MALTA: CORPORATE TAX REGIME

1. Withholding Tax Rates by Beneficiary Type

Beneficiary	Dividends[1]	Interest	Royalties
Resident Companies	0%	0%	0%
Resident Individuals	0% or 15%[4]	25%	0%
Non-Resident Companies & Individuals (no treaty)	0%	0%[2]	0%
Non-Resident Companies & Individuals (with treaty)	See table below[3]	0%[2]	0%

[1]: No withholding tax is applied to dividends paid by a Maltese company, unless they originate from untaxed income and are distributed to certain residents (see note 4). Malta’s full imputation system prevents double taxation for shareholders: the tax paid by the company is credited against the beneficiary’s income tax.

[2]: Interest and royalty income paid to non-residents are exempt from tax, provided they are not linked to a permanent establishment in Malta.

[3]: Treaty Refunds: Some treaties allow for a partial refund of tax already paid by the company (e.g., Austria, Bulgaria, Kuwait, Libya, Romania), if the rate stipulated by the treaty is lower than the Maltese tax rate (35%).

[4]: A 15% withholding tax applies to dividends distributed to:

Resident individuals;
Foreign entities controlled by or acting on behalf of Maltese residents;
EU/EEA residents who have declared that 90% or more of their worldwide income originates from Malta.

2. Withholding Tax on Dividends Under Tax Treaties

Country	WHT Rate on Dividends
Albania	0%
Andorra	0%
Armenia	0%
Australia	0%
Austria	Possible refund of 2.5%[3]
Azerbaijan	0%
Bahrain	0%
Barbados	0%
Belgium	0%
Botswana	0%
Bulgaria	Possible refund of 5%[3]
Canada	0%
China (People’s Republic)	0%
Croatia	0%
Curaçao	0%
Cyprus	0%
Czech Republic	0%
Denmark	0%
Egypt	0%
Estonia	0%
Ethiopia	0%
Finland	0%
France	0%
Georgia	0%
Germany	0%
Ghana	0%
Greece	0%
Guernsey	0%
Hong Kong	0%
Hungary	0%
Iceland	0%
India	0%
Ireland	0%
Isle of Man	0%
Israel	0%
Italy	0%
Jersey	0%
Jordan	0%
South Korea	0%
Kosovo	0%
Kuwait	Possible refund of 20-25%[3]
Latvia	0%
Lebanon	0%
Libya	Possible refund of 20%[3]
Liechtenstein	0%
Lithuania	0%
Luxembourg	0%
Malaysia	0%
Mauritius	0%
Mexico	0%
Moldova	0%
Monaco	0%
Montenegro	0%
Morocco	0%
Netherlands	0%
Norway	0%
Pakistan	0%
Poland	0%
Portugal	0%
Qatar	0%
Romania	Possible refund of 30%[3]
Russia	0%
San Marino	0%
Saudi Arabia	0%
Serbia	0%
Singapore	0%
Slovakia	0%
Slovenia	0%
South Africa	0%
Spain	0%
Sweden	0%
Switzerland	0%
Syria	0%
Tunisia	0%
Turkey	0%
Ukraine	0%
United Arab Emirates	0%
United Kingdom	0%
United States	0%
Urugua	0%
Vietnam	0%

Leaders League ranking 2024

Leaders League 2024

Michelangelo is listed for the third year running in the following categories:

Litigation – « Recommended ». » – Law firm France 2024 Read More

Michel-Ange advises one of the founding partners of Openmedias on its tie-up with Groupe SCP.

Description du deal : Le Monde du Droit

Michel-Ange advises HEROES MEDIA on the acquisition of people magazine PUBLIC

Michel-Ange assists HEROES MEDIA with the tax aspects of the acquisition of PUBLIC magazine.

Deal description : Le Monde du Droit

Leaders League ranking 2023

Leaders League 2023 Michel-Ange est référencé dans les catégories suivantes: – Contentieux fiscal et assistance à redressement – «Pratique réputée» – Fiscalité des transactions – « Forte notoriété » – Fiscalité des associations et organismes à but non lucratif (OSBL) – « Excellent »

Private: Tax regime for cryptocurrencies: update following the adoption of the 2022 French Finance Act

The Autorité des Marchés Financiers (“AMF”) defines “cryptocurrencies” as follows: “Crypto-currencies”, rather called “crypto-assets”, are virtual digital assets that rely on blockchain technology through a decentralized registry and an encrypted computer protocol. A crypto asset is not a currency. Its value is determined solely by supply and demand. Crypto-assets do not rely on a trusted third party, like a central bank for a currency. There are currently more than 1,300 crypto-assets. The best known are bitcoin, ripple, ether, litecoin, nem and dash.” Bitcoin is today the best-known cryptocurrency. It is both a payment system and a unit of account. It allows its holder to make transactions but also to build up assets. Because of the invasion of Ukraine by Russia and the economic sanctions taken against the latter, cryptocurrencies are now at the center of discussions. On February 24, 2022, just before the collapse of the ruble, purchases of bitcoins in Russia reached a peak of 1.5 billion rubles (about 20 million euros). Some Russian citizens have also invested heavily in Tether (stock symbol: USDT), a “stablecoin” that aims to replicate the value of the U.S. dollar and is said to be more stable in price than bitcoin. The adoption of the Finance Law for 2022, the current crisis in Ukraine but also the ever-growing interest of the general public in crypto-currencies represent an opportunity to take stock of the tax regime applicable in case of transfer of a crypto-currency by an individual resident in France, and the related reporting obligations.

Transfer of digital assets: main tax considerations

Taxable event

Transfers of digital assets for consideration are taxable transactions when they are the counterpart of

money which is legal tender ;
the exchange of an asset other than a digital asset;
the exchange of a digital asset with a balancing cash;
a service.

Conversely, transactions involving the exchange (without balancing cash) of digital assets do not trigger the payment of any tax. The French Tax Code (“FTC”) defines “digital assets” by reference to Article L. 54-10-1 of the French Monetary and Financial Code (“FMFC”). The following are thus covered

tokens mentioned in Article L. 552-2 of the FMFC, excluding those meeting the characteristics of financial instruments mentioned in Article L. 211-1 of the FMFC and the savings bonds mentioned in Article L. 223-1 of the FMFC subject to another tax regime (that of Article 200 A of the CGI). As a consequence, pursuant to article L. 552-2 of the FMFC, a token is any intangible asset representing, in digital form, one or more rights, which can be issued, registered, kept or transferred by means of a shared electronic recording device allowing the owner of the asset to be identified, directly or indirectly. In practice, this includes tokens from Initial Coin Offerings (ICOs), which are issued through a blockchain technology to finance a new or innovative company;
any digital representation of value that is not issued or guaranteed by a central bank or public authority, that is not necessarily attached to a legal tender and that does not have the legal status of a currency, but that is accepted by natural or legal persons as a medium of exchange and that can be transferred, stored or exchanged electronically.

Recommendation: Holders of volatile crypto-currencies (e.g. bitcoin) should be able to secure part of their wealth, without tax friction, by converting part of their crypto-currencies into “stablecoin” (which are deemed less volatile – e.g. USDT). This transaction would be tax neutral if the “stablecoin” in question is validly considered a cryptocurrency.

Applicable tax regime

Capital gains realized – under the conditions referred to above – by individuals domiciled in France for tax purposes upon the sale of cryptocurrencies for consideration, are taxable at the flat tax rate of 30% (12.8% for income tax / 17.2% for social security levies)[1]. However, this tax regime only concerns individuals who carry out transactions on an occasional basis in the context of the management of their private assets. It should be noted that :

the capital gains resulting from the usual exercise of an activity of purchase-resale of digital assets are subject to the regime of Industrial and Commercial Profits (“BIC”) – application of the (application of the progressive scale of income tax)[2].
the regime of Non-Commercial Profits (“NCP”) applies (progressive income tax scale), by exception, when the gains realized by the taxpayer do not constitute a capital gain resulting from an investment transaction, but are the consideration for the taxpayer’s participation in the creation or operation of this virtual unit of account system (so-called “mining” activity).

The 2022 Finance Act has modified the above regime (for transfers of digital assets that will be carried out on or after January 1, 2023), as follows:

the professional or non-professional character of transactions involving digital assets will no longer be assessed on the basis of their usual nature but on the basis of the conditions under which they are carried out. The criteria for qualifying as “professional” the purchase and sale of digital assets will be aligned with those provided for stock exchange transactions, namely the carrying out of purchase, sale and exchange transactions of digital assets under conditions similar to those characterizing an activity carried out by a person engaging in such transactions on a professional basis. In practice, only a modification of the applicable administrative doctrine with the assistance of professionals in the sector should make it possible to identify clear criteria and thus secure the various types of transactions. Capital gains realized under such conditions will henceforth be taxed according to the BNC regime (application of the progressive income tax scale);
capital gains realized in a non-professional context may be subject to the progressive income tax scale instead of the flat rate of 12.8%, upon the taxpayer’s express and irrevocable option. The option will be global and will cover all capital gains on the sale of digital assets realized by the tax household. It will be exercised each year when the tax return is filed and at the latest before the deadline for filing. This option can be exercised for the first time in 2024 for the taxation of 2023 income.

Recommendation: The option for the progressive income tax scale should only be of interest if the taxpayer’s marginal income tax bracket is 11% (or lower).

Reporting obligations

Individuals (resident in France) who carry out transactions on an occasional basis as part of the management of their private assets must :

declare their accounts held abroad (e.g. Coinbase, Binances, Bitpanda) using a form n°3916 ;
declare capital gains realized on the sale of assets using form n°2086.

Management packages: vigilance is still required

Many companies offer their executives and/or employees share acquisition schemes known as management packages.

In principle, these schemes align the interests of executives and/or key employees with those of shareholders.

In practice, these arrangements allow managers/employees to benefit from more lenient taxation on the income earned. Indeed, the taxation applicable to capital gains on securities is generally more favourable compared to the taxation applicable to employment income.

The tax system is based on the principle that the taxpayer is entitled to the same tax treatment as the employee.

Potentially abusive arrangements

Management packages are included in the list of potentially abusive arrangements published by the Ministry of Economy and Finance on 1 April 2015.

The schemes targeted by Bercy are mainly the following: share warrants, preference shares (ratchet) and share purchase option contracts.

The schemes governed by tax law are not, however, covered by this list (allocation of free shares, share subscription or purchase options, warrants for business creator shares).

Risks of requalification

The tax authorities reserve the right to requalify a capital gain as non-trading profits, or salaries and wages, if the shares, or options were granted on preferential terms and outside the legal arrangements.

The list of abusive arrangements published by Bercy follows on from numerous court cases and the “Gaillochet” decision no. 365573 of 26 September 2014.

In the light of the case law of the Conseil d’Etat, the risk of requalification can be reduced when the following conditions are cumulatively met:

the investment is made at market price;
the risk of loss of the sums invested is real;
the investment is not conditional on the exercise of functions within the company;

For several years, the tax authorities have regularly referred these disputes to URSSAF, which can claim from the company issuing the shares the employer and employee contributions on the amount of the capital gains requalified as salaries and wages.

The decisions of the Conseil d’Etat n° 428506, 435452 and 437498 of 13 July 2021

The Conseil d’Etat recently ruled that an executive, by subscribing to share warrants at preferential rates, benefited from an advantage.

This benefit, when granted by reason of the functions held in the company, constitutes according to the Conseil d’Etat a salary complement.

The salary nature of the gain therefore no longer seems to depend on whether the investment was made at a market price or whether there was a real risk of loss.

In practice, however, management packages go hand in hand with a condition of presence (i.e. with an exit settlement in the context of LBO transactions). However, on reading the conclusions of the public rapporteur, the mere fact that the transferor was a director or employee of the company whose securities he is transferring is not in itself sufficient to justify a reclassification.

It is therefore advisable to encourage the greatest caution when structuring such profit-sharing tools, in particular by having such tools valued (by a third party) on entry and by excluding any non-transferability clause.

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Links

List of potentially abusive arrangements published by the Ministry of Economy and Finance on 1 April 2015

Council of State decision “Gaillochet” n° 365573 of 26 September 2014

Decisions of the Council of State n° 428506, 435452 and 437498 of 13 July 2021

Hierarchical recourse: two separate guarantees during and after the audit

The hierarchical appeal is intended for taxpayers who encounter difficulties:

during the course of the accounting audit; or
during the contradictory examination of the personal tax situation.

The hierarchical appeal: an amicable means of appeal

The charter of rights and obligations of the audited taxpayer allows taxpayers to address:

to the divisional inspector (formerly the departmental inspector) or principal inspector; and then
to the contact person specially designated by the director of tax services.

The charter of rights and obligations of the audited taxpayer further allows taxpayers who disagree with the auditor on the envisaged rectifications:

to obtain further clarification from the divisional or principal inspector and, if significant differences remain after these contacts; and

to call upon the contact person specially designated by the director to whom the auditor reports.

The hierarchical appeal allows the taxpayer in practice to set out the elements that he or she considers justify a change in the tax administration’s position.

The hierarchical appeal: a remedy not provided by the legislator

This possibility of hierarchical appeal does not derive from any legal provision but from administrative doctrine. This procedure can be used against the tax authorities only on the basis of Article L 10, para. 4 of the Book of Tax Procedures. This text allows the tax authorities to appeal to the tax authorities on the basis of the law. This text in fact allows taxpayers to avail themselves of the administrative guarantees contained in the taxpayer’s charter.

The contributions of the Conseil d’Etat (decision of 25 March 2021 n°430593 “Sté RTE Technologies”)

The Conseil d’Etat recently had the opportunity to clarify that this possibility covered two distinct substantial guarantees open to taxpayers at two different moments of the control procedure:

in the first place, during the audit and before the rectification proposal is sent; and
in the second place, after the response made by the tax administration to the taxpayer’s observations, in case of disagreement on the merits of the envisaged adjustments.

It follows that the refusal of the tax administration to comply with a request for an interview made during the audit and stating difficulties during the audit is likely to result in the irregularity of the audit procedure. The irregularity of the audit procedure is the result of the refusal of the tax administration to comply with a request for an interview made during the audit and stating difficulties during the audit. The irregularity would thus be admitted even if an interview had been granted after a second request made by the taxpayer following the tax administration’s response to his observations. The question arises, however, whether the mere mention of difficulties is sufficient to support a request for an interview during an audit, or whether it is necessary to justify the difficulties encountered at the time of the request.

Franco-Monegasque tax treaty: the tax authorities publish new comments in the BOFiP

A tax treaty was signed on 18 May 1963 in Paris between France and the Principality of Monaco.

The main purpose of this agreement is to introduce a tax in the Principality on the profits made by certain companies in Monaco. This agreement also defines the tax regime applicable to individuals of French nationality who have transferred their residence to the Principality.

The stipulations of this agreement were specified by various exchanges of letters between 1963 and 2010.

The tax administration updated its comments published in the BOFiP on 2 June 2021. The previous comments had been reported on 12 September 2012, the date of opening to the public of the website bofip.impots.gouv.fr (BOFiP).

This update is an opportunity to recall the main taxation rules applicable to persons with interests in France and Monaco.

Main tax rules applicable to individuals

The Principality of Monaco does not impose income tax on individuals domiciled in its territory.

However, Article 7-1 of the tax treaty between France and the Principality of Monaco provides, under certain conditions, that French nationals domiciled in Monaco are subject to income tax in France on all their income, under the same conditions as if they were domiciled or resident in France.

Article 7-3 of the Franco-Monegasque tax treaty provides that individuals of French nationality who have transferred their domicile or residence to Monaco as from 1st January 1989 are subject, as from 1st January 2002, to the solidarity tax on wealth, now known as the Impôt sur la Fortune Immobilière (“IFI”), in France under the same conditions as if they had their domicile or residence there. They are therefore taxed on all their assets that are included in the tax base, whether they are located in France or abroad, including in Monaco.

On the other hand, persons established in Monaco before 1 January 1989 are subject to the IFI only in respect of their assets located in France.

French nationals born in Monaco and having constantly maintained their residence there since their birth are also considered for IFI purposes as persons domiciled for tax purposes outside France, subject to the production of a certificate of domicile.

Main taxation rules applicable to companies

Article 1 of the Franco-Monegasque tax treaty introduced, as from 1 January 1963, a Tax on Profits (“ISB”) made by certain companies established in Monaco.

The scope of application of the ISB does not extend to all companies carrying out activities in the Principality. Only some of them, due to the nature of their activities, and under certain conditions, are subject to this tax.

In accordance with Article 2 of the Franco-Monegasque tax treaty, two categories of companies fall within the scope of the ISB:

companies carrying out an industrial and commercial activity in Monaco and of which at least 25% of the turnover comes from operations carried out directly, or through intermediaries, outside the territory of the Principality; and/or
companies whose activity in Monaco consists of receiving : (1) proceeds from the assignment or licensing of patents, trademarks, manufacturing processes or formulae; and (2) proceeds from literary or artistic property rights.

The tax treaty also contains specific tax base rules applicable to companies established in France or in the Principality of Monaco in respect of certain payments made to beneficiaries established or resident in the other State. Certain expenses are only deductible from taxable profits if the conditions set out in Articles 3 and 4 of the tax treaty are met. These articles have in particular introduced (1) a ceiling on certain deductible remuneration and (2) specific deductibility rules applicable to certain payments (not having the character of salaries) made to persons resident or established in Monaco by way of fees, royalties, brokerage and commissions.

Finally, subject to the provisions of Articles 3, 4 and 8 of the Franco-Monegasque tax treaty, the ISB is established and collected in Monaco under the same conditions as French corporation tax.

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