In this Article
Dr Justine Scerri Herrera
Proper tax planning and structuring is essential for any business, and especially essential for business such as fintech, blockchain, and crypto. The harmonised Maltese tax framework may be just the right option for you, as it provides a plethora of structuring opportunities, depending on your needs.
EU-approved Tax Regime
Company Taxation in Malta
Tax benefits in Malta include an onshore, EU approved tax regime, together with the possibility to apply parent-subsidiary directive. Additionally, there is an extensive double taxation treaty network with 70+ treaties signed that provides relief from double taxation. Also, a full imputation system for taxation of dividends, group relief regime available for trading losses, and a refundable tax credit scheme on dividends to shareholders, residents & non-residents.
Companies Incorporated in Malta
Company Taxation in Malta
Companies incorporated in Malta that are resident in Malta are taxed at a flat corporation rate of 35% on chargeable income. Nevertheless, upon receipt of dividend, the shareholders of such company would be eligible to claim a refund of part of the tax paid in Malta at the level of the company.
Such shareholder, in receipt of a dividend distributed by a company resident in Malta out of profits allocated to its Foreign Income Account (typically foreign source passive income) and/or its Maltese Taxed Account (typically trading income or domestic source passive income) would be entitled to claim a refund of a portion of the Malta tax suffered or paid on the profits out of which the dividend was distributed. These refunds would usually include the following.
1. of six-sevenths (6/7) of the Malta tax suffered at the level of the Malta company on profits allocated to its Foreign Income Account or its Maltese Taxed Account. Out of which the dividend was distributed (i.e., effective tax rate 5%). OR
2. a reduced to five sevenths (5/7) of the Malta tax suffered at the level of the Malta company on profits allocated to its Foreign Income Account. Out of which the dividends were distributed in the event that such profits consist of passive interest or royalties, or dividends derived from a participating holding when the anti-abuse provisions are not satisfied (effective tax rate 10%). OR
3. a reduced to two-thirds (2/3) of the Malta tax paid by the Malta company on profits allocated to its Foreign Income Account. Out of which the dividends were distributed in the event that the Malta company would have claimed relief for double taxation in respect of the said profits (effective tax rate of 23.3 %).
Companies and Start-ups
Company Taxation in Malta
The processing of the refund by the Maltese CFR is efficient, usually taking up to 14 days. However, companies can now also opt to apply for the so-called ‘fiscal consolidated unit’ allows to surpass the refund mechanism.
Furthermore, holding companies may benefit from the participation exemption regime. This allows dividends received from qualifying holdings to flow through the business without attracting further tax, provided that certain requirements are met.
Companies and start-ups in certain industry sectors may also benefit from targeted tax regimes designed to enable sectoral growth. Malta Enterprise has launched a number of schemes regarding start-ups. These include a start-up residence permit allowing non-EU nationals to base themselves in Malta under advantageous regime. Other benefits provided by the Maltese islands include grants for early stage of development up to €10,000 which includes development of business proposal and start-ups presenting viable business plans may receive funding of up to €20,000.
Additionally, start-ups can also opt for the Smart and Sustainable Investment Grant scheme with a maximum grant capped at €70,000 per project. Conversely, small, and medium sized enterprises (SMEs) can opt to apply under Malta Enterprise for guarantees against bank loans.
These and many other incentives, coupled with funding, and a beneficial taxation system are designed to support industry sectors earmarked for growth.
How Can We Help?
If you are looking for your next business and home destination, Malta is the next best place to be. Coupled with excellent business environment, highly qualified personnel, and great weather it is a perfect place to develop your business. Drop us a line if you would like to find out more about how MK Fintech Partners can help you with your business needs: contactmkfintech@kyprianou.com
More about MK Fintech Partners Ltd.
Michael Kyprianou Fintech Partners Ltd is a Maltese licensed VFA Agent (virtual financial assets agent). It comprises a team of dedicated experts who provide services such as advisory, licensing and registrations of activities related to Fintech, Crypto, Blockchain, Investment, company incorporations and banking. and other ancillary services. MK Fintech Partners forms part of the Michael Kyprianou Group, a top tier international legal and advisory firm. It has established an enviable reputation as a broad-based legal practice over the years. Mainly by keeping at heart its principle to always exceed its clients’ expectations. MK has grown to become one of the largest law firms in Cyprus with offices in Nicosia, Limassol and Paphos. The MK Group’s international presence also includes fully-fledged offices in Greece (Athens and Thessaloniki), Malta (Birkirkara), Ukraine (Kiev), the United Arab Emirates (Dubai), United Kingdom (London), Israel (Tel Aviv), and Germany (Frankfurt).
The content of this article is valid as at the date of its first publication. It intendeds to provide a general guide to the subject matter and does not constitute legal advice. We recommend that you seek professional advice on a specific matter before acting on any information provided. For further information, contact us at MK Fintech Partners via email at contactmkfintech@kyprianou.com or by telephone +356 2016 1010.
