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Disclaimer
The following is our understanding of the present applicable provisions of
Maltese law. This material has been prepared by professionals in the firm of
Brian Tonna & Co., a member of Nexia International, a worldwide network of
independent accounting firms'. This information is intended as a general guide
only, and therefore these notes cannot, and should not be considered as
providing a detailed analysis of the applicable legal provisions, should not be
used in replacement thereof and should not be relied on for any purposes of any
obligations that may arise out of Maltese law. For this purpose we urge you to
obtain appropriate legal and tax guidance and advice including advice on other
tax and legal benefits that could be applicable.
While all reasonable attempts have been made to ensure that the information
contained herein is accurate, Coldwell Banker Malta and Brian Tonna & Co.
accept no responsibility for any errors or omissions it may contain whether
caused by negligence or otherwise, or for any losses, however caused, sustained
by any person that relies upon it.
As from 1st January 2008, the unit of local currency in Malta is the Euro
(€)
Why Malta?
Malta is both an attractive and tax efficient base from which to do business in
Europe. A pleasant warm climate and hospitable English speaking population,
rich culture and a relatively low crime rate together with a stable and
democratic political situation are definitely a rare and irresistible
combination for many people intending to settle or retire indefinitely in Malta
or Gozo.
The Permanent Residence Scheme
An individual qualifying for the scheme may take up residence permanently or
indefinitely in Malta on obtaining the certificate issued under the Residence
Scheme Regulations, 2004. The certificate entitles the holder to a flat income
tax rate of 15%, subject to a minimum annual tax liability (after taking into
account any double taxation relief) of ?4,193. The tax is calculated on
chargable income and capital gains arising in Malta and on foreign income
(excluding capital gains) remitted to Malta.
Other tax considerations
There is no estate duty tax in Malta. Duty on documents and transfers (stamp
duty) is however payable on a transfer (whether on death or otherwise) of
immovable property situated in Malta and shares in Maltese companies, unless
the respective companies are quoted on the Malta Stock Exchange or are
otherwise exempt from such stamp duty. Duty on the acquisition of immovable
property is currently levied at ?5 on every ?100 or part thereof and this
chargeable on the higher of the cost and market value of the relative property.
There is no real estate tax. Any capital gains on the transfer of one's own
residence is exempt from tax if the property has been owned and occupied for at
least three consecutive years and the property is transferred within one year
of being vacated.
There are no customs duties or VAT on the importation of household effects for
EU residents. Restrictions are in place for firearms and weapons of and kind.
Vehicles are not to be considered as household effects and registration taxes
are still imposed when one transfers his residence to Malta. Non EU residents
may be required to put a deposit or a bank guarantee for the VAT / duty in
question. Upon the expiry of 183 cumulative days stay in Malta such deposits or
bank guarantees are refunded or cancelled provided the duration of stay can be
proved.
Eligibility
Any non-Maltese citizen is eligible to apply for a residence scheme certificate
and qualify for the particular tax treatment outlined above, subject to certain
conditions. The applicant must:
• Either own assets outside Malta worth at least ?349,000 or has an annual
income of at least ?23,000 arising outside Malta
• Remit to Malta (and not re-transfer out of Malta) at least ?13,950 in
his/her respect plus ?2,300 per dependant (being a spouse, son and daughter
under 21 years of age and a parent or grandparent of the applicant who is
financially dependant on him/her) annually
Other conditions
• File, with the Inland Revenue Department, an application form together
with various supporting documentation.
• Take up residence by not later than one year from the issue of the
certificate.
• Within 12 months from taking up residence in Malta either purchases a
residence in Malta at a cost of at least ?116,000 for a house or ?69,000 for a
flat, or lease/rent a residence in Malta at a rent of at least ?4,150 per
annum.
The processing of an application for a residence scheme certificate typically
takes around 3 months from the date of the application. Once an application is
approved, the applicant will be notified of the approval and will be obliged to
pay ?4,193 to the Commissioner of Inland Revenue by not later than 30 days from
such notification. The payment will be available as a credit against the
applicant's Maltese tax liability for the year in which he takes up residence
in Malta. A non-refundable administration fee of Euro 115 (or equivalent in
foreign currency) is charged for the processing of the application.
Business Benefits
Today Malta is internationally recognized as a brand denoting excellence in
financial services. It offers an attractive cost and tax efficient base for
financial services' operators looking for an EU-compliant, yet flexible
domicile. But what makes Malta so attractive?
• An ideal cosmopolitan location for efficient international business
contacts
• Excellent flight connections
• Sophisticated ICT infrastructure
• Friendly relationships with Mediterranean rim countries
• High standard of living as well as comparatively low daily running costs
• High quality homes and apartments to satisfy the most demanding
requirements
• A major transshipment hub in the region
• English as an official language with a number of other languages spoken
by a large number of Maltese citizens
• High education and training level
• Comparatively low ancillary labour costs, an excellent work ethic and a
highly motivated workforce
• A long established and strong democratic tradition
• Liberal economic policies and commitment to open and competitive
business environment
• A long standing commitment in encouraging foreign investors
• A strong, yet flexible, single regulatory body in the Malta Financial
Services Authority (MFSA)
The Maltese fiscal regime has been one of the main drivers in creating an
attractive environment for foreign investors. Since joining the EU in 2004,
Malta has become an attractive jurisdiction for tax planning and corporate
structures. An agreement with the EU preserves the competitive Maltese
full-imputation system and has been deemed by the European Commission to be
compliant with EU non-discrimination principles.
Malta is the only EU member state with a full imputation system of taxation in
force. Shareholders are entitled to a credit for the company tax paid on
distributed profits and will qualify for a refund when the credit exceeds their
tax liability. Malta grants relief from double taxation under the credit method
and includes not only treaty relief but also unilateral relief and the flat
rate foreign tax credit, thereby ensuring that income arising from overseas is
not subject to double taxation, even if there is no double taxation agreement
in existence. Malta's double taxation treaty network extends to over 45
countries.
Other key features of the Maltese tax system:
• No withholding taxes on the distribution of dividends, interest and
royalties paid to a non-resident provided the recipient is the beneficial owner
of the income
• Access to the Parent-Subsidiary, Interest & Royalties and Mergers
Directive
• Participation exemptions
• An exemption from tax on income derived by collective investment schemes
• Possibility of Advance Revenue Rulings on international transactions
(guaranteeing a tax position for a minimum of five years)
• Absence of 'thin capitalization' rules and no anti-controlled foreign
corporation legislation
• No capital duty on share issues and exemption from duty on transfers of
shares in, by or to companies having the majority of their business interests
outside Malta
• The possibility for companies to denominate their share capital and
their accounts in any convertible currency
• The possibility of migrating companies to and from Malta
• Relative ease of incorporation for non-regulated entities
• Low registration and maintenance costs
• A taxation scheme for groups of companies allowing the offset of losses
between group companies
Use of Maltese Companies
Maltese companies and structures are used for various types of businesses.
Besides in international holding structures, Maltese companies are also used in
the following areas:
• Services
• Banking
• Captive Insurance
• Remote Gaming and E-business
• Wealth management
• Fund management and administration
• Financing
Ship and Yacht registration
Malta's long maritime tradition and culture has led to the country becoming a
well established, reputable, open ship register. Malta is today the eighth
largest ship register in the world. Some salient points about ship
registration:
• Being an E.U. member all vessels flying the Maltese flag are deemed to
be E.U. Vessels.
• The Maltese Flag has been upgraded to the White list on the Paris MoU,
making unnecessary controls less likely on ships flying the Maltese flag. Malta
also has bilateral agreements with foreign governments where Maltese Ships
receive preferential treatment in respect of Port charges and taxes.
• It provides a complete exemption from all local taxes favour owners,
charterers and financiers of Maltese ships in respect of profits derived from
the ownership, sale, operation, chartering and financing of Maltese ships.
• Exemption from all duties and other charges in respect the sale or
transfer of a ship and the allotment of any share or stock of a company owning
such a ship; and from succession duties, capital gains tax, VAT and also in
respect of exchange control formalities.
• No restriction on nationality of Masters, owners and crew.
• No restrictions on sale and mortgaging of Maltese ships.
The advantages of registering a yacht under the Maltese Flag are not limited to
the reputation of the flag, and benefits range from financial and fiscal
advantages to employment incentives. Registration and yearly maintenance of the
registration are obtained at minimum costs, and the provisional registration of
a yacht can be obtained within twenty four hours of the filing of the necessary
documents, with the permanent registration taking place within six months from
the provisional registration upon all documentation being received by the
Authority.
As a rule, yachts which are used within the EU waters, and all yachts owned by
EU citizens must be VAT paid and must have a VAT paid certificate. We give
tailored advice on all VAT issues, including the possibilities of Temporary
Importation of a non-EU vessel into EU waters, and the periods of time which
may be spent within EU waters by a non-EU registered vessel in EU waters. Malta
is one of the EU jurisdictions offering substantial VAT reductions by means of
Lease structures. The jurisdiction offering most over all benefits with regard
to this structure is Malta, since the law does not impose that the Lessor and
the Lessee must have a different beneficial owner, and nor is it imposed that
the Lessor must be a financial institution. Furthermore, Malta offers the
lowest base rate of VAT at 18 %.
At Maltese law, for the purpose of VAT, the lease of the yacht is considered a
supply of services with the right of deduction of input VAT by the lessor,
where such right applies. This supply of services is taxable according to the
use of the craft, attributed within the territorial waters of the European
Union (EU), provided that the lessor is a Maltese company (including a
commercial bank) which is leasing the craft to any Maltese or non-Maltese
person or company.
The guidelines issued by the Maltese Vat Department establish the estimated
percentage portion of the lease based on the time that the craft is used within
the territorial waters of the EU. These percentages are set according to the
length of the craft and its means of propulsion (power or sailing). The
standard rate of VAT of 18% is only applied on the established percentage of
the lease, deemed to be related to the use of the craft in EU territorial
waters. The minimum rate is paid on a yacht of 24 meters or bigger, where the
'vatable' portion is established at 30% with an effective rate of VAT and tax
of between 5.4 and 6.2 per cent.
In order to benefit from the Maltese VAT lease scheme, the boat must come to
Malta, possibly at the beginning of the lease agreement. A financial leasing
agreement is drawn up between a Maltese company and any Maltese or foreign
person or company. Prior to the set up, approval is sought in writing from the
Commissioner of VAT who is to confirm the rate applicable according to the use
in EU territorial waters (depending on the size and propulsion of the craft),
as well as the acceptability of the value of the craft as declared. For this
purpose a valuation certificate of the craft is submitted with the application
for approval.
Payments are divided into two phases - An initial contribution is paid by the
lessee to the lessor amounting to 50% of the value of the craft. Subsequently,
Lease installments are paid every month by the lessee to the lessor, and the
law (guidelines) requires that the lease agreement should not exceed 36 months
Furthermore, the lessor is expected to make a profit from the leasing agreement
over and above the value of the boat, and the purchase value at the end of the
lease agreement must not be less than 1% of the original value of the craft,
and this will is subject to the standard rate of VAT at 18%.
If the lessee opts to purchase the craft at the end of the lease, a VAT paid
certificate is issued to the lessee provided that all VAT due has been paid.
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