This question is one of the key issues when it comes to establishing a company in Malta. Whoever settles in Malta, establishes a company, operates it, and pays taxes to the island nation, is generally liable to pay corporation tax to Malta. In short, the 35% corporation tax have to be paid to the Maltese authorities – at least in the first instance.
There is a possibility to get a refund of 6/7 of the corporation tax if foreign businesses are involved in the company as a shareholder. This refund is possible if the limited company has the right structure, and the necessary application has been filed with the authorities. But what about the profits of the Malta Limited company, are these taxable in other countries like Germany and the UK, and if so, to what extent?
If you are living in Germany or the UK, and stay there more than 180 days a year, you will have to pay income tax in the respective country. This also includes the profits from a Maltese Limited company. Depending on your position in the company in Malta, you will be subject to the progressive income tax rate or the flat rate withholding tax.
How can you achieve the 5% tax in Malta? This is generally possible. In fact, it is the legal way to reduce the tax burden, and not tax evasion or even tax fraud. If the profits of a Maltese Limited company are not paid out directly to the shareholder in another country, but to a foreign owned company, it is not classed as your personal profit, but the company’s that owns the shares of the Malta Limited. This means that these profits do not need to be taxed in the UK or Germany (or wherever you live in Europe). The taxation takes place at a different level.
It is important to keep in mind some factors when founding a company in Malta. However, these depend on the company, and it is not possible to lump them all together. If you are interested in a company formation in Malta, please feel free to contact the office of Dr. Werner & Partner, we would be happy to help you, and give you advice.
