MALTA INTERNATIONAL TRADING COMPANIES
The tax regime governing taxation of
profits of an ITC works like this.
Lets assume the ITC makes a yearly
Lm1000 profit on its global trading transactions. At the end of the
accounting year (every ITC can choose its accounting date to suit
its purpose) the ITC pays company tax on profits of 35% (therefore Lm350)
and distributes the remaining Lm650 as dividend. At that stage the shareholders
will claim a refund of 7.5% of the gross profits, that is Lm75, and a
refund of two thirds (2/3) of the corporate tax paid, that is 2/3 of Lm
350 equal in all to Lm233.33. These refunds are paid by the Inland Revenue
Department to the ITC within 14 days from the date of the request made to
the Inland Revenue Department.
Therefore still using the above
figures, if the ITC during the year makes a global trading profit of
Lm1000 and say its accounting period ends on 31st December, then on the
31st December it pays Lm350 corporate tax, and on the 1st January the
shareholders apply for the refunds. By the 15th January they will receive
Lm308.33 by way of tax refunds, which means that only Lm 41.67 is paid by
way of final tax - that is an effective tax rate of 4.17%. No withholding
taxes, stamp duties or exchange control restrictions apply on distribution
of the profits or dividends to the shareholders and there are no taxes or
restrictions on the exportation of the dividends from Malta. This
means that funds finding their way to Malta may be remitted anywhere
around the world.
| |
ITC
profits |
Distributions
to s/holders |
Tax
paid |
| ITC
year profit |
Lm
1,000 |
|
|
| Corporate
tax @ 35% |
|
|
Lm
350 |
| Distributed
dividend |
|
Lm
650 |
|
| 7.5%
tax refund on gross profits |
|
Lm
75 |
|
| 2/3rds
tax refund on corporate tax |
|
Lm
233.33 |
|
| |
|
|
|
| Totals |
Lm
1,000 |
Lm
958.33 |
Lm
41.67 |
Therefore the actual tax paid on a
profit of Lm1,000 is Lm41.67 which is equal to a tax rate of 4.17%.
There are no further withholding taxes or other payments to be made by the
ITC or by the shareholders themselves, and therefore the final total tax
rate is always 4.17%.
Moreover, Malta has thirty-four Double
Taxation Agreements in place and these can be made use of to
further diminish the tax that shareholders may have to pay in their
ordinary place of residence on the dividends received from the Maltese
company. For the full text of all the Double Taxation Agreements click
here.
As from the 1st May 2004, Malta has
joined the European Union. The accession has had no effect at all on
the taxation of International Trading Companies which continue to enjoy
all the tax advantages. However, from now on, all International
Trading Companies will have an EU VAT number which will render them more
transparent and better able to carry on trade within the European Union.
VAT should have no major impact on
these companies because most of the VAT they charge or pay will be
'neutral' under the reverse charge mechanism and VAT paid by these
companies for services and supplies received can be set-off as output vat
against their input VAT. VAT regulations are complex and we
suggest that you contact
us with any enquires you might have. Our tax and VAT
consultant, Mr. Chris Sammut will be happy to assist you with your
questions.
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