Malta's competitive tax system, extensive network of Double Taxation Agreements, fast incorporation, and its English-speaking educated workforce make it an increasingly popular business vehicle for companies from all over the world to register a company in Malta. Whether one is in need for a Malta holding Company (to be used as part of an effective asset-holding structure), a Malta trading Company, a ship-owning Company, an investment vehicle or a captive insurance company, Malta provides several solutions to accommodate such requirements.
The steps to set up a company in Malta are very straightforward and can be done remotely or online without the need to travel.
There are some things that one must consider before incorporating a company in Malta:
- The minimum share capital in Malta. This is €1,200 per company, of which 20% must be paid up, along with this, there is a disbursement fee of €320 payable to the authorities along with professional fees.
- Tax planning. As a brief overview, the Malta trading company will be taxed at 35% on trading profits, upon a distribution of dividends to the shareholder, the shareholder will become eligible to claim a tax refund on Malta tax paid of either 6/7, 5/7 or 2/3 depending on the stream of income, which will result in a net effective tax rate in Malta of roughly 5-10% depending on the refund claim.
Company Types & Company Name
- Private Limited Liability Company;
- Public Limited Liability Company.
The name of a private Company must end with the words 'Ltd.' or 'Limited' whereas a public Company must have 'p.l.c.' at the end.
Since Malta forms part of the European Union, the Maltese legislation provides for the setting up of a European public limited liability company, commonly known as a Societas Europaea (SE). The option of having an SE established offers clients the opportunity to operate within the European Union without the constates of the laws of each member state. If such company is registered in Malta, then its home state would be considered Malta and therefore regulated by the laws of Malta. Once registered, instead of receiving a "C" number, such companies would obtain an "SE" number. The Societas Europaea is easily transferrable within the EU/EEA and would normally be formed either through a merger or consolidation, the formation of a Holding company or subsidiary or through a reorganisation. For each set up certain conditions must be adhered to. At all times, an SE must have a subscribed share capital of €120,000.
Every Private Limited Company must have, at least, one (1) shareholder who may either be an individual person or a corporate entity.
Directorship and Company Secretary
A company that is registered in Malta must have a minimum of one (1) director or two (2) directors in the case of public companies, and one (1) company secretary. Whereas a director could be both an individual and a corporate entity, the company secretary must be an individual, unless a company is registered and licenced in Malta to offer/hold such company secretary position. Individuals in the role of Company Director or Company Secretary can be non-EU citizens and can have residence outside of Malta.
The requirement to ensure that the management and control of the company are carried out from Malta for taxation purposes is becoming of increasing importance. Therefore, although it is not a local requirement for one to have a board composed of Malta resident shareholders, it is recommended that one does consider appointing as a minimum fifty percent of the board to be construed of local directors along with a local company secretary who is aware of the Malta legislation.
Sourcing of Employees and Registered Office
Further to the appointment of Directors and a Company Secretary, in order to create greater value for the company and ensure that operations are being carried out from Malta, it would be beneficial to have an office and employees in Malta, always depending on the size and activity of the company. Every company must have a registered office address situated in Malta.
Opening a Bank Account
When it comes to banking options, a person interested in setting up a company in Malta must find a bank suitable for the company's current structure and activities. These in turn must match the risk appetite and client acceptance of the bank. One may wish to also consider electronic money institutions as a means of online banking as opposed to a fully-fledged licensed bank account. When setting up a Maltese company, it is not a requirement to open a bank account in Malta as it is also possible to have a bank account outside of Malta if necessary. The process to open up a bank account in Malta could be lengthy.
Company Formation Fees
The company registration fees in Malta are payable to the Registrar of Companies upon incorporation of the company. Currently, they vary from a minimum of €245.00 to a maximum of €1,750.00, depending on the value of Authorised Share Capital. A minimum, annual fee of €100.00 is payable together with the submission of an Annual Return.
The share capital may be divided into ordinary shares and preference shares and classes or variants thereof. In Malta, bearer shares are not allowed. Ownership of company shares or debentures is evidenced by their entry in the Company's register of members or of debentures and by the issue of a share or debenture certificate.
Time Required to set up a Company
The length of time required to set up a company in Malta depends on the type of company involved and on the timely submission of all information and documentation.
Taxation & Double Tax Treaties
Malta is currently signatory to almost 70 Double Tax Treaties and some interesting opportunities exist when putting into place the appropriate corporate structure. Corporate tax in Malta is calculated at a flat-rate of 35% on the gross profits based on the audited financial statements of the company. However, through the availability of a tax refund system granted to shareholders of Malta-registered companies, the overall net effective tax rate could be reduced to 0% in the case of holding company structures, and 5% in the case of trading companies. In either case, there are specific legal requirements that must be satisfied in order for shareholders to benefit from such tax refunds. Licensed shipping organisations which own or operate tonnage tax ships are exempt from taxes in Malta.
Accounting & Auditing Requirements
Malta-registered companies are required to keep proper accounting records and have their financial statements audited at the end of each financial year in accordance with the Malta Companies Act, 1995 and International Accounting Standards. Financial statements should include the directors' report, the auditors' report, balance sheet, profit and loss account, notes to the financial statements, together with schedules to the profit and loss account.
New company registrations in Malta are constituted by Memorandum & Articles of Association (M&A) that are subscribed to by the shareholder/s; and a certificate of registration that is issued by the Malta Registrar of Companies in respect thereof. The M&A would state the name of the company; the name, address and official identification of the subscribers; whether the company is a private company or a public company; the registered office address of the company in Malta; the activities of the company; details regarding the authorised, issued and paid-up share capital; the number of directors and their particulars, the number of company secretaries and their particulars, and the manner in which the legal and judicial representation of the company is to be vested.
Exchange Control and Share Capital
Maltese Companies are not subject to any exchange control restrictions.
The authorised and issued share capital of a private company shall be of a minimum of €1,164.69 of which at least 20% is to be paid-up front.
In the case of public companies, the minimum authorised and issued share capital shall be of €46,587.46 of which at least 25% must be paid-up. Companies may have their share capital denominated in € (Euro) or any other major currency.
A company wishing to transfer their operations to Malta, would not need to necessarily liquidate their current operations in their present country and set up from scratch in Malta. A company redomiciliation option allows the company to move the company domicile to Malta whilst the legal entity originally set up in a foreign jurisdiction remains in existence. A request by a foreign company to register as being continued in Malta shall be made to the Registrar of Companies in the manner and form required by the company. Moving domicile to Malta means that the company would need to comply with the laws and regulations of Malta without the need to set up a newly owned legal entity.
Mergers and Acquisitions
Mergers and acquisitions can come in many ways and forms, such as a simple transfer of shares or a subscription to a new share issue, a merger by acquisition or a merger by a formation of a new company, a joint venture or a transfer of property.
Although a Maltese branch is not considered to be a legal entity, it must still be registered with the Malta Registrar of Companies. A branch is easy and quick to set up and must notify the Registrar within one month of operating in Malta. There is no minimum share capital requirement to set up a branch and such setup is subject to similar laws and regulations to that of a registered Malta company including the possibility to apply for a tax refund on any Malta tax leakage. However, one must keep in mind that a branch is not a legal entity.
Registration of a Partnership
There are two partnership types allowed by the Maltese Companies Act. These are en commandite (commonly known as "limited partnership") or en nom collectif (commonly known as "general partnership"). Both Maltese partnerships have their own separate legal personality which is separate from that of its partners. The Maltese law allows for partnerships to own and hold property under any title at law and also be sued.
The setting up of a partnership is slightly different to that of a company, such as needing to have a partnership deed set up whilst also needing to appoint the general partners and the limited partners, depending on the type of partnership set up chosen. The process and timeline is pretty similar to that of a privately owned trading company with a few differences in the documentation prepared. It is also possible to convert a Limited Liability Company (LTD) into a partnership, should certain conditions be met.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.