basic facts on a maltese company
Maltese company law is principally based on English company law and in conformity with EU directives. Main legislation is the Companies Act of 1995. Shipping companies are regulated by the Merchant Shipping Act.
Capital The minimum authorised and issued share capital under Maltese law is as follows:
• private companies – €1,164.69 with at least 20% thereof paid up upon subscription;
• public companies – €46,587.47 with at least 25% thereof paid upon subscription.
Currency The company’s share capital may be denominated in any currency. Malta does not impose any exchange control restrictions and this facilitates the use of Maltese corporate vehicles for international business. Exchange risk is further minimized by the fact that the company’s income tax is paid in the same currency of the share capital. Any tax refunds are also given in the same currency.
Registration The registration of a company is done by submitting the necessary documentation to the Registry of Companies. The documentation includes the Memorandum and Articles of Association (M&A) together with an identification document of the subscribers, and proof that initial share capital has been paid up. The M&A must be signed by the subscribers or their attorneys, but need not be executed in front of a notary public. This enables subscribers to set up a company without actually having to physically come to Malta, however, due diligence documentation with respect to KYC procedures are required. Once all the documentation is submitted to the Registry of Companies the company incorporation or registration is done within 24 hours.
Fiduciary services Malta has a fully fledged trustee regime and hence shares in Maltese companies may be held by licensed trustees in a fiduciary capacity for and on behalf the subscribers.
Directors and Company Secretary Companies must appoint at least one director and one company secretary. The director may be a corporate entity but the company secretary must be an individual. As a rule, a sole director cannot occupy the post of company secretary as well unless the company is a single member company and has an ‘exempt’ status.
General Meetings The general meetings need not be held in Malta but may be done via a telephone or video conference. Moreover, a company may opt not to convene a general meeting if all the shareholders are in agreement and sign the necessary resolutions.
Annual Return & Annual Accounts Companies must submit an annual return upon each anniversary of the company’s registration date together with the annual fee. After the financial year end, audited financial statements prepared in accordance with the Companies Act must be laid before and approved by the general meeting of the company and eventually submitted to the Registry of Companies. Companies are allowed to submit abridged accounts.
Continuation of Companies Maltese law allows companies to change their domicile in and out of Malta. Companies moving their domicile to Malta must come from a jurisdiction which allows this. This possibility enables companies to freely move from one jurisdiction to another without the need of going through a liquidation process.
the corporate tax system in malta
A company registered under the laws of Malta is deemed to be ordinarily resident and domiciled in Malta and subject to tax on a world-wide basis. Any expenses incurred in the production of the income may be deducted from the income and gains derived by such company.
Taxation of MTC Although the Maltese Company would be subject to the normal corporate tax of 35% levied on their chargeable income for the year of assessment, certain fiscal incentives are available to non-resident shareholders (who may even be a Maltese company 100% owned by non-residents — the so-called ‘Dividend-Feeder Company’), upon a distribution of dividends by the Maltese company, which render the effective tax rate 5%.
Activities permitted by a Maltese company Given that a Maltese company eligible for tax refunds is not required to obtain any special status for tax purposes, no restrictions are imposed on the type of activities which may be carried out by such company. This implies that a Maltese company may carry out all types of trading and holding activities both with persons resident in Malta and persons resident outside Malta.
Tax Accounting The income tax system utilises different tax accounts for different sources of income namely the Final Tax Account (FTA), the Immovable Property Account (IPA), the Foreign Income Account (FIA), the Maltese Taxed Account (MTA) and the Untaxed Account (UA).
Profits attributed to the FTA include income that has been subject to a final withholding tax, profits arising from capital gains on immovable property which has suffered the property transfers tax, certain investment income and certain tax free profits. Profits attributed to the IPA are those profits resulting from the use of immovable property situated in Malta and which have not suffered the final withholding tax, profits from the rent, accommodation revenue by hotels and similar establishments, management fees and annual rental value of immovable property in Malta. A company’s trading or passive income which is not attributable to the FTA and IPA, is attributed to the FIA or the MTA depending on the source of such income
Tax refunds A distribution from the FIA or MTA enables the shareholder to apply for a tax refund of the company tax. The refund is equivalent to 6/7ths in the case of trading income and to 5/7ths in the case of certain passive interest and royalties. A company deriving foreign source income may also utilise the Flat Rate Foreign Tax Credit (FRFTC) by increasing the net foreign source income or gains by 25% and then deducting the FRFTC from the Malta tax. Upon a distribution of such foreign source income a shareholder may avail himself of a 2/3rds refund of the Malta tax. Distributions from the FTA, the IPA and the UA do not give rise to any tax refunds in the hands of the shareholders
Holding companies and the participation exemption Holding companies that derive dividend income or capital gains from a ‘participating holding’ may apply for a participation exemption. Alternatively, the Maltese holding company may elect to be subject and pay income tax and upon a distribution of profits the shareholder is entitled to claim a full refund of the company income tax.
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