Entrepreneurs and businesses are constantly looking for ways to reduce their tax burden by relocating to a jurisdiction with more favourable terms. However, it is often unclear which country actually offers the best overall package. When making such a major decision, the tax rate should not be the only factor you consider. You need to look at the bigger picture, including the banking system, the general economic climate, the available workforce, and the political infrastructure.
Banking
If you are thinking about moving your business abroad, you need to take a close look at the local banking sector. In this regard, Malta holds a clear advantage over Cyprus. Maltese banks have a strong track record of passing ECB stress tests, and the system operates differently than its Cypriot counterpart. Banking in Malta is far more conservative, which translates to a stable system that secures your future. Conversely, the banking sector in Cyprus has faced significant challenges in the past, including failed stress tests and substantial losses due to the economic crisis and exposure to the Greek market.
Economy
Malta's economy is on a consistent upward trajectory. GDP is rising, as are employment rates. Overall, the country is doing very well. This does not appear to be a temporary bubble, either; the government is actively implementing measures to sustain this strong performance. By comparison, Cyprus has faced periods of significant instability and has historically had to rely on substantial financial support from other European nations to stay afloat.
Taxation
Cyprus has a corporate tax rate of 12.5%, whereas Malta’s headline rate is 35%. At first glance, Malta seems much more expensive. However, Malta often proves to be the more tax-efficient option due to its tax refund system. If a Malta Limited company is owned by a foreign shareholder or a holding company, it is possible to claim a refund of the tax paid. Specifically, you can claim back 6/7ths of the corporate tax, resulting in an effective tax rate of just 5%.
At DW&P Dr. Werner & Partners, we can help you optimise your corporate structure to ensure you gain the full benefit of the Maltese system. Please feel free to contact us for a personal consultation. Our services include company formation in Malta, opening bank accounts, and assisting you in finding the right office space.
