A Nordic business structure can benefit greatly from establishing in Malta. Nordic GEM has joined forces with Papilio Services to provide services in Malta for clients from Scandinavia.
WHY MALTA?
Malta is a well-regulated EU Member State with English as an official language, making it the ideal location for non-nationals like digital nomads to set up and manage their business activities. It’s a friendly and well organised economy that offers numerous incentives specifically tailored to start-ups, trading and service operations – allowing them to benefit from the country’s advantageous tax system.
Companies are considered tax resident in Malta if they are incorporated or register there, or if control of management is exercised within its borders. The corporate levy stands at 35%, but this can be greatly reduced by taking advantage of full imputation systems plus shareholders dividends refunded upon distributions. In addition, all companies must submit audited accounts alongside their annual tax returns.
EXAMPLE 1 – SINGLE MALTA TRADING COMPANY
A company, Malta Co. 1, is 100% owned by an individual who is a resident in Norway and earns income from selling goods online. The taxable profits 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.
EXAMPLE 2 – DOUBLE MALTA STRUCTURE
Malta Co. 1 is 100% owned by an individual who is a resident in Sweden. Malta Co. 1 owns 100% of the shares in Malta Co. 2. Malta Co. 2 earns income from royalties from intellectual property. The taxable profit of Malta Co. 2 is 100.
Malta Co. 2 must pay 35 in income tax on its profits and is left with net 65 profits which can be distributed as a dividend to its shareholder (i.e., Malta Co. 1).
Upon such distribution, the Malta Co. 1 may be entitled to claim back 6/7 of the tax paid by Malta Co. 2 from the Malta tax authorities, resulting in a net total received income from Malta Co. 2 (i.e., 65) and refund from the Malta tax authorities (i.e., 30) of 95 (out of the 100 profits made by Malta Co. 2).
Malta Co. 1 can retain the dividend and refund received (e.g., to use for further investments), or it can distribute its profits to its shareholder. If profits are distributed, it will be in the form of a dividend.
A further option to the above is available if the double company structure elects to be registered as a fiscally consolidated unit, whereby Malta Co. 1 is elected as the main taxpayer. This would mean that instead of Malta Co. 2 paying 35 in tax and then Malta Co. 1 claiming 30 back as a refund, the tax would be consolidated at Malta Co. 1 level and a net payment of 5 would be made by Malta Co. 1 instead.
EXAMPLE 3 – MALTA HOLDING COMPANY
Malta Co. 1 is 100% owned by an individual who is a resident in Finland and earns income from dividends received from subsidiaries where Malta Co. 1 owns more than 5% of the equity shares (i.e., a participating holding). There are more instances where a holding can qualify as a participating holding even though the 5% threshold is not met.
Malta Co. 1 can opt for claiming a participation exemption on such dividends, resulting on no tax in Malta being payable on such dividends received by Malta Co. 1.
Malta does not charge any withholding tax on dividends distributed by Malta Co. 1 to a non-resident shareholder.
These are just a few examples of how the jurisdictions of Malta and the Nordics can work together. This is a simple illustration of how the system can work and is not advice, as there are conditions applicable to make this work. All proposed set-ups should be analysed before set up, including how receipts of dividends and tax refunds may be taxed in the country of residence of the non-Malta shareholder.
Contact us to learn if Malta is the right choice for your structuring plans!
