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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.
TAX CORPORATE ADVISORY AUDIT
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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 straightforward, 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.
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.
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.
TAX CORPORATE ADVISORY AUDIT
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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%.
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
Tax Refund System
Company
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. Nonresident shareholders of Maltese companies are entitled to claim a refund of the tax paid by the company whenever distributions are made to them.
Profit before tax Tax @ 35% Profit after tax Shareholder Net dividends Tax at source Gross Dividends
6/7ths Refund (6/7*35)
€
100 (35) 65 €
65 35 100
30
TAX CORPORATE ADVISORY AUDIT
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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.
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.
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.
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.
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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.
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
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’.
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.
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The Ordinary Residents Scheme
Long-Term Status
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.
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.
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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.
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
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.
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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.
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Key Official
Banking Arrangements
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.
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.
Who we are
Directorship
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.
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.
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.
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.
TAX CORPORATE ADVISORY AUDIT
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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
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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 ongoing 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: info@nmcorporateservices.com We look forward to being of service to you.
TAX CORPORATE ADVISORY AUDIT
www.nmcorporateservices.com
info@nmcorporateservices.com