Tax Residence under the Income Tax Act
In terms of the Maltese Income Tax Act, a body of persons "resident in Malta" refers to "any body of persons the control and management of whose business are exercised in Malta, provided that a company incorporated in Malta on or after 1st July 1994 shall be resident in Malta and any other company incorporated in Malta shall be resident in Malta from 1st January 1995 where the management and control of the business of the company is exercised outside Malta".
Tax Residence by Incorporation
The first reference is to a company deemed resident by virtue of its incorporation in Malta. A company incorporated in Malta is deemed to be resident and domiciled in Malta and is thus subject to tax on a worldwide basis.
Tax Residence by Management & Control
The second reference is to a non-Malta body of persons (including a company) subject to Malta tax insofar as the control and management of its business is effectively exercised in Malta.
Effective Management & Control
The place of effective management is the place where key management and commercial decisions necessary for the conduct of the entity’s business are in substance made. This claim that a company is effectively managed and controlled in Malta may be substantiated by ensuring that all board meetings and general meetings are held in Malta and that management decisions are taken in Malta (and not anywhere else). Moreover, the company’s records should be maintained in Malta in order to reflect the company’s effective management in Malta.
Further substance may be established by appointing Maltese resident directors. Other connecting factors may include running an operating office and taking on employees in Malta.
An oversea company which may have branch operations in Malta would be registered in terms of the Malta Companies Act, 1995 as this is necessary to ensure the recognition and taxation of branches in Malta.
Taxation of non-Malta domiciled Companies resident in Malta
A company which is resident in Malta by virtue of its management and control effectively being exercised in Malta, but is not domiciled i.e. not incorporated in Malta, is charged to tax in Malta only:
- on income arising in Malta and
- on income arising outside Malta, but received in Malta.
Capital gains arising outside Malta but which are not remitted to Malta are not subject to tax in Malta even where these are remitted to Malta. Non-resident shareholders of companies resident in Malta in receipt of a dividend out of Malta taxed profits, may qualify for refunds of tax, provided that the relevant conditions are satisfied.
Malta resident companies may also apply the provisions of Malta's network of double tax treaties
