A successful business would sooner or later start searching for a room to grow outside the domestic market. It means international expansion. A representative office in another country is a more convenient way to sell your goods and services abroad. Even in neighbouring countries, the registration of a new company is not cheap and requires a lot of patience. In this article we will talk about expanding your business to a country in Southern Europe, the Republic of Malta, a small island country in the Mediterranean Sea.
You open a business in a prosperous EU country with a strong, financially resilient economy, stable currency and no foreign exchange controls;
The process of incorporating a company in Malta takes a record short time. If you use legal support and do everything righton the first attempt, it will take you no more than 10 working days to open your company;
The Maltese would not mind if you moved your entire business there. There will be no administrative, immigration or economic consequences; on the contrary, this relocation will cost you almost nothing;
Both the assets and the share capital of Maltese companies are tax-free. Neither will youpay the stamp duty on the transfer of shares;
Foreign nationals and foreign companies can be incorporated as founders and directors of companies registered in Malta;
You can register your company in Malta remotely; your physical presence is not compulsory. However, the Maltese islands are one of the most picturesque places of the Mediterranean with ancient history and beautiful nature; you should definitely visit at least once;
For those foreign businesspeople who not only want to set up a company in Malta but also plan to relocate there themselves, the government offers an investor visa programme. Individuals are granted a European passport in exchange for a significant investment. You must invest at least €600,000 if you have been resident in Maltafor 36 months or at least €750,000 if you have lived there for 12 months;
Malta provides an ideal environment for certain types of business activities. For example, if your business is cryptocurrency-related, registering in Malta will help your company obtain an ICO licence.Other important sectors include fintech, maritime affairs, aviation, film, media and tourism sectors;
Malta’s banking system is reliable and convenient, which is especially important for start-ups abroad;
Tax optimisation. In terms of the development of small and medium-sized businesses, the Government of the Republic of Malta allows companies registered in the country to use tax deductions. In some cases, foreign-owned companies can reduce their effective tax rate to just 5%. Malta has signed double taxation treaties with 70 countries around the world. Overall, owing to the specifics of the Maltese tax system, some experts compare this island state to a traditionaloffshore.
Officially, the Malta corporate tax rate is a flat rate of 35%. One of the key advantages of the Maltese corporate income tax system is a full imputation system that applies to the taxation of dividends, whereby shareholders are entitled to a tax refund of up to 30%.
Overseas businesspeopleare attracted by the possibility of significantly reducing fiscal payments in Malta. Special conditions for certain business activities mentioned above and benefits laid down in the legislation are also used. How does it work?
The law allows the shareholders of a company to receive a refund of part of the corporate tax when distributing its profits. The refund amount is equal to a certain share of the tax paid (depending on the type of activity the dividends were received from and tax benefits already used) and reduces the effective amount of corporate tax to 5-12%.
This deduction is paid to the company’s shareholders instead of a corporate bank account. To optimise taxes, the so-called “two-tier structure” is used: a holding company and a subsidiary. In a holding, one company acts as a shareholder of another company. And since a part of taxes refunded to the founders is not taxable income, the proceeds remain at the disposal of the group of companies.
A company’s paper tax return is filed no later than nine months after the end of the reporting period. It is possible to file tax returns electronically.
The standard rate of value-added tax for companies registered in Malta is 18%. Some products are subject to reduced VAT rates of 7%, 5% and even 0%.
Maltese employers are required to pay contributions of 10% of the employee’s salary.
There are various types of companies available for setting up a business in Malta, including limited and unlimited liability partnerships, as well as private limited companies and public limited companies. We will focus on the latter two in more detail as they are the most common forms of business incorporation in Malta.
Perfect for setting up a small or medium-sized business. With this form of incorporation, the responsibility of directorsand shareholders is proportionate to the amount of their contribution to the share capital.
A private limited liability company must have a minimum share capital of €1,165. 20% of this amount must be deposited in a bank account at the time of company formation in Malta.
The Ltd must have at least one director and 2 to 50 shareholders. Both individuals and companies of any tax residency can act as directors and shareholders. In certain cases, a Maltese limited liability company may be owned by a single natural or legal person.
It is mandatory to have a secretary to maintain the business activities of limited companies and liaise with regulatory authorities. Only a natural person of any tax affiliation may be appointed to this position.
It differs significantly from a private limited liability company.
The share capital of this form of incorporation is divided into shares which can be traded on stock exchanges both in and outside the Republic of Malta.
The minimum share capital of an offshore company in Malta is €1,164.69, of which 20% must be paid upon signing the company’s Memorandum of Association.
The number of shareholders in a Plc is not limited but there must be at least two directors.
The process of starting a company in Malta can be divided into 8 steps;
Choose the form of company incorporation that best suits the specifics of your future business;
Create and reserve a unique name for your company. It can be in any language, but it will be written only in Latin. It is not acceptable in the company’s name torefer to illegal activities or activities that are regulated by state licences in Malta;
Prepare incorporation documents of the company – the Memorandum of Association and the Articles of Association;
To register a business in the Republic of Malta, it is necessary to have a registered address. By law, this must be a physical office owned or leasedin the country. Important company documents will be kept there;
Open a corporate account with one of the banks in Malta and deposit part of your share capital there. In the case of a PLC, where the share’s value may go up or down, the account must hold an amount equal to 25% of the company’s authorised share capital (i.e. initial, before trading on the stock exchange);
Register your start-up with the tax office. A tax number will be automatically assigned to your company;
Some activities such as gambling, investment, banking, trading and insurance will require a government licence;
Finally, when all the paperwork is prepared and approved, and if all additional terms and conditions are met, you pay the government fee, complete the application form and send the documents for registration.
The regulatory authority decides on your application within 2 days, and it takes another 7-8 days to finalise the necessary documents. If the form and the content of your incorporation documents comply with the Maltese Companies Act, the regulator will assign unique numbers to them and keep them safe. You will be provided with a certificate of incorporation, based on which all future business activities will be conducted. Companies registered in Malta must renew their status annually.
All companies registered in Malta must prepare and submit financial accounts and a tax return, even if they have not traded there.
A company has up to 10 months to prepare and submit its accounts after the end of the reporting period. The standard end of the fiscal in Malta coincides with the end of the calendar year. The duration of the first reporting period for a new company is from the date of incorporation until 31 December of the same year. Before submission to the Registry, the accounts are reviewed and approved by the board of directors.
The company’s auditors prepare a tax return based on the accounts. The last date for filing the tax return with the Commissioner for Revenue of the Republic of Malta is 30 September of the year following the reporting period.
Most Maltese companies are also required to conduct an audit and arrange an annual directors and shareholders’ meeting.
Malta has a rich history and culture. It was a British colony for more than 150 years, which affected not only the language but also the laws. In many respects, the Maltese legislation resembles the British laws.
Imperial & Legal’s advisors have extensive experience in registering businesses in Europe and the UK and solving related issues. Our specialists will not only help you open a company in Maltain no time but also take full advantage of tax optimisation solutions. We will be happy to help you with all processes: from the first financial accountsto the relocation of employees from the head office. Our specialists will do everything quickly, competently and at a reasonable price.
The following documents are sent to the Maltese Registry.
Information about the name of the company and its registered office in Malta.
Information about the founders, directors and company secretary*.
Approved Memorandum of Association and Articles of Association.
Documents confirming the fact of depositing a part of the share capital in a corporate account in one of the Maltese banks.
You will also need to pay a government fee to register your business. For companies with limited liability and minimum authorised capital, the fee will be €245. If you apply with the help of Imperial & Legal, the fee will be included in the cost of the service.
The amount of tax deduction is calculated depending on the type of corporate income.
6/7 is deducted from 35% corporate tax if the income was derived from trade. The state keeps only 5% of the company’s income.
A 5/7 deduction of the standard income tax rate applies if the company income is received from passive sources such as royalties (corporate tax will be 10%).
1/3 deducted from 35% corporate tax goes to the Maltese treasury if the company has already benefited from double taxation treaty relief (the income tax in this case will be 11.67%).
Some income of foreign-owned companies is exempt from corporate tax if certain conditions are met. For more details, please contact our specialists.
Re-domiciliation is the relocation of a company to another jurisdiction while retaining its management structure, main incorporation documents and financial obligations. Simply put, it is the re-registration of the company in another country with more favourable conditions for doing business. Moreover, the company is often re-domiciled only on paper thoughphysically it remains where it was.
The Republic of Malta provides unique conditions for foreign business, but the on-paper relocation will not work because the law requires companies to havea physical registered address.
All companies are registered for VAT in this country. But whether you will be charged value-added tax or not depends on the annual turnover of the company.
If it is less than €10,000 you have nothing to worry about. If your business turnover is less than €35,000 per year, you need to consider additional factors. VAT needs to be charged when a business turnover exceeds €35,000 in a year.
*Under the Maltese laws, information about the shareholders of the company to be incorporated is confidential and is only made available to third parties by court order.
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