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bigduckontax, Accountant
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I am setting up a UK holding company for a Maltese

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I am setting up a UK holding company for a Maltese subsidiary. The Maltese subsidiary will pay dividends to the UK holding company and the UK holding company will receive the Maltese tax credit/refund of 6/7 of the corporation tax paid in Malta, on payment of the dividend to the UK holding company. Is the tax credit received by the UK holding company treated in the same way as the dividend i.e. nil tax?

Hello, I am Keith, one of the experts on Just Answer, and pleased to be bale to help you with your question.

Yes it will be. Under the Double Taxation Convention between the UK ans Malta the tax deducted in one country is allowed as a tax credit against liability in the other. The Convention does not, however, protect against differences in rates of taxation.

I do hope that you have found my reply of assistance.

Customer: replied 6 months ago.
Thanks Keith, just to clarify this is a Maltese tax credit I am referring to (not UK tax credits). The Maltese corporation tax rate is 35%, the Maltese refund is 6/7 of that - equal to 30%. The 6/7 refund is paid by Malta tax authorities to the shareholder (in this case the UK holding company) on payment of dividends. For example, 100k profit = 35k Malta tax and 30k Malta refund. The UK company receives a dividend of 65k + tax credit from Malta of 30k and HMRC imposes no further tax. Net result is 5k tax in Malta and nil tax in UK. Correct?


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Customer: replied 6 months ago.
Thank you for your advice. Rating now - 5 stars :)

Delighted to have been of assistance.

Thank you for your support.