Malta Corporate Advice

Malta operates a fairly esoteric taxation system whereby all Maltese companies pay 35% tax but 6/7ths in the case of active income and 5/7ths in the case of passive income are refunded to foreign shareholders (or non-Maltese nationals resident in Malta who are holding via a foreign holding company) making the effective rate of tax 5% and 10% respectively. Malta also exempts from tax capital gains and dividend income from subsidiaries where the Maltese company holds at least 10% of equity. Advice on Maltese taxation can be limited to local considerations but also to international aspects such as the taxation treatment of the shareholders refund by foreign tax authorities and the application (and avoidance) of foreign Controlled Foreign Corporation rules which seek to tax companies based on the residence of their directors or shareholders. For a discussion of factors relevant to this area please see our main article on incubation.

Malta is a well regulated country within the EU which offers unparalleled access to the regulator. Timescales for regulation in Malta are frequently much less than other EU states. The passporting of licensing within the EU makes Malta a very popular destination for fund registration, online gaming and eMoney services (which is licensable separate from a banking licence). This is advantageous for all firms since licensing may be less bureaucratic in Malta than in other EU member states and the regulator may be willing to deal with smaller organisations that might not be able to obtain licensing in larger member states. Apart from all the above Malta has a low human resource cost base within the EU and this makes licensing more affordable in Malta than any other member state. A number of local firms are able to handle the licence process from beginning to end. For a discussion of the benefits of registering funds, online gaming companies and eMoney issuers in Malta please see our main articles.

The application of the extensive EU anti-competition rules makes up a significant practice area in Malta with some firms specialising in this area. This area is especially relevant to large multinational contracts and suppliers.

Public Procurement
Tendering for government contracts whether in Malta or elsewhere in the EU may require some local presence. For non-EU applications the advantages of tendering for EU contracts from Malta is the simple and straightforward establishment process whether by the formation of a local company or the registration of an overseas branch of a non-EU company. The excellent tax environment (the effective rate of 5% corporation tax) is beneficial for both EU and non-EU applicants. A number of local firms are able to handle the tendering process from beginning to end.

Maltese employees are liable to income tax only if they are resident in Malta and (excepting Maltese nationals) are taxed only on income arising in or remitted to Malta. Maltese income tax is charged on a tiered basis up to 35% but since little or no income may be chargeable the effective rate can be much lower or nil. Aside from income tax Malta has one of the lowest social security rates in Europe which is capped at around 3,500 EUR annually (total of employer and employee contributions). An EU citizen can pay their Social Security in any member state and many foreign nationals prefer to pay in Malta. Maltese residency is straightforward for European Union citizens who have a Treaty of Rome right to live and work in Malta without the the need for work permits or residency permits. Non-EU citizens can become resident on a number of grounds including following the grant of a work permit and such residency may grant some freedom of movement within the Schengen area. A number of firms in Malta are specialists in the area of taking up Maltese residency for both EU and non-EU applicants and the obtaining of local work permits (necessary for non-EU workers only). Please see our main article on residency for more details.

Debt Recovery
The recovery of local debts or assets in Malta must be handled by lawyers. This work is usually charged by the hour. Depending on the nature of the work some lawyers may engage specialist debt and asset recovery specialists. For credit control services available in Malta please see our main article on services provided by Maltese accountants.

Some firms in Malta specialise in litigation and litigation advice. The correct firm will depend on the nature of the litigation work. Malta has recently introduced divorce (2012) which has created an emerging new practice area.

Tax Investigation
Several local legal and accounting firms have experience in handling tax investigations in Malta.

Project Financing
Maltese private companies and public companies are highly flexible in their operation and can raise finance in a variety of different ways including through the issue of shares and flotation. Local advice may be beneficial to determine the best way to raise finance based around local regulatory requirements.

Shares on Malta’s stock market can be bought and sold locally or via clearstream banking from Germany and Luxembourg. Listed on the Maltese stock exchange may be a cost efficient alternative to listing in other EU member states which still allows some international trading. Secondary listing is also possible (the listing of a fund already listed on a foreign exchange on the Maltese stock exchange).

Transfer of Corporate Domicile/Registration of an Overseas Branch
Maltese law allows for the transfer of domicile of companies in and out of Malta. This allows for companies incorporated in countries which have become less desirable due to tax penalisation to relocate to Malta rather than having to transfer their assets which may be a taxable event. Similarly companies can be transferred out of Malta to any other country which allows for the transfer of a company’s domicile. Foreign companies can also be registered in Malta either as resident based on local management or as an overseas branch. Overseas companies will be liable to tax only on income which is remitted to or arising in Malta but will have to submit an annual return to the registrar of companies as well as following local requirements regarding the preparation and submission of audited accounts.

Transfer Pricing
Transfer pricing is a body of accounting and legal theory which deals with the correct apportioning of profit between bodies in common ownership. For example a company in a high tax country with a subsidiary or group company in Malta is likely to seek to attribute as much of its profits as is legally possible to Malta. The method by which the apportionment is made is complex and varies from country to country, but is usually based around factors such as heads of staff, seniority of employees, amount of office space and market presence. Some local firms have experience in transfer pricing rules and are able to advise on compliant ways of attributing as much income as possible to Malta.

Know Your Client (KYC)
Clients wishing to take advantage of Malta’s excellent regulatory infrastructure especially regarding the registration of licensed funds, eMoney originators and online gaming companies will need to conform to EU-wide Know Your Client (KYC) rules. Adequate staff and systems are a prerequisite for licensing and whilst some firms may locate competent staff to Malta others may prefer to outsource as much of this work as possible to local experts who are familiar with the Maltese implementation of the Anti-Money Laundering (AML) and working with the local regulator. Support in this area can be limited to assistance with origination of AML policy and drafting of compliance guidelines suitable for the requirements of the Malta Financial Services Authority (MFSA) to the complete outsourcing of AML or even some executive functionality.

Real Estate
Maltese law restricts the purchase of property to Maltese residents (whether EU or having obtained residency by another route). Non-Maltese residents wishing to acquire property in Malta can do so in designated areas or freely by the registration of a local company or by the obtaining of a permit. Most local law firms can handle property purchase. Rates vary greatly and are usually paid as a percentage of the property cost. Local stamp duty, notarial fees and estate agents commission need to be considered and it is beneficial to seek advice before committing to a property purchase to ensure a thorough understanding of all the costs involved.

Controlled Foreign Corporation (CFC) Rules
Advice may be necessary in both the country where the company is incorporated and the country where the client is resident in order to ensure that the company is not caught by anti-avoidance rules which seek to tax foreign companies based on their operation, their lack of substance or their ownership.