Setting up a limited liability company in Malta has many advantages for owners. Malta has an extensive network of double tax treaties, a fast incorporation process and a competitive tax system. The availability of an English-speaking trained workforce makes Malta a popular choice for companies from all over the world to register a company.

Advantages

• 5% Dividend Tax for trading companies (the 35% Corporation Tax becomes 5% given applied tax refunds for trading companies)
• Tax Free for holding companies (the 35% corporation tax becomes 0% given the tax benefits to shareholders of holding companies)
• Extensive network of double tax treaties
• Capital Gains Taxes are Tax Free (subject to conditions)
• Dividend Income can be Tax Free for "Participating Interest in Subsidiaries"* or be taxed from 35% to 6.25% for "Non Participating Interest in Subsidiaries" depending on the applicable double tax treaty; i,e depending on the tax jurisdiction of the subsidiary
• Nominee Services are permitted
• English is the official language

Disadvantages

• 5- 10 days to incorporate
• Public record of company submitted financial statements and statutory information
• Proper accounting records must be maintained
• Audited Financial Statement are required by a local registered auditor / audit firm
• Tax returns must be filed and submitted to the local tax office
• VAT registration is required
• Incorporation fees average depending on the share capital issue (from 245 - 1,500)

Characteristics

• Share capital; minimum is Euro 1165
• IFRS application is required for the preparation of the financial statements 
• Minimum one director local or international; could be physical or legal person
• Share capital; registered shares, preference shares, redeemable shares with or without voting rights. Bearer shares not permitted
• Restriction in banking, insurance trust administration and management services, collective investment schemes.
• Registered Office Required in Malta
• Companies Act 1995

Tax Free Dividend Income from Subsidiaries &  Participating Interest in Subsidiaries

The Maltese Companies Act requires the Holding Company to be able to demonstrate evidence that it exercises adequate control over its subsidiaries; "Participating Interest" in order to grant them with the 0% Dividend Income Tax. 

The criteria used to assess the "Participating Interest" of the parent are the following:

At least two out of the three voting rights

• Right to vote
• Right to profits (dividend right)
• Right to receive assets or funds during liquidation

In addition, at least one out the following 6 criteria must also be met

• The Maltese parent holds more than 10% shares its subsidiary, or
• The Maltese parent holds shares in the subsidiary having acquisition value of at least 1,164,000 for an uninterrupted period of at least 183 days; or
• The Maltese parent holds the shares in the subsidiary and it is entitled, at is option, to call for and acquire the balance of shares in the subsidiary; or
• The Maltese parent holds shares in the subsidiary and it is entitled to first refusal in the event of proposed disposal, redemption or cancellation of the shares in the subsidiary, or
• The Maltese parent holds the shares in the subsidiary and it entitled to sit on the board or to appoint a person to sit on the board of the subsidiary as a director, or
• The Maltese parent holds shares in the subsidiary for the furtherance of its own business and not as a trading stock

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