Offshore Jurisdiction Review: Malta

(Editor's note: The information in this article is based on Streber's personal experiences and has not been independently verified. As always, do your own due diligence.)

This tranquil, bilingual Mediterranean island nation has a lot to offer those looking to internationalize.

This article is being written on the terrace in a hotel room under the warm Maltese sun with a breeze of air constantly coming in from the northeast.

History

Malta has a rich and well-recorded history. While a small nation, it has played a big role in many events across the Mediterranean.

There is evidence of Malta being inhabited since as early as 5200 BC, with Neolithic farmers and fishers arriving from Sicily. These people lived primarily in caves, though they built megalithic temples, such as the Tarxien Temples, which are believed to be from around 3100 BC.

Recorded history begins around the 10th century BC with the arrival of Phoenicians. It remained a Phoenician hub for a few hundred years before becoming a Carthagian and subsequently Roman outpost during the 3rd century BC. It remained Roman for nearly 800 years, during which it prospered and saw dramatic growth.

At the end of the Roman reign of Malta in the 5th century AD, it was taken over by Vandals, though this was short-lived, as the Byzantine Empire conquered Malta in 533. This saw a period of stability, during which Malta was a province of Sicily until 870, at which time Malta again changed ownership, this time being invaded by an Arabic people known as the Fatimids.

In 1194, following a Norman conquest, Malta became part of the Kingdom of Sicily. During this time, Malta abandoned the Arabic alphabet, and Maltese became the sole still-surviving Semitic language to be written in the Latin alphabet.

The end of the Sicilian rule in 1479 saw Malta become a part of the Spanish Empire, after having been handed around as a gift by various barons and feudal lords.

During the 15th and 16th centuries, the Ottoman Empire was expanding. When the Knights Hospitaller were expelled from Rhodos, they settled in Malta. The Knights Hospitaller—or Knights of Malta—made Italian the official language of Malta and made significant improvements to the infrastructure. The Ottoman Empire tried to capture Malta but were thwarted by the Knights and retreated.

In 1798, Napoleon took Malta without resistance from the Knights, but the Maltese soon revolted and laid siege on the French, who had taken refuge in one of the Knights' former fortresses. After two years, the French were ousted, and Britain took Malta under its protection.

Malta remained British until 1964. During this period, Malta grew tremendously. It played a minor role in World War II, when it was besieged by German Nazi forces. The Maltese managed to keep Hitler’s forces away. For their bravery during the German siege, Malta was awarded the George Cross, which can be seen on the Maltese flag.

In 1964, Malta left the British Empire and became an independent nation within the Commonwealth, like Canada and Australia. The country fell under oppressive, though democratically elected, leftist rule until 1987, when the conservative Nationalist Party took over and transformed the proud island nation into a financial masterpiece. In 2013, the Labour Party, which has improved much from the party’s dark days, won its first election since 1998.

Incorporating Offshore Companies

Forming a company in Malta is easy and relatively cheap, though more expensive than an international business company (IBC). Despite the higher cost, however, it is in many cases cheaper to utilize a Maltese company, given the nation’s wide selection of tax treaties.

The ultimate beneficial owner (UBO) of a company need not be on public record. Company formation can usually be completed in a few days for EU nationals. It will take a bit longer (a couple of weeks) for other nationalities.

Maltese companies pay 35% corporate tax (some sectors pay less), one of the highest in the world. The trick is to utilize Malta’s cleverly-written tax code to get a tax rebate. Companies can get up to 100% tax rebate, making for an effective tax rate of 0%, but the most common figure is for companies to pay an effective tax rate of just under 5%. Couple this with Malta’s impressive collection of Double Taxation Agreements (70 as of this writing) and a superb international reputation, and you have one of the world’s premier jurisdictions for incorporation.

It is important to note that in order to get a tax rebate, a Maltese company needs to be structured and operated correctly. It is beyond the scope of this article to explain the details. Speak to a law or accounting firm. I have experience with the following firms:

Different company forms are available, but nearly all Maltese companies are formed as private limited companies. Both holding and trading companies can also be formed in Malta.

It is common to form a company in Malta and then use the company to own a ship, in order to make use of Malta’s advantageous taxation and fees for owning a ship or other maritime vessel. Despite being one of the smallest countries in the world, it is the largest registry of ships in Europe and eighth largest worldwide.

Banking in Malta

Similar to Scandinavian and German banks, Maltese banks are solvent and take a conservative approach to investments.

Unofficially, there are four tiers of banks: the two big banks, medium banks, small banks, and special banks.

The two big banks are Bank of Valletta (BOV) and HSBC Malta. These banks have a dominant part of the market. A foreign, non-resident investor or entrepreneur looking to open an account in Malta will often have better luck with BOV than HSBC.

The medium banks include the Banif Bank, APS Bank, Sparkasse Malta, FIM Bank, Medbank, and Lombard Bank.

Among the smaller banks, the Austrian-Liechtenstein bank Volksbank is present in Malta. Private banking with superb service is available at a rather humble minimum of 25,000 EUR (last I checked).Opening a bank account in Malta remotely is possible in some situations, but you are much more likely to get approval if you visit the bank in person.

Living in Malta

Malta is attractive to entrepreneurs, workers, and retirees alike. The government has special programs for high net worth retirees.

There are several tax advantages to living in Malta. Only income remitted into Malta is subject to taxation, meaning you can own offshore investments and not pay a dime in tax. Furthermore, remittance of capital gains into Malta is tax free.

Malta has no inheritance tax, wealth tax, or annual property tax.

Put together low taxation, low cost of living, and year-round sunshine, and it becomes clear why Malta is very attractive to live and work in.

EU nationals do not need any residence permit, although having a Maltese ID card will make life a lot easier.

The Maltese government recently lowered the threshold to grant residency to foreigners who rent or buy property in the country. The program is called the "Global Residence Programme" and is a way for foreigners to obtain residency in an EU country. It will allow foreigners who purchase property in Malta worth at least €220,000 or rent with an aggregate yearly rental value of at least €8,750 (or €730 monthly) to obtain a residence permit. The previous threshold to obtain residency through a real estate investment had been €400,000.

Final Words

Malta is a highly reputable, low-tax jurisdiction with conservative and solvent banks. Its population is well-educated and speaks English. Few days pass without sunshine, even during the chilly winter months.

Whether you are looking to form an offshore company, open a bank account, obtain residency, or you are just a regular entrepreneur or investor, Malta might have something for you. It is a jurisdiction well worth looking into.

Further Reading

http://www.telegraph.co.uk/finance/personalfinance/expat-money/8450766/How-Maltas-new-tax-rules-could-benefit-expats.html

http://tax-news.com/features/Malta_Holding_Companies_Review_201213__570272.html

http://www.deloitte.com/assets/Dcom-Global/Local%20Assets/Documents/Tax/Taxation%20and%20Investment%20Guides/2013/dttl_tax_guide_2013_Malta.pdf


Streber works as a consultant and director for a wide range of companies and has broad experience in offshore banking, offshore incorporation (formation and maintenance of offshore companies), taxation, privacy, ecommerce, merchant accounts, online payments, and all other things the privacy-minded entrepreneur might find interesting. You can read Streber's blog on offshore incorporation and offshore banking here.

Tags: offshore company , malta , foreign residency

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