Re-domiciliation of Foreign Companies to Malta

The continuation of companies regulations (Legal Notice 344 of 2002) allow a body corporate formed and incorporated or registered under the laws of an approved country or jurisdiction other than Malta which is similar in nature to a company as known under the laws of Malta, to request the Registrar of Companies in Malta to be registered as being continued in Malta under the Companies Act. Continuation of companies in Malta is conditional upon law of that country or jurisdiction authorizing it to be continued under the laws of another jurisdiction, and provided it is also authorized to do so by its charter, statutes or memorandum and articles or other instrument constituting or defining the company.

Continuation is an effective method of transferring the ownership of assets and liabilities to another jurisdiction without transferring the assets and liabilities themselves to another legal entity which may potentially create adverse tax consequences.

Tax status

A foreign company which is continued in Malta is deemed to be a body corporate incorporated in Malta under Companies Act. Companies incorporated under the laws of Malta are deemed to be ordinarily resident and domiciled in Malta unless management and control is exercised in another country and the tie-breaker rules of the relevant double tax treaty allocates fiscal residence to the state where the effective management and control is situated.

Companies ordinarily resident and domiciled in Malta are subject to tax in Malta on their worldwide income and gains. Yet they are entitled to claim treaty benefits and possibly the benefits granted by the EU Directives. They are also entitled to claim any fiscal benefits granted by the Income Tax Act, Income Tax Management Act and their the subsidiary legislation.

Alternatively if a foreign company is continued in Malta but its fiscal residence is not shifted to Malta, the company may be subject to tax in Malta on a remittance basis on its foreign sourced income. Under the remittance system of taxation, foreign sourced income is not subject to tax unless the income is received in Malta. Any capital gains arising outside Malta are not subject to tax in Malta even if they are received in Malta.

Following Malta’s accession to the European Union, despite that the continuation of a foreign company to Malta may slightly increase the effective tax rate, re-domiciliation is predominantly advantageous for companies incorporated in blacklisted low-tax offshore jurisdictions which are typically subject to Controlled Foreign Company (CFC) Legislation and anti-tax haven rules.

Procedure

Request for registration

Continuation commences by the foreign company filing of a request to be registered with the Registrar of Companies in Malta as being continued in Malta. The request should be supported with the following documentation:

A resolution or equivalent document of the foreign company authorising it to be registered as being continued in Malta and a certified translation in the English language where appropriate;

1. A copy of the revised constitutive document of the foreign company;
2. A certificate of good standing in respect of the foreign company issued by the foreign competent authority;
3. A declaration signed by at least two directors of the foreign company confirming:
   • The name of the foreign company and the name under which it proposes to be continued;
   • The jurisdiction under which it is incorporated;
   • The date of incorporation;
   • The decision to have the foreign company registered as continuing in Malta;
   • That the foreign company has given formal notice to the competent authority of the foreign ountry of its intention of continuing in Malta: evidence of such notice should be annexed to the declaration;
   • That no proceedings for breach of the laws of the country or jurisdiction of incorporation have been commenced against such foreign company;
4. A declaration signed by at least two directors of the company confirming the solvency of the foreign company;
5. A list of directors of the foreign company as well as the company secretary, if any, or of the persons vested with the administration or the representation of the foreign company;
6. Any other evidence or information which the Registrar may require;
7. The relative fees.

Provisional Certificate of Incorporation

Upon being satisfied that the documents supporting the request for registration comply with the Continuation of Companies Regulations and the relevant provisions of the Companies Act, Registrar of Companies in Malta will issue a Provisional Certificate of Continuation certifying that the foreign company is provisionally registered as continuing in Malta.

Within a period of six months from the date of the issue by the Registrar of the Provisional Certificate of Continuation, the company shall submit documentary evidence to the Registrar that it has ceased to be a company registered in the country or jurisdiction where it had been initially formed and incorporated or registered.

Failure by the foreign company to provide such documentary evidence shall grant the Registrar the discretion to:

1. Either strike the name of the company off the register and inform the relevant authority of the country or jurisdiction concerned that the company is not registered in Malta; or
2. Upon reasonable cause being shown allow a further period of three months prior to striking the name of the company off the register

Certificate of Continuation

Upon presentation to the Registrar of proof of the company having ceased to be a company registered in the country or jurisdiction where it had been initially formed and incorporated or registered and upon the surrender to the Registrar of the Provisional Certificate of Continuation, the Registrar shall issue a Certificate of Continuation confirming that the company has been registered as continuing in Malta.

Advantages of re-domiciliation to Malta

• No income tax consequences on inbound migration
• No step-up in the tax basis of the assets
• Access to Malta’s tax refund system
• Access to Malta’s participation exemption regime
• Access to Malta’s double tax treaty network
• Access to the EU Directives
• Possibility to fall outside the scope of CFC legislation
• Possibility to fall outside the scope of anti-tax haven rules
• Possibility to migrate outside to another jurisdiction
• No exit taxes in Malta (on outbound migration)

 For more information contact Franco Falzon