Audits of financial statements are compulsory for all legal entities registered in Malta, irrespective of their size and of whether they are trading or not. The audited financial statements are the basis for the computation of the tax charge and eventual submission of the tax return of the company.

We are able to undertake various types of audit and assurance assignments and whatever the scope of your audit requirements, our focus is to deliver valuable information that not only helps protect your business, but gives you the tools you need to expand and prosper. We take the time to understand your business, its strengths and its weaknesses and our audit team will be led by a partner who understands the business environment in which you operate.

Committed to Quality and Value

Producing quality audits is of paramount importance to the firm. Key to our approach are understanding clients’ businesses, having rigorous internal quality assurance procedures and ensuring the firm has outstanding technical knowledge. An audit should be worth the money a client pays for it and our approach is aimed at delivering this promise.

Committed to Clients

We are committed to our clients and about what they think, and we believe that an audit is not just a legal obligation, but an opportunity for the client to receive real benefits that convert an overhead into an investment.

Baker Tilly Sant is licensed by the Malta Accountancy Board to perform statutory audits of financial statements, and also carries out inspections of other financial and non-financial accountabilities. These activities are carried out in accordance with the International Standards on Auditing.

Apart from statutory audits, Baker Tilly Sant is also able to carry out other specialised audit assignments, such as internal audits and forensic audits.

 

The accounting function of any business is the backbone upon which any business is based. Irrespective of whether you are a start-up business or an established business, we tailor our services to assist our clients by providing a spectrum of services to help in the day-to-day routines and responsibilities of running and managing their business.

Towards this end, we offer the following services:

Management Accounting

At Baker Tilly Malta, we can assist you with your book-keeping and help you fulfill your diverse regulatory reporting requirements. Moreover, we are able to work on various accounts processing systems and are able to issue you with various periodic accounting reports tailored to your business requirements and to standards of group reporting.

However, having the numbers is one thing, interpreting them is another. Here is where we excel. We can put a set of figures into perspective. We will be able to discuss them with you to determine what the management accounts actually say about the state of your business.

We can identify with you the key performance indicators for your business and together decide what other factors are significant. This is the Baker Tilly Malta value added.

Preparation of Accounts

Baker Tilly Malta can prepare your statutory accounts to assist directors in fulfilling their obligations to report on the financial position of the business.

We are able to deal with books in any format, from the clearly itemised data of the smarter corporate to the ‘bulging envelopes’ of the multi-tasking owner-manager.

Using Baker Tilly Malta will allow you more time to do the things for your business that only you can do.

We are interested in helping you and your business succeed.

Payroll

Naturally, payroll processing and HR outsourcing are integral to our accounting and reporting services. Baker Tilly Malta can offer a fully comprehensive payroll service unique to each client’s individual needs. This can begin with registering the company as an employer with the tax authorities, registering the employee with the Employment and Training Corporation, setting up and computing the payroll, taking care of all monthly and yearly PAYE reporting requirements and reconciliations, as well as all related matters.

We deal with all the day-to-day aspects needed to pay your employees and have up-to-date knowledge of statutory employment information and issues.

All we need is your input every month, week or whatever frequency your staff is paid and we can deal with everything else. Should you wish, we can also arrange for your employee’s salary to be paid directly into their respective personal bank account.

We also provide tailored reports designed specifically to your requirements.

The process is operated in whichever way you prefer and we strive to ensure that the components we handle will be accurate and dealt with in a timely and professional manner.

 

At Baker Tilly Malta we can help you better manage your business through the offering of specialist advice in a number of areas, including:

Management Consultancy

At Baker Tilly Malta, we offer integrated business solutions supporting clients’ needs at various stages of their development, helping with the setting, implementing and monitoring of their strategies, operations and financial requirements.

In this respect, we provide:

• Profit Consulting – offering solutions related to optimisation of resources management; implementation of methods used for the improvement of the company’s performance, profit improvement and cost cutting.
• Business Decision Consulting – offering solutions to support the decision making process, including business plans scenario analysis, feasibility study, business cases and financial modelling.
• Business Models and Implementations – offering design of operating models, processes modelling and control procedures preparation, project management, change and quality management.
• IT Systems Consulting – offering support in IT implementation projects, including scope design, description of business and functional requirements, trainings and process roll-outs.

Mergers & Acquisitions

At Baker Tilly Malta, we can support business owners during all sorts of private equity deals, offering assistance throughout the entire process, from the due diligence stage through to the finalising of the agreement. Our services will include the liaison with all parties concerned and consider the diverse business aspects, with a view to rendering such service as smooth and seamless as possible.

We have excellent contacts and considerable experience in dealing with financial institutions during such situations, thereby ensuring that the best financial terms are achieved. Furthermore, we can assist in preparation of your business plan or presentation, ensuring that it highlights your strengths and potential and thereby impress your target audience. In short, we focus on project management so that you can concentrate on what is most important for you: running your business.

Due Diligence & Investigations

At Baker Tilly Malta, we are able to assist with the carrying out of diverse due diligence assignments, including financial and tax due diligence.

Each assignment is tailored towards the client’s individual needs and the process of carrying out due diligence would typically include:

• Defining the scope
• Collecting information
• Accessing data and holding discussions with key personnel
• Preparing the final report

Business Valuations

At Baker Tilly Malta we carry out business valuations for clients for diverse reasons, including for the purchase or sale of a shareholding stake, for donation purposes and for succession purposes.

Business valuations are conducted through the application of various methods, including the Discounted Cash Flow method, the Asset method and the Comparative method based on the application of profit and market ratios.

The choice of method adopted depends on the aims and needs of the client.

Human Resources

At Baker Tilly Malta, we understand that in order for a business to succeed it has to have the right team of people. We believe that people are a businesses’ most important asset and managing and developing the team is the key to any businesses’ success.

We can assist organisations by offering guidance in people development and training and in the structuring of the organisation in order to improve performance and productivity.

At Baker Tilly Malta, we are able to advise and assist on all day to day and operational HR issues and also support organisations in delivering specific HR projects.

IT Consulting

At Baker Tilly Malta, we understand that technology is critical to the development, communication and delivery of a business products and services and hence the need for a thorough and flexible technology strategy has never been more paramount.

We are able to assist businesses by offering tailored support in the implementation of IT projects, including scope design, description of business and functional requirements, trainings and process roll-outs.

At Baker Tilly Malta, we know that you need not only the highest quality tax advice and compliance services, but you need advice that is pro-active and constructive to enable you to compete in your local or global marketplace.

Malta Tax System

General Jurisdictional Rules

A person that is ordinarily resident and domiciled in Malta is subject to tax in Malta on world wide income. When a peson is either ordinarily resident or domiciled in Malta (but not both), than tax is charged on income arising in Malta and on foreign sourced income remitted to Malta – in this case no tax is charged on capital gains arising outside Malta whether remitted to Malta or otherwise. A persom who is not ordinarily resident in Malta but resides in Malta is subject to tax on income arising in Malta and on income remitted to Malta. A temporary resident is normally subject to tax in Malta on income arising in Malta.

The domicile of a person is normally considered as being the country which is considered by law to be his permanent home. Malta has not developed its own notion of domicile but we have borrowed the notion from British common law.

The term ordinarily resident is not defined by the Income Tax Act. Ordinarily resident means residence which is normally part of a person’s every day life. It normally means a regular physical presence in a country, it is a residence with a degree of continuity, nothwithstanding occasional temporary absence. It constitutes residence which is taken up voluntarily.

A person is said to be temporary resident as he takes up residence for a temporary purpose.

A company that is constituted in Malta is considered to be resident and domiciled in Malta for income tax purposes. Such companies are subject to tax in Malta on their world wide income.

A foreign company that transfers its management and control to Malta would be considered to be resdent in Malta. In this respect it would be subject to tax in Malta on income arising in Malta and on foreign sourced income remitted to Malta. No tax would be charged on capital gains derived outside Malta. Only remittances of income will be subject to Malta tax.

Capital Gains Tax

Tax on capital gains is due on gains realised from the disposal of assets such as:

• Immovable property;
• Company securities;
• Goodwill, business permits, copyrights, patents, trademarks and tradenames;
• Transfer of rights over taxable assets;
• Usufractuary interest.

Gains derived are added to the chargeable income and are taxed at the normal tax rates and bands.

Certain exemptions from taxation of capital gains (subject to satisfying certain terms and conditions) include:

• Gains derived from the sale of ones residence;
• Gains derived from sale of securities listed on Malta Stock Exchange;
• Inter group transfer of assets;
• Transfer of securities by a non resident in a Maltese Companies that are not engaged in immovable property;
• Donations to close relatives.

Property Transfer Tax

The sale of immovable property is subject to a 12% final tax on the transfer value. In the first seven years from date of acquisition, taxpayer may opt to be taxed under capital gains rules rather than paying this final tax. After the lapse of 7 years property is taxed at 12% on value of sale. Non resident can always opt to be taxed under normal capital gains rules as under the final tax of 12% they would not be able to claim double taxation relief.

Company Tax

Maltese companies are not subject to a separate system of corporation tax, companies are subject to income tax at 35%. The Maltese tax system adopts a full imputation system. Under a full imputation system, shareholders receive a credit for the full tax paid by the company on profits distributed to them. The credit given may be utilised by the recipient of such a distribution to offset his income tax liability.

Persons in receipt of dividends paid out of taxed profits do not suffer any further tax since the highest rate of tax in Malta for individuals is 35%, equal to the company tax rate. This implies that in Malta we do not have economic double taxation.

Dividends paid out of untaxed profits to Maltese individuals and bodies of persons, excluding companies, suffer a withholding tax of 15%. Dividends paid out of untaxed profits to non-residents are not subject to any withholding tax.

Double Taxation Relief

Malta provides for four types of relief of juridical double taxation as follows:

• Treaty relief;
• Commonwealth relief;
• Unilateral relief; and
• Flat Rate Foreign Tax Credit

In the case where Malta has a double taxation agreement and the treaty provides for the relief of double taxation, then treaty relief will apply. Commonwealth relief applies only if treaty relief is not available. If treaty and Commonwealth relief are not available, it is possible to claim unilateral relief. The Flat Rate Foreign Tax Credit is another form of unilateral relief and is normally applied when no tax is charged in the foreign jurisdiction or tax charged is minimal.

Treaty Relief – under the provisions of treaty relief, a foreigon tax credit is granted for foreign tax paid on income received from a country with which Malta has signed a double taxation agreement and which treaty makes provision for the relief of double taxation. Malta has an extensive double tax treaty network and most of these treaties are based on the OECD model convention for the elimination of double taxation.

Commonwealth Relief – this form of relief is a limited type of relief granted on taxes paid to British Commonwealth Countries in respect of foreign sourced income derived by Maltese resident persons from such countries. This relief is only available on a reciprocity basis.

Unilateral Relief – relief on a unilateral basis is available where treaty relief and Commonweath relief are not available. Under unilateral relief provisions the overseas tax suffered is allowed as a credit against the Maltese tax chargeable on the gross foreign income. This type of credit is limited in the same manner as the tax credit available under treaty relief, that is the amount of the credit is the lower of the Maltese tax charged and the foreign tax paid. Unilateral relief for underlying tax is also available. In oder to be able to claim relief, prove of foreign tax paid is mandatory.

Flat Rate Foreign Tax Credit (FRFTC) – the FRFTC is a form of unilateral relief only available to Maltese companies. This type of relief may be obtained by pooling together different sources of foreign sourced income. FRFTC can be availed of if the other tyes of relief canot be availed of. Treaty and unilateral relief cannot be claimed either if no prove of foreign tax paid is available or if no tax has been paid in the foreign jurisdiction.

The FRFTC is equivalent to 25% deemed tax suffered on the net amount receivable and is to be added to such amount. From this aggregate amount, attributable expenses are deducted to arrive at the chargeable income. The chargeable income is taxed at 35%, but the amount of FRFTC is deducted from such an amount. The FRFTC is limited is limited lower of the 25% credit and 85% of the Maltese tax due before deducting the credit itself.

System of Tax Refunds

A non-resident person or a Maltese company wholly owned by non-residents is entitled to cliam a refund of tax paid by the company on dividends distributed.

• As a general rule the refund amounts to 6/7 of the Malta tax paid. This would mean that the net effective tax paid in Malta would be reduced from 35% to 5%.
• The tax refund is reduced to 5/7 where the dividend is distributed out of passive interest or royalties or if received from a participating holding which does not satisfy the anti-abuse provisions. Passive interest and royalties means interest or royalty income which is not derived directly or indirectly from a trade or business, where such interest or royalties have not suffered or suffered a foreign tax, directly, by way of withholding or otherwise, at a rate of tax which is less than 5%.
• When an enterprise has claimed treaty or unilateral relief than the tax refund will amount to 2/3 of the Malta tax charge gross of relief (limited to the tax actually paid in Malta). If however the flat rate foreign tax credit is claimed,then the 2/3 refund is calculated on the actual tax paid in Malta.

By way of example hereunder is an example of the interaction of unilateral relief a 2/3 tax refund:

	€
Foreign income	10,000
Foreign tax paid (20%)	2,000
Malta tax charge	3,500
Unilateral relief	2,000
	———
Net tax payable	1,500
2/3 refund	1,333
	———
Effective tax paid in Malta (net of tax refund)	167
	=====

Participation Exemption

Income or gains derived by a company registered in Malta from a participating holding or from the disposal of such a holding, may at the option of the company be exempt from tax. In oder to exempt such income the following anti-abuse provisions must be satisfied:

• The taxpayer does not show such income or gains as part of his chargeable income in his tax return.
• The income is derived from a participating holding or from the disposal of such holding.
• The body of persons in which the participating holding is held:
  • is resident or incorporated in an EU country, or
  • is subject to at least 15% foreign tax, or
  • does not have > 50% of its income derived from passive interest or royalties, or
  • the equity holding is not a portofolio investment, and the non-resident body of persons, or its passive interest or royalties, have been subject to at least 5% foreign tax.

A portofolio investment is an investment in securities such as shares, bonds, and such like instruments and in which is held as one of many such investments for the purpose of risk spreading, where such an investment is not a strategic investment and is made with no interest in and without the intention of influencing the management of the company (in which the investment is held) and in addition is made only to follow the share price and dividend policy of the company, to maximise investment returns and to sell the investment as soon as it appears that the shares may lose value.

The first test is that the income has to be derived from a participating holding. A participating holding is a holding, that arises where a:

• Company holds directly at least ten per cent of the equity shares, or
• Company entitled to acquire the entire balance of equity shares not held at its option, or
• Company entitled to first refusal in the event of a proposed disposal of all equity shares, or
• Company entitled to directorship, or
• Company invests a minimum sum of €1,164,687, held for an uninterrupted period of at least 183 days, or
• Company holds such shares for the furtherance of its own business and not as trading stock.

Once the provisions relevant in determining whether a holding of shares satisfy the participation holding criteria, the company can either apply the participation exemption provisions or else opt to pay tax and claim 100% refund on tax paid on such income on distribution to non-resident shareholders or to a Maltese holding company fully owned by non residents. The terms of a double taxation agreement may provide that a resident of Malta will be entitled to exemption or relief from the foreign tax on certain types of income in the source state only if the company is subject to tax on that income in Malta.

Other Exemptions

Malta exempts from tax and does not impose any withholding tax on interest or royalties accruing to, or derived by, a non-resident beneficiary provided that such interest or royalties are not effectively connected with a permanent establishment through which the non-resident carries on business in Malta. To benefit from this exemption the non-resident shareholder must not be owned or controlled by, nor act on behalf of a person who is both ordinarily resident and domiciled in Malta.

Value Added Tax

The Maltese VAT system is based on the EU Directives. Every person carrying on an economic activity in Malta (excluding persons carrying exempt without credit supplies) must register for VAT purposes. Registered persons collect VAT on behalf of the Government of Malta. VAT is imposed on the ultimate private consumer and is not an expense suffered by the registered person.

The normal VAT rate is 18%, whilst a reduced rate of VAT applies to the following supplies:

• Holiday accommodation
• Supply of electricity
• Works of arts, collectors items and antiques
• Printed material
• Confectionery items
• Medical accessories
• Repairs of certain products
• Domestic care services

Food stuffs and pharmaceutical products constitute exempt with credit supplies. Medical and educational services constitute exempt without credit supplies.

 

Corporate Tax

At Baker Tilly Malta, we know that you need not only the highest quality tax advice and compliance services, but you need advice that is pro-active and constructive to enable you to compete in your local or global marketplace.

Our corporate tax compliance and advisory services are practical and focussed; delivering advice and hands-on assistance that allows you to implement your business objectives with confidence.

Our practical and focussed approach also extends to implementation of transfer pricing structures and international tax planning, working together as necessary with independent members of Baker Tilly International. For international tax issues we also offer connections to our tax services in other jurisdictions around the world through Baker Tilly International.

Indirect Tax

Our indirect tax compliance services include:

• Registration for Malta VAT
• Continuing VAT compliance, including EC Sales Lists and Intrastat declarations
• Acting as fiscal representative for non-EU businesses
• Handling claims for refunds of Malta VAT incurred by EU and non-EU businesses
• Advisory services on VAT, customs duties and stamp duties

Personal Tax & Expat Services

We offer a range of services designed to support businesses and their expats during assignments abroad. These services go beyond simply advising on tax matters. We also consider all the social insurance and/or legal and practical aspects, both in Malta and in the foreign country. In addition, we give our clients customised advice on a wide range of tax-friendly investment and reward schemes and issues related to social insurance and pensions. It goes without saying that we also take care of preparing your tax returns.

International Tax Structures

Malta is an ideal location where to set-up your business for your international organisation. With our expertise in this sector, we can help you in organising your business in such a way so as to maximise the tax benefits that can be attained through Malta companies.

Transfer Pricing

As yet, Malta does not have any Transfer Pricing legislation in force, however, this does not mean that you should not think of such an issue.

The world is globalising, and as an entrepreneur, you will face a number of challenges when expanding your business. With more international activity, your tax obligations toward various foreign governments will also be extended, as the tax authorities in the various countries will all want what their rightful share of your revenues. Higher levels of cross-border transactions therefore require a more extensive – and consistent – registration in your records of the underlying transactions within your group. A good record of the internal transfer prices applicable within your enterprise is indispensible and a key component of your risk management. After all, a lack of good Transfer Pricing documentation may result in time-consuming and costly discussions with various tax authorities and/or in your profits being taxed double.

Baker Tilly Malta supports you in identifying the tax risks in your Transfer Pricing system, in minimising these risks and in spotting opportunities.

This can be achieved in several ways:

• Optimisation of your business model for tax purposes
• Guidance of your organisation with respect to its legal obligations
• Guidance in concluding Advanced Pricing Agreements
• Support in discussions with the Dutch Tax Administration