CRS - AEOI - FACTA exchange informations to Malta

[Osleak]

But from 1 January 2019 with ATAD there is also CFC rule that it’s more strict...

With CFC rule your foreign company’s income could be included in the tax base of the Maltese resident entity

But there are few conditions and threshold:

It’s considered Controlled Foreign Company when the 2 point below are met (both)

1.control test (in case of an entity): the taxpayer by itself, or together with its associated enterprises holds a direct or indirect participation of more than 50% of the voting rights, or owns directly or indirectly more than 50% of capital or is entitled to receive more than 50% of the profits of that entity; and

2.low-taxation test: the actual corporate tax paid by the entity/permanent establishment is less than 50% of the tax that would have been ‘charged’ on the entity or permanent establishment in terms of the ITA.


The CFC rule shall not find application in relation to an entity or permanent establishment

1. with accounting profits of no more than EUR 750,000 and non-trading income of no more than EUR 75,000; or
2. of which the accounting profits amount to no more that 10% of its operating costs in the tax period.

 

[Osleak]

So basically to be sure that your foreign company that you manage and control from Malta are not taxable with 35% of maltese corporate you must be sure that 1 of the following point is met

1) the tax rate that your foreign company are paying is equal or more than 17,5% or
2) you own less than 50% of share or
3) your foreign accounting profit low than 750.000€ Or
4) the accounting profits amount must be no more that 10% of its operating costs in the tax period.

 

[Martin Everson]

So in princple what is being said is that any offshore company managed from Malta by a resident non-domicile and that business does no business in Malta or remits no money to Malta is tax free?

So i.e a Seychelles, RAK company etc would work as a tax free business solution for a Malta resident non-dom and CFC etc does not affect the tax free status?

Sounds really good if not too good to be true.

 

[GrumpyMess]

So i.e a Seychelles, RAK company etc would work as a tax free business solution for a Malta resident non-dom and CFC etc does not affect the tax free status?

Sounds really good if not too good to be true.

That's why I doubted. Probably by using such a scheme a person can get on a various anti-abuse rules. I find it extremely risky to start using this scheme without getting a pre-approval from the tax commissioner. However 5% Maltese company tax makes it so comfortable that I don’t understand why so few people use it. Why to deal with offshores, for which is impossible to open an account, if one can have a 5% company with euro banks.

In any case, I still see contradictions. Here is an excerpt found on one site "Generally foreign companies in Malta are only taxed on their Malta source income and income remitted to Malta. The exception is income arising from trading activities, which is always considered to be income arising in Malta.

The Malta-Cyprus Double Tax Treaty contains a tie breaker clause that provides that the tax residence of the company is where its effective place of management is. A Cyprus company with its effective place of management in Malta will be resident in Malta and would therefore only be subject to Cyprus tax on its Cyprus source income. It will not pay Maltese tax on non-Maltese passive source income not remitted to Malta."
Therefore tax can't be 0%.

 

[GrumpyMess]

4) the accounting profits amount must be no more that 10% of its operating costs in the tax period.

so if company has 10k in profits and 5k in expenses it falls under cfc law. the company has to have 10k profits and only 0.99k expenses to remain under the radar. right?

 

[Martin Everson]

Also what about the below. It sounds like Commissioner has provision to make the rules up if they don't like your face or is this where the brown envelope gets involved ....lets not act like Satabank got license the legit way...lol.

----- quote from deloitte

"Under a general anti-abuse provision, the Commissioner for Revenue is entitled to disregard for tax purposes any artificial or fictitious scheme that reduces the amount of Malta tax payable by a taxpayer, and to assess the taxpayer for tax to effectively nullify or modify the scheme and consequent advantage. There also are a number of anti-abuse provisions targeting specific activities. "

-- end quote

I would want approval of any scheme by the Commissioner. If you have that approval in hand in writing via your accountant then nothing else matters from lawyers, accountants, auditors etc.

 

[celizo]

I know an advocate in Malta who recommended last year to not be "director" of a foreign company in order to avoid any risk of taxation in Malta in a near future. So to this day, nobody has never had any issue but maybe that will change shortly (probably the law is not clear enough, and subject to différents interpretations).

 

[Osleak]

So in princple what is being said is that any offshore company managed from Malta by a resident non-domicile and that business does no business in Malta or remits no money to Malta is tax free?

So i.e a Seychelles, RAK company etc would work as a tax free business solution for a Malta resident non-dom and CFC etc does not affect the tax free status?

Sounds really good if not too good to be true.

With cfc rules They have applied some threshold as i wrote... csb aswell wrote same thing :

so if company has 10k in profits and 5k in expenses it falls under cfc law. the company has to have 10k profits and only 0.99k expenses to remain under the radar. right?

No you need to meet one of the point above!
Please read well there are 4 points please read well, they use OR and not AND ( this is very important) to go out from CFC rules

The CFC rule shall not find application in relation to an entity or permanent establishment

1. with accounting profits of no more than EUR 750,000 and non-trading income of no more than EUR 75,000; OR
2. of which the accounting profits amount to no more that 10% of its operating costs in the tax period.

 

[Osleak]

That's why I doubted. Probably by using such a scheme a person can get on a various anti-abuse rules. I find it extremely risky to start using this scheme without getting a pre-approval from the tax commissioner. However 5% Maltese company tax makes it so comfortable that I don’t understand why so few people use it. Why to deal with offshores, for which is impossible to open an account, if one can have a 5% company with euro banks.

In any case, I still see contradictions. Here is an excerpt found on one site "Generally foreign companies in Malta are only taxed on their Malta source income and income remitted to Malta. The exception is income arising from trading activities, which is always considered to be income arising in Malta.

The Malta-Cyprus Double Tax Treaty contains a tie breaker clause that provides that the tax residence of the company is where its effective place of management is. A Cyprus company with its effective place of management in Malta will be resident in Malta and would therefore only be subject to Cyprus tax on its Cyprus source income. It will not pay Maltese tax on non-Maltese passive source income not remitted to Malta."
Therefore tax can't be 0%.

Please post also the source...

 

[Osleak]

If you want i can share all url of the best maltese law firm where they wrote ther foreign company with management and control in Malta will be taxable in Malta only on the income arising in Malta and income arising outside Malta only if they are remitted in Malta....

It’s possible or it’s like spam?

 

[GrumpyMess]

If you want i can share all url of the best maltese law firm where they wrote ther foreign company with management and control in Malta will be taxable in Malta only on the income arising in Malta and income arising outside Malta only if they are remitted in Malta....

This dispute can go on forever, let's do the simpler way, I give you 50€ and you show me the paper from the tax commissioner which states that if I'm non dom resident in Malta in year 2020 neither me nor my offshore company pays any maltese tax if not remitted

 

[Osleak]

This dispute can go on forever, let's do the simpler way, I give you 50€ and you show me the paper from the tax commissioner which states that if I'm non dom resident in Malta in year 2020 neither me nor my offshore company pays any maltese tax if not remitted

ahahah, you can ask directly or you can pay law firm for advice... if you are interested!

 

[GrumpyMess]

ahahah, you can ask directly or you can pay law firm for advice... if you are interested!

I wrote them an email, but they didn't answered. It seems they simply ignore emails.

 

[Jmeery1]

Would a Malaysian company owning the Malta company solve the cfc problem? Malaysia has territorial taxation but company tax rates on Malaysian income are over 20%. Therefore would a Malaysian company be excluded from being subject to CFC legislation due to having higher 17.5% tax rate? Malaysia also has no CGT except on physical property so presumably that entity could just accumulate capital then be liquidated?

 

[lonizzita]

But from 1 January 2019 with ATAD there is also CFC rule that it’s more strict...

With CFC rule your foreign company’s income could be included in the tax base of the Maltese resident entity

But there are few conditions and threshold:

It’s considered Controlled Foreign Company when the 2 point below are met (both)

1.control test (in case of an entity): the taxpayer by itself, or together with its associated enterprises holds a direct or indirect participation of more than 50% of the voting rights, or owns directly or indirectly more than 50% of capital or is entitled to receive more than 50% of the profits of that entity; and

2.low-taxation test: the actual corporate tax paid by the entity/permanent establishment is less than 50% of the tax that would have been ‘charged’ on the entity or permanent establishment in terms of the ITA.


The CFC rule shall not find application in relation to an entity or permanent establishment

1. with accounting profits of no more than EUR 750,000 and non-trading income of no more than EUR 75,000; or
2. of which the accounting profits amount to no more that 10% of its operating costs in the tax period.

the only thing I didn't understand.

at the time of the creation of the company, in Gibraltar, I write the operational headquarters in Malta

if indicated, operational headquarters in Malta, do I have to pay taxes in Malta?

or should I put, operational headquarters in Gibraltar ?

 

[JohnLocke]

Anyone is able to clarify the situation for the guys asking here. If there should be someone that has a document that can show something we don't know it would be great to post it here if possible

 

[Martin Everson]

the only thing I didn't understand.

at the time of the creation of the company, in Gibraltar, I write the operational headquarters in Malta

Fair enough

if indicated, operational headquarters in Malta, do I have to pay taxes in Malta?

Yes

or should I put, operational headquarters in Gibraltar ?

Makes no difference. A Gibraltar company is only considered Gibraltar resident if it is managed and controlled in Gibraltar.

Gibraltar and Malta have had a TIEA since 2012 also.

You need to go and speak to a tax advisor.

 

[lonizzita]

Makes no difference. A Gibraltar company is only considered Gibraltar resident if it is managed and controlled in Gibraltar.

Gibraltar and Malta have had a TIEA since 2012 also.

You need to go and speak to a tax advisor.
[/QUOTE]

I spoke to a consultant, he told me this:

Gibraltar registered office and operational headquarters in Gibraltar, it is considered resident so you pay 10% tax

Gibraltar registered office and Malta operational headquarters, is not considered resident, therefore it is tax free.

Now,
Gibraltar registered office and Malta operational headquarters, for Malta the CFC up to 750k applies.

hours is everything correct?

 

[Martin Everson]

Gibraltar registered office and operational headquarters in Gibraltar, it is considered resident so you pay 10% tax

Correct.

Gibraltar registered office and Malta operational headquarters, is not considered resident, therefore it is tax free.

Not considered tax resident where...in Gibraltar yes but how about Malta? Did you ask him this....lol?

The place of management, control and operation of Gibraltar company is Malta right?

Now,
Gibraltar registered office and Malta operational headquarters, for Malta the CFC up to 750k applies.

This is not a CFC issue my friend. You told the Gibraltar authorities the following.

at the time of the creation of the company, in Gibraltar, I write the operational headquarters in Malta

Now you think any foreign company from a country with no DTA with Malta can be headquartered in Malta and operate on Malta soil and not pay taxes? Do you honestly believe this?

 

[lonizzita]

So we can’t trust of any one in Malta, same thing 3amalta and other law firms, i will ask also to csb group. But i think that this is common in Malta!

registered office and operational headquarters (office, director and at least one employee) all abroad

therefore it is not possible to be an administrator, these were his words:

''the EU ATAD (anti tax avoidance directive) claims that profits will no longer be taxable simply where a company is registered though where management and control and operations of such company are being carried out from which is why everyone is focusing on having substance (office, employee, directors) in the country where they are carrying out operations and where they want to be taxable''