Maltese International Trading Companies
TAXATION OF ITCs
While ITCs are subject to the normal corporate tax rate applicable to all onshore companies, the extensive network of double taxation agreements, together with the full imputation system of taxation and provisions for tax refunds contained in the legislation make Malta a very tax efficient jurisdiction for non-resident shareholders.
An ITC is taxed at the normal company rate of tax which is currently 35%. However, upon a receipt of a dividend from an ITC, non-resident shareholders are:
taxed at a flat rate of 27.5% on the gross amount of the dividend and are
credited with the amount of tax paid by the company on the profits out of
which the dividend was paid;
entitled to a refund of two-thirds of the Malta tax paid by the company on
the same profits. This refund is payable not later than the fourteenth day
following the end of the month in which the refund becomes due.
The following example illustrates the tax workings relating to ITCs:
|
Tax Computation for Non-resident shareholders (or Malta company wholly owned by non-residents) |
US$ |
US$ |
|
ITC’s Chargeable income |
100.00 |
|
|
Less: Tax paid by ITC (@ 35%) |
(35.00) |
|
|
Net dividend received from ITC |
|
65.00 |
|
Tax Liability (27.5% of ITC’s pre-tax profits) |
(27.500) |
|
|
Tax Credit (Tax paid by ITC) |
+ 35 |
|
|
Refund of 2/3 of tax paid by ITC (on application) |
+ 23.33 |
|
|
Net Refund |
|
+30.83 |
|
Net Dividend after Tax |
|
95.83 |
|
Effective Tax Liability |
|
4.17% |
On the distribution of
dividends to non-resident shareholders or to Malta companies which are
100% owned by non-residents, a refund equivalent to 2/3 of the tax paid by
the ITC becomes due.
These refunds are paid by the Inland Revenue Department to the
non-resident shareholders within 14 days from the date of the request made
to the Department.
International trading and holding companies may request an advance ruling on their taxable status. Such a ruling guarantees the tax position of the company for a minimum period of five years and may be renewed for a further period of five years. Any changes in the tax legislation during these periods will not become operative before the lapse of two years from the coming into force of the new law.
No withholding taxes, stamp duties or exchange control restrictions apply on distribution of the profits or dividends to the shareholders and there are no taxes or restrictions on the exportation of the dividends from ITC. This means that funds finding their way to Malta may be remitted anywhere around the world.
International Trading Company (Index)
Corporate Requirements
See also:
