The provisions of the Companies Act offer the possibly to companies incorporated or constituted outside Malta to conduct business in or through Malta by using a branch or a place of business in Malta.
This creates viable alternative when such companies opt not to register a separate legal entity yet carry out business in or through Malta by an extension of their foreign corporate vehicle.
All fiscal benefits granted to companies incorporated or resident in Malta are also extended to branches therefore the use of a branch may create an optimal solution in international tax planning strategies particularly in the light of complex anti-avoidance legislation.
An oversea company is defined as body corporate constituted or incorporated outside Malta.
The oversea company is required to deliver to the Registrar of Companies in Malta for registration the following documentation, within one month of establishing a branch, or place of business in Malta:
(a) An authentic copy of the charter, statutes or memorandum and articles of the oversea company or other instrument constituting or defining the constitution of the oversea company, and, if the instrument is not written in the English or Maltese language, a translation thereof into either of such languages, certified to be a correct translation in such manner as may be prescribed;
(b) A list of the directors and company secretary, if any, or of the persons vested with the administration of the oversea company, or a list of the persons vested with the representation of the oversea company. Such lists shall include the following particulars:
(i) In the case of an individual, his name, his usual residential address, his nationality and his business occupation; and
(ii) In the case of a body corporate, its registered or corporate name and registered or principal office;
(c) A return containing the following particulars:
(i) The name under which the branch or place of business is carrying on its activities where different from the name of the oversea company
(ii) The address of the branch or place of business established in Malta by the oversea company, and where more than one branch or place of business has been established, there shall be indicated the address of the principal branch or place of business
(iii) The activities to be carried out by the branch or place of business established in Malta;
(iv) The names and addresses of one or more individuals resident in Malta authorised to represent the oversea company for the activities of the branch or place of business established in Malta; and
(v) the extent of the authority of any individual falling within subparagraph (iv), including whether that individual is authorised to act alone or jointly with others, and in the latter case, the name of any person with whom he is authorised to act;
(d) Unless disclosed by the document specified in paragraph (a), a return containing the following particulars about the oversea company:
(i) the legal form of the oversea company; and
(ii) the identity of the register in which the oversea company is registered and the number with which it is so registered.
Every company which has registered a branch or a place of business in Malta must file on an annual basis audited financial statements pertaining to the operations conducted by the Maltese branch or place of business.
Activities of a Branch
The Companies Act does not impose any restrictions on the activities which may be carried out by the Maltese branch. In fact, a branch may carry out any activities in Malta or outside Malta. Such activities could include:
- Holding of shares in non-resident companies
- Holding and leasing of assets
- Holding and licensing of intangible assets
- Financing activities
- Trading activities with persons in Malta or outside Malta
Branches of oversea companies are taxed in the same manner as Maltese companies and are subject to the tax at the rate of 35%. Malta does not levy a branch remittance tax or similar tax on the profits deemed to be distributed to the head office.
Profits derived by a Maltese branch of an oversea company are allocated to one of the following tax accounts:
- Final Taxed Account
- Immovable Property Account
- Maltese Taxed Account
- Foreign Income Account
- Untaxed Account
The legislative changes in 2007 extended the tax refund system to Maltese braches of oversea companies. Shareholders in oversea companies are entitled to refunds of the tax levied on the profits derived by the branch, provided that all relevant conditions stipulated in the law are met.
- 6/7ths of the Malta tax
- 5/7ths of the Malta tax
- 2/3rds of the tax paid in Malta
- 100% of the Malta tax
A Maltese branch of an oversea company may likewise benefit from a participation exemption. Where the holding of shares by the Maltese branch constitutes a participating holding pursuant to the relevant provisions of the Income Tax Act, the income received by the branch from that participation is exempt from tax in Malta.
Possible uses of a Maltese Branch
International Trading Branch
Investment Holding Branch
Advantages of using a branch
- No equity requirements
- No registration costs
- Effective loss planning
- Possibility to avoid CFC legislation
- No substance required
- Tax treaty benefits
- Domestic relief from double taxation
- Access to the participation exemption
- Entitlement to tax refunds
- Preliminary advice and structuring
- Registration and implementation of the branch
- Registered head-office
- Accountancy services
- Statutory Audit
- Tax compliance
- Back office duties and administrative support
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