Refunds are paid out by the Malta Inland Revenue Department within two weeks of payment of the corporate tax. 
Here’s an example of how that works…

ITC Profits Refunds Tax Paid
ITC world-wide profit 1,000.00 
Corporate tax @ 35% 350.00
Distributed dividend 650.00 
7.5% tax refund: gross profits 75.00 
2/3rds tax refund: corporate tax 233.33 
Totals 1,000.00 958.33 41.67

There are no further withholding taxes or other payments to be made by the ITC or by the shareholders and therefore the final total tax rate is always 4.17%. There are no taxes or restrictions on the exportation of the dividends from Malta.

International Holding Companies—Tax Rates From 12% To ZERO

International Holding Companies are not allowed to trade. Their aim is to “hold” shares in one or more overseas companies and to own and manage assets held outside Malta.

The company will receive royalties, dividends, interest, capital gains, rents, and other income arising abroad or derived from foreign investments, as well as its own dividends. At the end of its financial year, the company audits its accounts and pays corporate tax at 35% on its world-wide income. Shareholders then benefit from considerable tax benefits through a system of tax refunds.  Non-resident shareholders of holding companies, upon payment of the corporate tax, become entitled to tax refunds as follows:

• 100% refund of the corporate tax paid where the overseas investment from which the income derives is considered to be a “qualifying participation,” making an effective ZERO rate of tax; or

• 2/3 refund of the corporate tax paid where the overseas investment from which the income derives is not a qualifying participation, making an effective tax rate of 11.67%.
A qualifying participation means any one of the following:

• The IHC holds 10% or more of the shares of an overseas company; 

• The IHC is entitled at its option to purchase or has the first right of refusal on a disposal of the balance of the equity shares of the overseas company; 

• The IHC is entitled to be represented on the Board of Directors of the overseas company; 

• The value of the shareholding exceeds Lm500,000 (approximately US$1.5 million) or equivalent in foreign currency; 

• The shares are held in the overseas company for the furtherance of the business of the IHC.
Once again there are no withholding taxes or other taxes on the dividends distributed to the non-resident shareholders.

Please refer to the table on the next page to help you compare the advantages of ITCs and IHCs.
You Might Not Have to Pay Tax in Your Home State, Either! Depending on where you live, your government may or may not tax you on the profits from a Maltese company you own or control.

If you live in a country like Panama, which doesn’t tax foreign income, there will be no further taxation beyond that imposed by Malta. If you live in a country that does tax these profits, thanks to Malta’s network of more than 34 tax treaties, it may be at a lower rate than would otherwise apply.

Even if you live in a country such as the United States that does not have a tax treaty with Malta (it expired in 1997), you can generally use “foreign tax credits” to avoid double taxation.

Another issue is whether your Maltese company qualifies as a “controlled foreign corporation” (CFC) in your country of residence, and thus is required to pay tax on profits as they are earned. It’s possible to avoid CFC status with careful planning, but the time to do it is before you form the company. It goes without saying that obtaining proper professional advice is essential.

All This And Shareholder Privacy, Too!

Apart from the obvious tax advantages, the International Trading or Holding Company can have nominee shareholders; nominee shareholders are provided by Maltese service providers licensed for this purpose by the Malta Financial Services Authority. The use of nominee shareholders makes the ultimate beneficial owners anonymous and the identity of the beneficial owners may only be revealed by the nominee to a Maltese court in the course of a money laundering investigation.

The use of nominee shareholders and local directors (which are not a requirement) will ensure full anonymity of the beneficial owners of the company and will help to keep the management and control of the company centered in Malta. The company is allowed to have either corporate or individual directors, both resident and non-resident in Malta.

There are various fees associated with International Companies. Certainly, you should get professional advice before considering setting up shop in Malta. 

Sidebar

Will the EU Spoil Malta’s Party?

There is some reason to consider that the EU might ask Malta to abolish or amend its near-zero taxes to certain shareholders in certain Maltese companies.

Reason: If you live or do business in Malta, you don’t qualify for these special tax breaks, which are allowed only to non-residents. That’s a no-no for the EU. This is why Ireland had to change its law a couple years ago to tax all corporations at 12.5%, rather than just certain “offshore” corporations at 10%. 

That said, it’s very unlikely that people who form a Maltese company that qualifies for the rebates will be hit by a 4.17% tax one year and 40% the next year. These companies receive an Advanced Tax Ruling from the Inland Revenue, which in any case guarantees their tax status for at least two years.

It’s much more likely that, should the EU apply pressure on Malta, Malta will do what a lot of the other new EU member states are doing—instituting a fairly low corporate tax rate of around 10%–20% in the next year or two. But this is still significantly more than the 4.17% that qualifying shareholders in some of these companies now pay.

Governments move slowly, and the EU moves slower than most. Still, it’s something to bear in mind before incorporating in Malta.

Additional Information

- International Trading Companies and International Holding Companies
- General Information
- Type of Company ITC IHC
- Average timeframe to set up a new company  2 days 2 days
- Average timeframe to activate shelf company  N/A N/A
- Migration of domicile possible? Yes Yes

Corporate Requirements

- Standard authorized share capital (in any foreign currency) Lm 500 (in any Lm 500 (in any 
- 20% to be paid up on incorporation foreign currency) foreign currency)
- Bearer shares allowed? No No
- Nominee shareholders permitted Yes Yes
- Minimum number of shareholders One One
- Minimum number of directors One One
- Corporate directors permitted? Yes Yes
- Local directors required? No No
- Local meeting required? No No
- Company secretary required? Yes Yes

Taxation

- Corporate tax rate 4.17% (after tax  0%–12% (depending
- refunds to non-resident  on source of income shareholders) and after tax refunds to non-resident shareholders)
- Ordinary tax base worldwide income worldwide income
- Tax exemptions N/A
- Withholding tax on dividends - tax rate None
- Withholding tax on interest - tax rate None
- Withholding tax on license fees and royalties None
- Double taxation treaties Treaties with 32 countries
- Value Added Tax rate 18% EU VAT Not required 

Disclosure and Reporting Requirements

- Disclosure of beneficial owner to Company Registrar (No when using nominees)
- Government register of directors Yes Yes
- Government register of shareholders Yes Yes
- Annual return Yes Yes
- Submission of accounts Yes Yes
- Audit required? Yes Yes