Malta is a Mediterranean island state, member of the European Union and the Eurozone. Being an ex British colony, Malta has adopted the Common Law legal system with features of civil law and applies the International Financial Reporting Standards (IFRS) for the preparation of the financial statements. The population is well educated and multilingual with English being the second language on the island. Malta is well known as a tourist destination, a yachting location as a result of its many natural marinas and a gaming jurisdiction.
It has developed as an international business center in Europe as a result of the above characteristics as well as its strategic location, stable political and economic environment, the excellent business infrastructure and telecommunications and above all its favorable tax regime with the following characteristics:
• Corporate tax rate 35% but with the possibility in the event of non Maltese Shareholders to reduce the effective tax rates as follows:
– 5% for business income through the tax refund system they apply (as 6/7 tax refund is received).
– At 10% for passive income interest or royalties (as 5/7 tax refund is received).
• Tax on dividend 0% – participation exemption is granted if 10% is held or minimum shareholding of €1.164.000.
• Capital gains tax on participation 0% under conditions.
• Capital gains tax on investments (trading in securities) 35% but effective tax rate 5% due to the tax refund system.
• Tax on income from royalties, patents in respect of inventions 0%.
• Tax on income from aviation 0%.
• Attractive jurisdiction for yacht registration, with excellent yacht registry and VAT solutions available.
• Licensing for Gaming Company.
• Extensive network of Double Tax Treaties with over 60 countries including good Double Tax Treaties with China, Russia and Israel.
• No withholding taxes on outbound dividend, interest or royalties for Malta with some exceptions.
• Competitive fees for incorporation and administration.
• Low capital requirements.
• Absence of CFC legislation, thin capitalization or transfer pricing rules.
• No wealth or capital taxes.
• No exit or entry taxes upon a shift of domicile or residence to and from Malta.
• Access to the European Parent –subsidiary Directives and European interest and royalty Directive (no withholding taxes are due over dividend , interest and royalty payments from companies resident in other European companies to Malta company).
Legal aspects of Maltese companies
The most commonly used type of company in Malta is the limited liability company with the following characteristics:
– Minimum one director, corporate or physical.
– Minimum 2 shareholders; as a practice we register one share in our names to meet this requirement, if needed.
– Obligatory secretary. Physical person licensed in Malta.
– Registered office in Malta.
– Memorandum and articles of Association must be signed by the subscribers.
– Share capital account is opened at a bank for the deposit of the paid up issued share capital.
– Minimum share capital for private company is €1165 with at least 20% paid in advance.
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