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Transfer of Tax Residence to Malta
A Company is resident in Malta in two scenarios:
- It is incorporated in Malta;
- Its management and control is effectively managed from Malta.
In the first scenario, a company incorporated in Malta is considered to be domiciled and resident in Malta and is taxable on its world-wide income. However, a company that is resident in Malta by virtue of its management and control being exercised in Malta is taxable on income arising in Malta, or on income arising outside Malta but transferred to Malta [on a remittance basis].
Generally, in terms of Malta's double taxation agreements with other jurisdictions, where a company is considered as a tax resident of both contracting states, the company shall be deemed to be a tax resident only of the state in which its place of effective management and control is situated, irrespective of where the company has been incorporated. In cases where the tax residence of a company is deemed to be Malta, the company may benefit from the same tax advantages afforded to companies incorporated in Malta or re-domiciled to Malta.
To be deemed a Malta tax resident, the competent tax authorities would need to be satisfied that the effective management and control of the company is being exercised in Malta. The effective management and control of a company is deemed to be in Malta when strategic and management decisions relating to the company are made in Malta. This is generally achieved by ensuring that board meetings are held in Malta. This can be achieved as follows:
- Appointing Maltese directors on the board;
- Setting up a place of business in Malta. However, establishing a place of business in Malta, would require the company to register as an 'oversea company' and a certificate, confirming this registration, is issued. No certificate is issued where a place of business is not established in Malta.
To further strengthen the argument that the effective management and control of a company is in Malta, and that the company is operating from Malta, a Malta bank account in the name of the company is generally opened.
Once the company files its first set of accounts and tax return the Malta tax authorities, upon request, can issue a tax residence certificate confirming the tax status of the company.
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