WHY MALTA?

TAX CORPORATE ADVISORY AUDIT www.nmcorporateservices.com [email protected]


Introduction

Setting up in Malta

Over the years Malta has established itself

and proved to be an ideal, cost and tax

efficient jurisdiction for international

business and investment. Malta is

emerging as one of the fastest growing

financial services centres mainly through

its attractive, flexible and comprehensive

legislative and regulatory framework.

The fiscal incentives created by the

government of Malta have been a major

driver of growth of the Maltese economy.

For one, Malta adopts a system of tax

refunds that significantly lowers the

effective tax suffered in Malta. In fact, the

tax refund system lowers the effective tax

rate to 5% in instances where the

shareholders of a Malta registered

company and not resident on the island.

This is the lowest in the EU region.

Moreover, the cost effectiveness of

running and operating a company from

Malta, the highly skilled English speaking

workforce in Malta and the ideal

geographic location of the island in the

Mediterranean sea coupled with a history

of political stability have all been major

contribution factors to why Malta offers an

excellent option for companies wishing to

operate in the European market. Being a

Member State of the European Union,

Maltese companies are entitled to benefit

from the freedoms established by the

Union with regards to the internal market.


Company Formation Limited Liability Companies are the most

common vehicles used in Malta for

carrying out trading or holding activities.

Setting up a company in Malta is straight-

forward, efficient and inexpensive.

Considering that the Malta company

register boasts over 40,000 companies

incorporated in Malta and the number is

increasing rapidly each year, it is

advisable that an applicant kicks off the

incorporation process by reserving the

proposed company name.

The Companies Act requires every

company to have two shareholders, to

appoint a director, a local company

secretary, to set-up a local registered

office and to have the share capital

deposited in a local bank account. Upon

submission of the Memorandum and

Articles of Association the company is

ready to be incorporated within a matter of

days.

Registration fees upon incorporation of a

company are dependent on the amount of

authorised share capital. The minimum

charge is €245 on an authorised share

capital of €1,500 increasing up to a

maximum of €2,250.

The annual company registration fee

payable is also dependent on the amount

of authorised share capital.

The minimum fee is €100 increasing up to

a maximum of €1,400.

A company is required to register for

income tax purposes upon registration and

required to submit a tax return every year.

Where the shareholders wish to claim a

refund of tax suffered by the company,

they will be required to register with the

Maltese tax authorities and apply for tax

refunds.

Company Redomiciliation

A body corporate formed and incorporated

or registered under the Laws of an

approved jurisdiction other than Malta

may, provided that certain conditions are

met, request the Registrar of Companies

to be registered as being continued in

Malta. This would allow the body

corporate to continue its operations in

Malta without having to wind up the

Company in its jurisdiction. Similarly, a

company incorporated in Malta may be

continued in a jurisdiction other than Malta

as permitted by the laws of the other

jurisdiction.

MFSA Fees related to the redomiciliation

of a company to Malta are identical to the

fees of incorporation. These fees must be

paid when the request to redomicile is

made to the MFSA.


TAX

A company incorporated in Malta is

treated as domiciled and resident in Malta

and is subject to tax on its worldwide

income and capital gains. Companies not

incorporated in Malta may still be subject

to tax in Malta for all income arising in

Malta.

Companies in Malta are charged a flat tax

rate of 35%.

Tax Refund System

The tax measures currently in force in

Malta provide excellent opportunities to

those companies set up to carry out

international trading as well as investment

and holding activities. Malta is the only EU

member state that operates the full

imputation system of taxation. Non-

resident shareholders of Maltese

companies are entitled to claim a refund of

the tax paid by the company whenever

distributions are made to them.

The refunds currently available are:

- 6/7ths refund: This is the most

commonly available refund option to

non-resident shareholders and is due

on those profits earned from trading

activities. Taking into account such

refund, the effective rate of tax works

out at 5%.

6/7ths

Refund

Company €

Profit before

tax

100

Tax @ 35% (35)

Profit after

tax 65

Shareholder €

Net

dividends 65

Tax at

source 35

Gross

Dividends 100

6/7ths Refund

(6/7*35) 30


- 5/7ths refund: This type of refund is

generally due in respect of income

derived from passive interest and

royalties. The effect rate of tax works

out at 10%.

- 2/3rds refund: Available in those

instances where the company has

claimed double taxation relief. The

refund depends on the type of double

taxation relief availed of and is limited

to the tax paid in Malta.

- 100% refund: Applies when profits

are derived from a participating

holding. A specific mention that the

company is a participating holding

must be made in the Memorandum &

Articles of Association.

Tax refund to the shareholder is payable

by the tax department not later than 14

days from the end of the month in which it

is claimed provided that the relative

conditions are satisfied (particularly the

payment of the dividend and the payment

of the company tax)

Double Tax Relief

The imposition of comparable taxes by

two or more sovereign countries on the

same income of the same taxable person

for the same taxable period creates

juridical double taxation. Such a situation

is undesirable as it discourages

international investment and trade. To

avoid being taxed twice on the same

income, Malta maintains a large list of

double tax treaties with foreign countries.

Currently there are 67 Double Tax

Treaties and the list is expected to grow to

75 in the coming year.

Apart from the double taxation treaty

network, Maltese tax legislation contains

domestic rules aimed at ensuring that

income originating from overseas is not

subject to double taxation even if there is

no double taxation agreement in

existence.

Royalties

Royalties accruing to the owner of a

patent in respect of a grant of a licence for

the use by a third party or affiliated

company of a patented product are

exempt from tax in Malta provided that the

person receiving the royalties derives

them from a qualifying patent approved by

Malta Enterprise.


VAT

VAT System

Anyone who carries on an economic

activity is obliged to register with the VAT

department, unless he provides an exempt

without credit supply. Such registered

persons collect VAT on behalf of the

Government. As such VAT is suffered by

the ultimate consumer and not the

registered person.

VAT Rates

The standard rate is 18% but a reduced

rate of 5% is charged in respect of certain

supplies including the supply of electricity,

printed material, medical accessories and

the repairs of certain products. There is

also a reduced rate of 7% charged on the

provision of accommodation in licensed

holiday premises.

Exempt Persons

Persons whose annual turnover is less

than the statutory thresholds are entitled

to be registered as an ‘exempt person’. An

exempt person does not charge VAT but

is not to deduct input VAT. Persons whose

turnover does not exceed €35,000 (in the

case of the supply of goods) and €14,000

(in the case of services) may opt to be

registered as an ‘exempt person’.

Other exemptions apply which depend on

the nature of the business. For instance

remote gaming operators and banking

institutions are also exempt from VAT.

Residence in Malta

The benefits of taking up residence in

Malta are clear. The economic outlook, the

climate, beaches and the beneficial tax

rates are a few examples and these

coupled with a reasonable cost of living

expense is proof of why you should

relocate to Malta.

Any person staying in Malta for a period

longer than three months requires an

authorisation from the immigration

authorities. Obtaining ordinary resident

status in Malta requires the applicant to be

in Malta for a period of at least six months.

There is no minimum value property

requirement for non-residents seeking to

obtain ordinary residence in Malta as long

as the applicant comes from an EU/EEA

Member State. For third country nationals,

there is a requirement for the applicant to

meet the criteria set out in the Acquisition

of Immovable Property Act before he

becomes eligible to buy property in Malta.


The Ordinary Residents Scheme

The Ordinary Residents Scheme is an

incentive offered to overseas residents to

transfer their tax residence to Malta. The

scheme is available to persons who have

adequate financial means, live in suitable

property, and are covered under a health

insurance policy. Ordinary residents may

also take up gainful employment or set up

a business activity. Tax in Malta is

charged on a remittance basis meaning

that an ordinary resident is charged tax on

foreign source income that is brought to

Malta and on local source income. The

maximum standard rate of income tax is of

35% however proposals have been made

to reduce the rate even further.

Long-Term Status

A person who has been resident in Malta

for a continuous period of five years may

acquire long term residence status in

Malta subject to the fulfilment of a number

of conditions.

High earners who wish to relocate to Malta

are encouraged to apply under the High

Net Worth Individuals Scheme and benefit

from a reduced flat rate of income tax of

15%.

High Net Worth Individuals Scheme

This scheme is an incentive to attract

foreign high net worth individuals to

acquire a tax residence status in Malta so

as to benefit from a beneficial tax rate of

15% on funds remitted to Malta.


Tax Status

Upon successful application, beneficiaries

become subject to Maltese tax on foreign

income remitted to Malta at a flat rate of

15%, with the possibility of double tax

relief. There are also minimum thresholds

of tax that need to be paid in Malta. An

EU/EEA/Swiss national must pay a

minimum annual tax of € 20,000,

increasing by € 2,500 for every dependent

living with the beneficiary. In the case of

non-EU/EEA/Swiss nationals, the

beneficiary must pay a minimum annual

tax of € 25,000, increasing by € 5,000 for

every dependent living with the

beneficiary.

The High Net Worth Individuals rules

stipulate that the application must be

submitted by an authorised mandatory in

Malta on behalf of the applicant.

Highly Qualified Persons’ Rules

The Highly Qualified Persons’ scheme

was introduced by the government as a

further incentive to attract foreign

investment and to bring expertise in

specific industry sectors to the island. The

scheme offers employees holding ‘eligible

office’ the possibility of applying for a

beneficial flat tax rate of 15% on

emoluments instead of the standard rates

of tax. It is available to both EU nationals

as well as third county nationals.

Senior officials working in the financial

services or remote gaming sectors may

qualify under this scheme subject to the

fulfilment of a number of conditions.

Remote Gaming

Malta was the first EU Member State to

provide jurisdictional services to

interactive gambling companies and is

now the largest remote gaming jurisdiction

worldwide and is home to some of the

largest remote gaming operators in the

world. This achievement is largely due to a

comprehensive regulatory framework and

tax planning opportunities for online

gaming operations. As a result, a range of

online services and facilities in the gaming

industry are readily available.

Remote Gaming Operators may apply for

licences in Malta with the Lotteries and

Gaming Authority. A Maltese licence

would enable the licencee to operate


across the whole of Europe, subject to any

foreign laws prohibiting gambling.

The Maltese Remote Gaming Regulations

specify that an applicant may apply for

four different classes of licences

depending on the nature of the business,

particularly depending on the gaming risk

the company is exposed to, the nature of

the business and the nature of the games

offered. An application for a gaming

licence in Malta takes roughly 14 weeks

from the stage of its submission to the

moment a system audit is scheduled and

a licence is issued. Remote Gaming

licencees are subject to rigorous

Regulation and are mandated to report to

the Lotteries and Gaming Authority on a

regular basis.

Once acquired a licence is valid for a

period of five years, subject to renewal.

Taxation

Malta licenced remote gaming operators

or platforms are subject to a gaming tax

which differs depending on the class of

licence acquired as shown in the figure

below.


Key Official

Every licensee is obliged to appoint at

least one key official who is responsible to

supervise his operations and to ensure

that the license holder complies with all

laws, regulations, conditions and any

directives issues by the Lotteries and

Gaming Authority. The key official should

be resident in Malta and appointed as a

director of the gaming company.

Who we are

We are a full service professional services

firm established in Malta in 1991 and have

grown to provide a wide range of services

including accountancy, audit, tax

consultancy, company formation and

gaming related services. Our firm’s

objective is to be a one-stop shop for our

clients so as to centralise all services

under one roof and to simplify and ease

their bureaucratic commitments.

What we do

Company Formation

Our firm can assist you incorporate a

company in Malta. Our services include

the collation of due diligence documents,

the drafting of the Memorandum and

Articles of Association, the preparation of

any relevant forms and the communication

on behalf of the company with the Registry

of Companies until the company is

incorporated.

Banking Arrangements

Prior to incorporation of any company in

Malta, the company is required to set up a

local bank account in which an amount

equivalent to the share capital shall be

deposited.

By virtue of a power of attorney we will be

able to act on your behalf to open a bank

account in Malta with your preferred

banking institution.

Directorship

Private companies are required to have 1

director while public companies are

required to have 2 directors. A Malta

resident director is not required by law

however having a local director would

furnish an indication to the tax authorities

that the general management and controls

of the company are exercised in Malta and

therefore the company should be subject

to tax in Malta.

Apart from a wide range of management

and compliance services, our firm offers

directorship services to companies which

satisfy our due diligence process.

Company Secretary

Although it is not a legal requirement to

have a local company secretary, it is

desirable to have one so as to ensure that

the company incorporated in Malta has

substance in Malta which would be looked

at favourably by the Regulatory and Tax

Authorities in Malta.


The role of the company secretary is to

liaise with the directors of the company

and to take minutes at meetings,

particularly board meetings which are held

in Malta, at least once yearly.

Our firm offers company secretarial

services for a minimal yearly fee. In

addition, our firm will be able to assist you

with the organisation and holding of

meetings in Malta, set up a venue for such

meetings and take care of the logistics

involved in the anticipation of the visit by

the company directors to Malta.

Registered Office

Every company incorporated in Malta

must have a registered office situated in

Malta. Our firm will be able to set up a

registered office in Malta under its own

address and will ensure that any mail

which is destined for the company are

communicated to the company in a timely

manner.

Company Compliance

Maintaining a company involves certain

recurring corporate and back-office

services. Through our low cost retainer

agreements our firm will be able to offer

you a number of hours of consultancy and

other services as you may require from

time to time. This would often involve the

preparation of letters and documents to

notify the Registry of Companies of varies

changes which take place within the

company.

Accounting Services

Preparation of Monthly

Management Accounts

Preparation of Final Accounts

Vat Return

Payroll Services

Remote Gaming

Our firm will be able to guide you through

the application process of the Lotteries

and Gaming Authority, advise on an

optimal technically compliant set up, on an

ideal disaster recovery policy, and

facilitate communication with officials of

the Lotteries and Gaming Authority

throughout the process.

Through our extensive list of contacts in

the industry we will be able to connect you

with co-location providers, payment

gateway providers and other gaming

operators and software developers in the

island which will enable you to conclude

all the necessary agreements and make

the necessary arrangements which a

company is required to have in place

before being awarded a licence.

Following the acquisition of the licence the

Lotteries and Gaming Authority keeps a

close eye on all its operators and any

operator who falls foul of its rules will be

sanctioned. In this respect, through our

retainer agreements we will be able to

upkeep the licence and be responsible for

all Regulator-facing correspondence for

the company, including the monthly

submission of player liability reports and


ad-hoc incident reports, decommissioning

forms, service provider authorisations etc.

Key Official Services

In the light of the legal requirement by the

Lotteries and Gaming Authority to have a

director who is resident in Malta act as key

official, our firm is able to provide you such

services to ensure full compliance with

any statutory or other requirements and

directives of the Lotteries and Gaming

Authority. Apart from acting as a point of

contact for all communications between

the licencee and the Lotteries and Gaming

Authority, our contract for the provision of

key official services also includes any on-

going compliance throughout the lifespan

of the licence. Additionally, through our

internal technical specialists we will also

be able to advise you on the most

appropriate and legally compliant set-ups

to ensure constant adherence to the

stringent rules of the Remote Gaming

Regulations.

Contact Us

If you are interested in getting to know

more about Malta or would like to receive

more information about our services, do

not hesitate to contact us on the following

e-mail address:

[email protected]

We look forward to being of service to you.

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WHY MALTA?