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[ESTABLISHING A BUSINESS ENTITY IN MALTA]
definition of ‘relevant activity under the PMLFTR. As a subject person, the CSP will need to conduct various checks before agreeing to set up the company, including verification of the client’s identity , determining the source of wealth and source of funds of the proposed company’s ultimate beneficial owners and identifying the AML and CFT risks involved in entering into a business relationship with that person. Where the business relationship is of an ongoing nature, CSP are obliged to continue monitoring the level of risk throughout the duration of that relationship. 4.4 Tax and Reporting obligations A company which is registered in Malta, but which is foreign-owned, can benefit from an exemption from the duty to be paid on documents and transfers. Following incorporation, the company must apply to the Commissioner for Revenue in Malta, providing information about the company and asking the Commissioner to authorise the application of the exemption to that Company. The application of this exemption is also registered with the Malta Business Registry. Malta’s attractive corporate tax refund system is one of the advantages enjoyed when setting up a company in Malta. A company is considered to be tax resident in Malta when the management and control of the company is exercised in Malta. According to local income
tax legislation, Maltese companies are subject to corporate tax at the rate of 35% on their worldwide income and capital gains. Foreign companies incorporated outside Malta conducting business activities in Malta are liable to tax on income arising in Malta. When companies are taxed at the standard rate of 35%, following the distribution of dividends, shareholders are entitled to a refund of the majority of the tax paid by the company. The purpose of this imputation system is to eliminate any double taxation that might arise on the distribution of such dividends. Thus, company profits will only be subject to tax at corporate level. This effectively means that a trading company can claim up to 30% tax refund, making for a net tax rate of five. A structure can be set up specifically to benefit as much as possible from the efficient tax system in Malta. A Malta trading company pays the applicable 35% tax whilst the remaining 65% is paid as dividend to a Malta holding company. The Malta holding company will then receive a 6/7 th refund of the tax paid by the trading company on distributed profits. At that point, no additional tax is due on transfers of profit to the foreign company or the foreign shareholders.
ILN Corporate Group – Establishing a Business Entity Series
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