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Company Tax System in Malta Presented by Rutger Kriek.

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Presentation on theme: "Company Tax System in Malta Presented by Rutger Kriek."— Presentation transcript:

1 Company Tax System in Malta Presented by Rutger Kriek

2 June 2011 Worldwide basis of taxation; Company tax at the rate of 35%; Full imputation system - Advance Tax: Tax is ultimately borne by the shareholder depending on tax status. Taxation of Maltese Companies

3 June 2011 No withholding taxes on dividends paid by a Maltese company. No withholding taxes on interest or royalties paid to non-residents. Taxation of Maltese Companies

4 June 2011 Holding Companies The Participation Exemption

5 June 2011 Holding Companies An important tax exemption referred to as the Participation Exemption provides for the exemption from company income tax of dividends and capital gains in relation to qualifying investments in an affiliated company known as a ‘participating holding’.

6 June 2011 Holding Companies Italian/Swiss Company Participating Holding 10% equity interest in the non-resident company or Less than 10% where shares have a value of EUR1.2m and are held for at least 6 months Malta is on Italy’s white list. Malta Holding Company Italian/Swiss Company

7 June 2011 Holding Companies Further conditions for dividend exemption: EU resident or incorporated company; Taxation test: foreign tax of 15%; Less than half its income is derived from passive interest or royalties.

8 June 2011 Trading Companies

9 June 2011 Full Imputation system of taxation; Refund to the shareholder of 6/7ths of the tax; Tax benefits arise on a dividend distribution. Imputation System

10 June 2011 Example: Profits 100 Tax at 35%(35) Profit after tax 65 Net Dividend 65 Refund 6/7ths30 Total Distribution 95 Effective tax cost 5% Imputation System

11 June 2011 Trading Companies Refund Dividend Malta Holding Company Malta Trading Company

12 June 2011 Maltese companies must pay tax 18 months after year end or upon the distribution of a dividend. Tax authorities obliged to refund tax within 14 days. Refunds

13 June 2011 Refunds Financial Statements to 31 December 2008 Tax Payment 30 June 2010 Refund 15 July 2010

14 June 2011 Trading activities: Management Consultancy fees; Group treasury; Portfolio investments; Licensing & Financing (non passive); Internet gaming; E-commerce; Re-invoicing. Trading Companies

15 June 2011 Licensing and Financing ‘Passive Interest and Royalties’

16 June 2011 Interest or royalty income not being derived either directly or indirectly from a trade or business; Provided that such income has not suffered direct or withholding tax at a rate which is less than 5%. Passive Interest and Royalties

17 June 2011 Combination of double taxation relief and refunds Effective tax cost of 6% No thin capitalisation Passive Interest and Royalties

18 June 2011 Passive Interest and Royalties Example

19 June 2011 Revenue Rulings

20 June 2011 Advance Revenue Rulings Inland Revenue Department provides Revenue Rulings - legal certainty to international investors Valid for 5 years and renewable for 5 years thereafter; Valid for 2 years following a change of law affecting the Revenue Ruling.

21 June 2011 Exemption on Dividend and Capital Gains; No withholding taxes; Treaty & Unilateral relief; Effective tax cost of 5% on trading; Passive interest and royalties %; Advance Revenue Rulings; No exit costs. Conclusion

22 June 2011 TAX SAVING STRUCTURES

23 June 2011 MALTA COMPANY EU COMPANY  No withholding tax on outbound dividends  Tax exemption on income  0% withholding tax based on the PSD  Capital gains tax protection based on several DTT’s including Denmark, Italy, Sweden, Germany, Czech Republic, Poland, Slovenia, Spain, Portugal, United Kingdom

24 June 2011 MALTA COMPANY  No withholding tax on outbound dividends  Tax exemption on income  0% withholding tax based on the broad implementation of PSD  Capital gains tax protection based on DTT LUXEMBOURG HOLDING COMPANY

25 June 2011 MALTA COMPANY DUTCH HOLDING COMPANY  No withholding tax on outbound dividends  Tax exemption on income  0% withholding tax based on the broad implementation of PSD  Capital gains tax protection based on DTT

26 June 2011 MALTA COMPANY GERMAN COMPANY  No withholding tax on outbound dividends  Licensing or financing activities  Profits subject to % effective tax  Licensing or financing activities  Profits subject to % effective tax  0% withholding tax on interest and royalty payments based on DTT

27 June 2011 MALTA COMPANY  % effective tax on passive interest income  No transfer pricing documentation  % effective tax on passive interest income  No transfer pricing documentation TREATY COUNTRY/ EU COUNTRY AFFILIATED DEBTOR  Reduction of WHT based on treaty  Exemption from WHT based on EU interest and royalty directive  Reduction of WHT based on treaty  Exemption from WHT based on EU interest and royalty directive Loan Interest Payment

28 June 2011 MALTA COMPANY % effective tax on passive licensing income No amortisation – IP contributed at nominal value % effective tax on passive licensing income No amortisation – IP contributed at nominal value TREATY COUNTRY/ EU COUNTRY AFFILIATED DEBTOR Reduction of WHT based on treaty Exemption from WHT based on EU interest and royalty directive Reduction of WHT based on treaty Exemption from WHT based on EU interest and royalty directive License Royalty Payment Royalty Payment

29 June 2011 MALTA COMPANY  No withholding tax on outbound dividends  0-5% net effective tax on trading profits Country A High tax country

30 June 2011 MALTA COMPANY  No withholding tax on outbound dividends  Refund on dividend distribution FOREIGN SHAREHOLDER MALTA LICENSED GAMING COMPANY  Profits subject to net effective tax of 5% plus gaming tax based on turnover

31 MALTA COMPANY  No withholding tax on outbound dividends  Refund on dividend distribution SHAREHOLDER MALTA E-COMMERCE COMPANY  Profits subject to net effective tax of 5%

32  No withholding tax on outbound dividends  Effective management and control in Malta  Company subject to tax on income arising and on income remitted to Malta only CYPRUS COMPANY EFFECTIVELY MANAGED & CONTROLLED IN MALTA CYPRUS COMPANY EFFECTIVELY MANAGED & CONTROLLED IN MALTA  Income not subject to tax in Cyprus

33 June 2011 MALTA COMPANY  % effective tax  No transfer pricing documentation  No withholding tax on interest payments  % effective tax  No transfer pricing documentation  No withholding tax on interest payments OFFSHORE COMPANY TREATY COUNTRY/ EU COUNTRY AFFILIATED DEBTOR  Reduction of withholding tax based on treaty  Exemption from WHT based on EU interest and royalty directive  Reduction of withholding tax based on treaty  Exemption from WHT based on EU interest and royalty directive Loan Interest Payment

34 June 2011 MALTA COMPANY  % effective tax  No transfer pricing documentation  No withholding tax on royalty payments  % effective tax  No transfer pricing documentation  No withholding tax on royalty payments OFFSHORE COMPANY TREATY COUNTRY/ EU COUNTRY AFFILIATED DEBTOR  Reduction of withholding tax based on treaty  Exemption from WHT based on EU interest and royalty directive  Reduction of withholding tax based on treaty  Exemption from WHT based on EU interest and royalty directive Royalty Payment Royalty Payment Royalty Payment  Owner of IP Sub- License License

35 June 2011  Tax transparent  Income attributable to the trust is not subject to tax in Malta  Look-through approach – income directly received by the beneficiary  Non-residents not subject to tax other than on income arising in Malta or the transfer of immovable property in Malta MALTA TRUST

36 QUESTIONS?


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