Optimising Tax in Portugal through Maltese Companies

Portugal NHR Status & Malta Holding Company

Dr. Priscilla Mifsud Parker | 12 Feb 2021

Chetcuti Cauchi Lawyers

Tax Residence in 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 Non-Habitual Residence (NHR) 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.


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Key Contacts

Dr Priscilla Mifsud Parker

Senior Partner - Corporate, Tax & Immigration

+356 22056422

Mr Steve Muscat Azzopardi

Senior Manager, Corporate & Fintech

+356 22056438