Located at the centre of the Mediterranean, Malta is well placed to provide access to the EU single market, as well as to benefit from its proximity to the surrounding markets of southern Europe, North Africa and the Gulf. The Island’s public and commercial, including financial services’, legislation are based on the English model. Our official languages are both English and Maltese.
An EU member state since 2004, Malta as a Funds domicile provides major advantages in terms of a robust and respected regulatory regime and its fiscal benefits. The island has justly achieved the mantle of a reputable and serious international financial services centre with a well educated management and employee resource and low operating costs in relation to other jurisdictions.
With effect from 1st May, 2004, credit institutions, investment services firms and insurance undertakings have been able to establish themselves in Malta and/or to provide cross-border services in Malta without obtaining a separate licence under the principles of mutual recognition and home state regulation and supervision. In addition, Maltese banks, investment services firms and insurance undertakings also have the opportunity to establish themselves overseas and/or to provide cross-border services in such countries forming part of the EEA without obtaining further licences abroad under the passport rights which will be given to them by the Malta Financial Services Authority (MFSA).
Sweeping changes to Malta’s financial services legislation in 1996 included removing the distinction between onshore and offshore business activities by combining domestic and international business under one law. Related tax legislation did away with the concept of a ‘zero/low tax domicile’ for offshore companies and applied a tax rate (35%) across the board with incentives tailored specifically to attract certain classes of business including fund management and administration.
Maltese resident companies are allowed to benefit from Malta’s double tax relief provisions and its diffuse double taxation network now without falling foul of inland revenue legislation in their parent’s domicile.
Malta has a sizeable network of double tax treaties; its current network totals 25 countries. The Government is actively pursuing additional treaties with particular emphasis on potential treaty partners with a focus on financial and investment services.
As agreed with the European Commission and endorsed by ECOFIN, Malta’s full imputation tax system has, with effect from 1st January 2007, been amended so that both resident and non-resident shareholders are now entitled to the same tax refunds in respect of underlying tax on distributed company profits. The company rate of tax of 35% has been retained and the tax refund applicable upon the distribution of profits where the tax thereon has not been reduced by double taxation relief is 6/7ths of the 35% underlying tax payable by the distributing company.
Therefore, after receipt of the tax refund the Malta tax burden on dividends received by shareholders of Maltese companies will be 5% which is reduced by the incidence of any double taxation relief for any foreign tax incurred on the profits comprised in the dividend.
The tax accounting and tax refund system has been further extended to Maltese branches of non-resident companies. The double taxation relief rules have been widened so as to allow individuals in receipt of inbound foreign dividends to claim relief not only for withholding and other direct taxes imposed on them as shareholders, but also for the corporate income tax (underlying tax) paid by the non-resident distributing company.