Understanding re-domiciliation of companies to Malta
Article

Understanding re-domiciliation of companies to Malta

20 November 2017

Re-domiciliation allows a foreign company to transfer registration to another jurisdiction, while retaining its existing assets and liabilities. Here’s an overview of re-domiciliation in Malta.

Under the terms of Malta’s Continuation of Companies Regulation, a company registered or incorporated abroad may re-domicile to Malta, while retaining its existing assets and liabilities.This option promotes “continuation” and prevents the foreign company from having to wind-up its business, crystalise any gains or losses and set up a new company in Malta.

Below are the potential reasons a foreign company might re-domicile to another jurisdiction:

  • when a shareholder moves residence and the current holding company is in a ‘blacklisted jurisdiction’
  • when there is no longer a double tax treaty in place to benefit the shareholder or a subsidiary incorporated under the holding company. 

Continuation of a foreign company

Under the Companies Act, a foreign company may request to be registered as “being continued” in Malta – provided that there is a provision in the law of that country or jurisdiction authorising it to do so, and provided it is also authorised to do so by its charter, statutes or memorandum and articles or other instrument defining the company.

Continuation is an efficient and effective method of retaining ownership of all the history and relationships of the migrating company, without transferring the assets, rights, obligations and liabilities to a third party, which may trigger various tax consequences.

The continuation of a foreign company to Malta does not trigger any Maltese tax, nor is it subject to any stamp duty or entry tax.

Local tax treatment for re-domiciled companies

A foreign company that re-domiciles to Malta becomes tax resident in Malta for Maltese tax purposes and subject to tax on its worldwide income and capital gains. Companies resident in Malta will obtain access to Malta’s extensive double taxation treaty network and become entitled to the other forms of relief from double taxation, including the unilateral relief and the Flat Rate Foreign Tax Credit. As Malta applies the EU Parent-Subsidiary Directive, dividends received by a Malta company and capital gains derived from the disposal of ‘participating holding’ will benefit from the Participation Exemption, provided certain conditions subsist.

In Malta, non-resident shareholders are entitled to claim a tax refund of up to 6/7ths of the standard 35% corporate tax paid by the company upon a distribution of dividends. This leads to an effective tax leakage of 5%. The percentage of refund varies depending on the type of income derived by the resident company.

Malta also benefits from a wide range of double tax treaties, which can be viewed at https://www.financemalta.org/double-taxation-agreements/.

How can TMF Group help? 

TMF Malta can help foreign companies incorporate and re-domicile their companies to Malta. Our local experts can also provide the administrative support needed to comply with local authorities’ requirements once the company is re-domiciled to Malta.

Find out more about how our services can help your companies reach new heights.

Written by

Elian Mallia

Finance Director at TMF Malta

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