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Malta is an EU Member State with an Exceptionally Advantageous Tax Regime

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Malta Advantageous Tax to Partnerships

Malta Extends Advantageous Tax Regime to Partnerships

The Budget Measures Implementation Act 2015 (published, yet whose enactment is still awaiting Parliamentary approval), shall result in a series of amendments to the Income Tax Act and Income Tax Management Act. Thereby, these measures shall bring a series of reforms to the taxation of Maltese partnerships, effectively resulting in the following:

  • Partnerships electing to be treated as companies for tax purposes;
  • The requirement for partnerships to carry out a trade or business to be deemed tax transparent; and
  • Amendments whereby it shall no longer be necessary for the obligations of the general partner (in partnerships en nom collectif and en commandite) to be unlimitedly liable for all the debts of the partnership.

Whilst, the election for a Maltese registered entity is not a novel feature, the extension of the tax concession to include partnership, shall render the latter more palatable options, in the context of tax planning. Currently, Maltese companies are taxable at 35% corporate tax rate, albeit the immediate shareholders, are, upon a final distribution of dividends, eligible for a series of tax refunds, the default of which is set at 6/7ths of the 35% -thereby bringing the tax leakage to just 5% of taxable income.

This election has been extended in piece-meal fashion to a series of institutes. For example, Maltese private foundations are subject by way of default to the same taxation as Maltese companies. Maltese registered trusts, may, in lieu of evoking tax transparency which would render any income percolating to the trust taxable at the beneficiary level, also elect, conditional to meeting a series of criteria, to also be treated as a company for tax purposes. The extension of such election, which shall be irrevocable once triggered, shall open a new series of opportunities for the use of Maltese partnerships in tax planning.

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