Malta

Essentials for excellence

Deloitte Malta Tax Services

March 2012

Malta has one of the

fastest growing financial
services industries in
the world. Financial
Services already account
for over 12% of the
countrys GDP. This is
expected to increase to
over 25% by 2015.

Contents

3
Malta: A high-profile business centre

5
Malta: Essentials for excellence

- Malta's International tax system

- Taxation of companies

- Taxation of individuals

- Corporate flexibility

- Attractive operating costs

- Capable human resources

- A step above the rest

9
Malta: The location of excellence

- Holding companies

- Principal companies

- Inter-group finance companies

- IP companies

- Releasing companies

- Aviation and shipping

- Trusts

- Funds, insurance and securitisation

12 Malta: Committed to success

14 Deloitte Malta

16 Malta Treaty Network

Deloitte Malta: Tax services - March 2012 | 1

2 | Deloitte Malta: Tax services - March 2012

Malta: A high-profile
business centre
Maltas ever-increasing reputation as a forwardthinking, flexible and reliable centre for business is
quickly beginning to precede it. Due to its competitive
fiscal regime, adaptable, highly-skilled English-speaking
workforce, and the remarkable quality of support service
providers operating under global brands, Malta has
positioned itself as a centre of excellence in a number
of areas. Stability, flexibility and commitment are the
driving factors which make investors feel particularly
comfortable when doing business in Malta.

Stability, flexibility and

commitment are the driving
factors which make investors feel
particularly comfortable when
doing business in Malta

Deloitte Malta: Tax services - March 2012 | 3

Malta's essentials
for excellence have
turned Malta into the
jurisdiction of choice for
a growing number of
international investors

4 | Deloitte Malta: Tax services - March 2012

Malta: Essentials for

excellence
Malta has one of the most
competitive fiscal regimes
in the European Union.
The workings of Maltas tax
system ensure a low
effective corporate tax rate.

Maltas international tax system

Malta has one of the most competitive fiscal regimes in
the European Union (EU). In addition to providing, as
an EU Member State, access to all EU Directives, Malta
has also concluded an extensive network of around 60
double taxation treaties, all of which are based on the
OECD model.
Malta does not generally withhold any tax on outbound
dividends, interest or royalty payments. Moreover, the
absence of thin-capitalisation and controlled-foreigncompany rules, the absence of specific transfer pricing
regulations, the absence of capital and wealth taxes
and the absence of entry and exit taxes, make Malta
a preferred jurisdiction to allocate business. While
advanced tax rulings are available, they are not required
and informal revenue guidance is readily available if
required.
Taxation of companies
The workings of Maltas tax system ensure a low
effective corporate tax rate. That is:
Companies that are both resident and
incorporated in Malta are chargeable to tax, in
Malta, on a worldwide basis.
Companies that are resident in, but not
incorporated under the laws of, Malta are taxable
in Malta on a source and remittance basis. This
means that such companies are not liable to
Malta tax on foreign source income, which is not
actually remitted to Malta, and foreign source
capital gains.

Image: viewingmalta.com

Companies that are not resident in Malta, such

as Malta branches of foreign head quarters, are
taxable in Malta on a source basis. This means
that such companies are not liable to Malta tax
on foreign source income and capital gains,
irrespective whether these are received in Malta
or otherwise.
The overall Malta effective tax rate applicable to the
taxable income of companies once distributed is
in general approximately 5%. This is based on the
opportunity for shareholders to claim, upon a dividend
distribution in their favor, a refund of a portion of the
Malta tax paid by the company on the distributed
Deloitte Malta brochure: Tax services - March 2012 | 5

Malta: Essentials for

excellence (cont...)
profits. The 5% effective corporate tax rate is the lowest
rate applicable to active trading profits within the EU.
Generally, other categories of income such as interest,
rent and royalties similarly benefit from this low effective
tax rate.
Taxation of individuals
As in the case of companies, the actual Malta tax cost
for individuals, similarly depends on the source of that
persons income, and on his tax status. Individuals
are taxed at progressive rates the highest of which is
35%. However, a flat rate of 15% applies to certain
expatriates working in the financial services and
i-gaming industry in Malta. In terms of the 2012 budget,
this regime is proposed to be extended to also include
the manufacturing industry.
In addition, Malta offers a beneficial tax scheme aimed
at attracting foreign High Net Worth Individuals (HNWIs)
to Malta. Under the scheme, HNWIs benefit from a
beneficial tax rate of 15% on applicable income subject
to a minimum annual tax obligation. Moreover, the
HNWIs who wish to apply for the scheme are required
to acquire or rent property in Malta of a minimum value.

Corporate flexibility
Malta offers a wide range of legal forms which persons
may utilise to structure their business. This grants
flexibility and adaptability, and essentially caters for all
forms of investment. These forms include private and
public limited liability companies, limited and unlimited
partnerships, trusts, foundations and investment and
securitisation vehicles.
Maltese law offers the possibility for companies that are
incorporated under the laws of a foreign jurisdiction to
continue as a company incorporated in Malta without
triggering liquidation. This is particularly relevant for
companies that wish to move away from an offshore
jurisdiction.

6 | Deloitte Malta: Tax services - March 2012

Attractive operating costs

Despite its world-class infrastructure, Malta boasts very
competitive operating costs by western standards. This
cost advantage is reflected in all related sectors, ranging
from salary costs to professional fees, and from rental
fees to licensing fees.

Capable human resources

The quality of Maltese professionals is undoubtedly of a
high calibre. Our wide expertise and the fact that English
is a mother tongue for the working professional gives us
a direct advantage.

The quality of life, economic and

political stability and the unrivalled
charm of this small yet progressive
island have successfully won over a
number of individuals who have in time
opted to relocate their entire business to
Malta or to setup home here
A step above the rest
The attractiveness of Maltas investment environment
is evidenced by the fact that a notable portion of
international investors who enter the market for specific,
predetermined purposes eventually opt to expand
their activities in Malta. The quality of life, economic
and political stability and the unrivalled charm of this
small yet progressive island have successfully won over
a number of individuals who have in time opted to
relocate their entire business to Malta or to setup home
here.

Some excellent fiscal essentials...

Some excellent non-fiscal essentials...

Transparent tax regime and a low effective

corporate tax rate of 0-5%

English is official language

No withholding taxes on outbound

transactions
Remittance basis of taxation for foreign
incorporated companies resident for tax
purposes in Malta

Wide range of experienced support service

providers
Business friendly and political stable
environment focused on financial services
Competitive business costs and easy set up

Extensive tax treaty network

Easy access to decision makers

EU membership and Euro-zone

Regulatory track record

No specific transfer pricing rules

Excellent flight connections to Europe,

the Middle East, North Africa and North
America

Procedure for advanced tax rulings &

informal revenue guidance available, but
not required
Redomiciliation procedure with no entry or
exit taxes & fair market value step-up on
shift of residence to Malta
No thin-capitalisation rules and no
controlled foreign company rules
No capital or wealth taxes

The quality of Maltese

professionals is
undoubtedly of a high
calibre

Deloitte Malta: Tax services - March 2012 | 7

It's flexible business

framework makes Malta
the location of excellence
for various investors
and transactions

8 | Deloitte Malta: Tax services - March 2012

Malta: The location of

excellence
Holding companies

Maltas 5% effective corporate tax

rate paired with the fact that the
island has a politically stable,
English speaking environment
makes Malta well known for
business model optimisation
structuring and tax aligned
supply chain management

Malta operates a broad and flexible participation

exemption regime in terms of which dividends and
gains derived from qualifying shareholdings (typically
>10% of equity shares) resident in both EU and non-EU/
non-treaty countries are fully exempt. It is not per se
necessary to rely on an active business test, a trading
test, an asset test, a subject to tax test or on a minimal
holding period. Maltas participation exemption also
applies to profits derived from qualifying foreign resident
partnerships.

Principal companies
Maltas 5% effective corporate tax rate paired with
the fact that the island has a politically stable, English
speaking environment makes Malta well known for
business model optimisation structuring and tax
aligned supply chain management. Maltas extensive
treaty network facilitates mitigating cross-border issues
relating, for example, to branches and permanent
establishments. As a result, principal companies,
e-commerce activities and procurement departments are
just a number of areas that are often located in Malta.

Intra-group finance companies

Over the years, Malta has gained international
recognition as a reputable and robust financial centre.
The island has recently experienced a rapid growth and
increased dynamism in its financial sector, in which it
now hosts a number of world-renowned group treasury
companies. Maltas strength as a hub for intra-group
finance companies is based on the island having
an excellent business infrastructure, EU compliant
legislation, a sound banking system, a relatively low
cost base, an attractive fiscal regime, including a low
effective corporate tax rate of 0-5%, and a highly skilled,
multilingual workforce.

IP companies
Besides being a member of the World Intellectual
Property Organisation (WIPO) and a party to a number
of international agreements relating to intellectual
property rights (IP), Malta is the preferred jurisdiction
Deloitte Malta: Tax services - March 2012 | 9

Malta: The location of

excellence (cont...)
to allocate IP also from a fiscal perspective. In terms of
Maltas patent box, royalties and similar income derived
from patents in respect of inventions are exempt from
Malta tax. In terms of the 2012 budget, this regime is
proposed to be extended to also include income derived
from copyright and other non-patented IP. Royalties and
other income derived from non-patented intangibles
are taxed in Malta at the effective corporate tax rate of
between 0-5%.
Where a company transfers its domicile or tax residence
to Malta, it may opt for a step-up in base cost of IP
situated outside Malta. Tax amortisation, equally spread
over 3 years, is available if the IP is used in a trade or
business. There are no restrictions as to the exit of the IP
from Malta and planning is available so as not to trigger
a Malta tax exposure.

Leasing companies
Attracted by its low effective corporate tax rate of 0-5%
and its flexible business structure, countless international
investors have opted to use Malta as a base for their
leasing arrangements. The variety of leasing activities
in Malta includes the leasing of yachts, aircraft, vehicles
and other equipment. Lease arrangements can be
structured as an operating or financial lease. Whilst
financial leasing is a licensable activity, an exemption is
applicable to intra-group transactions.

Aviation and shipping

Having long-established itself as an unmatched flag of
excellence for ship registration, Malta is now becoming
a prime location for aircraft registration. Malta has
fully-implemented the Cape Town Convention which
facilitates and ensures maximum efficiency in all matters
relating to the financing and leasing of such aircraft.
Should this not suffice, the lease income of a resident
company incorporated outside Malta from the leasing
of an aircraft or aircraft engine used for the international
transport of goods or passengers is tax-free (unless
remitted to Malta).

10 | Deloitte Malta: Tax services - March 2012

Trusts
The tax implications of a trust created under Maltese law
are dependent on various factors, such as the residence
of the parties to the trust, the nature and location of
the trust property and the relevant event in the life of
the trust. From an international perspective, Maltese
trusts may provide certain tax planning opportunities
for non-residents, whilst simultaneously offering them
the protection, security and estate planning benefits
that come with the use of what is arguably the oldest
and most flexible tool for estate planning and wealth
management in the broadest sense.

Attracted by its low effective

corporate tax rate of 0-5% and
its flexible business structure,
countless international
investors have opted to use
Malta as a base for their leasing
arrangements
The settlement of foreign assets on trust by a
non-resident settlor for the benefit of non-resident
beneficiaries would not normally trigger any Maltese tax
implications for any of the persons involved.
Maltese law also provides for the possibility for a
licensed trustee to irrevocably elect to have the trust
treated as a Malta company for tax purposes.

Funds, insurance and securitisation

Funds

The Maltese financial services industry is going

through exciting times. The international financial
service community is waking up to the fact that our
jurisdiction is a fully fledged investment management
domicile which boasts a statutory and regulatory regime
fully compliant with international standards.

Malta offers a wide choice of regulated vehicles (funds)

such as a SICAV, INVCO, limited liability company,
liability partnership, unit trust, contractual fund and
foundation. In addition, there is the option to set up
a multiclass fund or an umbrella fund. The degree of
regulation varies depending on the category of investors
the fund is targeting. No investment restrictions apply
to non-retail funds and the service providers (manager,
administrator, custodian, etc.) may be located outside
Malta.

The international financial

service community is waking
up to the fact that our
jurisdiction is a fully fledged
investment management
domicile which boasts a
statutory and regulatory regime
fully compliant with
international standards

The profits of a Malta fund are generally exempt from

Malta tax and no Malta tax is levied on distributions
to, or profits derived upon the transfer, redemption,
liquidations of units in the fund, by foreign investors.
Insurance
Malta provides the opportunity for companies to
locate their captive insurance business and insurance
management activities within an OECD-recognised
tax environment that combines tax efficiency within
a robust regulatory framework. Captive insurance
companies enjoy exemptions from certain licensing
and regulatory criteria as well as an expedited licensing
procedure and may be set up as protected cell company.
Securitisation

Image: viewingmalta.com

Securitisation transactions are, in principle, fully tax

neutral. Any company, commercial partnership, trust
or other approved legal structure can be set up as a
securitisation vehicle provided notice is given to the
regulator. Only public securitisation vehicles must obtain
a license before issuing financial instruments to the
public. Any asset, whether existing or future, whether
movable or immovable, and whether tangible or
intangible, including risks may be securitised.

Deloitte Malta: Tax services - March 2012 | 11

Malta: Committed to
success
12th soundest banking
sector
Image: viewingmalta.com

World Economic Forums Global Competitiveness Report

2011 - 2012 (142 countries reviewed)

15th position in financial

market development

Image: viewingmalta.com

World Economic Forums Global Competitiveness Report

2011 - 2012 (142 countries reviewed)

10th worldwide rating in

Business Readiness
component in Network
Readiness Index

Image: viewingmalta.com

World Economic Forums Global Information Technology Report

2010 - 2011 (138 countries reviewed)

12 | Deloitte Malta: Tax services - March 2012

4th worldwide rating in

Government Readiness
component
World Economic Forums Global Information Technology Report
2010 - 2011 (138 countries reviewed)

1st ranked in European

merchant marine industry
The World Factbook, 2010

2nd worldwide ranking in

Quality of Life Index
International Livings Quality of Life Index 2011

2nd safest country

worldwide
World Risk Report 2011 by the UN Institute for Environment and
Human Security

Deloitte Malta: Tax services - March 2012 | 13

Deloitte Malta

Deloitte Malta is a multidisciplinary firm that offers

a wide range of services. We are firmly established
as one of Maltas leading providers of professional
services providing audit, tax, advisory and other
related services to an extensive client base. We have
the largest international tax practice in Malta and a
dedicated financial services practice, serving a range
of multinationals that operate through Malta to take
advantage of our skills, competitive cost base, regulatory
environment, EU membership and attractive tax system.
The firm focuses on clients. We take great pride in our
ability to provide quality services. We are a multi-skilled,
multi-disciplined firm and we offer clients a wide range
of industry-focused business solutions. Our experience
has given us a significant advantage in terms of the
extent and quality of our relationships with all relevant
stakeholders in Malta.
Deloitte Malta is ranked as tier one best tax firm in
Malta by International Tax Review and for the past
two years in a row, Deloitte Malta was awarded best
National Tax Firm by International Tax Reviews Annual
European Tax Awards. Deloitte Malta was given the
award by the global publication International Tax Review
in recognition of the exceptional quality and innovation
of its international tax practice in Malta.

14 | Deloitte Malta: Tax services - March 2012

Deloitte Malta is ranked

as tier one best tax firm
in Malta by International
Tax Review and for
the past two years in a
row, Deloitte Malta was
awarded best National
Tax Firm by International
Tax Reviews Annual
European Tax Awards

Malta Treaty Network

EU States
Austria
Belgium
Bulgaria
Cyprus
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Ireland

Italy
Latvia
Lithuania
Luxembourg
Netherlands
Poland
Portugal
Romania
Slovakia
Slovenia
Spain
Sweden
UK

Other European States

Albania
Croatia
Georgia
Guernsey *
Iceland
Isle of Man
Jersey

Montenegro
Norway
Russia *
San Marino
Serbia
Switzerland *
Turkey *

Rest of the world

Australia
Bahrain **
Barbados
Canada
China
Egypt
Hong Kong *
India
Israel *
Jordan
Korea
Kuwait
Lebanon

Libya
Malaysia
Morocco
Pakistan
Qatar
Saudi Arabia*
Singapore
South Africa
Syria
Tunisia
UAE
Uruguay *
USA

Treaty active
Treaty pending *
No treaty
** Applicable as from 01.01.2013

16 | Deloitte Malta: Tax services - March 2012

Deloitte Malta: Tax services - March 2012 | 17

Malta Contacts
Conrad Cassar Torregiani
Leader Cross Border Tax Services
ctorregiani@deloitte.com.mt
Astrid Vroom
Senior Manager International Tax Services
avroom@deloitte.com.mt
Jevgenija Pavlova
Assistant Manager International Tax Services
jpavlova@deloitte.com.mt

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