Malta can offer a number of advantages in an international tax strategy. As a reputable financial centre with money laundering and professional secrecy legislation based on the EU model, it is not viewed with suspicion and is therefore a reputable jurisdiction from which one may carry on international business. It also offers a number of tax benefits and a vast Double Taxation Treaty network. Malta is nowadays considered to have one of the most interesting fiscal set-ups in the world and the fact that it is not a well-known centre renders it an even better prospect.

FINANCIAL SERVICES offered by the Maltese jurisdiction

1. International Trading Companies

International Trading Companies (ITCs) are normal onshore companies established by non-residents and dealing only with non-residents. Trading activities should be carried out from Malta (but not in Malta) and, with persons who are not resident in Malta.

As an onshore company, an ITC must keep proper books of accounts which present a true and fair view of its affairs. Financial statements must be audited by a Certified Public Accountant and Auditor.

The system of tax refunds means that while the company pays the normal company flat rate tax of 35% percent on its profits, the non-resident shareholder's ultimate tax liability is of 4.17% (the beneficial owner being entitled to two refunds for tax paid by the company which must be paid to him by the Inland Revenue Department within strict time intervals).

ITCs also benefit from exemptions from Death and Donation duty and Exchange Control regulations. The beneficial shareholders need not appear on the deeds of incorporation of the company as nominee shareholder may be used in their stead.

2. International Holding Companies

International Holding Companies (IHCs) are also normal onshore companies owned by non-residents and subject to a preferential tax regime.

The objects clause in the Memorandum of Association of an IHC must be limited to the holding of immovable property or shares and other investments outside Malta. These companies are ideal for the management of equity investments of any kind including investment portfolios.

IHCs also pay the normal corporate tax rate of 35% on profits but subsequently benefit from a number of refunds on tax paid. The ultimate tax paid by the beneficial owner may vary between 0 and 6.5%, depending on whether the company holds a qualifying participation in the overseas company or not.

The beneficial shareholders need not appear on the deeds of incorporation of the company as nominee shareholder may be used in their stead.

3. Maltese Trusts

Maltese Trust law is a fairly recent addition to the Statute Book and is modeled on the Jersey Law of Trusts. Malta is a signatory of the Hague Convention on the Law Applicable to Trusts and on their Recognition and the proper law applicable to a trust is decided in terms of this Convention. Where a trust adopts the Law of Malta as its proper law, it must be registered with the Malta Financial Services Centre. One of the trustees of such a trust must be a Maltese nominee company.

There is no legal requirement for foreign trusts to be registered in Malta even if they are administered from this jurisdiction.

Trusts registered in Malta pay a flat rate of two hundred Malta Liri (LM200) tax per annum on the aggregate income of the trust and on any income of the beneficiary. Trusts do not pay any annual registration fees, death duty, stamp duty. or customs duty on property imported into Malta. They are also exempt from Exchange Control regulations.

Absolute confidentiality in respect of the identity of the beneficiaries of a trust is guaranteed.

Malta as a hub for the Registration of Ships and Yachts

Malta is an ideal base for ship operations. Malta has a centuries-old maritime tradition. Its strategic location and its British Maritime tradition make it the ideal base for locating shipping and yachting activities in the Mediterranean Sea. Malta offers a whole range of international maritime services and facilities: deep natural harbours, well equipped ports, extensive bunkering, ship supplies and towage services, ship building and ship repair yards capable of taking the largest ships afloat, a high level of training for both deck and engineering officer, international yacht marinas backed by efficient repair and shore support services.

Only Maltese nationals (whether natural or legal persons) may register ships or yachts with the Maltese Shipping Registry (one of the largest in the world). Maltese shipping companies are formed specifically for the purpose of registering a ship or yacht with the Maltese Registry. These companies are exempt from tax and may be registered within 24 - 48 hours.

It is also possible to incorporate special types of Ship Management Companies (which take the form of the above described ITCs) which can also be used for the management, administration of ships whether the vessels are registered in Malta or elsewhere. The non-resident shareholders of such companies have an ultimate tax burden of 4.17% on net profits. There is also full exemption from Exchange Control Regulations, Death and Donation duties, stamp duties, Social Security contributions and capital gains tax.

Maltese ships benefit from a favourite tax regime with a total exemption from Malta tax on profits derived from the ownership and operation of vessels. Registration and annual fees are also relatively low.

Registering a Ship in Malta - The Benefits

• Favourable weather conditions
• Low berthing and maintenance costs
• No requirement for the ship/yacht to be berthed in Malta
• Low company formation and registration costs
• A legislative framework which is mainly based on UK legislation
• No restrictions on the nationality of the shareholders of the ship owning company and of its directors, on the master, officer and crew of the ship/yacht
• A complete tax exemption for the owners, charterers and financiers of Maltese ships over 1000 tonnes which can be extended to smaller ships
• A complete tax exemption on the profits derived from the ownership or the operation of a ship
• A complete tax exemption on dividends
• No EC VAT is payable on the acquisition of the ship by the Maltese company. The EC rule is that the shipping vessel will not be liable for EC VAT so long as it does not spend more than six months (whether continuous or not) in any one year in EC territory. EC Member States also have their own specific rules. Further details of such rules are available on request.
• No restrictions on the sale or transfer of the shares and no capital gains tax or stamp duty
• No succession duty
• A wide Double Taxation Treaty network

   

The Registration of the Ship or Yacht by the Maltese registered company

The shipping vessel must then be registered in the name of the Maltese company. Maltese law distinguishes between provisional registration and permanent registration. Provisional registration, which has a validity of six months (renewable by a further six months), has the same legal effects as permanent registration but it does not include the authority to operate the ship. Provisional registration can be effected very quickly pending the preparation of all the documentation required for permanent registration.

The authority to operate a ship will only be given once the Malta Maritime Authority is satisfied that the vessel conforms to the standards set in international conventions through the submission of all the necessary documentation. At this point, the registration of the ship becomes permanent. Ships which are 20-25 years old must pass an inspection by the authorised flag state inspector before or within one month of the provisional registration.

Ships which are 25 or more years old must pass an inspection by the authorised flag state inspector before provisional registration.

Bareboat charter Registration of foreign ships or yachts registered in compatible Registries may also be effected.

Details on the documentation required to register a ship or yacht in Malta can be provided on request.

Other Fiscal Benefits offered by the Maltese Jurisdiction

1. The Maltese Permanent Residence scheme

Foreigners may reside in Malta if they acquire a Permanent Residence Permit or an Employment Licence. A Permanent Residence Permit entitles the holder to a flat income tax rate of 15% on all income remitted to Malta subject to a minimum annual liability of one thousand Malta Liri (Lm1000) after any double taxation relief which is due. A permanent residence permit holder is prohibited from engaging in gainful employment while in Malta.

A remittance of about Lm 10,000 attracts the minimum tax of Lm 1000. The rest of the residence permit holder's income could be remitted elsewhere.

A foreigner who establishes his permanent residence in Malta is bound by law to purchase or lease a residence on the Islands. Foreigners are normally allowed to purchase one holiday home valued at more than LM30,000 for a flat and more than LM50,000 for a house. A recent legislation allows a derogation from the one property limitation rule for certain special designated areas.

Further details on the Permanent Residence Scheme and on purchasing or renting property in Malta are available on request.

Foreigners who are not permanent or temporary residents are also allowed to purchase one holiday home in Malta with the same minimum value restrictions. They are not subject to any tax liability as long as their stay in Malta does not exceed six months at any one time.

2. Incentives for Manufacturing Companies

The Industrial Development Act, 1988 offers a number of incentives for persons establishing manufacturing businesses in Malta, the main one being a complete tax holiday for companies exporting at least 95% of their products. In addition, most products manufactured in Malta are entitled to duty free access into the European Union.

Malta's Double Taxation Treaty Network

Malta is often marketed as a Treaty jurisdiction. It currently has more than twenty operative double taxation agreements with such countries as the UK, Germany, Switzerland, Italy, France, the Netherlands, Belgium, Switzerland, Austria, Australia, Finland, the United States, China and South Africa.

Most of the Treaties are based on the OECD model and generally provide for the possibility of final withholding taxes in the case of dividends, interest and royalties. The income of entertainers and athletes is also subject to particularly favourable treatment.

The double taxation treaty benefits are also applicable where an IHC or an ITC structure is used.

Further details about particular Double Taxation Treaties are available on request.

Disclaimer:
The information supplied is not to be taken as legal advice. No liability is accepted for any errors contained therein. Persons requiring further information or advice on a particular matter should seek professional advice. We would be pleased to assist you with any of your queries.