Our world, the business world is changing with tireless speed. The challenge is keeping up with it. Whilst maintaining traditional sectors such as manufacturing, tourism and ship-register activities new economic sectors have emerged, namely investment services, Gaming, pharmaceutical industry, medical cannabis, cryptocurrencies as well as artificial intelligence. That is why so important to have industry experts.
Griffiths + Associates’s multi-disciplinary team has in-depth knowledge, proven experience and a proven track record. Are you considering setting up a company in Malta?
We can help not only setting up a company in Malta in any industries, but properly adapt to the new changes through the tailored services we provide.
Setting up a company in Malta 2022:22 business ideas for expats living in or moving to Malta:
EU membership (that means free access to the European market which garners financial and procedural efficiencies), the jurisdiction’s emphasis on sound regulation and attractive tax rates make Malta an ideal location to set up a profitable financial company.
Among the types of companies one can open in the Maltese financial sector are:
- Insurance and reinsurance companies;
- Investment advisors;
- Fund managers;
- Pension funds;
- UCITS funds and hedge funds;
- Forex brokers and market makers;
- Commodity, equity and Forex traders.
3 important points be kept in mind when setting up the financial company in Malta:
- One must pay attention to the business form a financial company will undertake. The public company is usually suitable to undertake financial activities in Malta as this type of company can also be listed on recognised investment exchanges.
- In order to set up any of the types of the businesses above, one must register a company with the Malta Business Registry (“MBR”) based on following documents: business objective & business plan; proposed share capital; articles of association of the company; description of the internal control of the company; copies of the shareholders, directors and company representatives’ identification documents; registered office in Malta.
- Foreign or local investors setting up any type of financial institution in Malta are required to apply for a financial services license with the MFSA (there are mainly four categories according to the criteria established by the MFSA).
ICT is one of the best prospect industry sectors in Malta. According to the 2020 Digital Economy and Society Index (DESI) published by the European Commission, Malta ranks 5th out of the 28 EU Member States.
The most successful types of businesses operating in the Maltese information technology industry are companies creating programs, games and electronic payment solutions. Malta has developed a new strategy which the government plans to assist ICT startups and to attract foreign investors interested in the information technology industry.
Further information about the sector from Malta Enterprise may be accessed here:
The first step to open an IT business is to register a company with MBR and then apply for the required licenses based on the services to be offered related to the ICT sector, but also to request specific authorization from institutions such as the Financial Supervisory Authority if they operate in the financial technology industry. An authorization from the Malta Communications Authority is also required.
☛ We provide a full range of corporate services in Malta.
Main factors which make Malta such an attractive place to start a business in the Gaming sector are proactive gambling laws & regulations and favorable tax incentives — particularly the tax refund system.
The corporate tax rate in Malta is set at 35% but there is a full tax imputation system in place. This means that shareholders are entitled to a tax credit that’s equal to the tax paid on the profits that the dividends were paid for. The most common tax credit is the 6/7ths which can mean an effective tax rate of just 5% depending on the circumstances. There is also a gaming tax that is levied against gaming revenue generated from players based within Malta. This rate is set at 5% and is determined based on whether the player is a resident of Malta.
Share Capital requirements for gambling operators: for classes 1 & 2 require a €100,000 minimum while classes 3 & 4 require a minimum of €40,000.
For a successful startup gaming company you need to prepare business plan and apply for an Gaming licence, before your licence is activated, a systems test will be required. Upon successful issuance of a Gaming licence — valid for 5 years — by The Malta Gaming Authority (the only autonomous body that controls the iGaming industry in Malta), the business will undergo audits by an appointed independent gaming professionals from time to time.
The manufacturing industry is an important pillar of the Maltese economy and the entities operating in this sector are one of the main contributors to the Maltese GDP.
That’s why the government has introduced friendly policies for investors wanting to operate in the advanced manufacturing sector – a full package of incentives, ranging from fiscal benefits to the provision of custom-built specialised factory space, is offered by Malta Enterprise, the agency responsible for attracting foreign investment.
☛ Further information about the sector from Malta Enterprise may be accessed here: http://www.maltaenterprise.com/industries/advanced-manufacturing
Malta offers a competitive 35% corporate tax rate on worldwide income to all businesses incorporated in Malta. Furthermore, shareholders are entitled to claim a refund, which generally amounts to 6/7ths of the tax paid by the company to Malta.
Holding companies which are based in Malta can enjoy several benefits, including an exemption from stamp duty and capital gains on transfers of shares by non-residents and a favorable participation exemption regime.
Malta Enterprise provides additional pharmaceuticals sector-specific tax incentives like tax rebates based on the duration of an operation, ranging from 5% for the initial 7 years, up to 15%.
Pharmaceutical companies in Malta must apply for licenses depending on the activities they will carry out. The following certificates may be issued for a Maltese pharmaceutical company: good manufacturing practice certificate, manufacturing license, wholesalers license, registered active pharmaceutical ingredients importer and wholesale distributor license.
Pharmaceutical companies in Malta are required to submit the following documentation when filing for a license: the articles of association of the company issued by the MBR, application form, declaration of the managing pharmacist, clean criminal record issued by the police for the pharmacist license holder, plan of the premises with the total surface area endorsed by the declaration of an architect (and also, the premises must undergo an inspection from the Inspectorate and Enforcement Directorate of the Medicines Authority), detailed description of the pharmacy premises.
Pharmaceutical companies wanting to manufacture, retail, and wholesale pharmaceuticals, medicinal chemicals and botanical products is subject to five types of inspections: for new applications, for follow-up, for renewal, for variation, spot check inspections.
Medical Cannabis Industry as a new economic sector.
In November 2020, Maltese government unveiled a new investment programme included a wide range of fiscal incentives aimed at promoting economic activity and attracting foreign direct investment to medical cannabis industry.
Malta is a great destination for large foreign investors seeking to operate in the energy industry. The main reason is various tax incentives and grants for investors opening companies in the energy sector with a focus on renewable energy.
Foreign investors seeking to open a company in the energy industry in Malta must prepare the memorandum and articles of association of the company and obtain various special licenses with the Malta Resources Authority. Under the new legislation, all Maltese companies supplying these services must comply with certain efficiency requirements which will be measured by the Malta Resources Authority. Also, they must comply with the provisions of the Competition Law, as the Authority will also be in charge with supervising the prices imposed by these companies.
Investing in renewable energy is a strategy that is sound on a long-term basis in view of the respective international protocols signed including at European-level where countries have to reach certain sustainable targets within specific time-frames.
There are several incentives to incorporating the shipping company on Malta’s shores, most of them are financial:
- No tax charged or payable on income, to the extent that such income is derived from the organization’s shipping activities;
- No tax charged or payable on any income, profits or gains of a licensed shipping organization derived from the sale or other transfer of a tonnage tax ship or from the disposal of any rights to acquire a vessel which, when delivered or completed, would qualify as a tonnage tax ship;
- No tax charged or payable on any gain arising on the liquidation, redemption, cancellation or any other disposal of shares, securities or any other interest, including goodwill, held in any licensed shipping organization owning, operating, administering or managing a tonnage tax ship;
- No stamp duty charged on the registration of a tonnage tax ship under the Merchant Shipping Act and other registrations relating to a tonnage tax ship;
- No stamp duty charged on the sale or other transfer of a tonnage tax ship or any share thereof;
- No stamp duty charged on the issue or allotment of any security or interest of a licensed shipping organization or the purchase, transfer, assignment or negotiation of any security or interest of any licensed shipping organization or other company.
Several key factors of why Malta is an attractive jurisdiction for aviation businesses are the transparency of the rights and interests in aircraft, broad registration possibilities (whether used for private or commercial air transport), and competitive minimum depreciation periods, tax incentives for both the Malta-based airline operators and their employees.
Accelerated tax depreciation rates for the aviation sector: 6 years for the aircraft and engines and 4 years for interiors.
Malta’s attractive taxation system, which is applicable to all Maltese companies and branches of overseas entities, grants the shareholder of a Malta company, under the imputation system, the right to a refund of the tax suffered by the Malta company on the distributed profits to its same shareholder.
Malta offers a tax residency programme to the highly qualified persons in the aviation sectors by offering a 15% flat rate of tax (minimum of around €45,000 annually, the individual is not domiciled in Malta and earns income from a qualifying contract of employment in an eligible office within the aviation industry).
Another incentive relating to income derived from aircraft ownership, leasing or operation, also including aircraft engines, in any airport, has been put in place: for income tax purposes, such income shall be deemed to arise outside of Malta, and therefore exempt under the remittance basis of taxation, irrespective of the country of registration of the aircraft/engine, as well as to whether the aircraft calls at or operates from Malta.
Next incentive relating to the tax treatment of finance leasing of an aircraft: addressed to leasing arrangements not exceeding 4 years, in which it is outlined that the lessor is taxed on the annual finance amount (the difference between the total lease payments less the capital element divided by the number of years of the lease) whilst the lessee is allowed a deduction in respect of a number of items which include finance charges, maintenance and repair costs and insurance coverage. This ensures that the lessor does not suffer the wear and tear of the aircraft. In the event that the lessee opts to purchase the aircraft upon termination of the finance lease, and the lessor is not trading in the purchase and sale of aircraft, the purchase price received by the lessor shall be considered to be of a capital nature and no tax thereon shall be payable by the lessor.
Malta film & audiovisual industry regulatory framework developed by the Maltese authorities provides following financial and fiscal incentives:
✪ Tax Credit – Fiscal Aid: tax credits are computed as a percentage of either the value of capital investment or the value of wages for 24 months, covering new jobs created as a result of an investment project, that can give rise to a tax credit of up to 50%.
Facilities for filming and audio-visual productions qualify for investment tax credits. Another incentive being offered in Malta is that companies contributing towards the production of local films and training initiatives offered by the Malta Film Commission, could be able to benefit from a 150% tax deduction up to a maximum of €50,000.
✪ Co-production fund: The Maltese Government allocates a significant budget for film co-productions. The main purpose of the fund is to encourage collaboration between Maltese and foreign companies to produce films and TV series for international distribution.
Funding through this Fund can be made available through the following methods:
- loan guarantee (The Malta Co-Production Fund will act as a loan guarantor and will provide the lending bank with a maximum amount of €200,000 to be utilised as a guarantee against the loan to be taken up by the beneficiary)
- equity finance (Each co-production agreement sets a minimum and maximum financial contribution, and the country of the co-producer(s) making the largest financial contribution is deemed to be the majority country for that film, Equity Finance may amount up to €350,000)
✪ VAT: the general VAT rate in Malta stands at 18%, while accommodation in hotels and premises is offered at a reduced rate of 7%. In general, VAT incurred on expenditure attributable to business activities is fully recoverable in Malta.
Foods and drinks are part of everyday life for everyone, and so it is a good business that continues to thrive on the island. Most successful restaurants are unique local food and oriental cuisine. You can see as proof of that, 26 local restaurants have been named in the Michelin Guide.
To open a restaurant on the island, there are specific requirements that have been put in place by the atuhorities:
- the property where the restaurant will be opened must correspond with the regulations of the Food and Safety Commission;
- the restaurant must adhere to the rules on cleanliness, chilling and cross-contamination;
- the chefs and other employees must be allowed to work in the country, they should have the necessary experience to work in a restaurant business and must adhere to the rules of the Regional Environment Health Directorate.
Once all requirements have been met, the Malta Tourism Authority will issue the applicant with the license of the business. But before the applicant is authorised to open the restaurant, the inspectors from Environment Health Directorate will visit the site 28 days before the launch of the restaurant to ensure that the business can be opened to the public.
Malta, an English speaking country, has invariably pushed its education system as one of its pillars of its success.
The study of the English language is one of the main areas that have attracted various students from all over the world to further their studies in Malta. English language schools in Malta have flourished over the years, and this has been aided by qualified and experienced staff and organised packages specifically tailor made for the needs of the ever-demanding foreign students.
The government is giving the private independent schools grants for staff training, sports and technological upgrading including software license.
Various types of industries can set up a franchise such as food, clothing brands, drinks, motor companies, financial services, and electronics.
Opening a franchise in Malta is worth it, unlike the other European countries, the Maltese government has developed systems that enable the easy establishment of franchises in the island.
Creating a franchise, of course, involves an investment that requires due attention, starting from an analysis of the idea and a precise verification of the strengths and weaknesses of the brand. But the absence of withholding tax on outgoing royalty payments and dividends is enough to show how starting a franchise from Malta is certainly strategic from a tax point of view, considering that the royalties generated by the franchise are taxed in Malta at 35% as part of the business income. Additional benefit is that the subsequent distribution of the income as a dividend, the Maltese law provides for a refund of 6/7 on the tax paid by the company to the shareholder, thus effectively reducing the final tax rate to 5%.
The rules and regulations of the government recognize three types of franchises:
Single unit franchise – recognize one sole entrepreneur (franchisee) to be the representative of the franchise.
Area or multi-unit franchise – allows the entrepreneur to open more than one franchise in the country.
The franchisor that is the parent company of the franchise benefits from such business by receiving an appropriate fee from the franchisee (entrepreneur). The cost of payment is determined by the type chosen by the entrepreneur and the business type that will be operated.
This is suitable for companies that have customers on the island. They will benefit from quick forwarding of emails and phone calls from their Maltese customers.
Back offices offer cost savings alternative to companies and entrepreneurs because they do not have to spend money setting up an office and hire employees to manage the branch office. It can be an alternative especially to startups that try to minimize expenses, and particularly relevant for trust services, shipping and maritime trade, insurance or fund administration business.
Some of the services of a Virtual office could be:
- Registered physical office in the business centre in Malta;
- Local fax and phone numbers;
- Mailing services;
- Voice mailbox;
- Conferences calls or meeting rooms;
- Forwarding services;
- Secretarial services.
A wholesale trading company will would do very well on the island as Malta is since it is a small country and imports occupy an important part in the country’s economy. Just like any other business, some regulations must be adhered to for anyone who is interested in opening a wholesale trading company in the island. The company can be registered as LLC. The land or building that will house the company should be allowed to selling goods. A trading license issued by the commercial department through the Trade Services Directorate and import license is what will enable the shop to operate.
The most imported product in Malta is refined petroleum with a quota of 33%.
Recreational boats, passenger and cargo ships, planes, helicopters are the second most imported products in Malta and they occupy 30% of the country’s imported goods.
Malta also imports integrated circuits and chemical products that represent almost 6% each.
In smaller percentages, Malta imports: means of transportation, metals, foods, textiles, pharmaceuticals, spacecraft and aircraft spare parts, cars and cars spare parts and computers.
As a foreigner living in the island applying for permits and starting a business can take time.
The entrepreneur has to follow all the rules and regulations put in place by the government before operating the business. An easier alternative to this would be to buy an already existing company on the island.
Buying an already existing business has its perks:
- The company is already known by customers or the locals thus it will be easier to attract new clients;
- The flexible business operations allowed by the government will enable the entrepreneur to open other branches abroad if he so wishes;
- It will also have an easy time advertising its products and services to the people;
- Ability to bid for contracts;
- The company can easily apply for bank loans in the island.
Malta has attracted various fund administration companies and also fund managers within its shores, and the latter are servicing the ever increasing collective investment schemes being set up in Malta.
Professional Investor Funds, with their attractive “light” regulatory approach and very generous tax regime have become a very popular investment vehicle being set up in Malta and regulated by the Malta Financial Services Authority (“MFSA”).
The property market in Malta has been booming over the last few years, especially the area of construction. Challenges arose over the years in finding firms with the necessary tax and accounting knowledge to guide the constructions companies in their day-to-day requirements and niche area of operations.
Our firm has successfully advised and structured various businesses operating in the property sector in and outside Malta.
The “elite”, or rather the High Net Worth Individuals (“HNWI”) typically search for countries which are politically and economically stable, with good standard of living, suitably located geographically, having good health and educational systems, a favourable tax regime, possibly enjoying good weather throughout the year.
Malta, a European Union member within the Euro zone having a sound banking sector and political and economic stability is one of the prime European locations for HNWIs.
Griffiths + Associates understands the needs of HNWIs and the high level of service which the latter would expect from an organisation servicing international clients. The level of expertise has to be matched by the level of service, which is of paramount importance in the business model of our firm.
Passing on successfully one’s family business to the next generation, is one of the great dilemmas facing various first and second generation owners. Indeed, after years of sacrifice in building a thriving business, it easy to have this solid set up lose momentum and profitability due to lack of planning.
The introduction of the Family Business Act provided some positive features to enable local business to be better assisted in passing on family businesses to the next generation, and we are ready to assist in advising in this regard.
Although the import and export market in Malta is relatively small compared to the other EU member states, Maltese companies have been used over the years as vehicles for the importation of goods within the EU from non-EU sources, and also as an exit point for goods leaving the EU to third countries.
Enjoy Tax Benefits of Setting Up
a Business in Malta:
Intellectual Property (IP) Company:
Malta provides fiscal incentives for companies to hold intellectual property such as patents, trademarks and copyrights.
Key benefits of a Malta IP holding company:
— Malta is the only EU member state that operates the full imputation system of taxation. When a company in Malta derives royalty income from qualifying IP rights, any income stemming from those rights is exempt from corporate tax in Malta. The exemption is further extended to qualifying patents, wherever registered, even if their development and registration is carried and held outside of Malta.
- 100% refund– exemption on registered and qualifying royalties: companies deriving income from a qualifying IP, irrespective of whether such income is of an active or a passive nature, would be exempt from tax on that income in Malta. The Maltese company has the option to tax the income in Malta at 35%. However the non-Maltese resident shareholder is entitled to claim a 100% tax refund upon the distribution of a dividend by the Maltese company.
- the 6/7ths – ‘trading’ refund: this type of refund is generally due on those profits earned from trading activities. Taking into account such refund, the effective rate of tax works out at 5%.
- the 5/7ths – ‘passive’ refund: this type of refund is generally due in respect of income derived from passive interest and royalties. The effect rate of tax works out at 10%.
— No WHT on dividends paid by the Malta IP holding company.
— Access to an extensive double tax treaty network which is essential for tax efficient IP management.
— Access to the EU interest and royalties directive.
Malta has established itself as a robust and safe maritime jurisdiction and has the largest European maritime flag registry.
It is possible not only to set up a shipping company but also to redomicile from another jurisdiction to Malta, without liquidating the company in the country that it is being redomiciled from.
Find below benefits of owning a Malta Shipping Company:
- Shipping organisations are exempt from paying tax on income derived from shipping activities under the Income Tax Act;
- Possibility for players in the shipping industry to incorporate cell companies within their corporate structures, and they may also convert their existing companies into cell companies;
- Yachts may be registered on behalf of legally constituted corporate bodies or entities irrespective of nationality;
- Twenty four hour, seven days a week service in response to urgent matters;
- Malta offers very competitive ship registration fees;
- No withholding taxes; and
- No restrictions or taxation on the sale and mortgaging of Maltese registered ships.
Since 2010 Malta has taken steps to become a leading jurisdiction of aircraft registry that offers aircraft owners and operators, current and future, an easy and expedient registration procedure and further ease and freedom of intra-Community operation – maintenance, aircraft registration, leasing, finance as well as crew and flight training.
Malta’s aircraft registration regime’s openness to many different legal forms and arrangements, non-selectiveness regarding nationality, as well as the non-taxation schemes and other benefits, have proven to be an attractive feature sought after by many foreign entities today. For these reasons Lufthansa Technic, SR Technics, Aviation Cosmetics and VistaJet have established their businesses in Malta.
Among the various incentives available in this sector one can find that:
- A secure EU jurisdiction and legal framework.
- Access to intra-Community traffic rights: registration of an aircraft and fulfillment of additional requirements for license and certification in Malta, grants the aircraft rights to fly all intra-Community routes within the EU.
- Broad options of registration: any type of aircraft can be registered in Malta, including helicopters, airframes, as well as aircrafts under construction.
- From 2020, aviation companies can create new corporate structures by means of cell companies.
- Favorable taxation regime:
income derived by non-Maltese resident operators from the ownership, leasing or operation of aircrafts or aircraft engines used in international aviation business, such as transport of passengers or goods, will not be taxed in Malta unless such income is actually received in a Maltese bank account.
This will apply despite the fact that the aircraft may be registered and/or is operated in/from Malta. But even if any tax be due in Malta, this may be lowered to an effective tax rate of 5%, via Maltese tax refund system.
- Tax scheme for aviation related personnel: this allows workers who have registered under the scheme benefit from a favorable tax rate of 15% on all income derived from employment in Malta in amount of up to €5,000,000 (any excess of this amount is not subject to tax).
- Beneficial depreciation period for wear and tear.
Author: © By Olga Saliba
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