A Maltese Company can be established to act as Group treasury for related companies whether or not established in Malta. This enables a group of companies to have the flexibility in their financing operations.
Group Finance Company Malta
A Group treasury company is an important tool in international tax planning in any group company structure. The establishment of such a company gives rise to the following benefits:
- Favourable tax treatment resulting in low effective tax rate on interest income received through the implementation of beneficial Maltese Refund mechanisms;
- Non-resident shareholders (or corporate shareholders beneficially owned by non-residents) of the Maltese Treasury Company enjoy a 6/7ths refund
- Malta does not apply any withholding taxes on dividends distributions out of Malta to non-residents;
- No capital duty, no thin cap / debt to equity rules, no CFC rules;
- Extensive treaty network;
- Applicability of all EU Directives;
- No thin capitulation rules in Malta
- No CFC legislation
- No withholding taxes in Malta on outbound payments of interest to non-residents
- After 1/1/07 no need to obtain Advanced Revenue Ruling of Status to benefit from tax refund.
Low Effective Tax Rate on Interest
Interest receivable by a Maltese Company acting as Group Treasury is considered as trading income if such income satisfies the following conditions:
(1) interest which is derived, directly or indirectly, from a trade or business, and
(2) such interest has suffered any foreign tax, or
(3) such interest has suffered foreign tax, directly, by way of withholding, or otherwise, at a rate of tax which is at least 5%
Dividend distributed to non-resident shareholders will benefit from a refund of 6/7ths of the ACIT paid on such interest income. The resulting effective Malta tax rate on interest receivable therefore stands at 5%. The 6/7th Refund mechanism requires that no credit for double taxation relief is availed of by the Group Treasury Company. If double taxation relief is claimed the applicable refund would amount to 2/3rds of the Malta tax paid. Where interest income does not satisfy the above conditions such income is considered passive in nature and the applicable refund of Malta tax paid will amount to 5/7ths of the ACIT.
Funding of Malta Treasury Company
The funding of the Maltese Group Treasury Company may or may not depend on the ownership structure adopted for the Group Treasury Company. Some options include:
- Funds from each shareholder directly to the Group Treasury Company;
- From each shareholder personally to their personal holding company which will in turn advance loans to the Group Treasury Company;
- From profits of other related companies or subsidiaries ultimately being owned by the same structures;
- Through third party loans.