Malta vs Cyprus: Which Island Offers Better Tax Benefits?

Introduction

Considering the tax and business benefits of Malta and Cyprus? This comparison will help you understand the tax schemes, non-dom status, and accounting processes in both destinations from a strategic standpoint.

Malta vs Cyprus: A Comparison from a Tax and Business Standpoint

• Living in Bali for half a year made me crave island life again, and although I’m European, options are limited. A friend living in Cyprus raved about it, but Malta was also appealing.

• Cyprus has a straightforward 12.5% fixed corporate tax on all profits, with a possible increase to 15% under global taxation minimum. This still remains relatively low and fulfills global requirements.

• In contrast, Malta has an official 35% corporate tax, but there’s a refund of 30-35% after two years, effectively reducing the tax to zero to five percent. However, this refund only applies to foreign income and requires a complex holding structure with foreign companies.

• To be eligible for tax benefits in Malta, there are complex definitions of residential/non-residential shareholders and companies, making the structure more complicated.

Taxation and Non-Dom Status in Malta and Cyprus

• Non-domiciled individuals living in Malta or Cyprus can benefit from the non-dom status, which allows them to enjoy favorable tax treatments.

• In Cyprus, individuals with local Cyprus limited companies are not as affected by control foreign company (CFC) rules, as the focus is more on non-domiciled status and compliance with rule books.

• On the other hand, Malta relies heavily on foreign companies and income, particularly from the gaming industry, and is planning potential changes to its tax schemes to avoid future issues.

• Malta’s reliance on foreign companies and income, including from the gaming industry, has been a significant source of revenue for the country.

• While the potential changes to Malta’s tax schemes are uncertain at the moment, they are likely to be aimed at maintaining the attractiveness of the country for foreign companies and individuals.

Comparison of Tax Schemes in Malta and Cyprus

• Malta and Cyprus have different tax schemes for corporate and dividend taxes.

• In Cyprus, the corporate tax is straightforward, with a flat rate, while in Malta, it ranges from 0% to 35% based on the company structure.

• For dividend tax, Cyprus has a 0% official tax rate, but a 2.65% NHS contribution is applicable. In Malta, the dividend tax can range from 0% to 35% based on the company structure, and it is possible to achieve 0% through non-dom status.

• Non-dom status is a key factor for tax benefits, requiring 183 days in Malta and 60 days in Cyprus, with other specific requirements.

• Regarding business incorporation and accounting, Cyprus offers a straightforward and cost-effective process, including remote company incorporation with the right agency. Malta, on the other hand, has more complex procedures and costs.

Comparison of Accounting Processes in Cyprus and Malta

• In Cyprus, the accounting process is relatively seamless as the accounting software automatically sends all financial data to the accountant for processing. Only some signatures at the end of the year are required for the audit.

• Malta, on the other hand, involves a more complex accounting process due to the need for a holding structure with foreign companies. This incorporation and maintenance of the structure can be costly, requiring extensive accounting between the companies.

• Cyprus has been reported to offer faster processing and less bureaucracy compared to Malta. This could be attributed to having a very good accountant in Cyprus, making it easier to obtain the necessary approvals and fulfill requirements within a short period of time.

• Both Cyprus and Malta require payment of social insurance on income, with generally low salaries leading to a preference for tax-free dividends. Additionally, Malta is known as a hub for gaming and gambling, while Cyprus is more prominent in the Forex brokerage industry.

• Local banking in both countries presents its challenges. While Malta is still developing its banking sector, Cyprus experienced a banking crisis in 2012 and local bank accounts can be relatively costly. The recommendation is to consider working with an online bank or fintech company.

• Both Cyprus and Malta have been gray-listed in the past, making it somewhat challenging to open online bank accounts with modern fintech companies. However, there are avenues to assist with this process.

Comparison of Malta and Cyprus

• Malta and Cyprus may look very similar in pictures, but there are significant differences between the two.

• Cyprus is 29 times bigger than Malta, but has only around two to three times the population of Malta.

• In Malta, the population is much more concentrated on a smaller island, leading to a busier infrastructure and limited outdoor activities.

• Cyprus, on the other hand, offers a lot of land with fewer people, providing more opportunities for outdoor activities and experiences.

• When considering business, Malta is favorable for gambling, while Cyprus is more suitable for Forex and brokerages.

• The duration of stay required for legal status is also different, with Cyprus needing two months and Malta needing six months.

• Geographically, Cyprus is in Asia, while Malta is still in Central Europe, which can impact travel and business considerations.

• Budget plays a significant role, as Cyprus is relatively cheaper for running a business compared to Malta, with varying rental and grocery prices.

Conclusion

In conclusion, both Malta and Cyprus offer unique tax and business benefits, each with its own advantages and complexities. Understanding the differences in tax schemes, non-dom status, and accounting procedures is crucial for making the right decision for your business. Consider the strategic implications of corporate tax, non-dom status, and accountancy in both islands to determine the best fit for your business needs.

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