Want to leave Malta after Company Setup, which options?

[uncreative]

I have a problem with malta air pollution after starting this following setup:

Active Malta Ltd <-- 100% shares--- Malta Holding <--100%-- Scottish LP ( I am just Limited Partner with 100% shares, a nominee General Partner 0% shares )

The active company runs online marketing and SaaS, there is an office and 2 other employees.
I am the managing director of the active company and the maltese holding company and also UBO with 100% shares as a limited partner.

For personal reasons (One of my children got strong asthma) I would like to leave Malta in 2024 and immigrate permanently to a country with better air quality and a better health system.
Malta has an exit tax since 2020, which makes it difficult for me to simply move the business. 35% would have to be taxed on the enterprise value incl all assets. Not a good option.
In addition, nobody has been able to tell me how the value of the company in Malta is calculated. In any case, moving the company is not really necessary, especially since the Maltese location also has many advantages such as low taxes, qualified english speaking employees.

Some more information that might be important:

- As a Limited Partner of a scottish LP, you are not involved in the business of the LP by UK law. Possibly an advantage for CFC/PE Rules?

- I would like to stay completely out of active online business.

- One of my employees could be a full-time managing director, I trust him and he has the skills to do this job.

-Saving taxes is not my primary focus, searching for a solution to move permanently.

-I would be flexible in choosing a new country: Spain , Portugal , Austria, Andorra, Switzerland would be okay, but no tiny Islands and no countries with air pollution problems.


One idea:

I am appointing a new director with the same salary that I receive
for the active company and holding company in Malta.

Substance would be: Office + Managing Director + 1 Employee ( Customer Support )

I am leaving Malta personal and the business remains in Malta.
I pay taxes of receiving dividends as limited partner of the scottish LP. I would pay capital gains on the dividends in the new country.
So maybe my new country of my tax residency will accept the structure a liitle bit more.

Would that be a solution or would it be too naive and dangerous with regard to all the EU laws e.g. CFC rules?

Maybe there are some more options? If someone could help, would be great. I want to discuss next week some ideas in detail with a tax lawyer.

Thx

 

[JustAnotherNomad]

I would look into Portugal with the NHR system, many people use Malta companies as NHR residents successfully.
I don't think there would be exit tax, as long as you stay within the EU?
But you would have to make sure you set this up correctly, dividends paid by pure holding companies could potentially be regarded as a CFC in Portugal - I'm not sure about the exact rules.

I'm not sure how capital gains are taxed in Maltese holding companies.
If you can avoid the CGT, you could also consider selling the company to a Liechtenstein foundation, for example.
Make the transaction for $5M on paper for example (make sure you get a proper value assessment from an auditor), then lend the money right back to the foundation, which will be paying it back at 200k per year including interest.
Since you will only be receiving your own money back (plus interest), you may be able to only have to pay tax on the interest, even if you move to a high tax country.
But please talk to a good lawyer about such a setup, I'm only mentioning this as an idea to do explore. I'm not sure exactly how to set something like that up in practice.

 

[uncreative]

I would look into Portugal with the NHR system, many people use Malta companies as NHR residents successfully.
I don't think there would be exit tax, as long as you stay within the EU?
But you would have to make sure you set this up correctly, dividends paid by pure holding companies could potentially be regarded as a CFC in Portugal - I'm not sure about the exact rules.

Thank you for your post.
Yes, the NHR System in PT is also a good solution, would fit for saving taxes too.
However, I also fear that my setup with the scottish LP and the additional Holding in Malta will result in all income being generated 100% passively and thus affect the CFC rules in Portugal. I will contact a PT Taxman, probably they know this setup and maybe it is changeable, so it will fit in the end.

 

[cryptomma2]

Sorry to hear, I understand the air pollution issue very well. I find the issue to become better in the "countryside" next to the sea, but this might not be appealing.

The purpose of the exit tax is that it should penalize residents moving to low-tax jurisdictions, so the interpretation might not apply in your situation when you are moving to a higher-tax EU country. Also in terms of wording of the regulation, I think you could be in the clear, as condition 3 of the 4 states:

"(c) a taxpayer transfers its tax residence from Malta to another EU Member State or to a third country, except for those assets which remain effectively connected with a permanent establishment in Malta;"

so as long as you keep the substance of the company in Malta (as you said, via managing director), there might be no exit tax. But it's a good idea to enquire directly at the Commissioner. They tend to be responsive to emails.

I saw the suggested set-up with two Malta companies and a Scottish LP as foreign holding with another entity as general partner quite often recently. May I ask you why you chose it over a simpler structure, such as UK or Cyprus Limited as foreign holding? Thanks

 

[uncreative]

Yes the country side is a little bit better, but there are a lot of ships passing passing betweet malta and italy with bad air pollution too. Never thaugt that an island can have such a bad air quality.

Okay I understand, so I can move away without problems as long as the company stays in Malta. Better than nothing.
Good Idea to contact the Comissioner, I will do before I take the next steps.

My tax office suggested this structure with the LP as I live in Malta and it allows me to receive the dividends directly and within Maltas laws to my private account outside of Malta.

However, this setup is probably more of a disadvantage when it comes to leaving Malta and moving within Europe. Maybe there will be an Exit Tax for the scottish LP too? I dont know...

The income from the LP is certainly to be regarded as passive and there could therefore be potential for conflict in relation to the CFC Rules.

A Malta Setup always looks like tax optimisation, even if I can set up a place of business there. Who knows if high tax countries will end up accepting the setup. Finally I did a wrong decision with the setup, bad luck.

Maybe I can get rid of the LP and keep the dividends in the Maltese holding company. Or use another holding company in my new country, so that the new country also receives at least a few taxes.

 

[Konstanz]

Good healthcare + fresh air = Swtizerland
For it comes in mind

Or you can do Andorra. Also fresh air. Favorable tax system
also good health care

 

[MarkusCostigan]

I have a problem with malta air pollution after starting this following setup:

Active Malta Ltd <-- 100% shares--- Malta Holding <--100%-- Scottish LP ( I am just Limited Partner with 100% shares, a nominee General Partner 0% shares )

The active company runs online marketing and SaaS, there is an office and 2 other employees.
I am the managing director of the active company and the maltese holding company and also UBO with 100% shares as a limited partner.

For personal reasons (One of my children got strong asthma) I would like to leave Malta in 2024 and immigrate permanently to a country with better air quality and a better health system.
Malta has an exit tax since 2020, which makes it difficult for me to simply move the business. 35% would have to be taxed on the enterprise value incl all assets. Not a good option.
In addition, nobody has been able to tell me how the value of the company in Malta is calculated. In any case, moving the company is not really necessary, especially since the Maltese location also has many advantages such as low taxes, qualified english speaking employees.

Some more information that might be important:

- As a Limited Partner of a scottish LP, you are not involved in the business of the LP by UK law. Possibly an advantage for CFC/PE Rules?

- I would like to stay completely out of active online business.

- One of my employees could be a full-time managing director, I trust him and he has the skills to do this job.

-Saving taxes is not my primary focus, searching for a solution to move permanently.

-I would be flexible in choosing a new country: Spain , Portugal , Austria, Andorra, Switzerland would be okay, but no tiny Islands and no countries with air pollution problems.


One idea:

I am appointing a new director with the same salary that I receive
for the active company and holding company in Malta.

Substance would be: Office + Managing Director + 1 Employee ( Customer Support )

I am leaving Malta personal and the business remains in Malta.
I pay taxes of receiving dividends as limited partner of the scottish LP. I would pay capital gains on the dividends in the new country.
So maybe my new country of my tax residency will accept the structure a liitle bit more.

Would that be a solution or would it be too naive and dangerous with regard to all the EU laws e.g. CFC rules?

Maybe there are some more options? If someone could help, would be great. I want to discuss next week some ideas in detail with a tax lawyer.

Thx

Do you live in the south of Malta?

 

[JustAnotherNomad]

Or use another holding company in my new country, so that the new country also receives at least a few taxes.

Most countries exempt dividends from tax in such cases, as long as you keep them in the holding company.

 

[uncreative]

Or you can do Andorra. Also fresh air. Favorable tax system
also good health care

Yes, maybe Andorra is an option, but they implement CFC Rules 2024. but with a effectiv 5% CIT in Malta with a Holding there is a possibility that the company is not affected. The problem with Andorra is the bank system, not easy to come in with a maltese setup in the background. Do you know a good bank?

Do you live in the south of Malta?

I started in Sliema and tried Marsalforn (Gozo) and Dingli as well...

Most countries exempt dividends from tax in such cases, as long as you keep them in the holding company.

Not distributing the funds and leaving them in the Maltese holding would make it more difficult for tax authorities in a high tax country to suggest an abuse setup to save taxes?
Does it really matter that much? Otherwise you could, for example, not make any distributions for p.e 5 years, move back to Malta for 1 year get tax residency again and pay out the profits and move away after the year again. I don't think it's that easy, but of course it would be a very interesting option, does anyone have practical experience?

I think it would affect CFC Rules of most Countries.

 

[JustAnotherNomad]

Not distributing the funds and leaving them in the Maltese holding would make it more difficult for tax authorities in a high tax country to suggest an abuse setup to save taxes?

No, you wrote about using another holding company in the new country.
For example, say you want to move to Spain. You set up a Spanish holding company and sell the Maltese company to it, while still in Malta. This should probably avoid the issue of exit tax - because you sold the asset before moving out. Then you close the Maltese holding company.
Then you move to Spain and your Spanish holding company receives the dividends from the Maltese company (which is still taxed in Malta since it has sufficient economic substance).
Typically, there is no tax for the new holding company in such a case (participation exemption), or only very little. Provided that you keep the money in the new holding company.

Just a thought - it might not work, you'd have to do your own research.

 

[uncreative]

Sorry, now I understand it.
Yes, that could work and maybe this would be the best solution to avoid the exit tax.
I hope economic substance will be sufficient with 1-2 employee and an office in Malta.
I will check this option with a spanish tax lawyer too, maybe I can use the new beckham law additional.