The corporate income tax rate in Malta is 35%, which is quite high. However, there is a law that provides that 30% of the taxes paid will be refunded, which means that the effective corporate tax rate is just 5%.
This is currently the lowest corporate tax rate in the EU and one of the lowest in the world.
The good news is, there’s now an even better option!
From 2020, Maltese legislation allows for foreign legal entities to register a subsidiary in Malta and opt for fiscal unit group taxation and simply pay 5% corporate tax without a refund procedure.
Simple, efficient, zero hassle — and sports a huge cash flow advantage!
Taxes on dividends are charged at 0%.
The easiest option is to either:
However, the latter is not always possible, e.g. when a company wants to retain its trading history, or it has a number of open contracts.
In such cases, registering a permanent establishment in Malta or transferring your main corporate residence would be the best choice. Setting up a Fiscal Unit is another option now offered to foreign companies migrating their business to Malta. Which is good food for thought.
Why not upgrade your structure right now by moving your corporate tax residency to Malta?
Limited Liability Companies or Malta Limited Companies are the preferred vehicles for operating businesses both in the local and international context.
The country is also the only EU Member State that adopts the full imputation tax system through which shareholders are entitled to claim refunds on the tax paid by the company.
Refunds vary in line with the source from which the dividend is being distributed, thus potentially enabling shareholders to reduce their effective tax rate to 10%, 5% or have such income exempted from tax. There are also tax exemptions or benefits offered to special categories of employees.
Malta Limited Partnership or Malta LP is a tax transparent entity that has legal personality – it can enter into contracts in its own name. A Malta LP is an onshore entity registered in Malta.
Limited Liability Companies (Malta Ltd. Companies) are the preferred vehicles for operating businesses both in the local and international context. However, partnerships are subject to less regulatory obligations when compared to limited liability companies.
A Malta LP may opt to be treated as a tax transparent vehicle. This is an attractive planning instrument, when the beneficiaries or partners are not residents in Malta. In particular, should the tax authorities in the partners and beneficiaries’ country of residence recognize the Malta LP as the owner of all income attributable to the Malta LP, then the partners or beneficiaries would only be tax liable in their respective countries of residence after a distribution by the Malta LP of partnership earnings or income, capital gains, or property.
Independent tax resident business unit with its own tax number, place of business and local administration
Malta’s company law provides the option for foreign companies to set up branches or permanent establishments in Malta without the need to incorporate a new company, or transfer the official location of established companies, providing additional flexibility in respect to corporate structuring. An overseas company is defined as a “body corporate constituted or incorporated outside Malta”.
The registration of a PE is a simple and straightforward process and can be completed within a few days of receipt of all the documents required.
Consolidated group income tax rules. The new tax rules allow Malta companies that form a fiscal unit to pay 5% corporate tax without the requirement to pay 35% and claim a refund.
Taxes must be paid, the only question is where and how much?
Corporate migration enables companies to avoid liquidating the existing company and transfer the business portfolio of trading agreements and assets to Malta. By registering your overseas company in Malta or transferring its official location to Malta, whilst setting up a bank account in the EU, you achieve the goal of tax compliance and efficiency.
The process of transferring the official location of your overseas company to Malta will involve your entity making a formal application to the Registrar of Companies requesting that the foreign registered company be transferred to Malta. This application must be accompanied by the required documentation. We shall provide you a list of the required documents. Most importantly, you must prove that the law in the original country permits such a transfer, usually in the form of a declaration from the foreign authority in charge of the registration of companies.
Once all the required documentation has been accepted by Malta, the Registrar will issue a provisional registration certificate. Following the strike-off of the entity from the original country, Malta will issue a final registration certificate. In cases where the entity delivers a licensed activity, such as investment services, additional requirements would be applicable.