ATAD / CFC 2019 Malta Full Imputation Refunds

[Martin Everson]

jackfrost said:
Or does the eu parent-subsidiary directive come into play there
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Gibraltar is soon not EU so this directive will not apply after a transition phase in best case scenario.

jackfrost said:
Do the 75k non trading aka passive income apply to the e.g Gibraltar holding or shareholder as that is all passive income? (dividends from Malta LTD and dividends to shareholder)
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Yes it seems.

The text does read as if it is against passive income so would not be suitable for portfolio income, rental income or holding structure as in your case.

Last edited by a moderator: Oct 25, 2018
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Please note my posts should not be taken as financial or tax advice. Please seek professional advice in that respect.

 

[jackfrost]

I got a first accountant response that it should not affect the Non-Dom in Malta holding Maltese LTD with active business - being held by foreign e.g. Gib Holding which he holds 100% too structure in any way. Waiting for details and also inquiring with two of the large tax lawyers on the island in a couple weeks when everything had time to do a little Maltese digging with their contacts aka brother in law which is the minister blah blah etc pp.

No effect on imputation refunds as well as non-remitted foreign income for the UBO that is.

 

[jackfrost]

Associate had a consultation with one of the big / connected tax advocates in Malta.

The final wording / implementation is probably not going to go live before late December. However they could clear things up a bit:

1) CFC rules don't matter at all for the current full imputation system / corp tax refunds in those structures as CFC rules work the other way round.

2) On the private side as in the refunds / dividends things are different. Right now they are tax free corporate income of the Gibraltar company. So far the CFC guidance rules -do not- talk about private or corporate tax payers and Malta can fully comply with the EU guidance by specifying CFC laws only for corporate tax payers. In this scenario nothing would change at all. Neither on the corporate side nor on the private side of things.

Where things would change is if Malta specifically introduces the CFC guidance on both private and corporate tax payers. This would not change anything with the tax refunds on corporate level but the dividends and tax refunds to the holding company would then be income for the Maltese owner of the holding as it would be a CFC in that regard.

However even that doesn't necessarily mean that you would really pay any tax as the full imputation system with its tax credits etc does not distinguish between private / corporate income tax. It is all one tax class and you still have the 35% tax credits that you payed as as corporate tax with the Maltese limited. Also as long as it stays outside of Malta all of this would still be foreign income.

So the only way anything would really change as in more tax paid is that if Malta specifically tried to undermine their own system which of course there is like 0 chance for as thats what keeps Malta alive.

While they would of course not guarantee anything right now until the legislation is official their behind the scenes stand also was - there is no way in hell Malta is going to undermine it / not introduce new tax credits whatever even if the EU forces it to get private tax payers into the CFC boat etc.

They are heavily featured in the Panama papers and have direct ties to the government.

 

[Martin Everson]

That's good news thu&¤#. Proof is in the pudding however.

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[jackfrost]

Yes will update once the legislation is out. He will consult again with them at that point.

 

[Leisei]

Did Malta have any other CFC rules before ATAD implementation?
Because I'm reading this: There are restrictions if passive income corresponds to more than 50% of the total and if taxes are below 15% (tax-free.today)
was it possible for a resident to have an offshore 0% tax company without it being classified as CFC before 2019?

 

[Martin Everson]

Leisei said:
was it possible for a resident to have an offshore 0% tax company without it being classified as CFC before 2019?
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Yes it was possible. Now EU decided what is best for each EU country regardless of territorial tax system.

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[GrumpyMess]

Does this applies also to non-doms? If yes non-dom regimes are useless within EU

 

[Martin Everson]

GrumpyMess said:
Does this applies also to non-doms? If yes non-dom regimes are useless within EU
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A company has its own separate legal personality. Why would it carry your non-dom status in light of CFC?

Speak to a local tax specialist as it depends how EU country intends to implement ATAD.

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Please note my posts should not be taken as financial or tax advice. Please seek professional advice in that respect.

 

[mmueller]

Anyone have any practical info on how and when the refund is issued?

I've heard delays of up to 12 months from corporate tax payment and submission of the tax refund claim until the refund is approved and transfered. The law says "within a maximum of 2 weeks" if I'm not mistaken.

 

[Osleak]

Martin Everson said:
The Estonia company setup is not ideal for profit distribution but for those looking to retain profits tax free and simply use company relevant expenses paid outside Malta to live off. In such a scenario the setup is tax free EU setup. However an Estonia company paying a Malta resident a dividend will have WHT applied regardless of if the payment is made outside Malta.

So lets assume you made 250k EUR in 2018. You do your 6/7 full imputation in Malta to get 5% tax paid in Malta minus your Malta salary to live on. Then the remainder paid to your Estonia company sits tax free in Estonia company. You can draw a little more income to spend offshore via Estonia company relevant expenses paid to a personal non-Maltese account. It will just mimic your Gibraltar setup but you cannot like a Gibraltar company take money out from the company outside Malta with no tax consequences. This will all work for profits under Malta's CFC 750k profit threshold it seems.
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i've talk with 3/4 auditors in Malta, mostly of them used UK ltd dormant as holding od the Malta LTD trading company, and in the most of case the UK holding don't need the bank account, when you are at the moment to pay taxes with maltese company, you can ask for 6/7 refund and ask to refund it to the personal account of the UBO of the Holding Uk or directly to the bank account of the Malta LTD trading comapny.... all auditors told me that you can use the divided taxed at 5% (35% with 6/7 refund) tax free in Malta because you hhave already paid in advance for the 35% and the 6/7 full imputation refund is separate thing... so your dividend taxed at 5% you can collect to your personal bank account in Malta aswell it will be tax free.

 

[Osleak]

jackfrost said:
Yes will update once the legislation is out. He will consult again with them at that point.
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Hi @jackfrost

Have you news about new CFC rules?