exchange control 7 1.5 Patents, trademarks, and copyright 8 1.6 Data protection 8 1.7 Work permits 8 2. BANKING AND LOCAL FINANCE 8 2.1 The banking system 8 2.2 Financial markets 8 3. ACCOUNTING AND AUDIT REQUIREMENTS 8 3.1 Statutory requirements 8 3.2 Accounts and directors’ report 9 3.3 Books and records 9 3.4 Auditors and audit requirements 9 3.5 Accounting profession 10 3.6 Form and content of financial statements 10 3.7 Book and tax differences 11 4. INVESTMENT OPPORTUNITIES 11 4.1 The economy 11 4.2 Tourism is a mainstay of the Maltese economy 11 4.3 Basic resources 11 4.4 Foreign trade and balance of payments 11 4.5 Investment incentives 11 5. TAX INCENTIVES – MALTA ENTERPRISE ACT 12 5.1 Investment tax credits 12 5.2 Research and development tax credits 13 6. NON-TAX INCENTIVES UNDER THE MALTA ENTERPRISE ACT 13 7. NON-TAX INCENTIVES UNDER THE BUSINESS PROMOTION ACT 14 8. OTHER INCENTIVES 14 9. SHIPPING 15 CORPORATE TAXATION 15 1. CORPORATE INCOME TAX 15 1.1 Type of tax system 15 1.2 Taxable persons 16 1.3 Taxable Income 16 1.4 Losses 20 1.5 Rates 20 1.6 Incentives – The Malta Enterprise Act 21 1.7 Administration 21 2. GROUPS OF COMPANIES 22 2.1 Group treatment 22 2.2 Inter-corporate dividends (Participating Holding) 23 2.3 Company reorganisations 24 3. OTHER TAXES ON INCOME 24 3.1 Capital gains tax 24 4. PAYROLL TAXES 24 4.1 Payroll tax 24 4.2 Social security contributions 24 5. TAXES ON CAPITAL 24 5.1 Net worth tax 24 5.2 Real estate tax 24 6. INTERNATIONAL ASPECTS 24 6.1 Resident companies 24 6.2 Non-resident companies 25 6.3 Withholding taxes 25 7. ANTI-AVOIDANCE 27 7.1 General 27 7.2 Transfer pricing 28 7.3 Thin capitalisation 28 7.4 Controlled foreign company 28 8. VALUE ADDED TAX 28 8.1 General 28 8.2 Taxable persons 28 8.3 Registration 28 8.4 Taxable transactions 28 8.5 Taxable amount 28 8.6 Exemptions 29 8.7 Rates 29 8.8 Changes to the VAT rules – Telecommunications, Broadcasting and Electronic Services 29 9. MISCELLANEOUS INDIRECT TAXES 30 9.1 Capital duty 30 9.2 Transfer tax 30 9.3 Stamp duty 30 INDIVIDUAL TAXATION 31 1. INCOME TAX 31 1.1 Taxable persons 31 1.2 Taxable income 31 1.3 Employment income 32 1.4 Business and professional income 33 1.5 Investment income 33 1.6 Capital gains 33 1.7 Personal deductions, allowances, and credits 33 1.8 Losses 34 1.9 Rates 34 1.10 Administration 35 2. OTHER TAXES ON INCOME 35 3. SOCIAL SECURITY CONTRIBUTIONS 35 4. TAXES ON CAPITAL 37 4.1 Net worth tax 37 4.2 Real estate tax 37 5. INHERITANCE AND GIFT TAXES 37 6. INTERNATIONAL ASPECTS 38 6.1 Resident individuals 38 6.2 Expatriates 38 6.3 Non-residents 39 BDO MALTA BDO WORLDWIDE DOING BUSINESS IN MALTA | 1 The Knights of St John ruled the Islands for 268 years until 1798 when Napoleon Bonaparte drove them out and occupied Malta in the name of the French Republic. French occupation lasted two years until they were forced to surrender to the British forces. In 1800 Malta became part of the British Empire. Malta attained its independence in 1964. Ten years later, in 1974 it was declared a Republic within the British Commonwealth. On 1 May 2004 the country became a member of the European Union. THE BUSINESS ENVIRONMENT 1.3 Government and law The influence of British rule in Malta has left its mark on 1. GENERAL INFORMATION the legal and political system. Malta is a parliamentary democracy. The head of 1.1 Geography state is the President, who is appointed by the House of Representatives and whose role is merely that of Malta is a Member State of the European Union and a figurehead. General elections for the appointment an independent republic in the Commonwealth of of Members of the House of Representatives are held Nations consisting of a small group of islands - Malta, every five years. The Prime Minister is usually the leader Gozo, Comino, Cominotto, and Filfla – located in the of the party commanding the greatest measure of Mediterranean Sea, south of Sicily.
Load more

Recommended publications
  • Chapter 17: Tax Treaties
    Chapter 17 Tax Treaties www.pwc.com/mt/doingbusiness Doing Business in Malta Tax treaty policy Since the mid-seventies Malta has sought to expand its However, the tax levied on the companies under the Income tax treaty network. Most of Malta’s treaties are based Tax Act in such situations will be directly limited to 15% on the OECD model although some treaties (particularly as if the treaty rate applied to the company profits. Rather older ones) contain some material variations therefrom. than a refund on the payment of dividends the investors Some of them include special tax incentives for foreign can therefore qualify for the reduced rate at the company enterprises setting up manufacturing establishments in level at the time that the profits are derived and without Malta. These consist typically in low tax rates on dividends any obligation to distribute the profits to benefit from the arising in Malta supported by tax sparing provisions. Malta’s reduced tax rate. Maltese domestic law also provides that economic development, and particularly the growth in its no tax is payable by non-residents on interest and royalties financial services sector, expanded the scope for tax treaties arising in Malta, subject to certain conditions (see Chapter and in fact currently Malta has over 70 double taxation 11) and, as stated above, this rule applies irrespective of the agreements with almost all the important OECD countries. treaty provisions dealing with withholding taxes on these The current list of tax treaties is given in Appendix VII. categories of income. Similarly, no tax is payable by non- A tax treaty concluded by Malta becomes law by Ministerial residents on capital gains arising on transfers of company order and the provisions arising therefrom apply shares or securities, except where such gains are derived notwithstanding any provisions to the contrary under from the transfer of shares or securities in companies whose Maltese domestic tax law.
    [Show full text]
  • Annual Report 2006
    89 MMiinniissttrryy ooff FFiinnaannccee _________________________________________________________________________________________________________ Annual Reports of Government Departments ~ 2006 Ministry of Finance 90 Special Projects Division BACKGROUND The Special Projects Office has the function to undertake and implement a wide variety of initiatives some of which are of a corporate nature and others involving specific Ministry of Finance departments. The major corporate projects undertaken in the year under review were related to overseeing the development of: (a) Accrual Accounting; (b) eProcurement; and (c) eArchiving. Other assignments undertaken during the period under review range from the organisational reform of the revenue earning departments within the Ministry of Finance to the activities of the Co-ordinating Task Force for Own Resources. ACCRUAL ACCOUNTING Work is continuing on the introduction of accrual accounting at all ministries and their respective government departments. Accrual accounting will have a major impact on the way the internal financial business of Government will be conducted, particularly in areas of asset management and the management of debtors and creditors. This financial reform process will cross ministerial and departmental organisational boundaries and have a major influence on the departmental processes related to their day-to- day financial administration. Accrual accounting will provide more meaningful financial information that will enhance the quality of the Government's financial decision-making
    [Show full text]
  • Doing Business in Malta
    www.pwc.com/mt Doing Business in Malta A guide to doing business and investing in Malta October 2012 2013 Doing Business in Malta 1 Contents Foreword Chapter 1: Malta - A Profile 5 Chapter 2: Business and Investment Environment 13 Chapter 3: Investment Incentives 18 Chapter 4: Direct Foreign Investment 30 Chapter 5: Regulatory Environment 39 Chapter 6: Banking, Investment and Insurance Services 44 Chapter 7: Exporting to Malta 51 Chapter 8: Business Entities 54 Chapter 9: Labour Relations and Social Security 66 Chapter 10: Accountancy and Audit Requirements and Practices 74 Chapter 11: Tax System 84 Chapter 12: Tax Administration 94 Chapter 13: Taxation of Companies and Individuals 103 Chapter 14: Partnerships and other entities 113 Chapter 15: Taxation of Individuals 121 Chapter 16: Indirect Taxation 128 Chapter 17: Tax Treaties 136 2 PwC Appendix I - Qualifying companies for Investment Tax Credits 140 Appendix II - Capital Allowances 144 Appendix III - Corporate Tax Calculation 145 Appendix IV - Individual Tax Rates 146 Appendix V - Individual Tax Calculation 148 Appendix VI - Duty Documents and Transfer Act 149 Appendix VII - Tax treaties in force as at August 2011 150 2013 Doing Business in Malta 3 Foreword The Guide has been prepared for the assistance of those interested in doing business in Malta. It does not cover exhaustively the subjects it treats but is intended to answer in a broad manner some of the key questions that may arise. Before taking specific decision or in dealing with specific problems it will often be necessary to refer to the relevant laws, regulations and decisions and to obtain appropriate advice.
    [Show full text]
  • Doing Business in Malta 2016
    Doing business in Malta 2016 In association with: Contents Introduction ................................................................................................................................................................................ 3 – Country profile ................................................................................................................................................................... 4 Legal overview ........................................................................................................................................................................... 5 Conducting business in Malta ................................................................................................................................................... 9 Tax system ................................................................................................................................................................................11 Labour ...................................................................................................................................................................................... 18 Audit ......................................................................................................................................................................................... 21 Trade ........................................................................................................................................................................................
    [Show full text]
  • COMPLETING YOUR TAX RETURN a Step-By-Step Guide
    COMPLETING YOUR TAX RETURN A Step-by-Step Guide Basis YYeearar 2020 Ye ar of Assessment 2021 1 2 This information booklet has been produced by the Office of the Commissioner for Revenue to help you fill in your tax return for the basis year 2020 in a complete and correct manner. Please note that the booklet is a guide only and has no legal force whatsoever. For further information: • Visit our website: www.cfr.gov.mt • Call: Freephone 153 • Email: [email protected] The Office of the Commissioner for Revenue uses the information provided to process your Income Tax Return and Self-Assessment in accordance with the Income Tax Acts and subsidiary legislation. We may check information provided by you, or information about you provided by a third party, with other information held by us. We will not disclose information about you to anyone outside the Office of the Commissioner for Revenue unless permitted by law. The Office of the Commissioner for Revenue treats your personal information in accordance with the Regulation (EU) 2016/679 (General Data Protection Regulation) and the Data Protection Act (Cap 586) to protect your privacy. Any queries may be addressed to The Data Controller, Office of the Commissioner for Revenue, Floriana, FRN 1700. 3 CONTENTS GENERAL INFORMATION 6 YOUR TAX RETURN: THE SELF-ASSESSMENT SYSTEM 6 MARRIED COUPLES 8 SEPARATED / DIVORCED COUPLES 9 PARENTS 9 SINGLE PARENTS 9 PERSONAL DETAILS 10 OTHER INFORMATION 11 EMOLUMENT AND BUSINESS INCOME 13 1. Employment or Office 13 2. Trade, Business, Profession or Vocation 14 3. Pensions and Social Security Benefits 16 4.
    [Show full text]
  • Professional Investor Funds in Malta
    Professional Investor Funds in Malta June 2016 www.kpmg.com.mt Table of contents Why Malta? 2 Funds in Malta 5 Professional Investment Funds 11 Setting Up in Malta 13 Taxation for Funds and Fund Managers 28 Appendices: 34 Comparison between Fund Jurisdictions 35 Living in Malta 44 Key Contacts 49 1 Why Malta? Some Key data Factors contributing to Malta’s project finance, syndicated competitive advantage loans, treasury, custody and • Malta became the smallest depositary services. Malta also member state in the EU in May • Flexible legal and regulatory hosts a number of institutions 2004, and joined the Euro Zone in environment with a legislative specialising in trade-related 2008. framework in line with products such as structured EU Directives. Malta is trade finance, factoring and • GDP per capita is at 78% of the fundamentally a civil law forfeiting EU average, at €18,580 (March jurisdiction, however business 2015). • Major international accountancy legislation is principally based firms, including the Big 4 firms, • Malta was relatively unscathed upon English law principles are present on the island. Legal during the years following the • Malta boasts a high level of firms tend to be local, though financial crisis of 2008, and education with graduates most form part of international stabilised by 2012. representing a cross-section legal networks. Many • Malta has one of the highest of the various disciplines professionals in both areas figures of sunshine hours in related to financial services. pursue studies and training Europe with an average of 3,000 Specific training in financial overseas per year. services is offered at • Maltese standard time is one various post-secondary and • English widely spoken and hour ahead of Greenwich Mean tertiary education levels.
    [Show full text]
  • International Comparison July 2019 Read More
    INTERNATIONAL COMPARISON What´s in this issue: July 2019 Impatriates / Expatriates regulation Auren International Comparison is a quarterly publication that provides you an overview of trends and international tax developments by comparing tax issues in different legislations around the world, that may affect those doing business in multiple locations. Constant legislative, regulatory, and judicial changes, along with globalization, economic shifts, and operational adjustments, are challenging issues. Now more than ever, in an increasingly globalized world, companies must have a total perspective and awareness of tax issues, and this publication aims to cover key tax topics which should be of interest to businesses operating internationally. This edition includes numerous country focus pieces, in which it is analyzed the tax and legal considerations involved in moving employees to different jurisdictions around the world. We hope that you find this publication helpful. www.auren.com Index Argentina Israel Portugal more info more info more info Austria Italy Romania more info more info more info Bulgaria Japan Russia more info more info more info Chile Lebanon Serbia more info more info more info Croatia Malta Spain more info more info more info United Cyprus Morocco Kingdom more info more info more info Ecuador Nigeria Ukraine more info more info more info Germany Panama Uruguay more info more info more info India Peru more info more info INTERNATIONAL COMPARISON. July 2019 www.auren.com - 2 Argentina IMPATRIATE REGIME EXPATRIATE REGIME Normal regime Impatriate staff will be a tax subject only during the first five The expatriate staff continues to pay taxes in Argentina for their income from years in Argentina, contingent upon the topics presented in the a worldwide source as long as they are residents.
    [Show full text]
  • Doing Business Guide Malta
    Edition No. 2 January 2019 Doing Business Guide Malta This guide has been produced by the Morison KSi Maltese member firm About This for the benefit of its clients and associate offices worldwide who are Guide interested in doing business in Malta. Its main purpose is to provide a broad overview of the various issues that should be considered by organisations when setting-up business in Malta. The information provided cannot be exhaustive and – as underlying legislation and regulations are subject to frequent changes – we recommend anyone considering doing business in Malta, or looking to Malta as an opportunity for expansion, should seek professional advice before making any business or investment decision. While every effort has been made to ensure the accuracy of the information contained in this guide, no responsibility is accepted for its accuracy or completeness. The information in this guide is up to date as at the edition date. For more information, please contact: KSi Malta www.ksimalta.com Bernard Charles Gauci [email protected] +356 2122 6176 6, Villa Gauci Mdina Road BZN9031 Balzan Malta Disclaimer: Morison KSi is a global association of independent professional firms. Professional services are provided by individual member firms. Morison KSi does not provide professional services in its own right. No member firm has liability for the acts or omissions of any other member firm arising from its membership of Morison KSi. www.morisonksi.com Edition No. 2 January 2019 Contents Introduction 1 Business Structures 2 Labour and Personnel 5 International Mobility 6 Taxation System 8 Banking and Finance 13 Reporting Requirements 14 Grants and incentives / Agencies providing assistance 15 Specific sectors with favourable business opportunities 17 Why Malta? • History: Malta is proud of its Introduction ancient temples, which date back Malta has been described as one of earlier in human history than any the best places in the world to live, other structure in the world – and an ideal choice for investment.
    [Show full text]
  • CJ Rules That Impossibility to Deduct Tax Losses Incurred in Another Member State Prior to the Transfer of Corporate Tax Resid
    RECENT DEVELOPMENTS FOR TAX SPECIALISTS EDITION 183 EU Tax Alert - CJ rules that impossibility to deduct tax losses incurred in another Member State prior to the transfer of corporate tax residence is not a breach of the fundamental freedoms (AURES Holdings) - CJ rules that Netherlands tax rules on dividends paid to non-resident UCITS partly violate EU law (Deka) - CJ rules that Hungarian progressive tax having greater impact on undertakings owned by non-residents is not in breach of EU Law (Vodafone; Tesco) - VAT: new payment data exchange requirements adopted Highlights in this edition - CJ rules that impossibility to deduct tax losses incurred in another Member State prior to the transfer of corporate tax residence is not a breach of the fundamental freedoms (AURES Holdings) - CJ rules that Netherlands tax rules on dividends paid to non-resident UCITS partly violate EU law (Deka) - CJ rules that Hungarian progressive tax having greater impact on undertakings owned by non-residents is not in breach of EU Law (Vodafone; Tesco) - VAT: new payment data exchange requirements adopted EU Tax Alert 3 Contents Highlights in this edition - CJ rules that Belgian tax on stock exchange transactions does not breach freedom to provide - CJ rules that impossibility to deduct tax losses services (Anton van Zantbeek) incurred in another Member State prior to the transfer - Upcoming Commission proposals for June 2020 of corporate tax residence is not a breach of the fundamental freedoms (AURES Holdings) VAT - CJ rules that Netherlands tax rules on dividends
    [Show full text]
  • Malta Companies Key Facts
    Malta Key Facts Companies A Maltese company can be registered in terms of the Companies Act, 1995 (“the Act”) as a Public Company or a Private Company. Malta’s companies regime offers numerous planning benefits to international businesses and investors. A private company is a company whose – Minimum authorised and issued share capital Memorandum & Articles: of EUR1,165, 20% of which must be paid up upon incorporation. – Restricts the right to transfer its shares. – A company can have different share classes, – Limits the number of its members to fifty. with differing rights attached to each share class. – Prohibits any invitation to the public to subscribe – Free choice of currency of share capital, of for any shares or debentures of the company. functional currency for accounting purposes and for the settlement of any tax payable. A Public Company is one that does not meet the above criteria for classification as a private company. – The company must have a registered office in Malta. Principal Features of a Private Company – Every company must hold an Annual – A minimum of two shareholders being natural or General Meeting. legal persons. It is possible to register a Private Company as a single member company however – A company must file audited financial statements certain restrictions apply. (prepared under International Financial Reporting Standards as adopted by the EU) with the Registrar – Shareholders may be Maltese or non-Maltese of Companies. Companies may qualify to file resident. Nominee shareholders can also be abridged audited financial statements should they appointed provided that they are authorised by fall within the size criteria for ‘small’ companies.
    [Show full text]
  • Doing Business in Malta
    DOING BUSINESS IN MALTA DOING BUSINESS IN MALTA Maltese Business Services Overview 3 About Malta 3 Overview 3 The Economy 3 The Government 5 Business Practice and Etiquette 5 Laws, Regulations and Standards 6 Facts and Figures 8 Setting up a Business in Malta 8 Taxation In Malta 10 Corporate Taxation 10 Personal Taxation 12 Commercial & Residential Property in Malta 14 Who To Contact 18 3 DOING BUSINESS IN MALTA MALTESE BUSINESS SERVICES OVERVIEW In line with OCRA Worldwide’s endeavours to continuously offer its clients the best business solutions available, the Malta office is one of the newer additions to the network, offering an array of custom-made business solutions and corporate services. Situated at the newly established Tower Business Centre, in Swatar, Birkirkara, with a representative office in the heart of Valletta, which has been the country’s capital city since the 16th Century occupation of the Order of Knights of the Hospital of St John, the Maltese team provides expertise on an array of commercial, banking, corporate, legal and other related services. Malta’s strategic geographical location continues to play a very important part in its economic, political and cultural development as well as its prosperity today. Having implemented a sound legislative framework over the past decade, Malta’s accession as a member of the European Union in May 2004 has stimulated significant developments in the islands’ economy. These have resulted from a boost of inward direct investment into the country. With its highly educated English speaking workforce and the competitive cost of professional services, Malta has become firmly established as a reputable business and financial centre offering attractive business solutions for individuals and international corporations alike.
    [Show full text]
  • Taxation in Malta Agenda
    Taxation in Malta Agenda 1. The Malta Company 2. Dividend Income and Capital Gains 3. Anti-Abuse Provisions 4. Passive Interest and Royalty Income 5. Trading Income 6. Elimination of Double Taxation 7. Elimination of Double Taxation: The Flat Rate Foreign Tax Credit The Malta Company • Any Malta Company registered on or after 1 January 2007 may carry out international activities whether ‘trading’ or ‘holding’ in nature. • Tax treatment would depend on the allocation of income to the different taxed accounts depending on its nature and source. • The five taxed accounts are the: 1. Final Tax Account; 2. Immovable Property Account; 3. Foreign Income Account; 4. Maltese Taxed Account; and the 5. Untaxed Account. • The current income tax rate applicable to Malta companies is 35%. Dividend Income and Capital Gains A Malta Company in receipt of dividends deriving from a participating holding or capital gains from the disposal of such holding may, at its option, have this income treated in any one of the following manners: • Apply the participation exemption whereby the dividends or capital gains received by the Malta Company are exempt from tax in Malta; OR • Declare the income or gains as part of its chargeable income, and pay tax thereon, at the rate of 35%. Upon a distribution of a dividend by the Malta Company, its shareholder may claim a full refund (100%) of the Malta tax suffered on such dividends. Definition of “participating holding” 1. A holding of at least 10% of the equity; or 2. Shareholder entitled to call for and acquire balance of equity; or 3.
    [Show full text]