Lamima Consultancy Services Limited understands the true potential of operating in a globalised market economy and therefore it strives hard to offer a gamut of financial and counselling services to its international clientele. Our Office caters for all the needs required by foreign investors wishing to set-up a company within the Maltese territory.
Company tax in Malta is charged at the rate of thirty-five per cent (35%) however a benevolent tax credit system results in an effective corporate tax rate of five per cent (5%).
To benefit from this effective tax rate system various trading structures may be instituted but the following are the most common and simplistic examples:
- Maltese Trading Company Basic Trading Structure
- Maltese Trading company generates profit from its trading activities;
- Corporate tax at 35 % is applied on the Maltese Trading Company;
- Upon distribution of dividends, the foreign shareholder may apply for a 6/7 refund from the Commissioner of Inland Revenue on Corporate tax paid by the Trading Entity; and
- Effective tax is of 5 %.
- Two-tier Trading Structure
- Maltese Trading company generates profit from its trading activities;
- Corporate tax at 35 % is applied on the Maltese Trading Company;
- Upon the distribution of dividends the Maltese Holding Co may claim a 6/7 refund from the Commissioner of Inland Revenue on Corporate tax paid;
- The Maltese Holding Co. can either hold or re-distribute both the tax refund and dividends to its foreign shareholder. At this point no further tax being corporate or withholding applies.
Definition as a Participating Holding
The legal definition of foreign investment in Malta must be analysed in its own right but the following is one of the principle criterion established under Maltese law:
A company must at least control ten per cent (10%) of the shareholding in an alternative company. Furthermore, the capital component of the latter must be totally or partially constituted of shares to such an extent that the holding agent is entitled to at least ten per cent (10 per cent) of the following, namely:
- Voting Rights;
- Distribution of profits; and
- Asset distribution rights in the eventuality of winding up.
Furthermore, while the criterion established above must be satisfied, further considerations may apply to qualify as a participating holding company and are summarised below:
A company is an equity shareholder in an entity and is legally entitled by law to call for and acquire the total equity shareholding balance; or
A company is an equity shareholder in an entity however the former holds the first right of refusal over all equity shares in the eventuality that shares therein are to be either disposed, redeemed or written-off; or
A company is an equity shareholder in an entity a company but has the right to either sit on the main board or appoint an director to the said board to act in its name; or
A company is an equity shareholder in an entity and holds an uninterrupted investment for a period of at least one hundred and eighty-three calendar days (183) from the date or dates of its acquisition, for a minimum value of one million, one hundred and sixty-four thousand euro (€1,164,000); or
A company is an equity shareholder in an entity and the purpose of the investment is made on the singular premise of furtherance of its own business. The nature of the equities cannot in any way constitute tradable stock.
By definition a holding company is defined as any of the following three, namely:
- A partnership in commandite, and its capital cannot be divided into shares under the Companies Act nor does it constitute a property market partnership; or
- A body of individuals with a business objective constituted under foreign jurisdiction but its nature is very similar to a partnership in commandite, and its capital cannot be divided into shares under the Companies Act nor does it constitute a property market partnership; or
- A collective investment vehicle which was set-up, incorporated or registered outside the Malta, and the limited of each investor is limited to the value of their investment, is considered to be a participating holding as long as the criteria outlined above can also be satisfied.
Fiscal Benefits for International Clients:
- 6/7 refund: is the maximum amount of refund that can be called from the Commissioner of Inland revenue as long as the income component is not made of passive interest or royalties;
- 5/7 refund: is the maximum amount of refund that can be called from the Commissioner of Inland revenue if the income component is made of passive interest or royalties;
- 2/3 refund: is the maximum amount of refund that can be called from the Commissioner of Inland revenue if any form of tax relief is applied;
For a more detailed understanding on any of the above please contact:
Key Contacts:
Alex Agius
Managing Director
Marica Bonello
Senior Auditor
Lamima Consultancy Services Ltd
Email: info@lamima.com.mt
Tel: +356 21423059
