Accounting and Tax Benefits of Malta Offshore Company
Malta is a highly attractive destination for setting up an offshore company due to its advantageous tax and accounting system. The low corporate tax rates, extensive tax treaty network, and numerous tax incentives make it an ideal place for firms intending to lower their tax liabilities.
Additionally, the country’s transparent and straightforward accounting regulations, as well as its efficient and modern banking system, provide a stable business environment for companies operating in a wide range of industries.
Although, Malta’s accounting standards and regulations are in line with international standards, making it an attractive option for businesses looking for a transparent and compliant jurisdiction to establish their operations.
The country’s strategic location in the Mediterranean Sea has also made it a hub for international business, especially for those looking to expand their operations in Europe, North Africa, and the Middle East.
With the help of this article will be going to explore in detail about accounting and tax benefits of Malta offshore company. Without further ado, let’s get started.
List of the Accounting and Tax Benefits of Malta Offshore Company
We’ve listed some of the accounting and tax benefits of Malta offshore company below:
1. Tax Returns
Taking care of IT returns requires submitting them to either the International Tax Unit (ITU) or the Inland Revenue Department (IRD). Businesses are required to submit their income tax returns on or before the 31st day of March in the next year when their accounting year ends between January and June.
While the rest of them will need to file tax returns for income within nine months from the accounting reference date.
2. Accounting requirements of a Malta offshore business
As per the Maltese Companies Act 1995, Malta offshore businesses are required to keep current and accurate accounts that reflect the financial situation that the business is in.
It is required to do this every year, starting with the first account set to include more than six months and fewer than 18 months after the date of incorporation in Malta.
3. Necessity for filing annual returns
It is mandatory to submit the annual return, which includes an outline of directors and shareholders, as well as the secretary and share capital at the date. The annual returns must be filed within 42 days of the day of the incorporation of the business.
4. Tax Accounting for Business
It is important to categorize income into taxable accounts to determine tax refunds.
- Foreign Income Account (FIA):- The FIA includes dividends, royalties, capital gain, some interest, and other income that is passively earned outside Malta.
- Maltese Taxed Account (MTA):- MTA contains profits that maintain paid tax but aren’t counted in FIA.
- Immovable Property Account (IPA):- IPA is a place where you can earn money from transfers or other related activities to the immovable property in Malta.
- The Final Tax Account (FTA):- The profits which are tax-free and also tax-free for the shareholders at the time of distribution are allocated to the account.
- Accounts that are not taxed Account (UA):- UA is an account for the remainder of profits (or losses) that weren’t assigned to the tax accounts.
The profits will need to be deposited into respective tax accounts to qualify to be eligible for the tax credit refundable system to be implemented.
5. Double Tax Agreements
More than 70 countries, including nearly all OECD members, have signed dual taxation agreements with Malta.
Double tax treaties will not only guarantee that taxes will not be paid in two different countries but also serve as a means to encourage investment from certain countries.
6. Tax Credit Refundable System
The tax credit system that is refundable in Malta is appealing as shareholders can claim tax refunds of up that are up to 6/7ths of the tax that the company pays.
This lowers the tax effective rate to a minimal percentage of 5%, after-tax refunds. In addition, the double taxation relief that is available for foreign taxes incurred and refunded further reduces the tax rate effective to zero.
If the distribution of profits is made up of royalty or interest that is not a passive source of royalties, the tax refund would be decreased to 5/7ths the tax charged by the business. Thus, it reduces the effective tax amount to 10% after tax refunds.
The terms passive interest or royalty earnings relate to the income that has not been generated by royalties or trade that does not have to pay any tax from a foreign source, directly, through withholding or other means in a manner that results in a tax lower than 5%.
If an additional tax refund for double taxation is requested on a foreign-owned income account, the refund would be 2/3rds of the tax paid. The Malta tax refund will be 2/3 of the Malta tax paid if it’s available on the flat rate foreign tax credit.
7. Corporate Tax Rate
Malta is the ideal location to establish an offshore business because of its attractive corporate tax rate within the European Union. The average corporate tax rate is 35 per cent. There is also the tax system known as ‘full-imputation’ in Malta which allows companies to be eligible for an amount of tax credit equal to the tax that is paid by the company on a dividend.
By offering tax incentives like these the effective tax rate drops to around 10%.
A Malta company with a “participatory holding” is permitted to a full tax refund provided by the business and the amount would be paid to the company’s shareholders.
A tax of 18% is imposed on trading firms that deal with the EU. Tax advantages that businesses in Malta can benefit from include exemptions for the inheritance tax and wealth tax, annual property taxes, interest tax, dividend tax, and withholding dividend tax.
Conclusion
Malta has become an increasingly popular destination for establishing offshore companies due to its favourable tax regime, stable political environment, and highly skilled workforce.
The prominent benefit of establishing an offshore company in Malta is its competitive tax system. Malta offers a range of tax incentives, including a low corporate tax rate, tax refunds on qualifying distributions, and access to the country’s double taxation treaty network. When setting up a business in Malta, you should carefully consider the costs, risks, and regulatory environment as with any international expansion
It is best to seek advice from business experts of Odint Consulting to help you become aware of the accounting and tax benefits of Malta offshore company.
FAQ’s
The corporate tax rate for corporations in Malta has a tax rate of 35% however the tax rate on dividends and royalties is zero%.
Some of the advantages of an offshore company are low taxes, a lower tax burden, the geographical where you operate privacy, no accounting auditing, property ownership, and asset, as well as litigation protection.
A US person who is the owner of the shares of a foreign corporation is typically taxed US tax on profits of the foreign corporation only when they receive dividends from the foreign company.
Malta’s tax system is competitive as well as its vast system of Double Taxation agreements, rapid incorporation and English-speaking workforce make it a popular corporate vehicle for businesses from across the globe to incorporate a company in Malta.
Malta offers a variety of advantages, including low costs for setting up, attractive taxes, incentives to tax, and the effectiveness of human resources.
Malta offshore companies are required to file an annual tax return with the Malta Inland Revenue Department. The tax return must be filed within 18 months of the end of the company’s financial year.
Yes, a Malta offshore company can own property in Malta, subject to certain regulations and restrictions. It’s advisable to consult legal and tax experts before engaging in such transactions.
