Article 2 of the ITA defines the term Body of persons as any body corporate, including a company and any fellowship, partnership, society, foundation or any other association of persons whether corporate or unincorporated and whether vested with legal personality or not. The term ‘body of persons’ includes the limited liability company, however companies are special bodies of persons for purposes of law.

Companies as Opaque Entities

A body of persons qualifies to be considered as a company for the purposes of the ITA if it has any one of the following characteristics,

A limited Liability Company constituted under the Companies Act.
A partnership en commandite the capital of which is divided into shares, constituted under the Companies Act.
A body of persons constituted, incorporated or registered outside Malta and of a nature similar to either 1 or 2.
Any co-operative society duly registered as such under the appropriate law for the time being in force in Malta.

Companies, are taxpayers in full sense of the word. Companies are opaque entiries i.e. they are non-transparet entities for tax purposes. The ITA treats them as separate and distinct taxpayers form their shareholders. A clear distinction is maintained between the profits, deductions and losses of a company and the profits, deductions and losses of the shareholders of a company. It should be further noted that the attribution of a Compnay under the ITA carries with it specific adhoc rules that include:

Special residence rules that apply exclusivley to companies;
Only companies may apply the tax refund accounting system of taxation;
The law contemplates a special surrender of losses which apply to a group of companies registered in Malta;
The full imputation system in order to relieve economic double taxation at the level of the shareholders;
The flat rate of 35% only applies to companies or other bodies corporate.

Further amendments in 2007 to the ITA also included a new concept to the definition of a company . This new concept which emantes from ECJ jurisprudence most notably form the “avoir fiscal” and “Saint Gobain” cases reads as follows:

“a company which is resident in Malta or a company which although not resident in Malta, carries on an activity in Malta and in the case of a company which is neither incorporated nor resident in Malta shall mean a company that is registered for this purpose with the Commissioner in such manner as may be precribed”.

This definition of a company now also includes companies which are neither incorporated nor resident in Malta i.e. including permanent establishments. Hence all enties that fall within the above definition are also eligible to the tax refund accounting system. This definition has finally removed any discrimination of entities not registered in Malta but having connecting factors with Malta and put them on the same playing field with entities registered in Malta.

Transparent Entities

Partnerships En Nom Collectif and Partnership En Commandite whose capital is not divided into shares (hereinafter Partnerships) are transparent for tax purposes. Partnerships, which do not possess the status of companies are not full taxpayers for the purposes of the ITA. Partnerships are look throuhg entities and the income of a partnership is treated as the income of the partners and taxed at the level of the partners.

The ITA provides that any income of any partner form a partnership shall be deemed to be the share to which he was entitled to and shall be included in his personal tax return. Whereas in the normal course of events, the losses of a company are separate and distinct form the losses of the shareholders of such company, losses suffered by a partnership are automatically attributed to the partners. It should be noted that capital deductions are only allowable against capital gains or trading profits that were incurred in the production of the income. Hence capital allowances are kept within the partnership and can only be used against trading profits to which such capital allowances were used in the production of such trading profits.

Partnerships, unlike companies, do not pay tax in their own name. However, they are still required to file a return.

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