With an effective corporation tax rate of 5% for non-resident shareholders, Malta’s business legislation and tax systems make it a popular choice of destination for businesses in Europe. With prudent planning and intelligent organising, the Maltese tax system allows investors and shareholders to achieve significant tax benefits using Malta as a base.
The Maltese tax system is the only remaining full imputation system in the EU. It is fully approved by the EU and OECD, complying also with the EU’s non-discrimination system.
Malta’s corporate tax rate is 35%, however, as with all imputation systems, shareholders receive full credit for any tax paid by the company on distributed profits. This means that profits taxed at a corporate level are not subject to further tax in the shareholder’s hands, and, depending upon the rate of tax applicable to the recipient of dividends, may trigger entitlement to a tax refund in the hands of the recipient.
As a result, non-resident shareholders of a Maltese company should, upon a distribution of profits, be entitled to claim a tax refund of roughly 85% of the relevant tax paid in respect of trading income.
In simple terms, a taxable profit of 100 means 35 is paid in Maltese corporation tax. The 65 profit is distributed as a dividend and the non-resident shareholder can reclaim almost 85% of the tax paid. In this case, a rebate of 30 is received, meaning a total of 95 goes to the non-resident shareholder when the rebate is received.
If the low corporation tax is not attractive enough, there are also no withholding taxes on dividends, interest and royalties paid to non-residents (inbound withholding may be reduced via treaty network). In addition, for non-resident shareholders there are no wealth or inheritance taxes, no capital gains tax and no entry or exit taxes.
As a full member of the European Union, Malta enjoys the benefits of EU directives and in particular the parent and subsidiary directive. This allows for profits and gains earned through subsidiaries in one EU member state to repatriate to its holding company on a zero-tax basis. Malta also offers an extensive network of double taxation treaties. To date, treaties are in force with over 70 countries.
Setting up a Malta Ltd company is surprisingly easy and normally completed in 3 to 5 working days.
Set up combines low statutory registration fees with a low threshold minimum authorised share capital, of which at least 20% must be fully paid up.
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