Company and Jurisdictions
International Holding Company (IHC)/International Trading Company (ITC)
|Companies Act 1996.||LM500 (approximately Euros 1,170), 20% paid up.|
|Annual government fees:||Corporate Taxation:|
|Euros 180.||35% but may be reduced to 4.2% for ITC’s and between 0 and 6.5% for IHC’s when applying tax refund provisions to non-resident shareholders.|
|Time to incorporate:||Ready-made companies:|
|2 weeks.||Not generally available.|
|Minimum members:||Registered office required:|
|Single shareholder companies possible.||Yes, must be maintained in Malta.|
|Local registered agent:||Minimum number directors:|
|Yes.||One, individual or corporate. A register of directors must be filed with the Registrar and is open to public inspection. An individual must be appointed as secretary.|
|Officer to be locally resident:||AGM required:|
|No, but the Company is resident in Malta by reason of its incorporation.||Yes.|
|Annual return required:||Financial statements to be prepared and/or audited:|
|Balance sheets to be filed:||Share register required:|
|Yes. Accounts must be submitted with Annual Return.||Yes, at registered office|
|To be filed with Registrar:||Open to public inspection:|
|All changes in shareholding to be filed with Registrar of Companies.||Yes.|
|Exchange controls:||Redomiciliation permitted:|
|No.||Yes, in or out.|
|Language of incorporation:||Confidentiality:|
|English.||Confidentiality is governed by the Professional Secrecy Act, which has established a high common standard of confidentiality for all professional practitioners. Those who violate professional secrecy may be prosecuted under Section 27 of the Criminal Code and on conviction may be liable to fine or imprisonment.|
|Bearer shares permitted:|
- Full member of European Union can take advantage of EU Directive 90/435.
- Ideal holding company location and recipient of royalties and interest from EU.
- Within EU VAT area and VAT registration number easy to obtain. Ideal location for holding property in Portugal.
- Unusual tax system. High tax rates are actually paid but reclaimed by non-residents shareholders upon distribution of dividends, so no question of the company being a low tax entity.
- Good range of tax treaties, which should be effective due to high tax paid by Malta companies.
- Full audit required but costs relatively low.
- Slightly cumbersome incorporation procedure due to necessity of opening of local bank account for company in formation. .
OECD Harmful Tax Practices
Malta was one of six jurisdictions that gave an advance commitment to the OECD, on 19 May 2000, to exchange information with overseas authorities in criminal tax matters by 31 December 2003 and in civil tax matters by 31 December 2005.
Tax Information Exchange Agreement (TIEA)
EU Savings Tax Directive
Having recently become a Member State of the EU, Malta is required to collect and exchange information about savings income derived by taxpayers of other Member States, as of 1 July 2005.
Financial Action Task Force (FATF)
Malta’s regulatory regime was reviewed by the FATF in 2000. It was found to have a “comprehensive” anti-money-laundering system and was not therefore identified by the FATF in June 2000 as a non-cooperative country or territory (NCCT) in the fight against money laundering.
In January 2002, the Council of Europe Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures (MONEYVAL) conducted a second round mutual evaluation of the overall effectiveness of the Maltese anti-money laundering system and practices, including compliance with the FATF Special Recommendations on Terrorist Financing. The review found that Malta was in partial compliance with Special Recommendation No. 1 (ratification and implementation of UN instruments), because it had signed and ratified the pertinent UN Conventions, but had not yet fully implemented UNSCRs 1269, 1373, and 1390.
Mutual Legal Assistance Treaties (MLATs)
Malta is a party to the 1988 UN Drug Convention, the UN Convention against Transnational Organised Crime and the UN International Convention for the Suppression of the Financing of Terrorism. Malta has ratified the Council of Europe Convention on Laundering, Search, Seizure, and Confiscation of the Proceeds from Crime and the Council of Europe European Convention on the Suppression of Terrorism, and has amended its criminal code to be in alignment with these conventions.
Malta signed an agreement with the European Police Office (Europol) in April 2004 that will enhance the cooperation between Malta and the European Union, through Interpol, in combating international crime.
In 2004, the Malta Financial Services Authority signed Memorandums of Understanding (MOUs) with the Guernsey Financial Services Commission, the UK Financial Services Authority and the Gibraltar Financial Services Commission to provide a formal basis for cooperation, including exchange of information and investigative assistance.
Malta has entered into a considerable number of double-tax treaties. At the beginning of 1996 Malta substantially revised its corporate law so as to remove the distinction between offshore and onshore companies and thereby ensure that Maltese companies will obtain favourable treatment under these tax treaties. As a result, the treaty benefits are available to all Maltese companies other than Offshore Companies (which pay a fixed rate of tax of 5% on world wide income and are due to be phased out by the end of 2006).
Malta has 41 Double Tax Treaties currently in force:
- Czech Republic
- South Africa
- United Kingdom
Treaties signed but not yet in force:
Treaties awaiting signature:
Treaties under negotiation:
- United Arab Emirates
|Full Country Name:||Republic of Malta|
|Area:||316 sq km|
|Population:||398,534 (July 2005 est.)|
|People:||Maltese (descendants of ancient Carthaginians and Phoenicians, with strong elements of Italian and other Mediterranean stock)|
|Languages:||Maltese (official), English (official)|
|Currency:||Maltese lira (MTL) – MTL 0.37 per USD (2004)|
|Government:||Republic, parliamentary democracy|
|Legal system:||Based on English common law and Roman civil law; accepts compulsory ICJ jurisdiction, with reservations|
|Head of State:||President Eddie Fenech Adami|
The Republic of Malta is an archipelago of six islands; Malta, Gozo and Comino are inhabited. It is situated in the centre of the Mediterranean, (58 miles to Sicily, 180 miles to Libya).
The Romans made Malta part of their empire in 218 BC. St Paul was shipwrecked on Malta in AD 60, and converted the Maltese people to Christianity. Malta was under Arab rule in the 9th and 10th centuries, which strengthened the Semitic roots of the Maltese language. In 1530, the Emperor of Spain gave Malta to the Knights of the Sovereign Military Hospitaller Order of St John of Jerusalem. They survived a three-month siege by the Turks in 1565 and governed until 1798 when Malta fell to Napoleon. In 1800, the Maltese expelled the French with the assistance of the British Royal Navy.
In 1814, Malta became a British colony. Malta was an important naval base, being strategically placed between Europe and North Africa. During World War Two, it was subjected to a long blockade and five months of bombing raids by the Axis powers. Malta was devastated but did not surrender. In 1942 the island of Malta was awarded the George Cross.
Malta gained independence from the UK in 1964 and became a republic in 1974. In the 1970s and 1980s, the then Labour government, led by Dom Mintoff, turned away from Europe and forged links with the Soviet Union, North Korea and Libya. The Nationalist Party’s election victory in 1987 saw a new emphasis on EU membership. Neutrality remains enshrined in the Constitution.
The Nationalist Party Government applied in 1990 to join the EU and received a positive European Commission Opinion in 1993. The Labour Government of 1996-1998 froze, but did not withdraw, the application for membership. The Nationalist Party reactivated it on their return to office in September 1998. The Helsinki European Council in December 1999 formally invited Malta to open EU accession negotiations. These were completed in December 2002.
Public opinion on EU membership remained split. The opposition Malta Labour Party wanted a “partnership” with the EU but not membership. On 8 March 2003, 92% of the Maltese electorate of 297,000 voted in the government’s EU referendum. 53.6% of those who voted said yes to the EU. Malta signed the EU Accession Treaty in Athens on 16 April 2003. Malta entered the EU on 1 May 2004.
Government and Politics
|Head of State:||President Eddie Fenech Adami (since 4 April 2004)|
|Head of Government:||Prime Minister Lawrence Gonzi (since 23 March 2004)|
|Cabinet:||Cabinet appointed by the president on the advice of the prime minister|
|Elections:||President elected by the House of Representatives for a five-year term; election last held 29 March 2004 (next to be held by April 2009); following legislative elections, the leader of the majority party or leader of a majority coalition is usually appointed prime minister by the president for a five-year term; the deputy prime minister is appointed by the president on the advice of the prime minister|
|Election results:||Eddie Fenech Adami elected president; percent of House of Representatives vote - 33 out of 65 votes|
Unicameral House of Representatives (usually 65 seats; note - additional seats are given to the party with the largest popular vote to ensure a legislative majority; members are elected by popular vote on the basis of proportional representation to serve five-year terms)
Elections: last held 12 April 2003 (next to be held by April 2008)
Election results: percent of vote by party - PN 51.7%, MLP 47.6%, AD 0.7%; seats by party - PN 34, MLP 31
Constitutional Court; Court of Appeal; judges for both courts are appointed by the president on the advice of the prime minister
Political parties and leaders
Alternativa Demokratika/Alliance for Social Justice or AD (Harry Vassallo); Malta Labour Party or MLP (Alfred Sant); Nationalist Party or PN (Lawrence Gonzi)
Basic economic facts
GDP (2004 est.):USD 7.223 billion
Growth rate (2004 est.):1%
Per capita GDP (2004 est.): USD 18,200
Major Industries: Tourism, electronics, the Malta Freeport (duty free container trans-shipment port) financial services, shipbuilding and repair
Almost entirely lacking energy or other natural resources, and with a severe shortage of arable land, Malta is an import-hungry country. In the last 15 years, the Government has tried hard to create a high-technology manufacturing sector and to establish processing and distribution facilities around its rapidly growing Freeport. There are extensive investment incentives. Manufacturing, tourism and shipping go some way towards paying for imports, but the gap cannot be closed without the development of a financial services sector.
Maltese financial services legislation was relatively late in arriving, and while these sectors are growing, they are not on the scale of some other offshore financial centres. Malta joined the European Union (EU) on 1 May 2004. As part of its preparation for this event, Malta strengthened its regulatory regime and introduced measures to attract European investors and to shed its image as an offshore tax haven. Malta has made significant headway, introducing EU-compliant legislation for the prevention of money laundering and strong financial services legislation.
Since 1997, Malta has been closing the loopholes on all offshore financial activities. All licenses for offshore registered businesses expired on 30 September 2004, completing Malta’s transition from an economy with over 400 international business corporations in 2001 to a country where offshore banking and business is no longer permissible. Companies and trusts are now well regulated, and international entities are subject to 35% tax. Bearer shares or anonymous accounts are no longer permitted in Malta.
Malta now offers two types of company that will be of interest to the tax planner: the International Holding Company (IHC) and the International Trading Company (ITC). These entities are designed to take advantage of the many tax treaties signed by Malta (see above). The ITC is statutorily defined as a company that is engaged solely in carrying on trading activities from Malta with persons outside Malta and has objects expressly limited to such trading activities. The ITC may not hold foreign investments or equity. An IHC is a company whose activities are limited to foreign equity participation and other similar passive income generating activities. Such entities are taxed in a particularly advantageous manner where income is received from “participating holdings”.
There is a reasonably sophisticated business and professional infrastructure. Business sectors with offshore activity include banking, investment fund management (there is a stock exchange with a growing array of mutual fund listings), trust management, shipping (a particularly strong sector) and investment holding.
The Maltese Financial Services Authority (MFSA) is the regulatory agency responsible for licensing new banks and financial institutions; additionally the MFSA has been responsible for monitoring financial transactions going through Malta since the supervisory function of the Central Bank of Malta was passed to the MFSA in 2002. Recently the MFSA widened its regulatory scope to encompass banking, insurance, investment services, company compliance, and the stock exchange. The MFSA has a rigorous process of analysing companies prior to granting a license. This entails detailed analyses of all the applications it receives, including information about the directors and other persons involved in the management of the company.
In December 2001, Malta’s parliament established the Financial Intelligence Analysis Unit (FIAU) through an amendment to the Prevention of Money Laundering Act, 1994, to serve as Malta’s Financial Intelligence Unit (FIU). The unit became fully functional in October 2002.Malta will be home to a World Trade Centre as its application for membership to the World Trade Centres Association (WTCA) was accepted in March 2001. The government has stated that it sees the establishment of a World Trade Centre as 'an additional and very important step in the promotion and development of Malta as a principal hub for trade in the Mediterranean region.'
With its central location in the Mediterranean, Malta has long portrayed itself as a bridge between Europe and North Africa, particularly Libya, with whom it has enjoyed positive diplomatic and commercial ties. Malta now constitutes the southernmost flank of the European Union. Malta continues to be an active participant in the United Nations, the Commonwealth (in 2005 Malta hosts the Commonwealth Heads of Government Meeting), the Council of Europe, OSCE, the Non-Aligned Movement, and various other international organisations.Malta is a founding member of the MONEYVAL and chaired the committee until December 2003. The FIAU became a member of the Egmont Group in July 2003. Malta is no longer a member of the Offshore Group of Banking Supervisors, but has joined the International Organization of Securities Commissions (IOSCO).