An extract from The Inward Investment and International Taxation Review, 11th Edition

Tax residence and fiscal domicile

i Corporate residence

While companies that are incorporated in Malta are considered to be resident in Malta, companies that are not incorporated in Malta are considered to be resident in Malta when the control and management of their business are exercised in Malta. While the terms 'management and control' are not defined in Maltese law, on the basis of UK jurisprudence, which is generally followed in Malta, a company is regarded as being managed and controlled in Malta if key strategic or commercial decisions are made in Malta. Thus, where a company would prefer avoiding becoming fiscally resident in Malta, it would not hold board meetings in Malta. From a Maltese tax perspective, it is possible to transfer the tax residence of an entity by changing the place of control and management of the entity. It is also possible to transfer the legal seat in and out of Malta. On taking up tax residence in Malta or redomiciling to Malta, an entity is allowed to increase the tax base cost of its assets up to market value.

ii Branch or permanent establishment

A foreign entity can establish a tax presence in Malta where it creates a branch, agency or similar permanent establishment in Malta, in that the general rule is that income derived from trading in Malta is taxable, while trading with Malta is not. Generally, income and gains arise from trading in Malta where they are derived from the carrying on of some activity in Malta, such as providing services in, negotiating a transaction in or renting property situated in Malta. While the term permanent establishment is referred to, it is not defined under domestic law, and as such, taxation is governed by the source basis as indicated above subject to the protection and application of tax treaties. Most of Malta's treaties currently adopt the OECD Model Tax Convention (2014) definition of the term permanent establishment with certain variations, and thus afford the corresponding protection of the permanent establishment threshold and tiebreakers for establishing treaty residence.