Cross-Border Mergers, shift of foreign companies' management and control or domicile to Malta

Apart from incorporating a new Malta company, clients may also consider other options:

(a) a cross-border merger of a foreign company with a Malta company, or

(b) shift the tax residence of a foreign company to Malta, by ensuring that effective management and control of the company starts being exercised from Malta, or

(c) continue a foreign company in Malta, in which case such company would become domiciled in Malta.

Altima Malta has been involved in a number of re-organisation projects which involve either one of the above three scenarios.

 

Cross-border merger of a foreign company with a Malta company – This is possible through the Maltese Cross-Border Mergers of Limited Liability Companies Regulations which implemented the relevant EC Directive on cross-border mergers of limited liability companies. Furthermore, Maltese tax legislation includes specific provisions applicable for cross-border mergers involving Maltese companies.

This procedure can be used to redomicile an EU company to somewhere outside the EU. This may not be possible in certain EU jurisdictions but instead the directors may resolve to  merge an EU company into a Malta company and subsequently re-domicile such Malta company outside Malta through Malta’s continuation legislation.

 

Shift in tax residence of a foreign company to Malta – Foreign companies are considered to be resident in Malta when their management and control is shifted to Malta. This would result in a number of benefits for the company:

(a) source and remittance basis of taxation of income – only income which arises in Malta and foreign income which is remitted to Malta is taxable in Malta. Therefore, foreign income not remitted to Malta is not taxable.

(b) source basis of taxation of capital gains – only capital gains arising in Malta are taxable. Foreign capital gains are not taxed even when remitted to Malta.

(c) tax refunds applicable to income sourced in Malta or remitted to Malta – income which is taxable in Malta is subject to tax refund claims by shareholders of such companies when distributed as dividends.

(d) participation exemption eligibility – the foreign company managed from Malta becomes entitled to the participation exemption regime on qualifying shareholdings.

(e) double taxation relief – different forms of double tax relief are possible under Maltese legislation and a company is entitled to such relief if it is resident in Malta.

 

Continuation of a foreign company in Malta – Malta allows foreign companies to migrate or be continued in Malta without the need to be wound up in terms of the Continuation of Companies Regulations. In order to be able to migrate a foreign company to Malta, the entity must be a “body corporate” similar to a company in terms of Maltese law and must be incorporated in an approved jurisdiction as may be established by the Registrar.  Furthermore the laws of the other country must allow for the migration of companies and the company must be authorised to migrate in terms of its statute or constitutive document.

What are the advantages of re-domiciliation of a foreign company to Malta:

(a) If a company already is registered in another jurisdiction, there is no need to liquidate that company and open a new Malta company, thereby saving in costs.

(b) tax refunds applicable to income of the re-domiciled company – the company will become taxable on its worldwide income, but is subject to tax refund claims by shareholders of such company when distributed as dividends.

(d) participation exemption eligibility – the company becomes entitled to the participation exemption regime on qualifying shareholdings.

(e) double taxation relief – different forms of double tax relief are possible under Maltese legislation and a company is entitled to such relief if it is resident in Malta.