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A Maltese Tax Residency Certificate (TRC) is a document issued by the Maltese tax authorities that confirms a business entity’s tax residency status in Malta.
A TRC is often required for tax purposes, especially when dealing with international taxation or taking advantage of Malta’s double taxation treaties with other countries. A tax residency certificate is an integral part of international tax planning and trading.
What does a TRC do?
TRCs are primarily used to prove an entity’s tax residency in Malta. Tax residency is crucial in determining which country has the right to tax corporate income. Where there are double taxation treaties in place, this certificate is essential in order to avoid the double taxation of income.
There are two types of TRCs in Malta, which can be issued for different reasons.
- A TRC stating that the Company is registered in Malta, its registered address and international tax number.
- A TRC that declares that the Company is resident in Malta for the double taxation between Malta and another country.
To obtain a Tax Residency Certificate in Malta, a business entity must meet the criteria set by the Maltese tax authorities. The exact requirements can vary, but generally, you must demonstrate a genuine connection to Malta, which may include having a place of business, for example.
According to international tax rules and practices, and OECD tax treaty models, it is the place of effective management that triggers tax residency.
Double Taxation Treaties
Malta has an extensive network of double taxation treaties with other countries. These treaties aim to prevent double taxation of income and provide mechanisms for resolving disputes related to taxation. A TRC can be important in ensuring you receive the benefits of such treaties.
If you run your company from a foreign country outside Malta, your company might have tax residency in that foreign country. In this case, your Malta company has dual tax residency. This happens when two states believe that the company is a tax resident in their jurisdiction, and both will want to tax your company’s profits, and profit distributions.
If you aim to take full advantage of the Maltese corporate tax system, this is a situation you likely want to avoid.
Use in international transactions
TRCs are often required when dealing with international financial transactions, such as opening bank accounts, investing in foreign countries, or claiming reduced withholding tax rates on cross-border income.
TRCs are often required by foreign trading partners as proof that a Malta company is a tax resident in Malta, which avoids a withholding tax in another country.
The validity of a Tax Residency Certificate can vary depending on the specific circumstances and the requirements of the receiving party (e.g., a foreign tax authority, financial institution, or trading partner). In some cases, it may need to be renewed annually.
It’s essential to ensure that you meet all ongoing statuary requirements to maintain your company’s tax residency status in Malta and the validity of your TRC.
Failure to comply with tax regulations can result in the revocation of your tax residency status and the certificate itself.
The TRC application process
The application process for a TRC typically involves you stating the reason for needing the document, as well as listing a valid addressee.
It’s important to note that the Maltese tax authorities could check if the company is in good standing, i.e. there are no overdue documents or declarations submitted.
If any overdue financial statement or tax return is found, the authorities can postpone providing you with TRC until all routine obligations are met.
How to apply
The specific requirements and processes may change over time, so it’s essential to consult someone who has the most up-to-date information from the Maltese tax authorities or a legal advisor familiar with the latest regulations.
To apply for a Tax Residency Certificate in Malta, you should contact your local corporate service provider or a tax professional who has the required knowledge about Maltese tax laws and procedures.
1step is happy to assist you in navigating the complexities of international taxation and advise you on corporate tax planning matters. We can help you to establish substance requirements in Malta maintaining as well as supporting you to sustain Maltese corporate tax residency for your company.
International tax planning requires knowledge of local and international laws and regulations. This is a competence that we have curated over many years in business.
Our expert team has many years of combined experience in understanding the specifics of local and international laws, and regulations.
Malta has a wonderful and unique corporate tax system and we know how to ensure it works best for you, and how the country can be best utilised for efficient corporate structuring to your benefit.
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