During the last decade there has been a notable shift from traditional offshore structures towards more sophisticated onshore structures. Following international developments and regulations of the OECD, EU and other relevant authorities, more parties are focusing on structures using onshore companies before considering structures involving offshore companies, such as BVI limited companies.
Onshore structures are attractive because certain jurisdictions have introduced tax-driven anti-abuse provisions. The freedom of establishment and the free movement of capital principles within the EU mean certain domestic anti-abuse provisions do not apply to a company located in the EU; however, they could be triggered if a company redomiciles outside the EU. There are even cases known where individuals who own assets through offshore structures and who participate in residency programmes were denied tax breaks which they would otherwise have enjoyed had they owned the same assets through an onshore structure.
In the last year, there has been increasing demand for the redomiciliation of offshore companies to Malta. Malta is a stable and regulated jurisdiction with extensive financial infrastructure. It also benefits from EU membership. In addition, redomiciliation to Malta has the following benefits:
- A company will be treated as redomiciled and ordinarily resident for Maltese tax purposes and subject to Maltese tax on its worldwide income including foreign capital gains.
- A company will have access to Malta's double taxation treaty network and may be entitled to tax exemptions, for example, a participation exemption on certain foreign dividends and capital gains. There is also no withholding tax on dividends, interest and royalties paid to non-residents.
- There is an optional step-up in the base cost of assets to fair market value as at the date of redomiciliation.
- All articles and documents of the company, tax and related ancillary legislation, tax returns and related tax correspondence are in English because English is the official language of Malta.
- Due to Malta's EU membership, the company has access to the EU Parent/Subsidiary Directive, Interest/Royalty Directive and the freedom to establish and move capital within the EU.
- Though the Euro is the Maltese currency, the accounts of the company can be prepared in a different (functional) currency.
- The Maltese corporate headline income tax rate can be reduced to a 5% effective tax rate (from 35%) through tax credits and refunds.
- There are no specific transfer pricing, thin capitalisation or controlled foreign company rules.
- Advance tax rulings may be obtained from the Maltese tax authorities.
- Domiciliation implementation fees are low compared with other EU jurisdictions.
The regulations to redomicile companies in Malta are simple and flexible. These regulations allow redomiciliation if made from an approved jurisdiction, including EU members states and EEA members, OECD members, Jersey, Gibraltar, Isle of Man, Guernsey, British Virgin Islands, Cayman Islands, Bermuda, Bahamas and Mauritius.
Companies which have been incorporated and are registered in any approved jurisdiction may be redomiciled (onshored) to Malta as a continuing legal entity. This means that the company does not have to be dissolved or liquidated to change its redomicile to Malta, but can simply be 'transformed' into a Maltese company, subject to a number of conditions.
There are three important conditions for a company to redomicile to Malta:
- A shareholders' extraordinary resolution must be passed resolving that the company be redomiciled in Malta.
- The laws of the jurisdiction where the company is registered allow the company to be redomiciled in Malta.
- A written request is sent to the Maltese Registrar of Companies, together with a number of documents, requesting that the company be redomiciled in Malta.
Once the above-mentioned documents are approved as compliant with Maltese law, the Registrar of Companies will issue a Provisional Certificate of Continuation in favour of the company, which is valid for six months from the date of issuance. The company is then considered registered in accordance with the Maltese Companies Act, 1995, and subject to all its provisions.
During this six-month period, the company must present sufficient proof that it is no longer registered in the foreign jurisdiction. This usually takes the form of a Certificate of Cessation, issued by that jurisdiction. Once this is approved, the Maltese Registrar of Companies will issue the Certificate of Continuation. The company will be deemed to have registered in Malta on the date on which the company was provisionally registered.