The Malta Freeports Act, 1989 ("the Act"), provides for a number of substantial incentives, of a fiscal as well as of a non-fiscal nature, which are available to companies licensed by the Freeport Authority.
B. LICENSED COMPANIES
The Freeport Authority may grant a licence to a company to carry out in a Freeport a trade or business where the following conditions are satisfied:
1. It is a company which has been incorporated in accordance with Maltese company law;
2. The licensable trade or business shall consist principally in:
(i) the labelling, packaging, sorting, warehousing, storage, exhibition or assembly of any goods, materials, commodities, equipment, plant or machinery; or
(ii) any activity concerned solely with the conduct of a Freeport including, but not limited to stevedoring, wharfage, operation of terminals and container handling; or
(iii) the rendering of services analogous or complementary to the activities mentioned in (i) above.
3. The company's activities shall be wholly or mainly carried on or exercised within a Freeport.
Licensed companies, as well as other related persons (e.g. shareholders, expatriate employees, etc.) are granted a number of incentives.
Generally speaking, the incentives available in terms of this Act are applicable only in relation to those activities carried out by the company in terms of the licence granted to it by the Freeport Authority.
The incentives granted in terms of this Act are guaranteed against claw-back for a period of 15 years from the original licensing date or from the date of the use of the Authority's discretion whichever is applicable. It is interesting to note that licensed companies or other beneficiaries are given the option to refrain from benefiting from any incentive otherwise available.
The incentives available under the Act include:
1. Tax Holiday
An indefinite tax holiday (i.e. an exemption from income tax) in relation to those gains or profits arising to the licensed company from its licensed activities.
2. Tax Free Dividends
Dividends distributed by a licensed company out of profits which have been exempted from income tax are also tax free in the hands of its shareholders (provided they are not ordinarily resident or domiciled in Malta). In case of corporate shareholders, this tax exemption extends up to the ultimate non-corporate shareholders.
3. Tax Free Interest or Royalty Payments
Interest or royalty payments effected by a licensed company, in relation to operations exempt from tax in terms of the Tax Holiday, are tax free in the hands of the recipient provided the latter is a person who is not ordinarily resident or domiciled in Malta.
4. Customs Duty
The following goods imported by a licensed company into a Freeport are exempt from customs duty:
(i) goods imported in connection with structural work to an industrial building or structure within a Freeport;
(ii) equipment, spare parts, machinery or plant required for Freeport operations;
(iii) raw materials, components, intermediate products, by-products, unfinished goods or other goods imported in relation to its licensable activities.
5. Value Added Tax
The Value Added Tax Act provides for an exemption from the payment of VAT on importation of goods into a Freeport, to the extent that the said importation is also exempt from the payment of customs duty in terms of the Act.
6. Duty on Documents
The documents in relation to which there is an exemption from the payment of duty include those relating to the allotment of newly issued shares of a licensed company as well as documents relating to eventual transfers of such shares.
7. Transfer Duty
No duty is payable upon certain transmissions of shares in a licensed company occurring upon the event of the death of a shareholder thereof.
8. Expatriate Employees
Maximum individual income tax rate is reduced from 35% to 30%. Such employees may also opt to be exempt from the obligation to pay social security contributions in Malta.
Expatriate employees may also import their used personal belongings into Malta free from customs duty and, in terms of the VAT Act, also free from VAT.
1. Exchange Control
Exemption from a substantial amount of Exchange Control regulations, provided the licensed company does not have more than 40% of the nominal value of its issued share capital owned by Maltese citizens (including companies).
2. Certificates of Origin / Non-Manipulation
The Freeport Authority may, in those cases where the identity of goods or articles has been substantially transformed or in relation to which there has been value added through any processing or other operation carried out in a Freeport, release a certificate indicating Malta as the origin of any such goods or articles.
The Freeport Authority may also, where it is so satisfied, release a certificate to the effect that any goods or articles which have been transhipped through a Freeport have not suffered any manipulation in the Freeport so as to transform their identity.
THIS ARTICLE IS INTENDED TO PROVIDE GENERAL INFORMATION ON THE SUBJECT MATTER. IT IS THEREFORE NOT A SUBSTITUTE OF PROFESSIONAL ADVICE AND IS NOT TO BE ACTED UPON WITHOUT PRIOR CONSULTATION WITH SPECIALISED CONSULTANTS.