Document Prepared by:
Malta Financial Services Authority, Attard, Malta
Tel: 00356 21 441155

INTRODUCTION

The Malta Financial Services Centre (MFSC) is an autonomous body with a distinct legal personality to regulate financial services in Malta and those offered from Malta. As the primary Regulator of the financial services sector, the principal activities of the Centre are:

• the supervision and monitoring of international commercial and financial activities as well as registration of trusts;
• the regulation and supervision of banks, insurance and investment services.

The Regulatory Unit of the MFSC, is central to the whole set-up and a director heads a specialised unit dealing with each sector. The Unit is further supported by expert resources providing services of a legal, corporate, and investigative nature. The Regulatory Unit issues licences, directives and guidelines as provided for in the relative legislation.

The International Tax Unit (ITU) draws its staff from the Inland Revenue Department but forms an integral part of the MFSC’s overall structure and is housed within its premises. This ensures that all tax related matters with respect to international operations are dealt with efficiently and effectively. The ITU has, as part of its responsibilities, the issuing of Advance Revenue Rulings. These rulings provide certainty on the tax treatment of any international undertaking.

The MFSC also houses the Registrar of Companies thereby ensuring that the international business community will find within the same set-up all company incorporation services as would be required. Moreover, the MFSC assists new promoters in setting up their operations in Malta and is committed to provide such companies with services of the highest standard.

INTERNATIONAL TRADING COMPANIES

An international trading company (ITC) is defined in section 2 of the Income Tax Act, as a company registered in Malta which is engaged solely in carrying on trading activities, from Malta but not in Malta, with persons who are not resident in Malta and which has its objects expressly limited to such trading activities as well as to such acts and activities as are necessary for the conduct of its operations from Malta. This type of company may also engage in:

• purchases for export of goods manufactured, assembled or processed in Malta provided that such purchases are not made from a person who owns directly or indirectly more than 15% of the ordinary share capital of the said International Trading Company;
• trading with companies registered in Malta under the Malta Financial Services Centre Act, 1994; and
• trading with other International Trading Companies.

An ITC is therefore a normal onshore Maltese company having its status recognised only for tax purposes.

INTERNATIONAL HOLDING COMPANIES

The Maltese tax system does not have a specific “international holding company” regime. However, a Maltese holding company may qualify to hold a “participating holding” in an overseas company. A “participating holding” can take various forms. Primarily, a “participating holding” means a holding of at least 10% of the equity shares of a company not resident in Malta. If the shareholding percentage is less than 10%, its shareholding still qualifies as a participating holding, provided that:

• the Maltese corporate shareholder is entitled at its option to purchase or has the right of refusal on a disposal of the balance of the equity shares of the overseas company;
• the Maltese corporate shareholder is entitled to be represented on the board of the overseas company;
• the shareholding value exceeds LM500,000 liri (or the equivalent sum in a foreign currency);
• the shares are held in the overseas company for the furtherance of the business of the Maltese company.

TAXATION

Malta’s wide network of double taxation agreements as well as other methods for relieving double taxation on cross border transactions provide an excellent basis for establishing tax efficient structures including international trading and holding companies.

Malta’s full imputation system of taxation and the refund of tax provisions contained in the legislation make the ITC a very tax efficient vehicle for non-resident shareholders.

An ITC is taxed at the normal company rate of tax which is currently 35%. However, upon a receipt of a dividend from an ITC, non-resident shareholders are:

• taxed at a flat rate of 27.5% on the gross amount of the dividend and are credited with the amount of tax paid by the company on the profits out of which the dividend was paid;
• entitled to a refund under the provisions of the Income Tax Management Act of two-thirds of the Malta tax paid by the company on the same profits. This refund is payable by the Inland Revenue not later than the fourteenth day following the end of the month in which the refund becomes due.

Non-resident shareholders of a Maltese holding company which has a participating holding in a non-resident company qualify for a full refund of the Malta tax paid by the Maltese company on income arising from these foreign holdings. Such refund is triggered upon a distribution of this income to the non-resident shareholders of the Maltese company.

International trading and holding companies may request an advance ruling on their taxable status. Such a ruling guarantees the tax position of the company for a minimum period of five years and may be renewed for a further period of five years. Any changes in the tax legislation during these periods will not become operative before the lapse of two years from the coming into force of the new law.

REGISTRATION AND FEE STRUCTURE

The Memorandum and Articles of Association constituting the company are forwarded to the Registrar of Companies for registration. Evidence, in the form of a deposit slip showing that the paid up share capital of the company has been deposited at the bank, must be produced.

Upon registration, the Registrar will issue a certificate of registration, showing that the company has been officially registered. A record of all company registrations is available for public inspection.

The fees payable by a company to the Registrar of Companies upon registration are calculated according to the company’s authorised share capital as follows:

If a company subsequently increases its authorised share capital, the difference in registration fees would be levied.

FURTHER INFORMATION

Capital Requirements:

The Minimum issued share capital of an international trading or holding company is the equivalent of Lm 500 expressed in any convertible foreign currency. At least 20% of the issued share capital has to be paid up on incorporation.

Who May Incorporate:

A limited liability company may be registered by the shareholders or their authorised agent. In practice, a local firm of lawyers, accountants or consultants is engaged to carry out all necessary formalities. Subscribers may be individuals or corporate. Nominee shareholding is also permissible through the services of a local nominee company licensed by the Malta Financial Services Centre.

Time Required for Incorporation:

The length of time to incorporate depends on the type of company and on whether all information and documentation is available and in order. The process may take from as little as 24 hours.

Shareholding:

The minimum number of shareholders is normally two, however a “single member company” may also be registered under the Companies Act, 1995.

Registered Office:

Every company registered in Malta must have a registered office in Malta. The registered office of a company may be at the office of a firm of lawyers or accountants.

Directors and Secretary:

All companies must have at least one director and a secretary. The secretary must be an individual but no specific qualifications other than a general competence are required.

Meetings:

Every company must hold in each year a general meeting as its annual general meeting in addition to any other meetings in that year.

Company Returns:

Annual returns are to be filed annually by all onshore companies. Annual returns must be sent to the Registrar of Companies accompanied by a payment depending on the authorised share capital. This varies between Lm 50 - Lm 250.