Considerations for Multinationals with US and Maltese Operations

May 2022

BY

Sebastian BiddlecombeSenior Manager, International Tax Services

Anke KruegerManaging Director, International Tax Services

The following article, Considerations for multinationals with US and Maltese operations, originally appeared in the May 2022 issue of The Tax Adviser.

Malta has long been viewed as a favorable jurisdiction in which to conduct international business operations. The island nation located off the coast of Sicily is an EU member. In addition, the Maltese tax system offers a tax refund mechanism that can result in an effective corporate income tax rate of between 0% and 10% for certain Maltese corporations owned by nonresidents.

Because of these and other features, such as the fact that Malta does not impose withholding tax on dividends, interest, or royalties under its domestic law and the island country’s extensive tax treaty network, many multinationals, including those with U.S. operations, may be tempted to incorporate a Maltese entity into their group structure. Multinational businesses, however, should carefully assess the interaction of Malta’s tax refund mechanism with the ability to claim benefits under the United States–Malta tax treaty, as well as the potential interaction with proposed U.S. anti-conduit regulations. This discussion explores certain issues that multinationals should consider when deciding whether to use Malta as part of their worldwide operations.