Malta: Types of Company
Maltese company law derives chiefly from civil or 'Roman' law, rather than common law. A new Companies Act 1995 replaced the old Commercial Partnerships Ordinance, and set up a new regime for commercial entities under the Registrar of Companies. Companies set up under the old regime had until 1st January 1998 to convert themselves into the new formats, except that 'Offshore Companies', which can now no longer be formed, had 10 years to adapt. Shipping companies, and, while they survived, offshore companies, continued to be subject to the old Commercial Partnerships Ordinance.
In March, 2006, the European Commission formally requested Malta under EC Treaty state aid rules to abolish the tax regime for Maltese Companies with Foreign Income (CFI), and the International Trading Companies' (ITC) regime by the end of 2010 at the latest.
Competition Commissioner Neelie Kroes observed that: "The schemes provide sizable aid to companies that are owned by non-Maltese and produce revenues outside of Malta, and are therefore highly distortive without promoting growth of the Maltese economy."
In May, the Maltese government formally decided to gradually abolish the existing aid schemes.
Competition Commissioner Neelie Kroes announced: "I welcome the abolition of Malta's preferential regimes as a further important step towards eliminating selective tax incentives that significantly distort the location of business activities in the Single Market."
Malta's acceptance of the EC recommendation meant that:
- The existing ITC and CFI schemes were effectively abolished by 1st January 2007;
- A new refundable tax credit system was to be enacted by Malta provided that it does not effectively favour foreign-owned companies over domestic-owned companies;
- The tax status of ITC is prohibited to any new company registered in Malta after 31st December 2006;
- The existing ITCs benefitted from the system only until 31st December 2010; and
- The number of newly created ITCs between the date of acceptance of the appropriate measures and 31st December 2006 was limited to the yearly average number of ITC companies created in the previous five years.