Optimising Tax in Portugal through Maltese Companies

The Welcoming Shores of Portugal

An EU member state bordering the Atlantic Ocean, Portugal is an ideal location for families as well as businesses who are flocking to its shores on account of the country’s sound political system and strong market economy. From beautiful scenery to rich heritage, with over 125 days of sunshine a year to relax on its 850km of beaches, Portugal is not only seen as a holiday destination anymore, but also an investment destination. Portugal is a member of the Schengen Area and its strategic position means that Portugal not only has its foundations within Europe and European culture, but this ideal jurisdiction has easy access and great relationships beyond the Atlantic.

This is why many individuals are attracted to Portugal’s golden shores and are investing in one of Portugal’s coveted residency programmes. Investors can choose between Portugal’s Golden Visa Programme, which allows foreign individuals to gain residency in Portugal, or Portugal’s Non-Habitual Residence Programme that allows non-habitual tax residents to be exempt from tax on particular foreign income.

The Portugal Golden Visa Programme

Launched in 2012, the Portugal Golden Visa is an attractive programme which allows non-EU foreign investors to live, study, travel and do business within the EU by obtaining a residency permit for Portugal. After 5 years, applicants would also be able to apply for Portuguese Citizenship or Permanent Residence, on the condition that they provide basic knowledge of the Portuguese language (A2 level). In addition, one of the advantages pertaining to this residency, the Golden Visa holders are not required to pay additional taxes on foreign income.

In order to be eligible for the Portugal Golden Visa Programme, applicants must:

  • Be non-EU citizens of good standing with a clean police conduct
  • Invest in property, capital transfer or job creation in Portugal for at least five years
  • Enter Portugal with a Valid Schengen Visa;
  • Spend at least 7 days in Portugal within the first year of investment, and at least 14 days in the subsequent 2-year periods.

As part of the investment requirements, applicants may choose to purchase property in Portugal by either investing in real estate with a value of or above:
€500,000 for new properties or,
€400,000 for new properties in low occupied areas (i.e. less than 100 habitants per km2. )
€350,000 for old properties built over 3 decades ago, subject to renovation work
€280,000 for old properties built over 3 decades ago in low occupied areas (i.e. less than 100 habitants per km2. ), subject to renovation work

Alternatively, applicants can secure the investment by creating a minimum of 10 new jobs on a permanent basis that are approved by the local Social Security Institutions. The number of the jobs can be lowered down to 8, should the employment be exercised in low occupied areas.

The final means of investment is through capital transfer ranging from €250,000 in artistic output or national heritage, to investing a minimum of €350,000 in scientific research. Nevertheless, an investment of a minimum €1,000,000 in a Portuguese financial institution would also qualify for the Golden Visa purposes, should this be kept for 5 years. Investments can also be made as well as investment funds or in venture capital.

Non-Habitual Residence Programme

Through the Portuguese Non-Habitual Tax Regime (NHR), eligible applicants can become tax residents in Portugal with decreased income tax on particular foreign income for 10 years.
Eligibility for the NHR requires that applicants:

  • Are existing taxpayers but have not been tax residents in Portugal in the past 5 years,
  • Must stay in Portugal for 183 days to gain tax resident status in Portugal,
  • Must purchase or rent property in Portugal as a means of permanent residence, and
  • Maintain Portuguese tax residency for 10 years.

Maltese Companies and Portuguese Tax: The Link

A Portuguese resident who is part of the Non-Habitual Residence Programme in Portugal can carry out investment in Malta and in other countries through a Malta company in a tax-friendly environment. By setting up a company in Malta and receiving dividends from a Malta holding company, the investor can be exempt from paying tax in Portugal on this foreign-sourced income. Malta companies pay a high corporate tax rate of 35% however refunds are available in certain scenarios. A Malta company which elects to be treated as part of a fiscal unit will not obliged to pay the full 35% income tax which subsequently could be claimed back in full or part by its shareholder/s. Instead, the tax refund due to shareholders shall be taken into account when calculating the final tax liability of the consolidated fiscal unit and shall be paid by such unit’s principal taxpayer.

Why Malta?

Apart from the double tax treaty in place between Malta and Portugal, Malta offers a number of other advantages for the conduct of business including having a very highly skilled workforce, having English as one of its official languages, fast turnaround time in terms of setting up, a very high level of due diligence in terms of onboarding keeping out any ill-intended operators. Malta can, therefore, be used as the place to have a setup to then be able to reach out to European and non-European clients alike. Like Portugal, Malta is a member of both the European Union and the Schengen Area and is on Portugal’s white-list.
As a business-minded jurisdiction, Malta, like Portugal, has seen investors in various industries make Malta their new business base ranging from iGaming to manufacturing, blockchain technology to medical cannabis, to more traditional sectors like hospitality, the investment management sector, funds sector and others. In addition, the island’s stable and efficient tax structure means that in Malta there is no withholding tax on the payment of interest, royalties or dividends.