Business • January 11 2004

How Malta has earned its reputation as a tax haven

Malta’s offshore regime established between 1989 and 1996, already had tongues wagging about Malta being a tax haven, and the introduction of International Trading Companies (ITC’s), which are onshore companies, would seem to have kept Malta’s bad reputation intact.
ITC’s are advertised widely via the internet on websites such as www.Malta-Tax.com, www.inter-shore.com and www.euromalta.com; but is known to be a mainstay of the business of auditors Deloitte and Touche and PricewaterhouseCoopers among others. One website www.taxhavenco.com lists Malta as a tax haven and offers to set up companies for Euro 3,850.
An International Trading Company is a corporate vehicle with a resulting effective tax rate of 4.17 percent, in the sense that although the companies pay 35 tax as other Maltese companies, the individual shareholders are entitled to tax refunds which bring their effective tax outlay to 4.17 percent, a very attractive proposition for companies wishing to avoid high tax rates. ITC’s are perfectly legal, but the EU is not entirely happy with Malta’s tax regime.
The only major condition for the setting up of such companies is that business is not done in the Maltese islands, but between foreign countries. While the companies are registered as onshore, Malta-Tax.com, for example advertises: "An ITC is a very effective offshore vehicle. It can be adopted to: receive commission income; receive management or operational fees hold patents, copyrights, franchises and other intangible rights perform re-invoicing operations."