Companies and entrepreneurs often look for a way to lower their tax burden by moving the company to another country that has a more favourable tax structure. However, it is not often clear which country offers the best options, and it is not only the tax rate that should be considered when making this big decision. Other factors include the banking system, the general economy, available workforce and political structures.
Banking
When thinking about establishing a company in another country, you will also have to look at the banking situation of the respective country. In this case, Malta has the clear advantage, as they not only passed the ECB stress test in October, the bank system is also different than in Cyprus, as Malta’s banks do not rely on foreign investments, the capital is mostly from national sources. The banking operations are also more conservative, which ensures a stable banking system for the future. On the other side, the banks in Cyprus did not pass the stress test, and they lost a lot of money because of the financial crisis and bad economic situation in Greece, as one third of their capital was in Greek banks.
Economy
The economic situation in Malta is on the rise. The GDP is growing, and so is the employment rate. Overall, Malta is doing very well. It also does not appear to be a temporary phenomenon, the government is actively employing measures in order to increase their good performance. The situation in Cyprus is quite unstable at the moment, and the government relies heavily on financial aid from the other European countries.
Taxation
Cyprus is currently offering a corporate tax rate of 12.5%, whereas it is 35% in Malta. This may seem like a lot more in Malta, but it is in fact possible to get a tax refund when the limited company in Malta is foreign-owned. In this case it is possible to apply for a refund of 6/7 of the corporate tax, which will result in an effective rate of 5%.
The office of Dr. Werner & Partner can help you optimise your company structures in order for you to take the best advantage of the Maltese company structure. You are welcome to contact us for a personal consultation. Our consultation services in Malta include, among others, company incorporation, opening of bank accounts and we can also help you finding the right office for your company.
