Overview of Corporate Tax in Malta
Overview of Corporate Tax in Malta
Recent years have seen continuous efforts to consolidate and diversify Malta’s financial services industry. This market is becoming an increasingly crucial pillar of the Maltese economy and the industry as a whole is one of the largest contributors to boom of economic growth that Malta has been experiencing. The key to the success of the financial services industry is a balance between the proper and streamlined regulation of financial services all the while allowing a flexible approach to them. At the core of corporate structuring, is tax.
Not only has this position not been challenged, but corporate taxation and transparency are now a more central element than ever before – globally. In Malta and most other jurisdictions, firms have been inundated with work in corporate tax and structuring. This work has been primarily focused on keeping up-to-date with important international initiatives. These initiatives include the BEPS project and the EU Anti-Tax Avoidance Package. The implementation of FATCA and the CRS has necessitated reporting that closely follows the BEPS project and the EU Anti-Tax Avoidance Package. Bilateral activity on this level has also continued, with Malta constantly on the prowl for respectable treaty partners.
Tax Climate in Malta
Considering the changes that the international initiatives will bring to the tax landscape as it currently exists, Malta is confident of its ability to adapt and evolve in light of such changes and promises to emerge as an even more robust and secure jurisdiction in and through which to do business. Malta has a long-standing, time-tested general anti-avoidance rule integrated into its domestic tax law. This rule embraces some of the principles at the heart of the BEPS project and has an extensive double tax treaty network (with more than 70 jurisdictions) largely based on the OECD model, including the exchange of information provisions. Although the outlook remains cautious, business carries on as usual.
Industry Sector Focus
Malta as a leading financial European jurisdiction is veering into the FinTech era as the international financial sector is. The IT sector in Malta is growing very fast and a number of IT services are now being offered by the financial industry. The local financial services regulator strives to stay ahead of the market and to ensure that the necessary legal frameworks are in place as regards FinTech. A number of areas are already well-regulated for FinTech with regulated FinTech products and services include:
- Peer-to-peer lending via an equity-based crowd-funding platform,
- Money transfer solutions such as:
- Payment service providers,
- E-wallets, as well as
- Online financial planning products.
Over the years, Malta has become an e-gaming and payment services hub. Through this, a number of licensed local institutions have seen an enormous growth. It is this growth that shows the appetite, so to speak, for such FinTech services in the financial landscape. This, combined with the robust financial sector in Malta, facilitates the growth of the local FinTech industry. This industry is expected to continue to grow.
Malta does not have a specific regime that regulates holding companies, i.e. a company holding shares of another company. However, it does have one for participation exemption which exempts any dividends or capital gains from qualified participants from taxation. This, together with the non-levying of withholding tax on outbound interest, royalties, or dividend payments, continues to make Malta an attractive holding jurisdiction.
Malta has provisions that exempt royalties derived from patents from taxation, until 2021. Malta has started to adopt a modified nexus approach for these royalties. Until then, the full imputation system and tax credit system offers an attractive alternative.
About Chetcuti Cauchi Advocates
Chetcuti Cauchi Advocates serves successful entrepreneurs, business families and institutions using the financial centres of Malta and Cyprus, and their advisors around the globe.
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