One of the most popular and tax effective vehicles designed specifically with the non-resident investor in mind is the International Trading Company (ITC).
ITCs have multiple uses and, inter alia, are particularly suitable for:
- carrying on any export-oriented trading activity from Malta;
- holding patents or copyrights and receiving income therefrom;
- re-invoicing operations;
- tax purposes, particularly for reducing the incidence of withholding taxes on interest and/or royalty income; or
- receiving commission income.
ITCs may no longer be incorporated as from the 1st January 2007. For ITCs in existence prior to 1st January, 2007, the tax system described in this fact-sheet shall continue to be applicable until the end of 2010 under agreed transitory provisions. ITCs may convert to companies carrying on international trade until the end of 2010 and benefit from attractive fiscal incentives. Please view our fact-sheet entitled ‘Taxation of Maltese Companies’.
What is an ITC?
An ITC is a normal private limited liability company registered in Malta which, accordingly, is regulated by the Companies Act, but which carries on trading activities with persons outside Malta who are not resident in Malta.
The exception to this rule is that ITCs may purchase, under certain conditions*, locally manufactured goods for export from local companies and may trade with other ITCs.
Besides general trading activities, the activities of an ITC may also include banking, insurance and investment services activities provided the necessary licences are obtained.
ITCs may not purchase immovable property in Malta but may freely lease office and living accommodation. Moreover, ITCs may not hold shares in other companies on a long-term basis and, consequently, cannot act as holding companies.
If the shareholders are non-EU residents, the Malta Financial Services Authority (MFSA) will require a banker’s character reference from all of the shareholders of the proposed company to ensure that they are reputable and financially sound.
The minimum share capital required to set up an IHC is € 1164.6 which must be, at least, 20% paid up (i.e. € 233). Any foreign currency may be used.
Shareholders may choose to remain anonymous by utilising the services of a licensed nominee company. This, effectively, means that foreign funds finding their way to Malta may be transported wherever according to the wishes of the anonymous beneficial owners.
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