This step continues to cement Malta enviable position as a stepping stone to Europe and will provide a valuable gate-way for Chinese investors wishing to exploit the European market.
Apart from its 7,000 year history, architecture, and beautiful beaches, Malta has growing appeal to the foreigner for various reasons, at the forefront of which is a very advantageous tax regime. This is approved by the European Union and to date Malta has signed over 54 double tax treaties making it a jurisdiction of choice for international tax planning opportunities.
The Malta/China new double taxation agreement will, when ratified, replace the existing double taxation treaty, strengthening further the very good relationship between the two countries. The new double taxation treaty reduces the withholding tax rate for dividends with respect to holdings of at least 25% to 5% from the previous 10%. Whereas, withholding taxes on royalties derived as a consideration for the use of, or the right to use industrial, commercial or scientific equipment has been reduced to 7%. The reduction in withholding tax rates, coupled with the fact that Malta does not withhold outbound taxes on dividends, interests and royalties, makes Malta a very interesting jurisdiction for tax planning opportunities particularly to extract profits out of Europe.
The corporate tax rate in Malta is 35%, however through the application of double taxation relief and the local tax refund provisions, the effective tax rate in Malta is reduced to between 0% to 6.25% depending on source and nature of income. Furthermore, the availability of the participation exemption coupled with the absence of an outbound dividend withholding tax makes Malta an attractive exit route for non-European investors investing within Europe.
With effect from 1 January 2010, Malta has introduced new legislative amendments, enhancing Malta attractiveness in the following areas: Aviation Income arising in Malta derived by a person being tax resident but not domiciled in Malta and resulting from owning, leasing or operating aircraft or aircraft engine used for or employed in international transport of passengers or goods, will be deemed to arise outside Malta. Consequently, it will not be subject to tax in Malta unless such income is remitted to Malta. Royalties - A Maltese company receiving royalties derived in respect of inventions whether in the course of trade, business, profession or vocation or otherwise, may opt to be exempt from taxation in Malta.
Furthermore, since accession to the European Union, Malta fund and captive insurance industry has also experienced exceptional growth, as have other areas relative to the financial sector. The success of this sector was also recently reaffirmed by Malta 11th place ranking in the World Economic Forum Competiveness Index a clear indicator that a country size is not necessarily proportionate to its success.
