BENEFITS OF INVESTING
Over the past years, Malta has seen a drive by successive governments to promote the islands development as a prime international business, financial and maritime centre.
As a result of Malta's membership to the European Union and the consequent adoption of Community legislation, and also because Malta complies with the policies and directives of international organisations such as the Organisation for Economic Co-operation and Development (OECD), Malta enjoys an excellent reputation and track record.
In the third edition of the Global Financial Centres Index (GFCI) report published in March 2008, Malta was identified as one of the top three financial centres worldwide, likely to increase in importance over the next two to three years. Malta was also listed among the financial centres where operators might think of opening in the next five years. The index, which rates and ranks each major financial centre in the world in terms of its competitiveness, is issued by the City of London Corporation.
Malta also enjoys a high credit rating among global credit rating agency agencies. In 2009, Standard and Poor's maintained its stable outlook for Malta reaffirming its A/A1 credit rating, Fitch reaffirmed its A.
Malta's strategic geographic position makes it a regional hub for the provision of business related services, notably in the financial, i-gaming, back-office services, information technology, and aircraft maintenance fields.
Malta also ranks as one of the safest places in the world since there is a very low crime rate.
Malta's status as a member of the European Union, as well as the adoption of the Euro as Malta's currency in 2008, have made the country a jurisdiction of choice with investors, many of whom decide to locate their businesses to Malta due to an advantageous corporation tax system. Malta company benefits include the attractive Malta tax system, as well as a few other factors that come into play when owning a business or registering a company in Malta, such as:
- Malta's state-of-the-art telecommunications infrastructure
- support services by pro-active Maltese professionals who adopt a "can do" attitude
- a highly qualified and skilled Maltese workforce, fluent in various languages (English is an official language)
- Malta's strategic geographical location
- Malta's convenient time-zone
- Malta's stable political environment and democratic government
- Malta's attractive tax system
- an extensive Maltese double tax treaty network and other double tax relief mechanisms (Malta has concluded over 50 double tax treaties)
- relatively low costs for the registration of Malta companies
- Malta's friendly business environment
One of the attractive benefits to persons who choose Malta as a jurisdiction to incorporate their companies, is the income tax system available to any Malta business. Malta tax legislation provides a number of incentives to shareholders of Malta companies deriving income from their investments and/or trading activities, whether derived from Maltese companies, or companies registered outside Malta. The income from Malta companies is subject to a flat income tax rate of 35%. Four forms of relief from double taxation are available, including Malta's far reaching double tax treaty network, thus, the Malta company is granted a relief from double taxation in cases where the income of the Malta company would have also suffered tax in a foreign jurisdiction. This ensures that the same income will not be subject to tax twice in two different jurisdictions.
When income received from investments and/or trading activities is distributed by Malta companies by way of dividends, a refund of the tax paid by the Malta companies becomes due, provided that such dividends are distributed out of profits allocated to the foreign income account, or to the Maltese taxed account (with the exception of profits derived from immovable property situated in Malta). Profits, which stand to be allocated to the foreign income account, are those profits and similar income which arise outside Malta, such as dividends, interest, income or gains derived from a participating holding, or from the disposal of such holdings, royalties, capital gains, rental income, business profits and investment income. The amount of the Malta tax refund depends on whether the investment constitutes a "participating holding" or otherwise. Tax refunds in Malta are also available to shareholders receiving dividends from their foreign companies, distributed out of profits arising in Malta, through an overseas branch registered in Malta.
Income derived from a participating holding or from the disposal of such holdings will qualify for a participation exemption, which is intended to exempt from Malta tax dividends and gains derived from such holdings. The income derived from a participating holding which qualifies for a participation exemption, may be excluded from the Malta tax return, and as a result, may be tax free. In the case of income deriving from a participating holding, and which thus qualifies for a participation exemption, one may still opt to pay the Malta tax due and claim a 100% tax refund.
Upon receipt of a dividend from Malta companies, shareholders will become entitled to a refund of 6/7ths of the total tax paid (i.e. including the overseas tax). The total tax refund will, however, be limited to the Malta tax paid, so that the total effective tax rate paid in Malta will be 6/7ths of 35%. This refund is available irrespective of whether business was carried out in Malta or not, further alleviating the burden of taxes imposed on the company
The Maltese tax refund is reduced to 5/7ths of the total tax paid where the dividend is distributed out of profits derived from passive interest or royalties. Passive interest or royalties consist of interest or royalty income which is not derived directly or indirectly from a trade or business and which has suffered tax (direct or by way of withholding) at a rate which is less than 5%.