Investors see Malta as Ideal for Investment


Investors

 


The Republic of Malta’s importance as an onshore tax-haven is on the rise as more wealthy investors move money out of Switzerland for fear that they may be drawn into the crackdown on tax evasion within the country.

Assets held by foreigners in Malta have crept up in recent months to stand at €28bn, up from €25bn last December and just €8.7bn at the close of 2003, according to the latest statistics from the Central bank of Malta. And Maltese private bankers claim that the pick-up in interest in their country’s banking system stems in part from an exodus of money leaving Switzerland where banking secrecy laws are under threat due to UK and US authorities’ scrutiny of offshore accounts.EDITOR’S CHOICEGold retains value, but not price - Nov-28Wealth managers keep steady amid the turmoil - Jul-12Fed in $85bn AIG rescue deal - Sep-17The Short View - Sep-18Emerging markets lose lustre for GMO - Sep-16Gold retains lustre in spite of price slump - Sep-01“The wealthy are coming out of Switzerland. They’re worried about appearing on a list somewhere,” says Mark Watson, chief executive of Mediterranean Bank, a Maltese private bank, which boasts a tier-one capital ratio of 35 per cent. “The tax rates in Malta are attractive and it’s onshore, above-board and part of the Eurozone.” An advantage of Malta’s taxation system is that the country maintains double-taxation treaties with more than forty countries. “Most of these treaties ensure that profits generated in Malta are either exempt from tax in the country of residence of the investor, or that such a country will provide a tax credit for the Malta tax spared as a consequence of the incentives Malta provides,” according to the website of Chetcuti Cauchi, a Maltese law firm.  A second perk is that while a 35 per cent corporate tax rate is levied on the income of Maltese companies, this rate is often slashed thanks to the existence of a so-called imputation system of taxation. This means that the 35 per cent tax paid by the company to the government is allowed to be marked down as a credit to the shareholders in the company who receive dividends. “When dividends are paid by trading comapnies to the shareholders, these shareholders become entitled to claim refunds of 6/7ths of the Malta tax paid by the company,” explained Chetcuti Cauchi’s lawyers. “Taking into account such refunds, this results in an effective rate of Malta tax of 5 per cent.” Malta also holds appeal for pensioners, according to Karina Challons, director of specialist tax with HSBC Private Bank. Under Maltese law, foreigners who move to the country and draw down pensions only face a 15 per cent tax rate. Another plus is that assets held outside of Malta do not draw capital gains or income tax so long as they are not brought into the country. “For retirees, Malta can be very attractive from a tax point of view,” Challons says. The UK’s highest earners have already begun to feel the brunt of the coalition government’s promised crackdown on tax avoidance, with accountants saying the authorities are already moving to close widely-used schemes. The coalition crackdown, intended to rake in a further £7bn in revenue, is running in tandem with a separate probe into tax evasion, a crime, focussed on people with significant assets overseas. Thousands of high earners have received letters recently from HM Revenue and Customs telling them they are suspected of serious fraud. Accountants, including Grant Thornton and KPMG, told the Financial Times this had led to a flurry of concerned phone calls from clients. The Revenue said it was “part of our drive against offshore tax evasion”. Malta’s importance as an investment hot spot is on the rise with assets held by foreigners in Malta having increased considerably in recent months to stand at €28bn, up from €25bn last December and just €8.7bn at the close of 2003, according to the latest statistics from the Central bank of Malta. And Maltese private bankers claim that the pick-up in interest in their country’s banking system stems in part from an exodus of money leaving Switzerland where banking secrecy laws are under threat due to UK and US authorities’ scrutiny of offshore accounts.

“The wealthy are coming out of other countries, such as Switzerland. They’re worried about appearing on a list somewhere,” says Mark Watson, chief executive of Mediterranean Bank, a Maltese private bank, which boasts a tier-one capital ratio of 35 per cent. “The tax rates in Malta are attractive and it’s onshore, above-board and part of the Eurozone.”

An advantage of Malta’s taxation system is that the country maintains double-taxation treaties with more than fourty countries. Most of these treaties ensure that profits generated in Malta are either exempt from tax in the country of residence of the investor, or that such a country will provide a tax credit for the Malta tax spared as a consequence of the incentives Malta provides.

A second perk is that while a 35 per cent corporate tax rate is levied on the income of Maltese companies, this rate is often slashed thanks to the existence of a so-called imputation system of taxation. This mean that the 35 per cent tax paid by the company to the government is allowed to be marked down as a credit to the shareholders in the company who receive dividends.

“When dividends are paid by trading comapnies to the shareholders, these shareholders become entitled to claim refunds of 6/7ths of the Malta tax paid by the company,” explained a prominent lawyers company in Malta. “Taking into account such refunds, this results in an effective rate of Malta tax of 5 per cent.”

Malta also holds appeal for pensioners, according to Karina Challons, director of specialist tax with HSBC Private Bank. Under Maltese law, foreigners who move to the country and draw down pensions only face a 15 per cent tax rate. Another plus is that assets held outside of Malta do not draw capital gains or income tax so long as they are not brought into the country. “For retirees, Malta can be very attractive from a tax point of view,” Challons says.

“All this, together with the positive signs of the recovery of the international economical situation, are excellent for Malta's prospects as an international financial and investment hub, not forgetting real estate ventures" added Joseph Lupi, Managing Director of Frank Salt Real Estate, “and we are fully geared to maximise this opportunity and promote Malta's offering and its properties in such promising markets. In fact by the end of 2010 the company will have organised 12 property exhibitions, as well as several seminars and roadshows, with an investment running into tens of thousands of Euros.”

Article Source: Financial Times. To read the full article visit FT.COM