TAX in Malta

Malta invest

UnderstandinG Tax in malta

We are by no means tax experts, however, Invest Malta has partnered with ARQ Group in Malta to provide a general guideline and overview on the tax requirements in Malta. 

TOPICS

Personal Tax Programmes

Tax benefits under the residence program

Qualifications for Tax Residence

Personal Tax Rates

Pensioners

Fiscal Incentives

Tax Refund System

Fiscal Incentives Part 2

Participation Exemption and Holding

Double Taxation Relief

Income Tax and Duty Exemptions on Transfer of Shares

Other Benefits


SPECIALISTS: ARQ GROUP

ARQ Group is a partnership between the founding partners of Capstone Group, a mid-tier audit and accounting firm and the law firm, FFF Legal. It brings together expertise in accountancy, taxation, business advisory and corporate services within one organisation with independent audit and legal support also close at hand. ARQ builds on the experience and reputation of the 5 founding partners who come from varied backgrounds and have accumulated experience in various sectors and segments along the way. 

The decision to seek, what was initially seen as a ‘closer integration’ between Capstone and FFF Legal very quickly developed into a more complete association with the creation of the ARQ Group brand to incorporate the merged corporate, trust and fiduciary, accounting, taxation and business advisory services administered previously by Capstone Advisory and Alliance Trust Company Ltd. This new entity carries forward the experience, culture and work ethic accumulated over the course of a number of years and countless client relations into a fresh and more developed environment with updated systems and procedures as well as a greater depth in personnel. 

With material input from both parties the intention is to provide a seamless and efficient solution to our current and future clients.

Disclaimer:

ARQGROUP.com

The information provided in this document is for information purposes only and should not be treated or interpreted as either investment, legal, tax or professional advice. Any views or opinions expressed herein are not intended and should not be construed as being investment, legal, tax or professional advice, but reflect ARQ In Tax Ltd views and opinion in relation to the particular theme and/or subject of the document. Since the information being provided is highly dependent on Governmental Policy, Law and Regulation, this material is subject to change without notice and recipients are urged to seek more specific and timely advice . ARQ In Tax Ltddoes not accept liability for any loss, whether direct or indirect that may be incurred by any recipient who acts solely on the basis of the information being provided.

ARQ In Tax Ltd – Company Registration number C68774 of Tower Business Centre, Level 1, Suite 5, Tower Street, Swatar, BKR4013, Malta is part of the ARQ Group Ltd. and is licensed by the Malta Financial Services Authority under the companies act of 1995.


 
 

Personal Tax Programmes

Any person resident in Malta but not domiciled is subject to tax on what is known as the ‘remittance basis’. This means that such a person would be subject to tax on any income arising to him in Malta or otherwise remitted to Malta from overseas. Furthermore, Malta has introduced a number of residence schemes for both EU/EAA citizens as well as Individuals coming from non-EU countries which are combined with their own particular tax regulation.

 

TAX BENEFITS UNDER THE RESIDENCE PROGRAMMES

Holders of residence certificates under the residence programmes benefit from:

A flat rate of personal income tax of 15%, chargeable only on a remittance basis;

Foreign source income received in Malta is subject to Malta tax only if remitted to Malta while foreign capital gains are altogether outside the scope of tax in Malta;

Local source income arising from business, investment or other economic activity held in Malta is subject to tax at 35%;

An annual minimum tax of €15,000, payable annually in advance, covering the holder and all his dependants;

Applicants are not legally bound by minimum stay requirements. However, they must not spend more than 183 days in a calendar year in another jurisdiction as this may make them tax resident in that jurisdiction too.

QUALIFICATIONS FOR TAX RESIDENCE

In order to qualify for tax residency an applicant will need to satisfy the following conditions:

1.         Applicant must buy or rent property in Malta.

I.          Property purchased in the island of Malta must have a minimumvalue of €275,000;

II.         Property purchased in the island of Gozo or in the South of Malta must have a minimum value of €220,000; OR

III.        If the applicant opts for rental of property, the property must have a minimum annual rental value of €9,600 (or €800 a month) in Malta and €8,750 (or €730 a month) in Gozo or in the South of Malta.

4.         Non-EU/EAA applicants will not be eligible to benefit from Malta’s free State healthcare system and is therefore required to purchase all-risks private medical insurance.

5.         An Applicant must be in financial good standing, not have any criminal record and speak English adequately.

 

PERSONAL TAX RATES

The Tax Rates applicable to individuals are progressive rates, with a tax free bracket, reaching a maximum rate of 35% for income above €60,000. They are charged on an individual’s income for the year from a number of sources in the following manner: 

Maltese law offers foreign individuals who choose to reside in Malta alone or together with their families two important tax residence programmes.

PENSIONERS

An optional Malta retirement tax programme applies for EU nationals. Under this retirement programme, beneficiaries retiring in Malta will be granted a special tax status which entitles them to a personal Malta tax liability of 15% on any income arising outside Malta which is remitted to Malta, subject to a minimum Malta tax liability of €7,500 per year of assessment plus €500 per dependent. Other chargeable income (essentially local source income) would be subject to Malta tax at a flat rate of 35%. 


Disclaimer:

ARQGROUP.com

The information provided in this document is for information purposes only and should not be treated or interpreted as either investment, legal, tax or professional advice. Any views or opinions expressed herein are not intended and should not be construed as being investment, legal, tax or professional advice, but reflect ARQ In Tax Ltd views and opinion in relation to the particular theme and/or subject of the document. Since the information being provided is highly dependent on Governmental Policy, Law and Regulation, this material is subject to change without notice and recipients are urged to seek more specific and timely advice . ARQ In Tax Ltddoes not accept liability for any loss, whether direct or indirect that may be incurred by any recipient who acts solely on the basis of the information being provided.

ARQ In Tax Ltd – Company Registration number C68774 of Tower Business Centre, Level 1, Suite 5, Tower Street, Swatar, BKR4013, Malta is part of the ARQ Group Ltd. and is licensed by the Malta Financial Services Authority under the companies act of 1995.

 
 

Fiscal Incentives

The Maltese jurisdiction operates the full imputation system of taxation allowing any tax paid on chargeable income to be available as a credit in the hands of the recipient should the income be subject to further transfers. A number of other incentives, fully aligned with OECD principles as well as EU directives, are aimed towards attracting Foreign Direct Investment to the island and at the same time continue in the development and attractiveness of Malta as a financial services centre.

 

Tax REFUND SYSTEM

The standard corporate rate of tax in Malta is 35% of the chargeable income. Shareholders receiving distributions from a Malta Company are entitled to claim a refund of the Malta tax. Tax refunds also apply where a Company operates through an overseas branch in Malta.

The refunds available are:

6 / 7ths Refund:     Applies to chargeable income sourced from trading activities. The effective rate of tax works out at 5%.

5 / 7ths Refund:     Applies to income derived from passive interest and royalties. The effective rate of tax works out at 10%.

2 / 3tds Refund:     Available where the Company has claimed double taxation relief. The refund depends on the type of relief availed of and is limited to the tax paid in Malta.

100% Refund:     Applies to dividends and capital gains derived from a Participating Holding.

*Refer to the diagram

 

Malta tax refund
Malta tax information residence

Event 1:   Malta Trading Company chargeable income is taxed at 35%.

Event 2:   Malta Trading Company declares a dividend and distributes such to its Holding / Shareholder.

Event 3:   6/7 of Corporation Tax is refunded by the Malta Government to the Holding / Shareholder. Holding applies for and Malta Government grants tax refund.

 

MALTA HAS BEEN ON THE OECD ‘WHITE LIST’ FOR GLOBAL STANDARDS IN TAX COOPERATION AND INFORMATION EXCHANGE FOR A NUMBER OF YEARS

Fiscal Incentives Part 2

Malta has been on the OECD ‘White List’ for global standards in tax cooperation and information exchange for a number of years and its fiscal regime is also fully EU compliant. 

PARTICIPATION EXEMPTION

Dividends and Capital Gains derived from Shares held under a Participating Holding are Exempt from Malta Tax, at the option of the tax payer.

A 10% holding in a non- resident company held by a Malta resident entity may qualify as a “participating holding”. In the case where the shares held are less than the 10% threshold, such holding may still qualify as a “participating holding” if the Malta Company:

•    is entitled at its option to purchase or has the first right of refusal on a disposal of the balance of the equity shares of the foreign company; or

•    is entitled to be represented on the Board of Directors of the foreign company; or

•    holds a shareholding exceeding € 1,165,000 or equivalent for an uninterrupted period of 183 days; or

•    holds equity shares in the foreign company for the furtherance of the business of the Maltese company (not trading stock).

Malta tax information for residents

PARTICIPATING HOLDING

Income or gains derived by a company registered in Malta from a participating holding or form the transfer of such holding shall be exempt from tax.

This means that the dividends derived by a Malta company from a participating holding or any gains made by such company on the sale of shares in a participating holding will not attract any tax liability. 

MALTA: DOUBLE TAXATION RELIEF

Malta does not impose any exit tax on outgoing dividends, interest and royalties regardless of the tax residence and status of the recipient. However, income received in Malta from foreign sources may be subject to foreign taxes. Malta has an extensive treaty network to mitigate the incidence of double taxation and also other forms of relief including Unilateral Relief and Flat Rate Foreign Tax Credit (FRFTC).

Malta’s domestic provisions relieve both juridical double taxation, through the various forms of relief explained below, and also economic double taxation mainly by the application of the full Imputation System.

Malta adopts a credit method of Double Taxation Relief in accordance with Article 23B of the OECD Model Tax Convention.  In addition to Treaty Relief, which would be applicable if the foreign tax had been incurred in a jurisdiction with which Malta had concluded a Double Tax Treaty, Malta extends its relief provisions unilaterally through three other forms of credit.

INCOME TAX AND DUTY EXEMPTIONS ON TRANSFER OF SHARES

Any gains or profit accruing to or derived by any person not resident in Malta on the transfer of any shares on a company shall be exempt from tax, provided that such company does not own property in Malta.  Furthermore acquisitions or disposal for any reason whatsoever of marketable securities by persons who are not resident in Malta shall be exempt from Duty.  Marketable Securities included any shares, stocks, debentures, bonds and any interest in any Company or corporation and any documents representing the same.

 

OTHER BENEFITS:

•      Tax exemption on interest, discount, premium or royalties accruing to or derived by any person not resident in Malta.

•      Low rates of tax for individuals approved under the various tax programmes applicable toindividuals for applying residence in Malta.

•      No Exit Taxes on repatriation of funds outside Malta

•      No transfer pricing rules.

•      No thin-capitalisation rules or debt to equity ratios.

•      Procedure for redomiciliation of Companies into and out of Malta without the need of winding up.

 

MALTAHAS BEENON THE OECD ‘WHITE LIST’ FOR GLOBAL STANDARDS IN TAX COOPERATION AND INFORMATION EXCHANGE FOR A NUMBER OF YEARS


Disclaimer:

ARQGROUP.com

The information provided in this document is for information purposes only and should not be treated or interpreted as either investment, legal, tax or professional advice. Any views or opinions expressed herein are not intended and should not be construed as being investment, legal, tax or professional advice, but reflect ARQ In Tax Ltd views and opinion in relation to the particular theme and/or subject of the document. Since the information being provided is highly dependent on Governmental Policy, Law and Regulation, this material is subject to change without notice and recipients are urged to seek more specific and timely advice . ARQ In Tax Ltddoes not accept liability for any loss, whether direct or indirect that may be incurred by any recipient who acts solely on the basis of the information being provided.

ARQ In Tax Ltd – Company Registration number C68774 of Tower Business Centre, Level 1, Suite 5, Tower Street, Swatar, BKR4013, Malta is part of the ARQ Group Ltd. and is licensed by the Malta Financial Services Authority under the companies act of 1995.