Doing Business in Malta Presentation by Simon Ciantar Senior Partner

1. Doing Business in Malta Presentation by Simon Ciantar Senior Partner

2. Doing Business in Malta • Geographical Position of Malta :

3. Doing Business in Malta

4. Basic Statistics • Population: 400,000 • Area: 246 Square Kilometers • Capital City: Valletta • Official languages: Maltese and English • Other Languages: Italian and French • Religion: Catholic • Climate : Typical Mediterranean • Culture: European with strong British Influence • Currency: Euro

5. Doing Business in Malta • About our firm: • - Small sized accountancy and audit firm • - Operating since 1986 • - Specialised in offering financial services to non residents • - Members of AGN International - List of services: - Accounting and auditing - Tax consultancy - Fiduciary and trustee services - Corporate services - Management consultancy Web : www.sciantar.com

6. Advantages for foreign Investment • A growing financial centre within the EU • A unique tax system within the EU • Tax system approved by the EU • In a recent tax exercise carried out by our Network (AGN International) Malta came second as regards tax advantages within the EU after the Isle of Man • EU member • Member of the Euro zone

7. Salient Points • Low tax jurisdiction • However tax system works differently than in other such jurisdictions • Malta tax system uses a Full Imputation system • Unique within the EU

8. Imputation System • What does it mean? • Basically tax suffered in the hands of a company is given as a tax credit in the hands of the recipient receiving the income (both individual and corporate)

9. Imputation System • So unlike most low tax jurisdictions, corporate tax rate is not low (35%) • So where are the advantages? : • In the Maltese tax system all the tax advantages occur at the level of the shareholder ( individual or corporate) • Upon a distribution of a dividend from a Maltese company to a non resident individual or company the non resident can a claim a refund of 6/7 of the Malta tax paid • This results in a net effective tax of 5% • The refund is payable within 15 days following the end of the month in which the tax was paid

10. Imputation System

11. Imputation System

12. Refund System • Additional Advantages: • If income derived from abroad is derived from a Participating Holding (PH) then a full refund can be claimed. • Definition of PH : • An investment of at least €1,200,000 in a company not resident in Malta, and such holding is held for an uninterrupted period of at least 183 days • Such investment should not be held as trading stock In such a case a full refund applies. This also applies in the case of a sale of the PH. Any tax suffered on the capital gains upon the disposal of a PH will be eligible for a full refund Note: If a company does not qualify for a PH , the 6/7 refund will apply.

13. Refund System • Additional advantages (continued): • Participation Exemption (PE) : • If the PH satisfies certain additional criteria than no Tax needs to be paid in the first place. Thus avoiding any possible cash flow problems.

14. Tax Refunds • Conditions for a PE: • The foreign entity in which the PH is held must be a resident of or incorporated in a country or territory which forms part of the EU • OR: It is subject to any foreign tax at a rate of at least 15% • OR: less than 50% of its income must be derived from passive interest or royalties. If NONE of the above conditions are satisfied than ALL of the following have to be met: • The PH must not constitute a portfolio investment AND • Either the body of persons not resident in Malta OR • It’s (the body of persons’) passive interest or royalties have been subject to any foreign tax not less than 5%

15. Tax refunds • Participation Exemption( Summary): • If a Maltese company has dividend income from outside Malta and the investment qualifies as a PH , a full refund of the Malta tax paid will be possible (i.e.: 0% Net tax ) • If the dividend income also qualifies as a PE no tax is paid outright and obviously no refund need be applied for. This income need not even be declared in the Income Tax Return. • Moreover the possibility exists for companies which even though their foreign investment qualifies for a PE , still have the option to choose the income to be treated as a PH, and therefore have their income declared in the tax return, pay 35% tax and claim a full refund. • This option may be beneficial for companies which would want to show a tax paid on their dividend received in their home country.

16. Tax Refunds • Passive income: • 5/7 refund applies (i.e.: 10%) Definition of passive income: • Interest or royalties which are not derived, directly or indirectly from a trade or business and where any foreign tax suffered thereon is less than 5% • Therefore extremely restricted provision; does not cover all types of passive income, but merely interest or royalties. • Interest or royalties derived from a trade or business qualify for a 6/7 refund • If at least 5% foreign tax is suffered automatically interest or royalties are not considered passive

17. Tax Refunds .

18. Tax Refunds • Further Benefits: • The possibility exists to claim relief from tax suffered abroad . Three types of relief : • Unilateral relief (UR) • Treaty relief (TR) • Flat rate foreign tax credit (FRFTC)

19. Tax Refunds

20. Tax Refunds

21. Tax Refunds • FRFTC: • What if foreign income has not suffered tax abroad? • Then we can still apply FRFTC • This is a relief from Malta tax on a notional foreign tax suffered on the income

22. Tax Refunds

23. Tax Refunds

24. Tax refunds

25. Additional Advantages • No tax on dividend income received • No withholding taxes on payment of dividends and interest to non resident individuals or corporate entities • No capital gains tax on the disposal of securities between non residents or between Maltese companies owned by non residents • No tax on the liquidation of a company • Companies can act as both trading and holding with no tax disadvantages • Branches of foreign companies are treated as separate entities with full entitlement to tax refunds

26. Additional Advantages • No thin capitalization rules • No Stamp duty upon transfer of shares between non residents • Possibility of transfer of group losses • A wide network of double taxation agreements with over 50 countries including the USA and all EU countries

27. Additional Advantages • Minimum share capital requirements (only €1200 which can be utilized by the company) • Low registration fees and low cost base to operate from • A professional English speaking work force with a European mentality • A stable economic and political environment • A sound banking system with a number of large international banks

28. Additional Advantages • One of the best IT infrastructures in the EU • Various foreign investment especially in research and development, pharmaceutical industry, IT and semi conductor industry. • Recent investment by Dubai with the first Smart City outside of Dubai • One of the largest Shipping registers in the World

29. Permanent Resident Scheme • This is a Government Scheme offering Maltese residency to Foreigners for tax reasons. • How does it work: • Upon application a tax residency certificate is issued, showing that the individual is now resident in Malta and is paying tax in Malta. • Individual can present this to the tax authorities in his home country as proof that he/ she is no longer tax resident in his/her country of origin.

30. Permanent Resident Scheme • Requirements : • Applicant must bring into Malta a minimum of €14,000 plus €2,300 for every dependent p.a • Pays tax of 15% on this amount subject to a minimum of €4,200 p.a. • Produce a certificate from his foreign bankers showing that he/she has an annual income of at least €23,300 or a capital equivalent to €349,500

31. Permanent Resident Scheme • Must buy or rent property in Malta • Need not live in Malta, and indeed need never come into Malta at all ! • Cannot be employed in Malta, however can own a company and derive dividends • Note: The move of tax residency is not necessarily straight forward and some countries may still consider you tax resident in their country despite having the Maltese residency certificate. It is always important to discuss this with your tax consultant.

32. Listing on the Malta Stock Exchange • Potential to list a foreign company on the Malta Stock Exchange (MSE) - Primary or Second Tier Market for secondary listing on the Frankfurt Stock Exchange (FSE) 3 methods to explore • Option 1: - Open a Maltese registered holding company. - Maltese company acquires 100% of the foreign company to be listed.

33. Listing on the Malta Stock Exchange • Alternative – option 2: • Open Maltese Company • Merge existing foreign company with Malta company • Alternative – option 3: • Overseas company re-domiciles to Malta having been in existence for more than 3 years • Shares are then listed on the Maltese Stock Exchange. The company can then be listed on FSE by taking advantage from the UCITS Directive Pass porting Rights available to UCITS registered anywhere in the EU/EEA

34. Listing on the Malta Stock Exchange • Advantages: • Low cost base • Full expertise available in a one stop shop • Maltese listed company will benefit from very low tax base as discussed previously • Approachable and flexible regulator

35. Listing on the Malta Stock Exchange • Requirements: • Existing company to buy or merge in as subsidiary or re-domiciles. • Minimum of three years trading record (a lesser period will be considered if the company chooses to list on the Second Tier Market) • Business plan • Prospectus • Minimum share capital of €250K

36. Doing Business in Malta Any Questions ?

37. Doing Business in Malta Thank you