The European Union countries are a desirable target for those foreign entrepreneurs who are going to test their abilities in a jurisdiction with clear rules for business and effective mechanisms of legal protection of private property. On the one hand, a company registered in the European Union gains access to a vast solvent market of goods and services, with a huge potential for development. On the other hand, business activities in united Europe are strictly regulated and heavily taxed. In addition, the transfer of production or trading activities to another jurisdiction is always accompanied by significant costs, even in the near abroad.
Fortunately for European start-ups, the EU includes Malta, where special conditions are in place for foreign businesses to successfully grow a new company in Europe while optimising corporate taxes.
By choosing Malta as the place of incorporation of a company, a foreign businessman:
Runs a business in a country with a stable prosperous economy that is part of the euro zone;
Gains the opportunity to supply its goods and services to other 26 countries of the European Union on favourable terms.
The Republic of Malta is a completely white jurisdiction, but at the same time provides foreign businessmen with opportunities typical of a classic offshore zone.
The government is encouraging entrepreneurial activity. Maltese SMEs can take advantage of tax deductions. In some cases, these incentives can reduce the corporate income tax rate to a record 5%.
The arsenal of tax planning tools does not end here, as Malta has more than 70 international double taxation treaties.
Moreover, in this jurisdiction, the share capital of companies and property owned by them are not taxed, and the transfer of ownership of company shares is not subject to stamp duty.
In certain circumstances, Malta registered holding companies do not pay corporation tax on profits sourced from dividends from subsidiaries in other jurisdictions.
In this country you can legally engage in gambling business, including the organisation of online casinos. All gambling activities are officially licensed by the state.
Ship owners register their companies in Malta in order to pay a fixed charge on the tonnage of their ships each year in lieu of income tax. The amount of this payment depends directly on the category and age of the ship.
If your business is related to the cryptocurrency market, opening a company in Malta will allow you to obtain an ICO licence.
Malta’s financial institutions are as reliable and convenient as the best banks in the UK, Germany and Switzerland. Your company’s funds will be reliably protected, and settlements with customers and suppliers will be made in record time and in any foreign currency, as there are no currency controls in the country.
The Maltese authorities do not in any way prevent the transfer of an existing foreign company to their jurisdiction. The islands are equally relaxed about the transfer of the activities of a company registered in Malta to another country.
If a foreign entrepreneur enlists the support of competent registration agents, opening a company in Malta will take no more than 10 working days. To develop small and medium-sized businesses, the Maltese have simplified the procedure of company registration and reduced the number of requirements to the founders. There are no restrictions on the citizenship and tax residency of founders and directors of Maltese companies.
You do not need to leave your home country to incorporate a company in Malta — the whole procedure can be carried out remotely.
Malta has a special procedure for obtaining residence permits and citizenship for those foreign entrepreneurs who are planning to move to Europe and who are not just setting up a company in Malta, but are willing to invest a substantial amount of money in their business. Such investments are referred to as “special merit” in Maltese immigration law. Generous investments in the economy of the islands allow you to obtain an EU passport in 1-3 years.
A foreign entrepreneur can register his firm in Malta as a corporation or as a partnership. The choice of the appropriate legal form depends entirely on the objectives of the business. Foreign businessmen usually open a company in Malta:
Private limited companies;
Public limited companies;
Partnerships and limited partnerships.
Let’s look at each of the above forms of business organisation in more detail.
Private limited liability companies cannot issue bearer shares. The liability of the founder in such a company is limited to the amount of his share (tangible contribution or financial obligation) in the share capital.
The minimum authorised capital of a Malta LLC is €1,164.69 divided into a certain number of shares of the same par value. A minimum of 20 per cent of the nominal value of all shares in the company must be paid by the founders by depositing funds in a bank account opened for this purpose in a financial institution in Malta.
At least 2 founders are required to set up a Limited Liability Company in Malta. A private company can be set up by either a person or another organisation. An LLC cannot have more than 50 shareholders.
If an entrepreneur or a company combines both the owner and the director in one person, such a business structure is called a “single founder company”.
A minimum of 1 director is required to manage an LLC. The management can be carried out by a person or a company.
All Maltese limited liability companies are required to have a company secretary. The functions of the secretary are usually performed by an individual rather than the firm. There are no restrictions relating to the taxation or nationality of the secretary.
A private limited company can be recognised as an exemptcompany (PEC — Private Exempt Company)if the following conditions are met:
The number of shareholders of the firm is not more than 50;
Legal persons are not directors of the company, nor are they holders of its shares or debentures;
Neither the company nor its directors are parties to an agreement whereby the policies of that company are determined by third parties unrelated to its management, founders or shareholders.
PEC are exempt from the obligation to employ a separate corporate secretary. Since a director in such a structure cannot be a company, he can combine the functions of director and corporate secretary.
PECs can make a loan to their director, or act as a guarantor on their director’s loan, which is strictly prohibited in an LLC.
If a number of conditions are met, recognised smallPECs not only may not have their annual accounts audited or preceded by a meeting of the founders, but also have the right to submit them in a simplified form.
Companies of this type may offer their shares and debentures on the financial market. But not before they are registered and issue a prospectus.
The liability of shareholders for the debts of a PLC is limited to the market value of the company shares they hold. The authorised capital of a public limited company must be at least €46,587.47. At least 25% of this amount is paid by the founders during the incorporation process.
The founders of a public limited company in Malta can be either local residents or foreign citizens and organisations. Maltese corporate law does not limit the maximum number of shareholders of a PLC.
The management of such a company requires the appointment of at least 2 directors, who may be shareholders or employees. Also, like a private company, a Maltese public company is required to have a corporate secretary.
It is generally believed that doing business with a Maltese PLC is more difficult because such commercial organisations usually have individually drafted statutory documents, their financial report must be preceded by an audit and a general meeting of shareholders, and in general the maintenance of a public company is much more expensive.
For your convenience, Imperial & Legal specialists have compiled a comparative table on these 2 types of Maltese companies:
Partnerships in Malta are unincorporated commercial associations of people and/or companies. The fact of the establishment of a partnership is recorded in the Memorandum of Association. As it is easy to guess, the very configuration of this legal form of doing business implies the participation of at least 2 partners.
The authorised capital in a partnership is not divided into shares but consists of separate contributions from the partners. The principle of “transparent taxation” can be applied to these business structures, according to which the partnership does not report and does not pay tax on the profits received but distributes them among the founders.
In Malta, you can register:
Partnership Em Nom Collectif — an ordinary partnership in which the liability of the partners for the debts and pecuniary obligations of the organisation is unlimited and extends to all their assets;
Partnership En Commandite — a limited liability partnership in which 2 types of participants coexist:
General partners who take an active part in the management of the organisation and are fully liable for all its debts;
Limited partners who do not participate in decision-making and whose liability for the debts of the partnership is limited to the amount of their contribution to the share capital.
Malta has a 35% corporate tax on all income of companies incorporated in Malta, regardless of where it originates, including income derived from the sale of assets. Foreign companies registered in other jurisdictions also pay 35% tax on all income earned in Malta.
How do Maltese companies with foreign participation reduce their corporate tax costs?
Malta’s tax legislation allows shareholders to apply for a partial or full refund of tax paid at company level. But only after the tax has been paid in full. And distribution of dividends. Here are some illustrative examples of such refunds.
It is possible to recover the full amount of corporation tax paid by a Maltese company if:
Income received from investments qualifies as equity participation in the authorised capital of the enterprise;
The company’s dividend income is consistent with the equity treatment.
Shareholders who receive dividends because of distributions of income received in other countries and on which taxes at a rate of 5% or more have been paid can expect a refund of 6/7 of the amount of corporation tax paid.
An amount equal to 5/7 of the corporation tax paid is refunded to shareholders if the income was derived from passive sources, such as royalties from the use of company-owned intellectual property.
A refund of 2/3 of corporation tax is available to those shareholders who:
Received dividends from income derived from the distribution of overseas earnings of a company registered in Malta;
Applied for exemption from double taxation.
Thus, the founders of a Maltese company can reduce the amount of corporate tax from 35% to an acceptable 5-12% of the profits received. And the application of the “two-tier scheme” of business organisation in Malta allows some foreign entrepreneurs to reduce tax expenses to zero.
Some Maltese companies with foreign earnings reduce their tax expenditure at the corporate level. To do so, they utilise Malta’s international double tax treaties or foreign tax credits.
Malta has an 18% rate of value added tax. There are concessional VAT rates (5% or 7%) that apply to certain goods and services.
A firm is registered with the tax office as a VAT payer either voluntarily or when its annual turnover exceeds the amount of €35,000. If a company has a turnover of €10,000 to €35,000, the decision to register for VAT is made after considering a number of additional circumstances. Organisations with a turnover of less than €10,000 generally do not pay VAT.
If your firm has a physical presence on the islands and employs employees, you will be required to pay an amount equal to 10 per cent of the wages paid to the social funds.
The amount of duty that a company pays to the state when it takes possession of a property is:
5% — if a property is being purchased;
2% — if securities are purchased.
The accounting period for entrepreneurs in Malta is the standard calendar year. If the firm is new, the first financial year runs from the date of opening until 31 December.
The financial report must be submitted no later than 10 months from the end of the accounting period. Before the document goes to the Malta Financial Services Authority, it must:
Pass an auditor’s review;
Obtain approval at the annual meeting of the incorporators and directors.
You may not conduct a financial audit and provide the authorities with an abridged version of the financial report if 2 out of 3 of the following statements are true about your company:
Your firm had no more than 2 employees during the reporting period;
The company’s balance sheet does not exceed €46,587.47;
Annual turnover totalled no more than €93,587.47.
The company’s tax return is prepared based on the financial statement. It is submitted to the Malta Revenue Authority within 9 months of the end of the financial year.
There is also the so-called annual company report, which shows up-to-date information about the management, founders, authorised capital and registered office. The starting point for this type of report is the date of incorporation. The data is submitted to the Registrar who maintains the Maltese company register.
The filing of the annual report is preceded by the payment of a state fee, which will range from €85 to €1400 depending on the size of your company’s share capital.
Imperial & Legal specialists have prepared a step-by-step description of the process of registering a business in Malta:
Step 1: Choose the right type of company to incorporate.
Step 2: Think up, check for compliance, and approve the name of the future company.
Step 3: We agree with you the structure of the company to be registered, draw up the memorandum of association and articles of association, and approve the incorporation documents.
Step 4: Find you a suitable office in Malta for incorporation. If you wish, this can be by purchasing or renting a real office space. In particular, a partner of our company can provide his office for registration of your business directly on site. And the annual cost of such a lease is included in the price of our services.
Step 5. Our specialists will help you to open a current account in one of the banks in Malta to place a part of the authorised capital of the future company.
Step 6: Next, we assist you in registering your newly opened company with the Maltese tax authorities, where it will be assigned a tax number.
Step 7: The Government of Malta regulates trading, gambling, investment, insurance and banking activities. If your business activity involves any of these areas, we can help you obtain an official licence.
Step 8: The final step is the actual incorporation of the company. The representative of our company pays the registration fee (as a rule, this fee is already included in the cost of Imperial & Legal services) and submits the completed application form with the package of necessary documents to the Maltese Registry.
The application is approved by the authorities within 1-2 working days and the execution of the company documents takes no more than 8 working days. If the contents of the company’s statutory documents do not violate the Maltese Companies Act, the Regulator will retain them in its custody and assign numbers to them. The representatives of the company will receive a certificate of incorporation.
Malta-registered firms renew their status every year. A company with limited liability and the minimum allowed share capital will have to pay a renewal fee of €100.
The amount of this payment depends directly on the amount of the authorised capital of your company in Malta. The amount can vary from €100 to €2,250. If for any reason your application is rejected, the registration fee will not be refunded. This is why it is so important to have the right legal advice at all stages of starting a new business. The registration fee is already included in Imperial & Legal’s standard Malta company incorporation package.
To enable you to set up a company in Malta without unforeseen costs and within the statutory timeframe, please contact us for advice. Imperial & Legal’s expertise has long gone beyond the incorporation of a business in Malta.
Imperial & Legal can help you optimise your company’s taxes and assist with immigration to Europe if you are planning to invest in your business on the islands to move to Europe with your family. Whatever the challenge, we will find a tailor-made solution for each one, considering all the client’s interests.
In our article we have told only about the registration fee, the amount of which is relatively small for simple companies and substantial for complexly organised commercial structures with a large share capital.
Your expenses should also include the rent of the registered office, the labour costs of the corporate secretary and the cost of the incorporation agents. Furthermore, once you have received your Malta company registration certificate, your costs do not end, as the registration must be renewed every year. There is an annual renewal fee which depends on the amount of the share capital.
It is standard practice in our company to provide a whole package of services, with the help of which the aspiring Maltese businessman successfully solves most of the tasks associated with opening a company in Malta.
To find out the exact cost of incorporating a business in Malta for your circumstances and requirements, please contact our specialists at Imperial & Legal.
There is indeed a way to save money on the procedure for starting a business, but it does not lie on the surface. You can almost halve the fee you pay to the state in the process of registering a company if you refuse paperwork and go through the whole procedure online.
A registered office refers to a company’s registered office, which:
Specified in the constituent documents and application for registration;
Is a real office space in Malta, bought or leased by a foreign businessman;
Allows government agencies to send notices, injunctions, etc. to the company.
In other words, a registered office is not a “P.O. Box”, but an actual existing office space. But by no means always the legal address coincides with the actual address of the company.
Maltese tax law allows the founders of a company to reclaim a portion of the corporate tax. This deduction is not transferred to the company’s bank account, but to the accounts of its shareholders. Therefore, a “two-tier system” is used, when not 1 company is opened in Malta, but a holding company consisting of 2 companies. One of the holding companies is a shareholder of the other.
Under Maltese law, the portion of the corporate tax already paid to the state is not taxed and is then returned to the shareholders as a deduction. Therefore, with Malta’s “two-tier system”, a significant portion of the corporate tax bill remains at the disposal of the group of companies. To find out the exact amount of tax deduction for your business, please contact our experts.
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