Companies which are incorporated in Malta are deemed to be resident and domiciled in Malta and chargeable to tax on a world-wide basis, irrespective of where the income generating activitiy is carried out.
Companies which are incorporated outside of Malta but which establish their management and control in Malta are deemed to be resident but not domiciled in Malta and chargeable to tax on income and taxable capital gains arising in Malta and on foreign sourced income remitted to Malta.
Companies which are neither incorporated nor have their effective control or management in Malta but which however operates a branch in Malta are taxed in Malta on the amount of income which is attributable to the branch.
2. Fiscal implications on aviation operations
Income derived by an owner, lessor or operator of one or more aircraft/aircraft engine, irrespective of their country of registration, and which is engaged in the international transport of passengers or goods, is deemed to arise outside of Malta, notwithstanding the fact that the aircraft may have called at or operated from any airport in Malta.
This provision allows for the possibiliy of foreign companies which operate in the aviation business, to structure their affairs in such a way as to establish residence in Malta and have their income generated from aviation business not taxed in Malta, to the extent that such income is not remitted to Malta.
3. Tax incentives for individuals working in the Aviation industry
Through the introduction of the ‘Highly Qualified Persons Rules’ individuals who are resident but not domiciled in Malta may benefit from a favorable tax regime in relation to qualified employment income generated in Malta.
Qualified employment includes persons who are employed with undertakings holding an air operators certificate. Such persons may opt to have their employment income charged to tax at a rate of 15%. Income which arises in Malta which does not qualify as qualifying employment would be taxed at the normal individual tax rates.
Due to the remittance basis of taxation which is associated with Maltese resident but non domiciled persons, it is seen to be highly beneficial for companies which carry out aircraft activities to establish or transfer their residence of foreign incorporated companies to Malta.
This would allow a company to benefit from the deemed source provision whereby any income derived from the operation, leasing or ownership of an aircraft will not be subject to income tax in Malta, unless such income is remitted to Malta.