Reasons To Relocate Yourself And Your Business To Malta

When discussing company incorporating in Malta and its benefits, the tax aspect is mentioned more often than others. Everyone has heard about Maltese attractive tax environment with the unique full imputation system, allowing shareholders to benefit from tax credits and refunds on the tax paid by the company, about "Participation Exemption" beneficial for holding companies with investments in other jurisdictions, about double tax treaties, etc. So, yes, incorporating a legal entity in Malta as a limited liability company is the most tax-efficient solution within the EU. But here we should remember about the necessary requirements.The imperative baseline requirement is the clean tax management of a Maltese company, and this can generally only be realized through an active de facto business operation on site.Malta's tax system, to be efficient at a 360-degree level, generally ought to operate the concept of "economic substance," which means that companies should have a real presence in Malta, including physical offices, employees, and activities.Here it would not be out of place to mention a few various frameworks.

• The Controlled Foreign Company or Corporation (CFC) rules, that indicate how a company can and may be established and operated abroad. The key CFC concept is to attribute the income of a foreign corporation to its controlling shareholders for tax purposes, that helps prevent individuals or entities from using offshore entities to defer or avoid tax obligations. In the context of this article, an investor or founder residing in a country with CFC rules, should know that these rules may impact the tax treatment of their overseas entities, including a company established in Malta. If the CFC rules apply, the investor or founder may need to ensure that the Maltese company has sufficient substance to avoid adverse tax consequences. The level of substance typically involves having real economic activities, a physical presence, employees, and genuine business operations in Malta. It is crucial to carefully consider the specific requirements and thresholds of the CFC rules in the investor or founder's country of residence and comply with them to prevent any adverse tax implications.

• BEPS guidance of the Organization for Economic Co-operation and Development (OECD). BEPS stands for Base Erosion and Profit Shifting, refers to tax planning strategies used by multinational enterprises that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations. OECD has developed guidelines and recommendations to address BEPS issues with the aim to ensure that profits are taxed where economic activities take place and to prevent the artificial shifting of profits to low-tax jurisdictions. And according BEPS rules a clean tax management of a Maltese company can only be realized through an active business operation on site.

Ending with a discussion of the tax aspect, we would like to reiterate: this is extremely important is to reside in the same country where you are setting up your business.Now let us why incorporating in Malta makes sense without the tax aspects, we unpack them one by one.

• Stable Legal Environment:

Malta has a stable legal and regulatory framework, making it a reliable and secure jurisdiction for business operations. The country's legal system is based on English common law but also adapted a civil code based on Napoleonic laws.

• English Language:

English is one of the official languages, and all the legislation in Malta are in the English language. Business documentation is often in English as well, simplifying communication for international businesses.

• European Union Membership:

Malta is a member of the European Union, offering companies access to the EU Single Market and benefiting from EU regulations and trade agreements.

• Business-Friendly Environment:

The Maltese government actively promotes a business-friendly environment, and the regulatory framework is designed to support entrepreneurship and economic growth.

• Financial Services Hub:

Malta has established itself as a reputable financial services hub, particularly in sectors such as banking, insurance, and fund management.

• Skilled Workforce:

Malta has a well-educated and skilled workforce, particularly in sectors such as finance, information technology, and gaming.

• Incentives for Specific Industries:

Malta provides specific incentives for industries such as gaming, aviation, and maritime, attracting businesses in these sectors.

• Strategic Location:

Malta's strategic location in the Mediterranean makes it a hub for business activities connecting Europe, Africa, and the Middle East.

• Quality of Life:

Malta offers a high quality of life with a Mediterranean climate, a rich cultural heritage, and a relatively low cost of living.No doubts, these advantages make Malta an attractive destination for company formation; it's crucial to conduct thorough research and seek professional advice to ensure that the chosen business structure aligns with specific goals and complies with legal and regulatory requirements.You can contact our professionals for legal, tax, and business advice to ensure compliance with regulations and to optimize the personal advantages associated with company incorporation in Malta.Give our office a call at +356 2738 3631 or email us at info@griffithsassoc.com.