Let’s talk frankly about company formation in Malta. We are going to look at the current state of affairs, important issues that merit attention and mistakes that should definitely not be made.
It’s all over the Internet advertising such “Do you want to register your company in Malta?”, “Start your business with the one of the best tax-rates in Europe and little paperwork” or “Open a company in Malta in 5 days” – most of such content is about hypothetical possibilities, half-truths, and questionable tax tricks.
Before you launch your great business idea in Malta, you must decide how you will do business if you ever hope to financially survive and prosper.
We will help you to formulate combinations of business structures to conduct business and as a result seriously reduce the tax impacts as well – these are all about having no future regrets the time and money spent for nothing.
So let us begin discussing “Company registration in Malta”, with what’s most important.
1. Openness To Foreign Investment.
Starting from the year 2004, the focus of the Maltese government is attracting cross-border investment and offering a safe, stable and open business environment, constantly creating new incentive for entrepreneurs to form companies in Malta or to relocate their companies here.
Malta provides incentives to attract investment in:
- Research and development;
- High-tech manufacturing (electronics, artificial intelligence technologies, precision engineering);
- Information and communications technology industry (business creating electronic payment solutions, software, games);
- Digital gaming and sportsbook industry;
- Financial sector (blockchain technology, pension funds, forex traders, brokers and market makers, insurance companies, etc);
- Medical cannabis industry, pharmaceuticals manufacturing, and biotechnology;
- Film and audiovisual Industry;
- Energy and resources sector with the focus on renewable energy;
- Registration of ships;
- Aerospace and aviation maintenance.
Malta Enterprise (Maltese economic development agency) may allocate the following measures of assistance:
- Allocation of industrial space;
- Access to finance (soft loans, loan interest subsidies and loan guarantees);
- Investment tax credits based on investment in either plant and machinery or employment figures;
- A wide range of bespoke schemes designed to assist in a company’s export activities, research and development and so forth.
Further detailed information may be accessed here: http://maltaenterprise.com/support
2. Malta Company Registration Overview:
The Maltese Commercial Code provides for the establishment of several types of business entities according to the needs of an individual investor when setting up a company in Malta:
— Private limited liability companies;
— Public limited liability companies;
— General partnerships;
— Limited partnerships.
Foreign companies can also open subsidiaries or branch offices in Malta.
When setting up a Maltese private company, the minimum share capital amount accepted is € 1,165.
The minimum for a public company is approximately € 46,600, of which 25% must be deposited prior to registration.
Important: In case of private companies with an authorized share capital exceeding the minimum requirements, only 20 % of the amount must be deposited.
The maximum number of shareholders for limited liabilities companies is 50 and minimum is two (although a single-member company may also be registered under the Companies Act).
Steps of Malta Company Formation Process:
1. Choose a business form.
2. Select a company name with the Malta Business Registry (MBR).
3. Prepare the necessary documentation: draft the company’s memorandum and articles of association.
4. Deposit the share capital (this may be done in our Client Account until the bank account is opened).
5. File the application with the MBR.
The MBR will also request that due diligence on the directors, shareholders, and/or beneficial owners be provided before proceeding with the incorporation. Upon incorporation, companies must pay a registration fee payable to the MBR according to the amount of share capital held by the company.
6. Obtain a Certificate of Registration:
Once all the requirements above are satisfied, the MBR will normally carry out incorporation of a company within two to three working days. Once incorporation is complete, the MBR will publish a Certificate of Incorporation that will also display the company registration number.
7. Getting a necessary license for your business.
8. Obtain a Tax Identification Number.
9. Register for VAT in Malta.
When doing this there are 3 important thresholds to keep in mind:
if your annual turnover is:
– Less than €10,000 you are probably exempt from charging VAT.
– More than €35,000 you will definitely have to charge VAT.
– Between €10,000 and €35,000 it will depend on a number of factors.
Regardless of whether your revenue meets the threshold or not, you need to register your company with the VAT authorities (certain exemptions apply).
10. Registering for a PE number.
11. Register with the JobsPlus.
12. Data Protection requirements.
A new company officially opened in Malta, what now? Starting a business in Malta also means, upon official incorporation, having to provide Annual Returns & Accounts every year.
The Maltese Government offers a one-stop shop for businesses – Business First – that assists companies with all processing of services and information to establish a company. Business First brings more than 50 essential services from various government departments and entities under one roof. It assists all enterprises based in Malta, including micro enterprises, small and medium-sized enterprises (SMEs), larger companies, and foreign investors wishing to set up in the country.
3. Tax benefits
for efficient cross-border business and investment involving Malta.
10%-30% – Government Incentives for inbound investment.
These incentives are reserved for enterprises carrying on certain activities in Malta, mainly manufacturing activities.
The tax credits range between 10% and 30% for projects commencing between 1 Jan 2021 and 31st Dec 2023, depending on the undertaking’s size.
The application in relation to such investment projects should reach Malta Enterprise by 31 Oct 2021.
10,000 € – Government grant for business.
The Business Start 2021 scheme, where start-up undertakings in their early stage of development may apply for a grant of up to €10,000 for the development of their business proposal and start-ups presenting viable business plans may receive funding of up to €20,000;
20,000 € – Government grant for business.
200,000 € – Government tax credits and/or cash grants.
The Business Development 2021 Scheme whereby undertakings carrying on or intending to carry out an activity contributing to the regional development of Malta which require assistance to set up business development projects may receive assistance of up to €200,000 in the form of tax credits and/or cash grants;
45-65% – Government tax credit for micro enterprises.
A tax credit for micro enterprises is provided under the Micro Invest Scheme.
The credit amounts to 45% (or 65% for undertakings operating in Gozo) of eligible capital expenditure and/or wage costs incurred, which tax credit would then be utilised against the tax incurred on income derived from the qualifying trade or business activity for that financial year, subject to certain maximum limits applied over three consecutive fiscal years.
2,000,000 € – Government tax credit for skills development.
This tax credit has been introduced with the aim of offering assistance for the development of training programs.
Where Malta Enterprise is satisfied that an undertaking qualifies under this scheme, assistance with respect to eligible costs shall not exceed 70% for small undertakings, 60% for medium-sized enterprises, and 50% for large undertakings.
The total amount of assistance that may be granted should not exceed the amount of EUR 2 million.
Support in terms of this scheme may be awarded until 31 December 2022.
45% – Government tax credit or cash grant to assist undertakings which carry out R&D projects.
The aid consists of a tax credit or cash grant calculated at a rate of up to 45% depending on the size of the undertaking.
Assistance in the form of a cash grant may only be approved prior to the commencement of the project.
Applications under this scheme will be accepted by Malta Enterprise Corporation until 31 December 2022.
The Malta Enterprise Corporation may also provide additional assistance in respect of R&D, of up to 25% of eligible costs, if the undertaking carries out an industrial research.
In addition, a project may receive additional assistance of not more than 15% of eligible costs of up to a maximum aid intensity of 80% of eligible costs.
0-35% – Corporate Profits Tax.
Malta has a ‘full-imputation’ tax system where corporate profits are taxed at 35%.
When dividends are distributed to shareholders out of the company’s taxed profits, it carries an imputation credit on the tax that has already been paid by the company.
After the tax refund, a shareholders tax burden decreases to 0% – 5%.
0% – Withholding tax rates:
- No WHT charged, on dividends paid to non-resident companies.
- No WHT charged, on interest paid to non-resident companies.
- No WHT charged, provided a non-resident person is not engaged in trade or business in Malta through a permanent establishment (“PE”) situated there and where the debt claim in respect of which the interest, discount or premium is paid is effectively connected with such a PE; AND the non-resident is not owned and controlled, directly or indirectly, nor does the non-resident act on behalf of an individual/individuals who is/are ordinarily resident and domiciled in Malta.
- No WHT charged, on patent royalties and certain copyright royalties paid to non-resident companies.
- No WHT charged, on provided a non-resident person is not engaged in trade or business in Malta through a PE situated there and where the intellectual property in respect of which the royalties are paid is effectively connected with such a PE; AND the non-resident is not owned and controlled, directly or indirectly, nor does the non-resident act on behalf of an individual/individuals who is/are ordinarily resident and domiciled in Malta.
- No WHT charged, on fees for technical services.
0 years – Tax losses.
Trading losses may be carried forward indefinitely. No carry-back is allowed.
0-18% – VAT.
The standard VAT rate in Malta is 18 percent, which may be reduced to 5 percent or 7 percent, depending on the nature of goods or services.
81 – number of tax treaties.
Malta has signed double tax treaties with 81 countries and jurisdictions, in order to avoid the double taxation of income and provide lower withholding taxes on dividends, incomes and royalties for foreign companies that are non-residents but develop business activities in the country.
4. Tax Advantages of Company Registration in Malta,
for Malta Holding Companies
“Malta is Booming – 5% tax – Low tax rates”, “Malta Tax Haven: Malta is an Offshore Jurisdiction”, etc – this statement is posted all over the internet, but the fact this is only about the tax rates offered to operative companies.
Holding vehicles satisfying the participating holding rules can be very attractive for business operating in such activities in Malta.
Supposing you have a Malta Holding Company which in turn holds 100% of an EU subsidiary and 100% of a non-EU subsidiary.
If these underlying subsidiaries are actively trading (this is a prerequisite), this qualifies as what is referred to as a participating investment provided that 100% have the right to vote and right to dividends.
As a result, dividends flowing up to the Malta Holding Company, from these subsidiaries are tax-free in Malta under the participation exemption.
How simple it is! But not really, let’s unpack that “participation exemption”.
Participation Exemption conditions:
Equity shares must satisfy ONE of the following conditions:
- Has at least 5% of the equity shares in the other company; or
- Is an equity shareholder in a company and the equity shareholder company is entitled to the option to call for and acquire the entire balance of the equity shares of the non- resident company and is entitled to the Right to the first refusal to purchase such shares; or
- Is an equity shareholder in a company and is entitled to sit on the Board or appoint a person to sit on the Board of that company as a director; or
- Is an equity shareholder in a company which invests a minimum sum of €1,164,000 and such investment is held for an uninterrupted period of 183 days; or
- Holds the shares in the company for the continuance of its own business and the holding is not held as trading stock for the purpose of a trade.
As per the Malta tax structure, Dividends resulting from a participating holding in an EU resident company is exempted from tax in Malta in all cases.
Tax on dividends received from a participating holding in a non-EU resident company are exempt in Malta provided at least one of the following additional criteria is fulfilled:
- The said non-resident company is subject to a foreign tax of a minimum of 15%; or
- The said non-resident company does not derive more than 50% of its income from passive interest and royalties; or
- The shares in the non-resident company are not a portfolio investment and the non-resident company or its passive interest or royalties have been subject to tax at a rate which is not less than 5%.
Additional conditions are to be satisfied in cases where the Parent-Subsidiary Directive for the elimination of withholding taxes has been applied.
The holding in OpCo should qualify as a PH on the basis of the following considerations:
(i) OpCo is a company incorporated in USA whose nature, is similar to that of a company incorporated in terms of Maltese law (i.e. separate legal personality/limited liability and capital divided into shares);
(ii) OpCo does not own immovable property in Malta; and
(iii)Hold Co’s shareholding in OpCo will entitle Holdco to at least 5% of any two of the following rights in OpCo: (a) a right to votes, (b) a right to profits available for distribution, (c) a right to assets on a winding up of OpCo.
- On the basis that the PH is incorporated in USA and is subject to tax of at least 15%, the relevant anti-abuse provisions for claiming participation exemption on dividend income are deemed to be satisfied.
- Participation Exemption can therefore be claimed on the dividend income that HoldCo received from OpCo.
- There should be no Maltese tax (whether by way of withholding or otherwise).
- The exemption applies also on distributions of such income made all the way up to the ultimate shareholders.
- No Maltese tax on capital gains arising from the transfer of Hold Co’s shares in USA OpCo. No anti-abuse provisions in the case of the exemption applicable to gains/profits derived upon the transfer of shares in USA OpCo.
- Capital gains derived by EU Co or any other non-resident shareholder on the transfer of shares in Hold Co should also be exempt from Maltese income tax subject to certain conditions.
Where the participation exemption does not apply or where the company does not opt for income or gains to be exempt, Malta holding companies would be subject to tax on income for any applicable deductible expenses at the Malta corporate tax rate of 35%.
Upon receipt of a dividend, the shareholders would be eligible to claim a refund of the tax paid by the distributing company on income distributed as a dividend, depending on the type and source of income received.
The shareholder of the Malta company would be eligible to receive tax refunds as follows:
- 100% of the Malta tax paid where the income being distributed was eligible for the participation exemption;
- 5/7th of the Malta tax paid, where the income received by the company is passive interest or royalties or dividend income from a participating holding which does not fall within the safe harbors or satisfy the anti-abuse provisions.;
- 2/3rd of the tax payable (gross amount) in Malta, where income has benefited from double taxation relief; and
- 6/7th of the Malta tax in all other cases.
Maltese Limited Companies are not offshore companies as Malta has been a member of the EU and Malta’s tax system has been deemed by the European Commission to be compliant with EU non-discrimination principles.
It has also gained approval from the OECD. However, Malta offers a highly efficient fiscal regime that eliminates double taxation on taxed company profits distributed as dividends.
A full imputation system applies to the taxation of dividends, whereby the tax paid by the distributing company is imputed as a credit to the shareholder receiving the dividend. To top it off, Maltese limited company has the same accounting obligations as any other company.
5. Is a favorable tax burden the sole reason for company registration in Malta?
This is about your projected profit and size of activities.
The crux here, there are a lot of providers who offer company formation services in Malta at a ridiculous price, without any further enquiries as to client’s purpose, the amount of expected annual company profit, and the country of residence of the ultimate beneficial owners.
Tempting, isn’t it? However, there’s something what you don’t immediately see – the consequences that go along with such a decision, and these often only become apparent 2-3 years after the incorporation. Most important factor here is the expected income.
In our opinion, a Maltese company formation and the development of the associated structure are only worthwhile from an expected annual company profit not less than 200,000 euros. It is important to understand the establishment and operation of a company in Malta costs money and time – back office management & support, accounting & auditing services, tax returns – this is a “must be”, doesn’t matter you have activity or otherwise.
It is a very common situation when after a while, a founder take a decision to liquidate or sell the company even prior to not starting doing business.
Therefore, it has to be weighed whether the effort of setting up the structure is really worth it. Furthermore, it is important to have a real business plan; it is the foundation of the business.
A proper business plan guides you through each stage of starting and managing your business. We can assist you in drafting of the pre-business and post-business plans.
In conclusion, we cannot fail to mention obvious but none the less valuable reasons for a company formation in Malta:
- Geostrategic location – positioned between Europe and Africa, Malta benefits from being one-hour ahead of UTC;
- Multilingual – Malta’s official languages are Maltese and English, this removes most language barriers foreigners face in many countries. Apart from that many locals can also speak Italian and Spanish;
- Climate – Maltese trump card – 360 sunny days in a year, hot summers and mild winters;
- Practical regulation in the financial or gambling sector;
- Attractive ship-registration possibilities.
We are here to help you navigate the latest information and provide expert advice – our multilingual advisors (English, Italian, Spanish, France, and Russian) are at hand to assist.
Especially our advisory can be useful if your tax situation is particularly complicated.
Everyone knows that ignorance of the law does not exempt from the responsibility, this is not an issue to be toyed with.
We do not lure in clients with cheap advertised rates, which later increase with many mandatory add-on fees, we always make sure our clients have a clear understanding of what they are getting and what they are paying for.
Proper advice is worth the money – saving a few hundred Euro on the setup of your company can end up costing much more than this in both money and time down the track.
Author: © By Olga Saliba
6. Malta company registration fees
We practice individual approach to each client. Please submit your request and we reply with a Personal Proposal.
Need Our Assistance With Registering a company in Malta?
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FAQ about company registration in Malta:
Can I register a company in Malta online?
Yes, online company registration in Malta – from anywhere in the world, No Need to Travel! You can get it all arranged for you remotely and effortlessly if you request our experts’ professional assistance.
What types of companies can be registered in Malta and what are the benefits?
Types of companies you can register in Malta: LLC (Limited liability company), Public limited company, Representative office and Branch office. You can read more in this section. Details →
What is a minimum issued share capital in Malta?
It depends on the type of company:
- LLC (Limited liability company): 1,165 €
- Public Limited Company: 46,600 €
- Representative office: None
- Brach office: None.
Is it possible to get a grant from the Maltese government?
Yes, Malta and the EU offer various grant programs for businesses, and we can help with the necessary documentation.
You can read more about Grants in the article of our expert: “Business Grants and other incentives for startup 2020-2023” or “EU Funded Projects – Opportunities for the startups in Malta”
Which business sectors and industries in Malta are advantageous?
Financial sector, ICT Industry, Gaming sector, setting up a company in Malta specializing in high-technology products in areas such as electronics or precision engineering, formation a holding company in Malta in Pharmaceutical Industry and etc.
For a complete overview of the business sectors, see the section “22 Ideas to set up a Business in Malta“.
Publications of our experts:
Reasons to relocate yourself and your business to Malta.29.02.2024
Reasons to relocate yourself and your business to Malta.22.02.2024
Discussing a rather ambiguous question: “Is Malta a tax haven?” Malta’s tax system includes the concept of “economic substance,” which means that companies should have a real presence in Malta, including physical offices, employees, and activities.16.02.2024
On December 2023, the Ministry for Finance and Employment has issued Updated Nomad Residence Permits Rules, LN 277 of 2023, coming into effect on 1 January 202420.12.2023
Through our proficiency in EU funding we can support you to identify the right funding source for project ideas and apply on your behalf for business grants and other incentives.26.10.2023
Auditing iGaming Entities 2024: for more information about our igaming audit services, or to find out how we can become your CPA partner, contact us.23.10.2023
EU funded projects overview 2021-2027. We keep you updated on the new opportunities provided by EIT Urban Mobility and other EU funded projects in Malta. Follow us and you always catch the opportunity for the good start and further promotion of your innovative ideas!15.10.2023
Guidelines on the VAT treatment for pleasure yacht leasing in Malta 2022. It opens the possibility for the yacht owners to benefit from VAT optimization.16.08.2023
Let’s find out more about Malta UK double tax treaty as part relating directly to the competitive tax regime.08.05.2023