Why residents in Spain would form a company in Malta

April 11, 2023

Why Malta?

Malta is an ideal destination for businesses and individuals residing in Spain seeking advantageous tax incentives. As part of the EU, Malta offers numerous benefits for holding companies and trading operations, making it a highly attractive location to investors, entrepreneurs, and high net worth individuals.

Malta Tax Advantages

The corporate tax structure in Malta is tailored to attract businesses through a reduced effective tax rate of 5%. This can be achieved through the country’s refund mechanism offered to eligible shareholders under certain conditions. Companies based or managed in Malta are subject to a global corporate tax rate of 35%, but this cost can be notably reduced with the use of applicable Maltese tax laws. Furthermore, there are several other fiscal benefits that make the Maltese system appealing.

Malta is an outstanding jurisdiction for entrepreneurs and businesses seeking alternative options with beneficial taxation rates. Structured in accordance with EU regulations, the tax system in Malta is a full imputation system which enables companies to pay their profits at source yet not have shareholders face further taxation on distributed dividends – resulting in a more efficient system than classical taxation models. Additionally, its refund scheme allows company shareholders registered in Malta claim up to six-sevenths of paid taxes back as refunds – consequently reducing overall costs to an effective tax rate of 5%. Lastly, those involved in more passive income sources such as royalties or interests would benefit from an overall effective rate slightly above 10%.

For businesses looking to consolidate their subsidiary companies and benefit from international tax advantages, a Maltese holding company might be the perfect option. Not only does it provide protection for personal and business assets such as real estate holdings, shares in other companies, intellectual property and more – but Malta also offers a full participation exemption tax regime which can make capital gains on disposals of shares or dividends exempt from taxation. Moreover, there are several residency programs tailored towards individuals or expats that offer special tax status with income remitted to Malta taxed at 15% (certain conditions apply). Finally, the Malta Retirement Programme provides even further benefits with pension income remitted to Malta being taxed at 15% as well (conditions also apply).

Example of a Malta company setup – Single Malta Trading Company

A company, Malta Co. 1, is 100% owned by an individual who is a resident in Spain and earns income from selling goods online. The taxable profit of the company is 100.

Malta Co. 1 must pay 35 in income tax on its profits and is left with net profits of 65 which can be distributed as a dividend to its shareholder.

Upon such distribution, the shareholder may be entitled to claim back 6/7 of the tax paid by the company from the Malta tax authorities, resulting in a net total received income from the company (i.e., 65) and refund from the Malta tax authorities (i.e., 30) of 95 (out of the 100 profits made by the company).

Malta does not charge any withholding tax on dividends distributed to a non-resident shareholder, and the tax refund payment does not suffer any income tax in Malta.

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