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How optimize my tax setup in Malta (5% tax with Trading Malta + Holding Gibraltar)

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Luke Volter

New member
Mar 13, 2024
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#1
Hello,

I'm currently exploring options to optimize my tax setup. Here's my situation:

I'm an Italian citizen residing in Malta for the past 3 years. I operate a marketing agency from my home in Malta, serving clients globally, generating an annual income of €100,000.

My current business structure is as follows:

  1. Maltese company
  2. Gibraltar Holding company, owning 100% of the Maltese company
  3. I own 100% of the Gibraltar holding.
Cost breakdown: I incur an annual expense of €12,000 for accounting services (€10,000 for the Maltese company and €2,000 for the holding company), which I find quite high.

Strategies for optimization:

  1. I've reduced my monthly salary to €1,000 to minimize taxes on earned income. My aim is to maximize dividends at the end of the fiscal year.
  2. To mitigate taxes on dividends, I plan to limit dividend distributions to €34,000 annually, as exceeding €35,000 would trigger a €5,000 tax liability. Additionally, I intend to take all dividends from the holding company in the year before departing Malta, thereby paying the €5,000 tax only once.
  3. I claim one-third of my home rent as office expenses and deductible bill collection costs.
Questions:

  1. Is my business structure legally compliant? I've come across discussions suggesting the use of a third company, and I want to ensure my setup is entirely legal and secure.
  2. My current accountant's fees seem excessive. Apart from seeking quotes from other accountants, are there any measures I can take to streamline costs? What are the typical fees charged by Maltese accountants? I've heard of peers paying €8,000 annually and wonder if there's room for improvement.
  3. Are there deductible expenses I may be overlooking? Can I handle certain tasks myself to reduce reliance on my accountant?
  4. Given my circumstances, would it be advantageous to establish an LLC in the United States?
I appreciate any insights or guidance you can provide on these matters.

Thank you.

I will add one piece of data that may be important. I have a super humble lifestyle, concretely I live on 1,000 euros a month and I am happy, so if some ideas to optimize need that I spend little is not a problem.
 
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#3
Luke Volter said:
Is my business structure legally compliant? I've come across discussions suggesting the use of a third company, and I want to ensure my setup is entirely legal and secure.
Click to expand...

I've given my opinion on thread I hope you have already read. But if no one complains and because your resident in Malta if your accountant says its fine then leave it.

Luke Volter said:
My current accountant's fees seem excessive. Apart from seeking quotes from other accountants, are there any measures I can take to streamline costs? What are the typical fees charged by Maltese accountants? I've heard of peers paying €8,000 annually and wonder if there's room for improvement.
Click to expand...

That's Malta when it comes to accountants i.e payroll, quarterly VAT accounting, registered office, tax representation, annual return filing fee etc etc....lol. Without a breakdown of the annual cost of your Maltese company i.e the 10k it's difficult to tell. In any case you maybe able to save a couple of grand at best but it may not be worth the hassle.

Luke Volter said:
Are there deductible expenses I may be overlooking? Can I handle certain tasks myself to reduce reliance on my accountant?
Click to expand...

Again what does 10k beak down as? Tax is not your issue with 5% full imputation system so deductibles won't help against fixed accounting costs. You could however forfeit payroll and switch fully to dividends once a year to save on that :confused:.

Luke Volter said:
Given my circumstances, would it be advantageous to establish an LLC in the United States?
Click to expand...

Involving US would be last thing I would do. If you are using local banking or EMI services then get ready to have problems if you add US entity to your structure.
 
#6
Luke Volter said:
  1. Maltese company
  2. Gibraltar Holding company, owning 100% of the Maltese company
  3. I own 100% of the Gibraltar holding.
Click to expand...

Did you form the structure before 2020/in 2020?
Usually now a tax unit is created with another company in Malta to pay directly without waiting for reimbursement.

Out of curiosity, when you asked for a refund, how long did it take them to give it back to you?

Luke Volter said:
Cost breakdown: I incur an annual expense of €12,000 for accounting services (€10,000 for the Maltese company and €2,000 for the holding company), which I find quite high.
Click to expand...
The turnover is generated by how many transactions?

Luke Volter said:
  1. Given my circumstances, would it be advantageous to establish an LLC in the United States?
Click to expand...

If the LLC is managed from Malta it would be taxed directly on the individual. The argument about not remitting the LLC's earnings to Malta and only paying the 5K are meaningless (see various European regulations, GAAR etc...)

Another thing, also with regards to Maltese residence, Italy requires a "vital centre", to confirm fiscal domicile in the new state of residence in case of controls. Having business on the island is a plus point.
 
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