MALTA Law and Practice Contributed by: Donald Vella and Kirsten Debono Huskinson, Camilleri Preziosi Advocates
1. Corporate Structures, Residence and Tax Treatment 1.1 Corporate Forms and Their Tax Treatment Persons looking to establish a presence in Malta may choose to adopt one of various different types of avail - able legal forms, depending on the purpose and aims of the stakeholders involved in the conduct of the business or activities in question. The Companies Act (Chapter 386 of the Laws of Mal - ta) contemplates the possibility of setting up commer - cial partnerships, which can themselves take distinct forms, such as a partnership en nom collectif or gen - eral partnership, or a partnership en nom commandite or limited partnership. A Maltese commercial partnership has its own sepa - rate legal personality, distinct from its partners, and is capable of owning and holding property under any title at law and of being sued. It is also possible to establish civil partnerships under the Maltese Civil Code (Chapter 16 of the Laws of Malta) – these are typically adopted by professionals coming together to exercise their profession (including lawyers, accountants and auditors). These entities are fiscally transparent. In terms of the Maltese Income Tax Act (Chapter 123 of the Laws of Malta) (ITA), all partnerships may be taxed as separate legal entities. The most common corporate form adopted for the purpose of conducting business in Malta is the limited liability company. Maltese legislation also contemplates a framework for establishing trusts, foundations and associations. Trusts can either be taxed as separate legal entities or treated as transparent entities, depending on the election made by the trustee. Foundations and asso - ciations are taxed as separate legal entities. 1.2 Use and Taxation of Transparent Business Structures As noted in 1.1 Corporate Forms and Their Tax Treat- ment , very few Maltese corporate forms are treated
as transparent entities from a Maltese tax perspec - tive. None of these entities are commonly adopted in particular business sectors, other than the civil part - nerships. 1.3 Tests for Determining Tax Residence For the purposes of Maltese tax legislation, bodies of persons such as companies or partnerships – wheth - er corporate or unincorporated – are deemed to be resident in Malta when the control and management thereof are exercised in Malta. Furthermore, compa - nies incorporated in Malta in terms of under the Com - panies Act are automatically deemed to be resident in Malta by virtue of their incorporation. In practice, the place where the control and manage - ment of a body of persons is carried out is usually deemed to be the place where the director(s) of such a company are resident and/or the place where the key decisions regarding the company’s strategy and policy are taken (among other factors). 1.4 Applicable Corporate and Individual Tax Rates Malta tax-resident companies are subject to Maltese tax on their worldwide income and capital gains, irre - spective of where their income or gains arise, and irre - spective of the remittance of such income or gains to Malta. The chargeable income of a company resident in Malta is subject to tax at a flat rate of 35%. Certain tax refunds may be available, as further set out in 3.4 Taxation of Individuals on Shares in Closely Held Corporations . The tax paid by individuals in respect of income attrib - utable to such individuals through transparent entities depends on their country of residence. Malta resident persons are subject to the following progressive rates (a) up to EUR12,000: 0% (subtract nothing); (b) EUR12,001 to EUR16,000: 15% (subtract EUR1,800); (c) EUR16,001 to EUR60,000: 25% (subtract EUR3,400); and (d) EUR60,001 and over: 35% (subtract EUR9,400). of income tax: • Single rates:
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