The Taxation of
Malta International Trading Companies:
Net tax liability in the hands of non-resident shareholders: 4.17%
1. Taxation
system
2. Tax
Computation
3. Procedure
for Refund
4.
Advanced Revenue Rulings
5. Other taxes
Taxation system
While
Malta's International Trading Companies are subject to the normal corporate tax
rate applicable to all onshore companies, the extensive network of
double taxation agreements, together with the full imputation system of
taxation and provisions for tax refunds contained in the legislation
make Malta a very tax efficient jurisdiction for non-resident
shareholders.
An ITC is
taxed at the normal company rate of tax which is currently 35%. For
companies registered prior to 1st January 2007, 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 of two-thirds of the Malta tax paid by the company on
the same profits. This refund is payable not later than the fourteenth
day following the end of the month in which the refund becomes due.
Tax computation
The
following example illustrates the tax workings relating to ITCs:
|
Tax Computation
for
Non-resident
shareholders
(or Malta company
wholly owned by non-residents) |
US$ |
US$ |
|
ITC’s Chargeable
income |
100.00 |
|
|
Less:
Tax paid by ITC (@ 35%) |
(35.00) |
|
|
Net dividend
received from ITC |
|
65.00 |
|
Tax Liability
(27.5% of ITC’s
pre-tax profits) |
(27.500) |
|
|
Tax Credit (Tax paid
by ITC) |
+ 35 |
|
|
Refund of 2/3 of tax
paid by ITC
(on application) |
+ 23.33 |
|
|
Net Refund |
|
+30.83 |
|
Net Dividend
after Tax |
|
95.83 |
|
Effective Tax Liability |
|
4.17% |
Procedure for Refund
On the
distribution of dividends to non-resident shareholders or to Malta
companies which are 100% owned by non-residents, a refund equivalent to
2/3 of the tax paid by the company becomes due.
Where the overseas investment is considered a “qualifying participation”,
these shareholders are entitled to a 100% refund of the tax paid by the
holding company.
These
refunds are paid by the Inland Revenue Department to the non-resident
shareholders within 14 days from the date of the request made to the
Department.
Advance Revenue Rulings
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.
Other taxes
No
withholding taxes, stamp duties or exchange control restrictions apply
on distribution of the profits or dividends to the shareholders and
there are no taxes or restrictions on the exportation of the dividends
from ITC. This means that funds finding their way to Malta may be
remitted anywhere around the world.
Applicability of the ITC Regime
The system of tax refunds described above applies to companies
registered in Malta until 31st December 2006. For
information about the
new corporate tax regime and tax refunds, now available to
all shareholders, refer to the
new Company Tax System section.
See also:
.
