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Newsletter | Articles  FOCUS ON MALTAOn 16th April 2003 Malta's Prime Minister signed the EU Accession Treaty in Athens. This Treaty sets the way for Malta and other applicant states to join the European Union with effect from 1 May 2004. Malta's accession is the fruit of long and detailed negotiations with the EU, involving a screening exercise covering, in the main, all Maltese legislative provisions. Tax legislation Part of the legislation screening process included the analysis of income tax laws for the purpose of ensuring compliance thereof with EU legislation. The result of this process has been the confirmation that Maltese tax legislation is, in fact, compliant with EU legislation currently in force. In effect, the applicable tax regime, particularly in the field related to Malta international trading companies and Malta international holding companies, is not expected to require any changes as a result of Malta joining the EU. Legislative Developments In terms of legislative developments, the Maltese parliament had, in December 2002, introduced a regulatory framework in relation to continuation of companies in and from Malta and also lifted the restriction on international trading companies from operating solely "from Malta but not in Malta". This development will enable tax structures and offshore companies established outside of the EU to be continued as limited liability companies in Malta. This means that such companies can be continued as international trading companies and international holding companies and would thus qualify for the relative tax treatment. Another projected innovation in Malta law is the proposed revision of the Trusts Act which is expected to enable, among others, corporate trustees to operate in and from Malta. The Malta company is now fully resident and tax paying. It is not an 'offshore' company. The tax advantage does not arise in the company at all. The advantage arises from the fact that a non resident beneficial owner or shareholder receiving the dividend, under Malta's tax Imputation System, suffers a tax at source on the dividend which is in fact the company corporation tax. As such share holder does not have Malta taxable income, in view of his residence and in view of the non-Maltese nature of the trade, he is eligible for a refund of tax suffered. The refunds are as follows:
Profits must be 100% distributed as dividend to gain the refund. Clearly this means that the recipient of the dividend should have a tax liability in their place of residence. It is important therefore to implement ownership structures that protect against such liabilities. ILS is able to provide suitable structures which can be used in conjunction with the Maltese entity to mitigate against this effect. Uses of Maltese companies To facilitate trading in the EU with full VAT registration. To act as a holding company. Maltese companies will now, of course, benefit from EU Parent Subsidiary directive protection as well as a small range of non-EU tax treaties. A good alternative to Dutch structures and UK structures, although Malta does not perhaps at the moment have the range of treaties outside the European Union that the Netherlands and UK do. For more information on Maltese companies see our datasheet or contact David Ashton or any ILS office. |
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