Malta has a vibrant and strong economy and has long been viewed as a gateway between Europe and Africa, it is ideally placed to facilitate international business. Malta is a full member of the European Union that has enacted very favourable tax legislation that enables clients to trade or hold assets in a low cost and low tax environment. The Maltese International Trading Company (ITC) and International Holding Company (IHC) are highly effective corporate entities with which to carry out cross border trade and investment, they are able to benefit from corporate tax rates of 4.17% and 0% respectively.

The Maltese ITC is used extensively for cross border European trade and is able to access Malta’s large network of double tax treaties. The ITC is a tax resident Company that files auditored accounts in Malta and benefits hugely from Malta’s imputation tax system. The ITC can be registered for VAT in Malta and does not require a resident Director.

The Maltese IHC is very similar in its makeup, however, it must only be utilised as a holding structure. The IHC is commonly used to hold interests in other foreign corporations, enabling the free flow of dividends and capital gains from the foreign corporations to Malta, without Withholding Tax, by utilising Malta’s excellent double tax treaty network. The IHC is not taxed on foreign sourced income from it subsidiary companies and does not require a resident Director.

The benefits of Malta are obvious and should be seriously considered by anyone looking to trade in or with the European Union or create a very favourable holding structure.

Maltese Companies – The Benefits

Why Malta and Maltese Companies?

The significant advantages of Malta as an international business centre:

Other benefits of Malta companies:

Operational Case Study

An International client is seeking to establish an International Trading Company is a respectable tax paying jurisdiction.

The client, Mr. Rossi, is trading in buying and selling electronic goods from Malaysia to their clients in Italy. It is decided that an International Trading Company (ITC) is registered in Malta which does business exclusively with non-residents of Malta, both in fact and according to its Articles.

An International Trading Company pays an effective rate of tax of only 4.17% under the Maltese tax imputation system. In addition it is able to make use of Malta's many double taxation treaties. The beneficial owners of an ITC can remain confidential if they incorporate the company through a licensed nominee company. As regards its legal basis, the ITC is formed as a private limited company.

Mr. Rossi has an opportunity to sell electronic goods to an Italian supermarket chain and has sourced a suitable supplier in Malaysia. Mr. Rossi thus wishes to establish a suitable entity that is EU resident, tax paying, as well as being tax efficient for Mr. Rossi’s own personal requirements.

Thus, Mr. Rossi, via his ITC, enters into contracts with the Malaysian supplier and the Italian supermarket chain and arranges to ship the goods from Malaysia to Malta. On arrival of the goods in the Maltese Free trade zone, the documentation is replaced with that of the Maltese company and exported to Italy. There is no VAT charged on the sales invoice from Malaysia to the Maltese ITC as is an export from Malaysia.

The Maltese ITC, registered for VAT in Malta, will be obliged to quote their VAT number on their invoice to the Italian supermarket chain, as well as the Italian supermarket chain’s VAT number which will enable the Maltese ITC to zero rate the supply to Italy. The Italian supermarket chain will account for VAT on the supply in the usual manner within Italy.

The Italian supermarket chain on receipt of the goods will pay the agreed amount by whatever form of payment to the Maltese ITC, who in turn pays the Malaysian supplier.

The profit gained by the Maltese ITC as earlier indicated will be taxed effectively at 4.17%. The resulting dividend can be paid to Mr. Rossi, without suffering any withholding tax and to wherever Mr. Rossi wishes.

Potential Issues

Clients wishing to benefit by utilizing Malta should contact a Director or Consultant in our London office.