Tax Benefits in Malta by Verdun Group

Tax Benefits in Malta by Verdun Group

INDEX
1.0 Tax benefits in Malta in general
2.0 International Holding Companies in Malta
2.1 Holdings Typically Held to Best Utilize a Malta Holding Company
2.2 Benefits of Using Malta for Holding Assets in the EU/EEA
2.3 Why Overseas Investors opt for Malta as the Preferred Choice
3.0 The EU Directives and the 2-Tier Structure
4.0 Malta Trading Companies – “The Tax-Friendly Gateway to the EU”
4.1 Malta’s Strength as a Gateway to the EU
4.2 Examples of Industries Currently Relocating to Malta
5.0 More European Online Businesses Operate from Malta
5.1 Typical Functions to Outsource to Malta
5.2 Recruitment of Multi-lingual Staff
6.0 VAT Rates of Only 5.4% for Yachts in Malta
6.1 Lease-Purchase Agreement
7.0 Shipping Registry in Malta on Global Top 5 list
8.0 Leasing and Other Financial Services in Malta
9.0 Expatriates in Malta Taxed at Only 15%

1.0 Tax benefits in Malta in general

• Taxation in the hands of the shareholders could be as little as nil in Malta
• The general corporate tax rate is 35%
• Due to favorable tax credits the majority of holding companies in Malta are taxed at 0% in the hands of the investor
• Similar tax credits for trading companies leave only 5% as tax paid in the hands of the shareholder
• Only 5% net tax suffered after tax-credit! 6/7 of the corporate tax is credited to the shareholder(s)
• No withholding tax! No tax on dividend payments
• Parent- Subsidary Directive is valid! Valid all over the EU/EEA area
• Only €240 to be paid up in share capital! Only 20% of the minimum €1,200 to be paid on incorporation
• Full limited liability

2.0 International Holding Companies in Malta

EU membership in 2004 has made Malta one the favorite jurisdictions for international holding companies in Europe.

Malta holding companies are taxed on a worldwide basis at the standard corporate rate of 35% reduced to an effective rate of 0% in the hands of the investor.

2.1 Holdings Typically Held to Best Utilize a Malta Holding Company:

• Aircrafts |Motor cars | Yachts | Ships
• Real estate | Shares and securities | Bank accounts
• Intellectual Property |Patents | Copyrights | Franchises | Intangible rights

2.2 Benefits of Using Malta for Holding Assets in the EU/EEA:

• Full refund on all capital gains tax in the hands of the shareholders
• Full refund of all dividends in the hands of the shareholders
• No withholding tax in the hands of the shareholders

2.3 Why Overseas Investors opt for Malta as the Preferred Choice:

• Tax advantages based on EU-Directives valid within the EU/EEA
• No withholding tax suffered in Malta

3.0 The EU Directives and the 2-Tier Structure

By taking advantage of the EU Parent-Subsidiary Directive any parent company tax resident in another EU/EEA member state may distribute dividends tax-free from a Malta subsidiary. This corporate structure has become a major success within the EU/EEA and is being used by some of the largest brands and business corporations in Europe to structure their international activities in a tax-favorable way.

See the most commonly used tax structure displayed below:

4.0 Malta Trading Companies – “The Tax-Friendly Gateway to the EU”

Malta agreed on a groundbreaking deal with the EU when joining the Union in 2004. The country has a favorable geographical location combined with Europe’s most attractive tax benefits. International companies selling to the European market take advantage of the tax benefits of using Malta as their gateway to the EU.

4.1 Malta’s Strength as a Gateway to the EU:

• Access to the European market
• One of the lowest VAT rates in Europe at 18%
• Very attractive returns to the shareholders at a total tax suffered of down to only 5% (following tax-refunds in the hand of the investor of up to 6/7 of the corporate tax suffered)
• No withholding tax in Malta
• Attractive double tax treaties with more than 40 countries
• Highly developed IT –infrastructure
• English is an official language

Companies from several industries are taking advantage of all the benefits offered by Malta as a European member state.

4.2 Examples of Industries Currently Relocating to Malta:

• Online businesses
• Textile industry
• Pharmaceutical industry
• Call centers
• Financial services
• Insurance
• Research & Development
• More…

5.0 More European Online Businesses Operate from Malta

Online based business is growing rapidly and is easier to relocate than any other industry. The trend for European online based businesses is to move its operations to Malta and more tax friendly environments and still keep all the benefits of being located in an EU member state.

5.1 Typical Functions to Outsource to Malta:

• Sales
• Support
• Server hosting
• IT

Due to the rapid expansion of the e-gaming industry in Malta the country has developed in to a high-end provider of IT-infrastructure. Other online businesses are starting to realize this potential and move further south in Europe.

5.2 Recruitment of Multi-lingual Staff:

• Attractive tax benefits for foreign employees with personal tax rates at only 15%
• 321 days of sun a year

6.0 VAT Rates of Only 5.4% for Yachts in Malta

The VAT rate on leasing of yachts by a Malta company is reduced by a predetermined percentage depending on the size and means of the yacht.

Since it is hard to determine the exact period of time a yacht spends in EU territorial waters the conclusion has come to charge VAT based on the anticipated number of days a year the yacht will be in EU waters. The larger the yacht – the less time is expected to be spent in EU territory.

The official table released by the Maltese VAT department:

6.1 Lease-Purchase Agreement

With careful planning, the Tax and VAT rates charged in Malta give the lessee of a yacht owned by a Malta company the option to become the owner of an EU VAT-paid yacht by paying as little as 6-7% on the original value of the yacht in tax and VAT together.

7.0 Shipping Registry in Malta on Global Top 5 list

Shipping companies based in Malta are totally exempt from taxation on ships over 1,000 tons (‘Exempted ships’). The exemption is valid for the operation and ownership of Maltese registered vessels, including charterers and financiers.

Any type of vessel may be registered in the Maltese register of ships and fly the Malta flag provided it is wholly owned by Maltese citizens or by Maltese corporate bodies. The law also allows foreign ships to be bareboat charter registered in Malta and the bareboat charter registration of Maltese ships in foreign registers.

8.0 Leasing and Other Financial Services in Malta

Over the last five years a trend among multinational companies have been to set up a financial services division in Malta to serve the world wide activities of the group. The operations in Malta are local profit centers tailored to provide for financial services like leasing arrangements for capital intensive goods and services and looking after the majority of the internal financing of the group activities and external financing offered to clients.

9.0 Expatriates in Malta Taxed at Only 15%

Individuals not deemed ordinary resident in Malta with employment income subject to tax in Malta may as of 2010 opt for a flat taxation rate of only 15% instead of the standard progressive tax rates applicable to ordinary residents.

Verdun Group (Malta)
malta@verdungroup.com
+356 2010 7000

Verdun Corporate Services (Malta) Limited
Suite 7 / Level 4
The Plaza Commercial Center
Bisazza Street
SLM 1640, Sliema
Malta

Malta Industry Insight

Putting the Malta Aircraft Register on the map
by AeroNautica

Tax Benefits in Malta
by Verdun Group

Responsible Gaming - CSR in the e-Gaming Industry
by Jonathan Dalli - Head of Marketing, e-Management

The Malta Gaming Jurisdiction - Quality Attracting Quantity
by Jonathan Dalli - Head of Marketing, e-Management

[Back to Malta Review Index]

Stay Updated

Network Blogs and Features

• Tax Reforms A-Go-Go »
• Equity Compensation in Startup - Guide »
• Governments Go Easy on Taxpayers... »
• Digital Doings... »
• UAE Onshore Trust Law: Broadening the scope of wealth preservation solutions in the region »
• FDI Sees Ireland Through Covid and Brexit, Solidifying its Reputation as a European Base for Multinational Corporations »
• Transfer Pricing Tidbits »
• Court Case Catch-Up »
• UK's Tax Agenda Topped Up »
• Trusts Act 2019: New Zealand Foreign - or 'Offshore' - Trust Changes »