Case Study: Setting Up a Company in Malta the Right Way

This is a classic case of misguided structuring advice. Let’s break it down to show why choosing the proper structure is critical and how incorrect setup can lead to tax inefficiency, compliance risks, and lost opportunities.

Client Profile:

Residence & Domicile	Maltese resident (from EU) but non domiciled
Existing business	Sole owner/director of a Hong Kong LLC, operating for several years and primarily used for invoicing
Objective	Optimize for tax efficiency and asset protection, and streamline funds repatriation to Malta
The incorrect advice received	Set up a Maltese holding company to own the existing Hong Kong LLC, in other words, put Malta on top of the structure. The Honk Kong LLC continues providing consultancy services with the Maltese-resident individual managing and controlling same from Malta.

The Funds Repatriation Issue

The client wants to receive funds in Malta in a tax efficient manner, but that doesn’t automatically mean Malta should sit on top of the structure.

In the event when a shareholder is Maltese resident but non-domiciled, it is recommended to set up a tax neutral foreign holding entity to act as the shareholder of the MT OpCo in order to benefit from Malta’s income tax refund mechanism.

This is precisely our case, with the only difference being that the foreign holding entity already exists, so only the Maltese OpCo needs to be set up. Since the operations will be carried out from Malta, setting up a Maltese OpCo fully owned by the Hong Kong LLC is the best and safest structure that works.

Maltese Resident/Non-domiciled Shareholder

Holds shares in the Foreign HoldCo

Foreign holding entity (tax neutral)

Hong Kong HoldCo that owns 100% of MT OpCo

MT OpCo

Operating company (Malta) that generates income

Income

MT OpCo pays 35% Maltese corporate tax on profits

Dividend Distribution

Since Malta uses a full imputation system, the dividend comes with a tax credit for the tax already paid at the corporate level. Foreign HoldCo receives dividends from the MT OpCo and claims the Malta tax refund – resulting in an effective tax rate of 5% (after the 6/7 refund).

Why the Advice to Set Up a Malta HoldCo Was Wrong

With the Maltese company as the holding entity over a Hong Kong OpCo triggers Maltese tax implications since the dividends received cannot enjoy participation exemption rules and the profits may be subject to higher taxes in Malta here’s why that’s a problem:

Worldwide Income Taxation in Malta

A Maltese-resident company is taxable on its worldwide income unless structured carefully.
Once the Malta HoldCo “owns” the Hong Kong LLC, all of Hong Kong’s profits may potentially subject to Maltese tax even if no dividends are distributed.

No Tax Deferral

Funds sitting in Hong Kong may still be deemed taxable in Malta through controlled foreign company (CFC) rules or management & control criteria.
The client loses the benefit of tax deferral that typically exists with a foreign company operating independently.
Native participation exemption nuances need to be studied carefully.

No Added Asset Protection

Simply interposing a Malta HoldCo does not improve asset protection if the beneficial ownership is still transparent and centralized under one person who is resident in Malta.

Insight

This example shows how critical proper structuring is – not just for tax efficiency, but for legal clarity, long-term flexibility, and compliance. A simple misstep like putting a Maltese holding company on top reverses the intended benefits and can increase tax exposure unnecessarily.

Always align structure with: