Doing Business Guide Malta - GKK Partners
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Edition No. 2 January 2019 Doing Business Guide Malta
About This This guide has been produced by the Morison KSi Maltese member firm
for the benefit of its clients and associate offices worldwide who are
Guide interested in doing business in Malta.
Its main purpose is to provide a broad overview of the various issues that
should be considered by organisations when setting-up business in Malta.
The information provided cannot be exhaustive and – as underlying
legislation and regulations are subject to frequent changes – we
recommend anyone considering doing business in Malta, or looking to
Malta as an opportunity for expansion, should seek professional advice
before making any business or investment decision.
While every effort has been made to ensure the accuracy of the information
contained in this guide, no responsibility is accepted for its accuracy or
completeness.
The information in this guide is up to date as at the edition date.
For more information, please contact:
KSi Malta
www.ksimalta.com
Bernard Charles Gauci
bgauci@ksimalta.com
+356 2122 6176
6, Villa Gauci
Mdina Road
BZN9031 Balzan
Malta
Disclaimer: Morison KSi is a global association of independent professional
firms. Professional services are provided by individual member firms.
Morison KSi does not provide professional services in its own right.
No member firm has liability for the acts or omissions of any other member
firm arising from its membership of Morison KSi.
www.morisonksi.comEdition No. 2 January 2019 Contents Introduction 1 Business Structures 2 Labour and Personnel 5 International Mobility 6 Taxation System 8 Banking and Finance 13 Reporting Requirements 14 Grants and incentives / Agencies providing assistance 15 Specific sectors with favourable business opportunities 17
Introduction Why Malta? • History: Malta is proud of its
ancient temples, which date back
Malta has been described as one of earlier in human history than any
the best places in the world to live, other structure in the world –
and an ideal choice for investment. In even the pyramids of Egypt.
a survey carried out by Expat Insider • Infrastructure: Malta is known
and published at InterNations. as a ‘smart island’ because of its
org (2016), Malta ranked in second excellent information technology
place as the best country for expats (IT) infrastructure.
to live in,1 based on its pleasant
climate, geographical position, • Safety: The UN World Risk
low crime rate, reliable banking Report Malta has consecutively
system, and – last but not least rated Malta as the second safest
– its tax planning incentives and country in the world, based on its
opportunities. exposure to and ability to cope
with natural disasters.2
The economy • Skills: As indicated in the
Education and Training Monitor
• Currency: Malta is a full member 2013 (issued by the European
of the European Union (EU), with Commissioner for Education,
the Euro as its official currency. Culture, Multilingualism and
Youth) Malta has amongst the
• Capital: The capital city of Malta
highest rates of graduates
is Valletta (named after the
among the 27 EU member states.
French nobleman, Jean Parisot
de la Valette, who led resistance • Labour: When it comes
against the Ottomans at the to recruitment and human
Great Siege of Malta in 1565). resources, Malta guarantees value
for money, as wages are highly
• Language: Despite being such a
competitive notwithstanding the
small country, Malta has retained
remarkable quality of Maltese
its own language, Maltese. Most
workers.
of its population also speak
English and Italian.
• Climate: Malta’s bathing water is
among the EU’s best, which is an
additional bonus to the Island’s
300 days of sunshine.
• Accessibility: There are directs
flights to/from all major cities in
Europe and North Africa.
1. See: www.internations.org/expat-
insider/2016/the-best-and-worst-places-
for-expats
2. See, for example: www.unu.edu/
media-relations/media-coverage/malta-
worlds-second-safest-country-again-
%E2%88%92-world-risk-report-2013.html
www.morisonksi.com Malta 1Business While business activities could be
carried out on a personal basis as
service provider (CSP) would
submit on behalf of the prospective
Structures self-employment, for additional
protection (in some cases) and
company the memorandum and
articles of association, mainly
formality one could consider the highlighting the name (a name
following types of structure. reservation facility in advance
is available), registered address,
Limited liability company main objectives (usually including
a number of secondary objectives
that entitle the company to perform
Any person, resident or not, may
its legal business, aside from the
set up a private limited liability
specified principal objectives), share
company (LLC) in Malta with a
capital composition and structure,
minimum paid-up share capital
board composition and the
of €233. By default, any LLC
company’s expected fixed duration,
incorporated in Malta obtains
if any.
Maltese fiscal residence and
domicile, and is thus taxable on
worldwide income. Compliance obligations of limited
liability companies
A Maltese LLC would generally have
LLCs registered in Malta must
the following characteristics:
prepare and submit an annual
return on the date of the company’s
• At any time, must have at least
annual anniversary together with
one director and one secretary
settlement of the annual fee, which
(this could be the same person)
ranges from €100 to €1,400. In
• Shareholders’ liability is limited addition, the company’s annual
to their capital contribution audited accounts would must
• By default, shares cannot be be submitted at the Registry of
sold to third-party shareholders Companies within 10 months
unless previously offered to after financial year-end (reduced
other existent shareholders to 7 months in case of public
(although different pre-emption companies).
rights could be set)
Redomiciliation of limited liability
• Must have its financial companies
statements audited and
submitted annually at the Malta allows for the redomiciliation
Registry of Companies. in and out of LLCs in terms of
‘continuation of companies’
How long does it take to form regulations. Any profits accruing to
a limited liability company? a company to be redomiciled into
Malta shall not be subject to any
Once all documents and signatures taxation in Malta.
are in place, and the necessary
due diligence testing successfully Branches in Malta
completed, a company is generally
set up within 3 business days. Presence through branches in Malta
must be registered as overseas
Establishment procedure of companies (OC) with the Registry
a limited liability company of Companies. A branch is merely
the extension of the actual foreign
Once the company and all involved company and would have no
parties have been duly vetted for separate legal entity.
due diligence purposes, a corporate
www.morisonksi.com Malta 2How long does it take to form an would have unlimited (general) accumulation and maintenance,
overseas company (branch)? liability. The capital of such fixed interest, spendthrift, charitable
partnerships may be divided into and unit trusts.
Once all documents and signatures shares.
are in place and the necessary How long does it take to form a
due diligence testing successfully trust?
Unless a partnership en commandite
completed, an OC to act as a branch
has its capital divided into shares
in Malta is generally set within 3 A trust need not be registered with
(in which case, is to be treated as
business days. any authority for its creation and
a company for tax purposes) all
can be legally set up unilaterally
partnerships, by default, are to be
Establishment procedure of an or bilaterally, by oral declaration,
considered ‘transparent entities’
overseas company (branch) or in writing. When dealing with a
for tax purposes, although they
written trust, the settlor must set up
could elect to be treated as normal
Once the company and all involved the trust with a licensed trustee. An
companies.
parties are duly vetted for due exception to this rule exists when
diligence purposes, a CSP would dealing with private and family
How long does it take to form a
submit on behalf of the prospective trusts, where the law provides the
partnership?
branch an authentic copy of the possibility for the trust to be set up
instrument of constitution, details either by (i) a notarial deed with a
Once all documents and signatures close family friend or relative acting
of directors and secretaries, and
are in place and the necessary as the trustee, or (ii) establishment
a return outlining the key details
due diligence testing successfully of a private trust company – that
of the prospective branch such as
completed, a partnership in Malta is, a private trust services provider
name, registered address and the
is generally set within 3–5 business without a licence, providing trust
activities to be carried out.
days. services only to family members.
Compliance obligations of an
Establishment procedure of a Establishment procedure of a trust
overseas company (branch)
partnership
Overseas companies generally When establishing a written trust,
A partnership en nom collectif is the settlor simply needs to decide
have to submit financial statements
formed by drawing up a deed of how they would like their trust to
consistent with those required for
partnership to be registered at operate, and ensure that the trust
LLCs to the Registry of Companies.
the Registry of Companies and to deed is drafted properly for the
Where the accounting requirements
include: (i) the name and residence beneficiaries. In this regard, the
of the place of origination differ
of each partner; (ii) the partnership’s settlor can also be a beneficiary.
from those of Malta, the Registry
name (ii) registered office; (iii) The settlor can also opt for
of Companies may still accept such
objectives; and the (iv) contribution the creation of an office of the
accounts, subject to full and clear
of each partner. protector to supervise the trustee
details about the activities in Malta
being included. in the management of the trust.
A partnership en commandite is Once a trust is set up, ownership
formed by drawing up a deed of of all the trust property passes on
Partnerships in Malta partnership to be registered at the to the trustee and not to the trust,
Registry of Companies and includes since a trust does not have legal
Partnerships in Malta could be details of who will be the general personality. Unless dealing with a
official setup under any of two and the limited partners. charitable trust, a trust cannot last
forms: more than 125 years.
Trusts in Malta
• Partnership en nom collectif in
Associations in Malta
which all partners would have
The Maltese legal system offers any
unlimited, joint and several
person the possibility to open a trust An association is created by
liability which could go beyond
under Maltese law. The law allows persons for the purpose of either
the initial capital contribution
for great flexibility in the creation of (i) promoting private interests, (ii)
invested therein.
a trust and thus allows all the main promoting a trade or profession, (iii)
• Partnership en commandite in kinds of trusts to be established achievement of a social purpose,
which at least one of the partners – including discretionary, or (iv) any other lawful activity
www.morisonksi.com Malta 3on a non-profit-making basis.
An association is thus the typical Foundations are set up
body utilised for trade unions and by public deed and are
organisations.
registered; despite this,
How long does it take to form an the contents of private
association?
interest foundations
Although an association need are confidential.
not be registered to be validly
constituted, an unregistered
association has limited legal Establishment procedure of a
personality. By comparison, foundation
registered associations have full
legal personality. Establishing a private interest
foundation requires a licensed
Establishment procedure of an entity to act as administrators to
association the foundation assets, similar to
a trust. The founders would thus
No special requirement exists in the need to establish a foundation
establishment of an association. deed for the beneficiaries. A public
The persons involved simply need purpose foundation on the other
to create a statute that suits their hand, does not require a licensed
purpose. entity to administer the funds
of the foundation. Unlike a trust,
Foundation in Malta a foundation will have legal
personality upon registration and
thus all foundation assets will be
A foundation in Malta can be
owned by the foundation. Both
established for a private interest
kinds of foundation can also opt
or for a public purpose. Private
for an office of the protector to
interest foundations act in a similar
supervise the management of
way to a trust, and also act as a
foundation assets. Private interest
wealth management tool. Public
foundations cannot last more than
purpose foundations, however,
100 years, while public purpose
serve as charitable institutions or
foundations can last indefinitely.
as bodies intended to promote a
specific purpose.
How long does it take to form a
foundation?
Foundations are set up by public
deed and are registered; despite
this, the contents of private interest
foundations are confidential. The
timeframe for the establishment of
a foundation essentially depends
on the founding members. The
minimum capital requirements
are €1,165 for a private interest
foundation and €233 for a purpose
foundation.
www.morisonksi.com Malta 4Labour and Minimum wage How are employee taxes handled
in Malta?
Personnel The labour market in Malta is
completely free, with minimal pre- Employers in Malta are required
set wage ranges and guidelines. to withhold tax from employees’
However, in 2019 the national salaries under the final settlement
minimum wage per normal working system (FSS). FSS works by
week for employees aged ≥18 years averaging the effective rate of tax
will be set at €175.84. chargeable on the employee and
applying that rate to the monthly
Working hours and leave salary. The amount so deducted
entitlement should be equal to the actual tax
chargeable on the individual. For
Generally, the normal hours of more information about FSS taxes,
work are 40 hours per week, but please refer to the section on
specific working-time patterns and individual taxation.
arrangements may be negotiated
between the employees and Employers must, by the last
employers. working day of the month following
that during which the salary would
Employees are entitled to 25 days have been earned, pay over to the
paid annual leave as from 1 January Commissioner the total amount of
2018 and would also be eligible for tax deducted or which should have
special time-off hours for reasons been deducted therefrom.
Labour laws and regulations such as maternity, paternity or
family emergency. Pregnant women Social security and similar
All employee–employer relations are entitled to an uninterrupted obligations of employment in Malta
are regulated by the Employment maternity leave of 14 weeks at full
and Industrial Relations Act (2002), pay, with the right to have this Employees and employers in Malta
which deals with a number of extended by a further 4 weeks make contributions with the aim of
issues such as (i) conditions of paid at the minimum wage. There being provided with medical care,
employment; (ii) protection of are also 14 days of public holiday pension, maternity benefits and
wages; (iii) termination of contracts each year, with no obligation to other social benefits. These are
and (iv) discrimination. compensate for these falling on categorised into (i) social security
a weekend. contributions and (ii) maternity fund
The typical probation period contributions (see Table 1).
of an employment contract is
6 months (although this could be
Table 1: Social security contributions in Malta, 2019
agreed differently). During the
probationary period, employment Employed persons
can be terminated with no reason, Paid by
as long as 1 week’s notice is given if
Type of contribution Employer Employee
the employee has already worked
for at least 1 month. Outside the Social security contributions 10% 10%
probationary period, termination Min €6.62 Min €6.62
of employment induced by either Max €46.53 Max €46.53
the employee or the employer
would require advance notice to
Maternity fund contribution Min €0.53 per week N/A
be given, depending on how long
Max 0.3%
the employee has been employed.
For example, an employee who has Self-employed persons
been in employment for between
Type of insurance
6 months and 2 years would
Social security contributions 15% Min €30.25
require an advance notice period of
2 weeks. Max €69.79
www.morisonksi.com Malta 5International Does Malta offer any specific
tax residence programmes?
Malta retirement programme
mobility Although it is possible to obtain
This applies to EU/EEA/Swiss
nationals wishing to retire in Malta
Maltese residence on the basis of and enables them to enjoy a flat
ordinary residence, as discussed tax rate of 15% on foreign income
below, Malta offers a number remitted to Malta (including pension
of programmes through which income, which must constitute at
one’s fiscal residence is officially least 75% of the applicant’s taxable
recognised and subject to certain income) rather than the progressive
beneficial treatments. tax rates outlined above, while
foreign capital gains would not
Global residence programme be subject to any taxes. This
notwithstanding, a minimum tax of
This applies to non-EU/EEA/ €7,500 is due annually and several
Swiss nationals and enables them requirements, including investment
to enjoy a flat tax rate of 15% on in (or rental of) real estate, must be
foreign income remitted to Malta satisfied.
rather than the progressive tax
rates outlined above, while foreign United Nations pension programme
capital gains would not be subject
to any taxes. This notwithstanding, Those receiving a UN pension or
a minimum tax of €15,000 is a widow’s/widower’s benefit who
due annually covering the main remitting 40% of this to Malta are
applicant and also any family not subject to any Malta taxes on
members so registered. Qualifying any UN pension received in Malta;
criteria include investment in (or they are also charged a flat tax rate
rental of) in real estate, health of 15% on other foreign income
insurance and payment of a brought into Malta. A minimum
government set application fee. tax of €10,000 is due annually
The programme is a recognised and various requirements must be
basis for being provided with a satisfied, such as investment in (or
Maltese EU Schengen visa and a rental of) real estate.
right to live and study in the EU/
EEA. Qualifying Employment in
Innovation and Creativity
Residence programme
Taking employment in Malta
Based on the global residence consisting of a senior position
programme (above), but applies to within entities directly engaged
EU/EEA/Swiss nationals and enables in industrial/product research and
them to enjoy a flat tax rate of 15% experimental development may
on foreign income remitted to Malta benefit on a 15% flat tax rate subject
rather than the progressive tax that the minimum annual salary is of
rates outlined above, while foreign €45,000. No tax would be paid on
capital gains would not be subject income exceeding €5,000,000.
to any taxes. This notwithstanding,
a minimum tax of €15,000 is Highly Qualified Persons
due annually covering the main
applicant and also any family Taking employment in Malta
members so registered. Qualifying consisting of a senior position
criteria include investment in (or within entities directly engaged
rental of) in real estate, health in Aviation/iGaming/Financial
insurance and payment of a Services/IVF Services may benefit
government set application fee. on a 15% flat tax rate subject that
www.morisonksi.com Malta 6the minimum annual salary is of
€84,000. No tax would be paid on Malta offers the
income exceeding €5,000,000. Individual Investor
Maritime Activities and the Programme (IIP),
Servicing of Offshore Oil and Gas recognised and
Industry Activities
approved by the EU,
Taking employment in Malta through which Malta
consisting of a senior position
within entities directly engaged in
offers citizenship by
Maritime and Oil and Gas Services means of a certificate
may benefit on a 15% flat tax rate
subject that the minimum annual
of naturalisation to
salary is of €65,000. No tax would individuals and their
be paid on income exceeding families in return
€5,000,000
for contributions
Does Malta offer any to the country’s
citizenship by investment economic and social
programmes?
development.
Malta offers the Individual Investor
Programme (IIP), recognised and
approved by the EU, through which
Malta offers citizenship by means
of a certificate of naturalisation
to individuals and their families
in return for contributions to the
country’s economic and social
development. The programme
offers unrestricted visa travel to
over 166 countries including the EU,
United States and Canada, as well
as the right to live and study in the
EU/EEA.
From a tax point of view, the
IIP would typically not result in
the individual acquiring Maltese
domicile (as explained above,
domicile remains tied to the country
of birth or the country of intended
permanent residence), unlike
residence which is a fundamental
requirement of the programme
itself. As a result, IIP applicants are
taxed on Malta-sourced income and
foreign income received in Malta,
at the progressive rates outlined
below, while foreign capital gains
received in Malta will not be taxed.
www.morisonksi.com Malta 7Taxation The Maltese general tax system
follows a three-based principle under
Maltese taxes would generally
be nil
System which Malta taxes:
• 2/3rds of the initial 35% paid by
the company in case of certain
• Income and capital gains sourced
foreign source income where
within Maltese territory
double taxation relief would have
• Foreign income and capital gains been claimed
derived by persons who are both
• 5/7ths of the initial 35% paid
ordinary resident and domiciled
by the company where the
in Malta
underlying profits involve passive
• Foreign income remitted into interest or royalties
Malta by persons who are
• 100% of the initial 35% paid by
either ordinary resident but
the company where underlying
not domiciled in Malta, or are
profits involve dividends and
domiciled but not ordinary
capital gains, subject to the
resident in Malta.
conditions of the participation
exemption (see section on
Taxation of companies dividends).
• Branches of an overseas
Companies incorporated in Malta company are also subject to
are taxable on their worldwide this treatment, but could avoid
income and capital gains at an initial paying any taxes on foreign
corporate tax rate of 35% on taxable capital gains or foreign capital
profit. Taxable profit is arrived at gains not remitted to Malta.
after allowing for a deduction of
all expenses that are wholly and
exclusively incurred in the production Notional Interest Deduction (NID)
of income.
As from 1st January 2017, Malta has
Reduced rates of tax for companies introduced thea Notional Interest
Deduction regime. The purpose of
The initial 35% corporate tax rate such regulation is to reduce any tax
could be lowered significantly to an disadvantages that entities may have
effective tax rate ranging from 0% when undertaking equity financing
to 6.25% following a distribution rather than debt financing. NID
of dividends (or issue of bonus provides for a framework whereby
shares) from the taxed company entities may opt (on an annual basis)
to its shareholders (see section to deduct an amount of interest that
on dividends). In this case, the is determined with reference to the
shareholders would request and value of the Company’s risk capital,
receive a tax refund from the Maltese which is made up primarily of its
Government of the initial 35% paid equity.
by the Maltese company, depending
on the underlying profits earned. The The way the mechanism works is
following are the possible rates of such that the shareholder/(s) of the
refund that could be claimed: Company must unanimously agree
to the application thereof given that
• 6/7ths of the initial 35% paid by in turn they would be deemed to
the company for an effective tax have earned an equivalent amount of
rate of only 5%. Where additional notional interest income. Such income
double tax relief in respect of would not be chargeable to tax in
foreign taxes of 5% or more Malta in the hands of non-residents,
could be claimed, the overall allowing for tax savings. A company
www.morisonksi.com Malta 8having a considerable amount of risk Notwithstanding any applicable individuals in receipt of inbound
capital may significantly reduce its double tax agreements or EU foreign dividends to claim relief not
tax charge for the year especially directives, dividends distributed only for the withholding tax and
when the mechanism is applied in out of Maltese companies to non- other direct taxes imposed on them
conjunction with the local tax refund resident shareholders would never as shareholders, but also for the
mechanism aforementioned in the be subject to any further taxation. corporate income tax (underlying
previous point. tax) paid by the non-resident
Dividend income received by Maltese distributing company on the profits
Losses and group of companies companies from outside Malta could from which the dividend is paid.
be subject to an outright exemption
Losses from the trading activities of (‘participation exemption’). In Companies are also eligible for an
a company may be carried forward general, for dividends received from additional mechanism of double tax
indefinitely for relief against future a foreign participating company, relief, known as the flat rate foreign
profits (capital or trading), or can a holding of at least 5% of the tax credit system (FRFTC). This
be transferred to other companies equity (although other parameters offers double tax relief by taking
within the same group. Capital losses are possible) would be subject to the form of a notional tax credit
may be carried forward indefinitely exemption from Maltese taxes. This of 25% of foreign taxes deemed
for relief against future capital gains exemption could also apply to gains to have been paid on qualifying
arising in the same company only. on disposal of shares in such foreign income.
participating companies.
In addition, besides exchanging Liquidation proceeds,
losses, companies forming part of Relief from double taxation
the same group can transfer capital payment of interest, royalties,
assets between them without Malta offers various means to discounts and premiums
incurring any taxes. This exemption avoid double taxation; the main
could be clawed back should two mechanisms are outlined below. Notwithstanding any applicable
companies no longer remain part of double tax agreements or EU
a group following an initial exempt Treaty relief takes the form of a tax directives, any payments from Malta
transfer of asset. credit granted for foreign tax paid in the form of liquidation proceeds,
on income received from a country interest, royalties, discounts and
Taxation of dividends with which Malta has signed a tax premiums will not be subject to any
treaty that makes provision for withholding taxes.
Malta operates a full-imputation double taxation relief. The amount
system regarding the distribution of of credit is the lower of Maltese Taxation of partnerships
dividends or issue of bonus shares tax on the foreign income and the
(seen as equivalent to dividends). foreign tax paid. Malta currently By default, partnerships other
This entails that when dividends are benefits from a network of double than partnerships en commandite
distributed from Maltese companies, tax treaties with over 70 countries, of which capital is divided into
notwithstanding whether or not the which facilitates business between shares are subject to ‘look-through’
shareholder is a company or resident the countries involved. taxation. This means that all profits
in Malta, no further tax is withheld or income earned by the partnership
on the said dividends and the initial The Commonwealth relief is a are divided in the profit-sharing
corporate tax paid is imputed to the limited form of double taxation ratio and brought to charge in the
shareholder as a credit of the tax paid. relief granted for taxes paid to hands of the partners by including
British Commonwealth countries in it as part of their taxable income,
The only instance whereby respect of income received from taxed at their respective tax rates.
dividends distributed by a Maltese such countries that provide a similar
company could be subject to further relief to Maltese-source income. Nevertheless, partnerships en
withholding taxes is if these are commandite of which capital is
paid from a company’s particular Unilateral relief works very much divided into shares or ‘look-through’
tax reserve (an ‘untaxed account’) in the same way as treaty relief, partnerships, which specifically
to Maltese resident individual except that it applies only where elect to be treated as companies
shareholders. In this case, the treaty relief is unavailable. With for tax purposes, would be treated
dividend would be subject to a effect from 1 January 2007, this as companies for income tax
withholding tax of 15%. relief has been widened to allow purposes without the application
www.morisonksi.com Malta 9Table 2: Personal tax rates for resident individuals (irrespective of domicile status)
Married Single Parent
Maltese resident and
Taxable Tax rate (%) Taxable Tax rate (%) Taxable Tax rate (%) domiciled individuals
income income income
are subject to Maltese
0–12,700 0% 0–9,100 0% 0–10,500 0%
12,701–21,200 15% 9,101–14,500 15% 10,501–15,800 15%
taxation on their
21,201–60,000 25% 14,501–60,000 25% 15,801–60,000 25% worldwide income,
Over 60,001 35% Over 60,001 35% Over 60,001 35% including capital gains.
Table 3: Personal tax rates for non-resident individuals (irrespective of domicile
status) than €35,000 or its equivalent
Taxable income Tax rate (%) in another currency – in the
0–700 0% case of a married couple, one
would have to look at the income
701–3,100 20%
derived by both spouses.
3,101–7,800 30%
Over 7,800 35%
As regards to capital gains arising
of the look-through approach. Such How does the status of residence outside Malta, the rules did not
partnerships would still be subject and domicile affect individuals’ change, that is, no tax would be
to the 35% initial corporate tax taxation? payable on capital gains arising
rate, but with the possibility of tax outside Malta irrespective of
refunds. Maltese resident and domiciled whether these are brought into
individuals are subject to Maltese Malta or not.
Individuals, expatriates and taxation on their worldwide income,
including capital gains. Alternatively, What are the applicable personal
residence schemes tax rates?
Maltese resident but not domiciled
How is an individual defined as tax (or vice versa) individuals who
Income tax for individuals is
resident of Malta? are neither permanent residents
calculated by applying a progressive
nor long-term residents would
tax rate schedule to taxable income
Generally, anyone who resides in be subject to Maltese tax only on
(see Tables 2 and 3). These apply
Malta for at least 6 months in a foreign income that they remit into
to any type of income derived by
year is considered a resident; but Malta. Henceforth, capital gains
individuals including employment
for taxation purposes, Maltese tax would not be subject to any Maltese
income, self-employment business
law looks at the notion of ordinary taxation even if received in Malta.
income, dividends, interest and
residence regardless of whether
royalties as long as such income
an individual has spent 6 months With effect from 1 January 2018, non-
would have not been subject to
in Malta or not. For an individual to domiciled persons will be subject to
separate final withholding taxes.
be considered ordinarily resident a minimum tax of €5,000 annually in
of Malta, Malta must be part of Malta. This minimum tax is payable if
Are any concessions made for
the individual’s regular order of the non-domiciled person:
assignees/expatriates in Malta?
life. Maltese tax authorities tend
to follow UK jurisprudence and • is not taxable in Malta in
Expatriates who render investment
practice in this matter. accordance with a scheme
or insurance services are generally
establishing a minimum amount
In addition to residence and exempt for 10 years from income tax
of tax in Malta, including The
ordinary residence, Malta also on specified fringe benefits.
Residence Programme, Global
relies on the concept of domicile. Residence Programme, Malta
Typically, persons who are not of In addition, individuals who are not
Retirement Programme and the
Maltese origin and who do not domiciled in Malta and who are
Residents Scheme Regulations;
intend to permanently establish in receipt of emoluments payable
and
themselves in Malta are not under a contract of employment
considered to be domiciled in Malta • derives income arising outside for an activity carried out in Malta
for tax purposes. Malta amounting to not less as an eligible office with companies
www.morisonksi.com Malta 10licensed/recognised in the Maltese non-residents, in terms of Article 73 • Interest deductibility limitation
gaming, aircraft and financial of the Income Tax Act (1948), where rule – came into force on
services sector may be subject to a person pays to a non-resident 1 January 2019;
tax on such income at a flat rate person any income chargeable
• Exit taxation rule – shall come
of 15% (instead of the progressive to tax in Malta, the payer must
into force on 1 January 2020;
rates up to 35% as set out above). withhold tax. The withholding tax
rate is 35% in case of a non-resident • General anti-abuse rule (GAAR)
Malta’s taxation system company and 25% in case of other – came into force on 1 January
non-resident persons. This is not 2019, and;
applied in specific
a final tax, and the non-residents • Controlled foreign company
circumstances can choose to file a tax return in (CFC) rule – came into force on
Malta and be taxed according to 1 January 2019.
Malta’s taxation system is usually the non-resident progressive rates
applied as outlined above, but as outlined above. If the income-
this section outlines certain Interest deductibility limitation rule
earning activities are definitely
circumstances or bodies of persons conducted outside Malta and the
that involve different tax treatment. The regulations limit the
said non-resident does not have a
permanent establishment in Malta deductibility of taxpayers’
Investment income exceeding borrowing costs (i.e. the
to which the income is connected,
there should be no withholding tax. amount by which the deductible
Certain investment income, such borrowing costs of a taxpayer, were
as interest from Maltese banks or it not for the provisions of these
other payers and other type of Further points of interest in
regulations, exceed taxable interest
income, could be subject to a final Malta’s taxation system revenues and other economically
withholding tax of 15% should it be equivalent taxable revenues that
so opted by the Maltese resident Advanced revenue rulings the taxpayer receives) to only up
recipient. to 30% of the taxpayer’s earnings
For extra convenience and clarity, before interest, tax, depreciation
Rental income Maltese tax authorities provide and amortization (EBITDA).
formal confirmations in the form
Rental income could be subject of advanced revenue rulings that As a result, any exceeding
to a final withholding tax of 15% remain binding for 5 years. With borrowing costs that exceed the
payable by 30 April of the year the Maltese tax authorities being 30% EBITDA threshold would be
of assessment – that is, the year particularly approachable, informal considered to be non-deductible
following the calendar year in non-binding yet still reassuring in the tax period in which they are
which income arises. This option confirmations are also very incurred, with a possibility to carry
would not allow any deduction of common. forward the excess, without time
expenses, even if directly related to limitation, and with a possibility to
the said rental income. EU ATAD implemented into carry forward, for a maximum of 5
Maltese domestic law years, unused interest capacity.
A person deriving rental income
may also opt not to be taxed at the The regulations shall apply to However, the regulations provide
15% withholding tax, but rather be companies as well as to other for several exclusions from, and
taxed on the rental profit margin entities, trusts and similar derogations to, the general rule.
at the progressive rates in case of arrangements that are subject to
an individual or at 35% in case of tax in Malta in the same manner as Exit taxation rule
companies. companies. The said regulations
shall also apply to entities that are A change of residence of
Taxes withheld in Malta on behalf not resident in Malta but have a company, or the movement of its
of non-residents a permanent establishment in Malta, assets or of its business to another
provided that they are subject to territory will be treated as a taxable
Although Malta does not withhold tax in Malta as companies. exit event. In such a case, the
any taxes on dividends, interest, company will become subject to
royalties, premiums, discounts and The regulations have introduced the tax in the same manner as if it has
liquidation proceeds payable to following anti-avoidance measures: disposed of its assets. The accrued
www.morisonksi.com Malta 11gains will be calculated by reference • To a CFC whose accounting
to the market value of the asset at profits amount to no more than
the time of the exit. 10% of its operating costs for the
tax period.
Depending on the destination of
the assets which may be subject
to exit taxation on the basis of this Indirect taxes
regulation and the recipient of those
assets, taxpayers may have the right The most common types of indirect
to defer the payment of the amount taxes in Malta are the following:
of tax by paying it in installments
over 5 years, although this would be Value added tax (VAT)
subject to the payment of interest
and, potentially, the provision of VAT is a tax incurred on
a guarantee. consumption the burden of which
ultimately falls on the end customer.
No exit tax will be chargeable in As far as VAT is concerned, Malta
the case of a temporary movement follows the EU’s directive and as
of assets that is linked to certain such VAT law is very consistent with
financial transactions as long as that of other EU countries except in
the assets are returned within 12 certain applicable rates or specific
months. matters. The standard rate is 18%
but other reduced rates such as 7%,
General anti-abuse rule (GAAR) 5% or 0% could apply.
This measure will accordingly apply Customs duty
to arrangements which are not
genuine, meaning that they are not Goods imported into Malta from
put into place for valid commercial outside the EU would typically be
reasons that reflect economic subject to VAT and would also be
reality, and which have been put subject to customs duty, depending
in place with a main purpose of on their type and place of origin.
obtaining a tax advantage that Should the imported goods have
defeats the object or purpose of tax originated from the EU, customs
law. duty does not apply.
Controlled foreign company (CFC) Excise duty
rule
Products such as tobacco, alcohol,
An entity will be considered a CFC fuel oils and mobile telephone
where it is subject to more than services are also liable to excise
50% control by a parent company duty in Malta.
that is tax resident in Malta and its
associated enterprises and the tax Stamp duty
paid on its profits is less than half
the tax that would have been paid Certain transactions are subject to
had the income been subject to tax stamp duty instead of VAT – such
in Malta. as transfers of immovable property,
marketable securities, insurance
The measure will not apply: policies or interest in partnerships.
• To a CFC with accounting profits
of no more than €750,000 and
non-trading income of no more
than €75,000; or
www.morisonksi.com Malta 12Banking and Maltese banking system • Copy of company’s incorporation
documents
Finance Malta’s banking sector has rapidly
evolved from retail banks serving
• Certificate of good standing for
company
the local population to a reputable
• Utility bill (for each beneficiary,
international financial hub. This
shareholder, director etc.)
has added dynamism to Malta’s
financial services industry, and the
expectation is that many other Accounts can be opened in all major
banking institutions will follow this currencies, including Euros (EUR),
lead. British pound (GBP) and US dollars
(US$).
Setting up a Maltese bank
account Maltese financing sources
Opening a bank account in Malta Domestic small and medium
is usually a simple process if you enterprises (SMEs) are more
meet the terms and conditions. Bank dependent than their European
accounts are not opened solely to counterparts on bank overdrafts,
Maltese residents: non-residents and credit lines or credit card facilities,
foreign companies can also open an according to a survey carried out
account in Malta. by the Central Bank of Malta in
conjunction with the European
Foreign nationals wishing to set up Commission and the European
a bank account in Malta must have Central Bank1). In 2014, more than
a connection with Malta and supply 70% of Maltese SMEs used these
documentation for the relevant types of financing, compared with
qualifying criteria, such as: around 37% in the EU – an inefficient
strategy, the survey suggests,
• Renting a property in Malta – a given that banks typically charge
valid rental agreement of at least higher interest rates on these forms
6 months of financing, compared with bank
loans.
• Buying a property in Malta –
preliminary agreement
• Working – contract of work,
which must bear the employer’s
name and address
• Owning a property – contract of
purchase
Foreign companies can also open a
bank account in Malta by supplying
the necessary documentation, such
as:
• A reference from a bank you
currently hold an account with
(for each beneficiary of the
business)
• Copy of passport (for each
beneficiary, shareholder,
1. Download: www.centralbankmalta.org/
director, etc.) file.aspx?f=31397
www.morisonksi.com Malta 13Reporting Every Maltese registered
company is required to submit an
• Filing of income tax returns
by partnerships that have
Requirements annual return to the Registrar of
Companies, accompanied by the
not elected to be treated as
companies: The tax year-end
appropriate registration fee, upon will always be 31 December and
each anniversary of the company’s the deadline for the filing of tax
registration. The return should be returns is 30 June of the year of
signed by at least one director or by assessment (the year following
the company secretary and should the calendar year in which
be submitted to the Registrar no later income arises).
than 42 days from the anniversary
date. Annual accounts need to be Audit
submitted to the Registrar no later
than 10 months and 42 days (in Although thresholds exist in terms of
the case of a private company) or the Companies Act (1995), Maltese
7 months and 42 days (in the case of income tax law prescribes that all
a public company) from the financial companies, regardless of size and/or
year end. The statutory accounts turnover, are subject to full audits.
of a Maltese company are required
either to meet the requirements of
International Financial Reporting
Standards (IFRS) or General
Accounting Principles for Small
Medium Enterprises (GAPSME). It is
important to note that penalties are
incurred for late filing of accounts;
the size of the charge depends on
the number of months late.
Tax
• Filing of income tax returns by
individuals: The tax year-end
will always be 31 December and
the deadline for the filing of tax
returns is 30 June of the year of
assessment (the year following
the calendar year in which
income arises).
• Filing of income tax returns by
companies is made in the year
of assessment – that is, the year
following the calendar year in
which income arises, as follows: Table 4: Deadlines for filing tax return
Financial year-end Deadline for filing of tax return
30th June or earlier 31st March of the following year
31st July 30th April of the following year
31st August 31st May of the following year
30th September 30th June of the following year
31st October 31st July of the following year
30th November 31st August of the following year
31st December 31st September of the following year
www.morisonksi.com Malta 14Grants and Through a business-friendly agency,
the Maltese Government offers
Tax credits for qualifying
certifications (2018-2020)
incentives a number of additional fiscal and
non-fiscal incentives to start-ups
Undertakings looking to
and businesses in general. Some of
continuously improve the quality
the currently available incentives
of their products, services
Agencies are described briefly here.
and processes through the
attainment of industry-recognised
providing Investment tax credits
(2014–2020)
certifications and quality marks may
also be supported through a tax
assistance This is a tax incentive primarily
credit up to €25,000 by recovering
the costs of achieving approved
aimed at manufacturing industries, certifications, quality marks, or
although it may also apply to licences. This incentive should
certain other sectors. It typically make it easier for undertakings to
consists of credits that can be carry out investments that lead
deducted from taxes due on to superior products, services of
chargeable income. Two types of higher value and more efficient
investment tax credits (ITCRs) are processes.
available:
Tax credits for assistance for
• ITCRs calculated as a percentage research and development
of a company’s expenditure
on qualifying tangible and
and innovation (2014–2020)
intangible assets in relation to an
initial investment project Expenditure on industrial research
or experimental developments
• ITCRs calculated on the value carried out for the acquisition
of wage costs for jobs directly of knowledge leading to the
created by the initial investment development of innovative
project. products and solutions may also
qualify for tax credits and/or cash
The percentage at which the ITCRs grants calculated on the basis of
are calculated varies depending qualifying R&D expenditure, subject
on the size of the business and the to conditions.
amount of qualifying expenditure.
Business start (valid until
Tax credits for small and 30 October 2020)
medium enterprises
(2014–2020) Small start-up enterprises that have
a viable business concept and are
SMEs may also be eligible for tax in the early stages of development
credits in respect of investment may be supported through a grant
seeking to innovate, expand or of up to €25,000.
develop operations. The tax credit
is calculated as a percentage of Start-Up Finance (2017-2020)
wages, furbishing and refurbishing,
investment and/or motor vehicle The aim of this measure is to
costs. The maximum eligible tax finance innovative undertakings in
credit is capped at €50,000, which their early stages of development
can increase to €70,000 for SMEs by supporting Small Start-up
established in Gozo, female-owned Undertakings that demonstrate
undertakings and those registered a viable business concept in the
as a family business. setting-up and initial growth phases.
www.morisonksi.com Malta 15Support is linked to private Finance to SMEs
equity, crowd funding and the
procurement of machinery and Attractive financing packages
equipment. Depending on the type are available to SMEs seeking to
of support provided, assistance support their growth through
may be up to Euro 100,000 if linked capital investment. Though subject
to crowd funding campaigns and up to normal banking criteria, these
to Euro 200,000 when the support facilities offer advantageous
is linked to private equity or interest rates and considerably
required to fund the procurement reduced collateral obligations.
of machinery and equipment.
Start-up investment grant
Micro Guarantee Scheme
scheme (valid until 2020)
(2017-2020)
This grant offers a reimbursement
This Micro Guarantee Scheme
of up to 50% of the investment
shall provide eligible undertakings
cost, up to a maximum of €300,000.
with a guarantee of up to 70%
on loans required to finance
business enhancement, growth and SME growth grant scheme
development. (valid until 2020)
Rent subsidy (1 March 2016 to This grant offers a reimbursement
31 December 2019) of up to 30% (20% for medium-
sized enterprises) of the investment
cost, up to a maximum of
Small undertakings engaged in
€500,000.
manufacturing activities that require
industrial space as a temporary or
permanent solution to implement
growth plans, handle an increase
in orders, and/or carry out process
innovations required to increase
efficiency may be supported
through a grant of up to €20,000.
www.morisonksi.com Malta 16Specific sectors Aviation licensed shipping organisation
may be exempt from tax under
with favourable The following are among the
various fiscal incentives available in
the Income Tax Act, provided
that the registration fees and
business this sector: tonnage taxes are duly paid;
• Instead of calculating the tax
opportunities • income derived by non-Maltese
resident operators from the
due according to income, profit
or gains deriving from shipping
ownership, leasing or operation activity, a flat rate will be paid
of aircrafts or aircraft engines in accordance with the net tons,
used in international aviation where the regime specifies the
business, such as transport of standard rates applicable;
passengers or goods, will not
• The inapplicability of the Social
be taxed in Malta unless such
Security Act, provided those
income is actually received in a
involved are operating as
Maltese bank account. This will
officers of employees within a
apply despite the fact that the
licenced shipping organisation,
aircraft may be registered and/or
and are not resident in Malta;
is operated in/from Malta
• The Duty on Documents will
• Should any Maltese tax be
also be exempt in relation to the
incurred eventually, through
tonnage tax ship.
Malta’s tax refund system, this
may be lowered to an effective
tax rate of 5% or lower Movies and filming
• A considerable cash flow
advantage by enjoying an Besides Malta’s natural beauty and
accelerated tax depreciation multicultural surroundings, which
rates: 6 years for the aircraft over the years have attracted a
and engines, and 4 years for the number of blockbuster Hollywood
interiors. movies, several financial and fiscal
incentives are offered in this sector.
Of particular relevance is the
Yachting and shipping opportunity for producers filming
in Malta to enjoy a cash rebate of
The commercial shipping sector up to 25% on eligible costs incurred
offers a number of incentives, while in Malta.
primarily a highly reputable flag at
reasonable costs. Income derived Investment funds
from commercial yachting and
shipping activities would still enjoy
iGaming and iBetting Malta is gaining a strong reputation
low rates of income taxes as per the
for being an efficient and reputable
usual refund system.
fund jurisdiction, with a number
Besides experiencing an effective
of world-renowned specialised
corporate tax rate of only 5% or As of 1 April 2018, Malta finally
parties ancillary to this sector
lower, Maltese iGaming and iBetting re-introduced the Tonnage Tax
already established. In addition to
companies also enjoy very low Scheme, strengthening our tonnage
offering clear and practical licensing
gaming taxes and licence fees. tax principles, whilst also promoting
procedures, Malta offers a number
International statistics continuously the registration of ships in Malta
of fiscal incentives such as the
show that Malta remains the leading and Europe. The scheme provides
absence of any taxes withheld on
iGaming jurisdiction in Europe – a that:
the net asset value of the fund.
status acquired by offering the right
blend of low-cost incentives while • Any income, profits or gains
also guaranteeing high EU-standard which derive from shipping
regulation. activities carried out by a
www.morisonksi.com Malta 17The Next Step
To discuss your needs, please contact:
KSi Malta
www.ksimalta.com
Bernard Charles Gauci
bgauci@ksimalta.com
+356 2122 6176
6, Villa Gauci
Mdina Road
BZN9031 Balzan
Malta
Disclaimer: Morison KSi is a global association of independent professional
firms. Professional services are provided by individual member firms.
January 2019
Morison KSi does not provide professional services in its own right.
No member firm has liability for the acts or omissions of any other member
firm arising from its membership of Morison KSi.
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