Malta: an ideal Holding Company location

Transcription

1 Malta: an ideal Holding Company location June 2010 TAX

2 Malta a tried-and-tested holding company location Why Malta is a prime EU holding company location Access to Wide treaty network, the EU Parent-Subsidiary Directive and Interest-Royalties Directives for reduced withholding taxes on dividend, interest and royalty flows. Effective means to structure the ownership of European subsidiaries. Equally effective for structuring the ownership of subsidiaries located in non-eu countries. To establish a platform for future business acquisitions or joint ventures. Full participation exemption on dividends and gains. No CFC and no Thin capitalisation limitations. Benefits from the provisions under Maltese tax allowing payment of dividends, interests and royalties without payment of withholding tax. Tax neutral liquidation of the holding company. Possible exemptions from the requirement of preparing consolidated financial statements at the level of the Maltese parent company. No exit taxes. 2

3 Setting up and maintaining a Maltese holding company What is a Holding Company? Not merely to hold investments, but also to manage its subsidiaries, and perform other tasks, such as a head office function, financing or licensing activities. Incorporation Incorporation is swift provided that all the necessary information and documentation is in place. Minimum issued share capital is EUR 1,165 or equivalent in foreign currency. 20% of the share capital has to be paid up on incorporation. The number of shareholders is usually two, however a single member company may also be registered. A Maltese Holding company can be incorporated as a private company or as a public company. A private company is one which: Restricts the right to transfer its shares. Limits the number of its members to 50. Prohibits any invitation to the public to subscribe for any of its shares or debentures. Re-Domiciliation It is possible to migrate the legal seat of foreign companies to Malta and of Maltese companies to foreign jurisdictions. Re-domiciliation is currently permitted to and from all jurisdictions, other than those on the Financial Action Task Force (FATF) black list. For a company to be continued in or outside Malta, the laws of the approved jurisdiction must also allow this procedure. The continuance of companies allows entities to transfer their seat to a country other than that in which it was registered without the need to dissolve the entity and set up a new company. Statutory fees of the formation of a Holding Company Upon incorporation or redomiciliation, registration fees based on the company s authorised share capital are due, but nominal in amount. A Maltese company is, on each anniversary of its incorporation required to file with the Registry of Companies an annual return providing details relative to the company s share capital, past and present members and particulars of the directors and company secretary. An annual registration fee is also payable to the Registry together with the filing of the annual return. This fee is determined on the basis of the company s share capital, but is nominal in amount. Ceasing operations The liquidation of a Maltese holding company held by non-resident shareholders is tax neutral. Public company A public company may offer shares or debentures to the public, but it can issue an application for its shares or debentures only where the company is registered and the issue is accompanied by a prospectus. Every public company must have at least two directors whereas every private company must have at least one director. 3

4 Company law Financial Statements Companies are required to file annual accounts drawn up in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU). These must be accompanied by a copy of the auditors report and the directors report. Exemptions from the obligations to prepare group accounts A. Financial Holding company A parent company which qualifies as a financial holding company can benefit from an exemption to file consolidated accounts. The financial holding company set up in Malta must have as its sole purpose the acquisition of holdings in other undertakings, and the management of such holdings in order to turn them into profits, without involving itself directly or indirectly in the management of those undertakings, and this without prejudice to its rights as a shareholder. The financial holding company would have to ensure that: - It does not interfere directly or indirectly in the management of any subsidiary undertaking - It has not exercised the voting rights attaching to its participating interest in respect of the appointment of a member of the board of directors of the subsidiary undertaking during the accounting period and the 5 preceding accounting periods; or, where the exercise of voting rights was necessary for the operation of the board of directors of the subsidiary undertaking, such voting rights were exercised without any interference or influence on the part of the parent company or of any of its subsidiary undertakings, and - no member with majority voting rights in that parent company; or - no member of the board of directors of that parent company; or - no member of the board of directors of a member with majority voting rights in that parent company is a member of the board of directors of the subsidiary undertaking. It has made loans only to undertakings in which in holds participating interests, provided that where such loans have been made to other parties, they would have been repaid by the end of the previous accounting period; and The exemption is confirmed by the Registrar of Companies in Malta. B. Exemption for parent companies included in group accounts A parent company shall be exempt from the requirement to prepare consolidated accounts if it is itself a subsidiary company of a parent company formed and registered outside Malta and it is included in consolidated accounts of a larger group. 4

5 Abridged Accounts The format of the accounts depends on the size of the company. Small companies can draw up abridged balance sheets and abridged layouts of profits and loss accounts. A small company is a company which on its balance sheet dates does not exceed the limits of 2 of the 3 following criteria: - balance sheet total: EUR2,562, turnover: EUR5,125, average number of employees during the accounting period:50 Private companies which on their balance sheet date do not exceed the limits of 2 of the 3 following criteria: - balance sheet total: EUR46, turnover: EUR93, average number of employees during the accounting period: 2 are exempted from the requirements of auditing accounts and such companies can, draw up abridged balance sheets and abridged layouts of profit and loss accounts and abridged notes to the accounts. 5

6 Taxation Incoming Dividends Malta has a full imputation tax system which completely eliminates the economic double taxation of company profits. Shareholders in receipt of dividends are entitled to a tax credit equal to the tax borne on the profits out of which the dividends are paid. Since the tax rate of 35% applicable to companies is also the highest tax rate in Malta, shareholders will not suffer any additional tax on the receipt of dividends Participation Exemption The Participation exemption provides for 100% relief on dividends and capital gains Covers dividends derived from a participating holding or gains from the disposal thereof connected with a shareholding that qualifies for the Maltese participation exemption ( participating holding ) The participation exemption is optional. If the Maltese registered company elects to include its income in its tax return, it will be subject to tax in Malta on such income and gains at the normal corporate tax rate, but its shareholders will be entitled to a 100% refund on distribution of profits derived from such income/gains No advance approval is required for the application of the participation exemption Dividends (not gains) derived from participating holdings acquired on or after 1 January 2007, the participation exemption is applicable if any of the following conditions are satisfied, that is, when the company or body of persons in which the participating holding is held: is resident or incorporated in an EU Member State; is subject to tax at a rate which is of at least 15%; does not derive more than 50% of its income from passive interest or royalties. When none of the above three conditions are satisfied, the participation exemption will not apply to the said dividends if both of the following conditions are satisfied: the holding must not be held as a portfolio investment and; the non-resident company or body of persons or its passive income must have been subject to tax at a rate of at least 5%. With effect from 1 January 2011 these conditions will also be applicable to dividends derived from all participating holdings A participating holding is the holding of shares by a company resident in Malta in a company not resident in Malta where the former: has at least 10% of the equity shares in the nonresident company; is an equity shareholder in the non-resident company and is entitled to purchase the balance of the equity shares of the non-resident company, or has the right of first refusal to purchase such shares, or is entitled to appoint a director on the Board of that company; or is an equity shareholder which invests in the nonresident company a minimum of Euro 1.2 million and such investment is held for an uninterrupted period of not less than 183 days; or holds the shares in the non-resident company for the furtherance of its own business and the holding is not held as trading stock for the purpose of a trade. A participating holding may also be held in a non-resident body of persons which is not a company such as a limited partnership 6

7 Outgoing Dividends, Interest and Royalties No WHT on dividends, interest and royalties to non-residents. Capital Gains A capital gain made by a non-resident on the disposal of shares in a Maltese holding company is exempt unless the assets of the holding company consist of any immovable property situated in Malta. Double Tax Treaty Network Malta has an ever-expanding double tax treaty network, at present over 50 treaties. Capital Taxes Malta Has no net worth tax or similar taxes on capital VAT An obligation to register in Malta for VAT purposes may arise where the holding company is involved in activities in addition to the holding of shares, such as the provision of management services or granting of loans. If the necessary conditions are satisfied, the holding company may be entitled to input tax credits in relation to expenses which it would have suffered. Expense Deductibility Interest incurred on loans or financing which are used to acquire or finance investments are deductible against income generated by such investments. Transfer Duties An exemption from duty on share transfer of 2% and 5% on property companies holding Maltese immovable property, can generally be applied for and obtained. Loss Carry-forward Unabsorbed trading or business losses can be carried forward for future set-off. Unabsorbed interest paid on loans utilised to finance the investment made by a holding company would not be deemed to constitute a loss from a trade/business. 7

8 Fees Company Registration Fee Company Annual Return Fee Euro Euro 245* 100** *For share capital of up to 1,500. The maximum fee is capped at 2,250. **For share capital of up to 1,500. The maximum fee is capped at 1,400 Fee information obtained is correct as at the time of publication of this document, and is for general information purposes only. 8

9 KPMG a full service firm The Firm was founded in 1969 and today is one of Malta s leading firms of Certified Public Accountants and Auditors and Business Advisors, providing a complete range of inter-related services. KPMG is situated at Portico Building, Marina Street, Pietà, Malta. The Firm also has a branch office in Victoria, Gozo. At present, the local staff complement numbers 235. KPMG is a full service Firm and offers clients a wide range of inter-related services to both audit and non-audit clients: Audit: Provision of statutory and regulatory attestation services; provision of advice in relation to compliance with statutory reporting requirements. Tax : Tax compliance; advice on direct and indirect taxes, incentives legislation, employee taxes, and cross-border tax planning; international business support services. Advisory: This includes: the provision of advice on governance, risk management and internal controls; business strategy and process improvement advisory services; How KPMG in Malta can help you Our philosophy is to help clients maximise business advantage from the challenge of relocating all or part of their operations to Malta, based on innovative strategies and a sound approach to regulatory and business risk management. The position of KPMG today is the product of the way in which we handle the issues that matter most to our clients, the dedication of our people to engendering competitive advantage for the businesses they serve, and our ability to provide a seamless service. financial advisory services including corporate finance, transaction services and restructuring; accounting advisory services; information systems advisory services. The result is a clear focus on the issues that really matter to you. In carrying out our work, we apply the highest standards demanded by the profession. We provide our services objectively and have in place rigorous procedures to ensure independence and adherence to the profession s and the firm s ethical rules. KPMG delivers its services through lines of business. For our clients this means exceptional people with an intimate industry-specific knowledge. We know that the success of investing in a jurisdiction depends on the right structure, maximum tax efficiency, effective risk awareness as well as outstanding performance and distribution capability. Our practice brings together knowledge and resources to provide clients with a comprehensive range of practical support across many different areas. Our commitment to excellence in all these areas makes KPMG a natural partner for success. 9

10 International Support KPMG is a unique global network of strong national practices (i.e. member firms) that provide Audit, Tax and Advisory services to local, national and multinational organisations. As a leading global professional services Firm, KPMG operates across 144 countries, with over 130,000 employees worldwide. From Afghanistan to Zambia, KPMG people come from many different backgrounds, but everyone shares a common set of values and follows the same code of conduct. Locally, KPMG s position in the marketplace very much reflects the status of a Big Four accountancy and professional services firm. With the strength of its member firms and the global breadth and balance of its operations, KPMG has the resources to deliver quality services worldwide through its network and delivers a globally consistent set of multidisciplinary financial and accounting capabilities based on deep industry knowledge. Throughout the world, the guiding philosophy of KPMG is to provide its clients with the highest quality service, to assist clients in developing a rich understanding of clients businesses, together with the insight, skills and resources required to address industry-specific issues and opportunities, as well as challenge clients to analyses their organisations and their markets in new ways. 10

11 Our Team Name Pierre Portelli Current Position Partner, Tax Services, KPMG in Malta Qualifications Fellow of the Association of Chartered Certified Accountants Fellow of the Malta Institute of Accountants Certified Public Accountant (with Practicing Certificate in Auditing) Member of the Institute of Financial Services Practitioners Member of the International Fiscal Association Experience Pierre joined KPMG in 1980 and worked in various divisions of the firm particularly in audit where he also led a number of audit engagements in Northern Italy whilst on secondment there. He later joined Ernst & Young in Tripoli, Libya where he undertook audit and advisory engagements mostly for oil sector clients. In 1996 Pierre re-joined KPMG and in 1997 he was admitted partner and given the responsibility to re-structure and develop the firm s rapidly growing International Business Division. Pierre is currently a partner in Tax Services and he heads the Corporate Services Division which is principally engaged in tax structuring for international clients and the continued support of such structures. Sector experience Pierre has advised and assisted several clients registering holding companies. His client portfolio includes holding companies which he assisted to set-up and he also oversees their on-going compliance requirements in Malta. 11

12 Name Juanita Brockdorff Current Position Partner, Tax Services, KPMG in Malta Qualifications Bachelor of Arts (Legal and Humanistic Studies), University of Malta Diploma in Notarial Studies, University of Malta Doctor of Laws, University of Malta Master of Laws in International Tax Law, University of Leiden, The Netherlands (summa cum laude) Admitted to appear before the Superior Courts of Malta Member of the Malta Chamber of Advocates Member of the Malta Institute of Taxation Member of the International Fiscal Association (IFA) Council Member of the Institute of Financial Services Practitioners. Experience Since joining KPMG in 2002 Juanita has worked in corporate taxation, providing advice to multinationals seeking assistance in tax matters and related planning. Her work covers both domestic and international tax issues, and extends to direct and indirect taxation. At present Juanita leads the corporate services team made up of 10 professionals at KPMG, handling the requirements of international clients who set up in Malta. She is particularly interested in the EU s impact on tax matters and acts as advisor to the Government on various tax-related Community law issues. Following Malta s accession she was involved in the process of revising the Maltese tax system in order to ensure compatibility with Community law. Juanita regularly delivers presentations on current tax issues at both local and international for a. Juanita s work was published in international tax reviews such as European Taxation, EC Tax Review, Intertax, and Captive and Art Review, For a number of years she lectured Advanced Taxation for ACCA, and in the course leading to the Advanced Diploma in International Taxation conferred by the UK Chartered Institute of Taxation. She has been invited to lecture in Italy during 2009 as part of a Masters in Taxation Course. Juanita acts as examiner of tax dissertations submitted to the University of Malta in order to obtain the degree of Doctor of Laws. Sector Experience Juanita regularly provides advice to holding companies setting up, relocating to and operating in Malta, covering both income tax and VAT implications. 12

13 kpmg.com.mt Contact Us: Pierre Portelli Partner Tax Services Juanita Brockdroff Partner Tax Services KPMG Portico Building Marina Street Pieta PTA 9044 Malta Tel: Fax: The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Imagery courtesy of the Department of Information/DOI Valletta, Malta KPMG, a Maltese civil partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative ( KPMG International ), a Swiss entity.