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Malta

 
   

Executive Summary
The Republic of Malta is the island nation that consists of the archipelago of seven islands, member state of the European Union. Malta became independent from the UK in 1964. Catholicism is the official and dominant religion. Maltese and English are official languages of the country with Valletta as its capital.

For a long time the very few industries of Malta were limited to cotton, tobacco and shipyards, but now the major resources of Malta are limestone, favourable geographical position and labour force. There are no domestic energy resources and 80% of its food needs are imported. The Maltese economy is dependent on international trade, transit and tourism. Banking and finance, as well as film production are growing industries of the country.

Malta is the part of the Eurozone.

Geography
Due to its geographical position, Malta, an archipelago in the central Mediterranean Sea, located near Italy, Libya and Tunisia, has always been attractive for conquerors, including British and Romans. The landscape of Malta is rich with fields and low hills, the highest point, Ta’ Dmejerk, reaches only 253 metres. There are no permanent rivers or lakes, but some smaller watercourses with fresh water can be found across the country all year round. The South of Malta is not Europe’s most southern point, as it is widely believed.

Only three main islands of Maltese archipelago are inhabited and these are Malta Island, Comino and Gozo. Malta enjoys a Mediterranean climate with mild winters and hot summers. Spring winds are frequent in Malta. Fresh water supply is a problem in Malta, it depends on underground reserves and more than a half of potable water is gained by the process of desalination, which causes further problems of pollution.

Map, Flag and Coat of Arm


Types of Company

Private Limited Company

This structure has the suffix LTD or Limited at the end of the company name, the incorporation of which takes approximately 10 days and shelf companies are not available. Only one member, and only one director (private person, citizen and resident of any country) represent the minimum requirement in order to incorporate a company. The company should have a registered office in Malta and a company secretary – a licensed Maltese nominee company. No bearer shares are issued, but preference and redeemable shares are permitted. Accounts must be kept, but it is not an obligatory requirement to file them.

International Trading Company
This is a type of company that conducts business solely with non-residents, but certain activities on the territory of Malta are allowed. A company should apply for an International Trading Company (ITC) status, which will be assigned by the Revenue for 5 years, that later on can be extended for further 5 years. This company is liable for only 4.17% of tax and can enjoy many Double taxation treaties Malta has signed with other countries. The ITC regime is brought to an end by the EU requirements.

International Holding Company
It is similar to International Trading Company, but it holds participation in foreign companies rather than is engaged in trading. Also this structure can benefit from Double taxation treaties.

Malta Offshore Company
Offshore companies were introduced in 1988, but are no longer available, and all the existent offshore companies of Malta had to be converted into other structures till 2003. These companies, however, could not apply Maltese Double taxation treaties.

General Partnership
The Deed of the partnership includes the name of general partners, the address of the registered office, objects of the partnership, amount of the capital and the duration of the structure. The partners are liable for full debts of the partnership.

Limited Partnership
This is a similar structure to a general partnership, with the only exception of some participants who should be limited partners meaning that they are liable for the partnership debts only up to the capital invested.

Branch of Overseas Company
Branches of foreign companies are available for registration and are taxed at the same level as any Maltese company. No taxes are withheld on profits that are transferred to the head office.

Trust
Maltese private persons and corporate entities can use trust structures that strictly follow international standards, transparency and anti-money laundering procedures. Trusts provide both flexibility and certainty that are believed to be attractive also for international investors. Professional trustees need to obtain a government license. Maltese trust must have a Maltese professional Trustee as one of trustees, which should file annual declaration of conformity with the law. Trusts can use the Double taxation treaties of Malta.

Unit trusts are treated in the same way as ordinary trusts.

Taxation

Personal

For determining the exact taxation position in Malta, it is necessary to evaluate both residence and domiciliation principles. Domicile of a private person is similar to the UK regulations – a person can have only one domicile and his/her domicile of origin can be changed if the person chooses another country for a permanent living. Residence is determined by an individual’s presence in the country (for at least six months in a year). Those persons who are both resident and domiciled in Malta, are liable to taxation on their world-wide incomes. Individuals who are resident, but not domiciled in Malta, are liable to pay taxes only on income generated in Malta. Income tax rate varies depending on an individual’s status and amount of income generated in a tax year.

Social security contributions are made both by employers and employees. Stamp duty is levied on various transactions (issuing shares, transferring shares of immovable property) at different rates. VAT rate is determined at 18% with a reduced rate of 5%. Property tax is applied as well.

Corporate
The tax year in Malta coincides with a calendar year, starting on 1st of January and ending on 31st December. Tax returns must be submitted within six months after the end of the year.

Following the EU regulations and requirements, Maltese government was forced to amend its low-taxation regime in 2006. Companies that are registered in Malta, as well as foreign firms that are managed from Malta are considered to be residents of the country and are liable to pay tax on world-wide income. Income tax includes also capital gains. Non-resident companies are liable to pay income tax only on income generated on the territory of the country.

Standard income tax rate is set at 35%, but there are certain structures that benefit from an opportunity of a lower tax rate liability.

Defined qualifying activities benefit from a reduced taxation. A number of incentives is applied to soft loans, training grants, job creation grants and low-rent premises.

Specialist advice is required in each particular situation for withholding tax purposes, as this has a complicated system, in which foreign income, taxed local income and untaxed local income must be distinguished.

 
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