Malta gained its independence from the United Kingdom in 1964. The Maltese islands lie 100 km south of Sicily and have a population of approximately 432,000; the climate is warm. Malta has a Westminster-style democracy, but has been politically fractious since independence. 15 years of post-colonial flirtation with Communism and the third world has however been succeeded by a more worldly attitude.
Malta was invited to join the EU in December 2002, along with Cyprus and eight Eastern European states. A referendum in March 2003 approved EU entry, and after the government was returned to power in April it signed the EU accession treaty in Athens. The Maltese Parliament ratified the accession treaty in July 2003 and Malta joined the EU in 2004.
The official languages are English and Maltese. The British military and naval base once dominated Malta but since 1979, when the British left, the excellent port facilities have not yet been fully re-utilised. Tourism has become a major contributor to the economy, particularly visits by cruise ships. The airport has good connections with a wide range of European countries. Figures for 2012 show GDP per head of US$26,600 which is low on the European scale and increases only slowly. For the same year inflation was at 1.4% and unemployment at 3.7%.
As a politically stable, English-speaking retirement destination, Malta has experienced a property boom. This took flight after joining the EU and following the adoption of the euro from 1st January 2008.
Almost entirely lacking energy or other natural resources, and with a severe shortage of arable land, Malta is inevitably an import-hungry country. In the last 15 years, the Government has tried hard, and with some success, to create a high-technology manufacturing sector and to establish processing and distribution facilities around its rapidly growing Freeport. There are extensive investment incentives.
Manufacturing, tourism and shipping go some way towards paying for imports, but the gap cannot be closed without the development of a financial services sector. Maltese legislation for banking, mutual funds, insurance and trust services was relatively late in arriving, and while these sectors are growing, they are not on the scale of some other offshore financial centres.
Malta has moderately high internal taxes, but offers low-tax regimes to companies and individuals. Malta phased out its ‘designer tax’ offshore companies, which the EU would never have accepted, and in 2006 had to give in to the EU by legislating away their replacements, international trading companies.
There is a reasonably sophisticated business and professional infrastructure. Business sectors with offshore activity include banking, investment fund management (there is a stock exchange with a growing array of mutual fund listings), trust management, shipping (a particularly strong sector) and investment holding.
- Headline tax rates: CIT 35%, PIT 20-35%, VAT 18%
- Treaty Jurisdictions: Albania, Australia, Austria, Bahrain, Barbados, Belgium, Bulgaria, Canada, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Greece, Hong Kong, Hungary, Iceland, India, Ireland, Isle of Man, Israel, Italy, Jersey, Jordan, Korea, Republic of, Kuwait, Latvia, Lebanon, Libya, Lithuania, Luxembourg, Malaysia, Montenegro, Morocco, Netherlands, Norway, Pakistan, Poland, Portugal, Qatar, Romania, San Marino, Saudi Arabia, Serbia, Singapore, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland, Syria, Tunisia, Turkey, United Arab Emirates, United Kingdom, United States, Uruguay
- TIEA Jurisdictions: Bahamas, Bermuda, Cayman Islands, Gibraltar, Macau
The corporate tax rate in Malta is 35% which can be reduced to 5% after refunds to the shareholders. This is done as a rebate after the full tax is paid. The IBC applies to the government for a 6/7 refund. The total tax is reduce to only 5% when distributions are made to the shareholders as dividends. When the shareholders receive their dividends they receive a partial refund (85%) of their percentage of the total taxes paid by the IBC. This results in a 5% total tax paid.
Malta taxes worldwide income. However, Malta has over 70 double taxation agreements with other countries to ensure a company does not pay taxes twice for the same income.
There are no taxes on bank account interest and dividends. There is no withholding tax on dividends, royalties, and license fees. In addition, Malta has no wealth tax, capital gains tax, or inheritance tax.
The Value Added Tax (VAT) is only applied to companies engaged in trading intra-EU and the rate is 18%.
Note: United States taxpayers must disclose all income to their government just like anyone residing in countries taxing worldwide income.
- Suitable for: Wealth Management, Banking, Insurance, Fund Management, Shipping, Yachting, E-commerce, E-gaming, Property Ownership
- Company Types: Limited companies, public limited companies, investment companies with variable share capital (SICAV), general partnerships, limited partnerships, branches, sole proprietorships and trusts
- Formation Cost: 1600 – 4000 USD
- Formation Time: 2 – 8 days
- Maintenance cost: 1300 – 2900 USD
In 2015, Malta made starting business easier by creating an electronic link between the Registrar of Companies and the Inland Revenue Department to facilitate issuance of a tax identification number.
Generally speaking, Malta’s comparatively low running costs, rent and wages and competitive telecommunication systems, serve to further enhance the Island’s attraction as an international business center.
In addition, the country does not impose restrictions on the importation of goods from other countries or groups of countries, although goods imported from non-European Union countries may be subject to import duties in addition to VAT (when applicable).
The main weaknesses in doing business in Malta, according to the World Bank, are in the areas of getting credit, dealing with construction permits, getting electricity and in enforcing contracts.
Malta’s Companies Act is mainly disciplined by English Law and EU directives, and describes the type of Maltese corporate entities that may be established in the country. Each of these business forms has distinct advantages and disadvantages, as well as differing scope of business activities, registration requirements and minimum capital requirements. In most cases it will depend on the degree of commitment a company has to Malta and the planned business activity.
Private Limited Liability Company
A limited liability company incorporated in Malta may be either a public or a private limited liability company. The liability of the shareholders in a Malta Limited Liability Company is limited to the amount, if any, of unpaid on the shares respectively held by each of them.
The main differences between the private and public limited liability company is the fact that a private company must limited the number of its shareholders to 50 and it cannot offer its shares to the general public.
Reserve a unique company name
It is possible to check for a company name online through the website of the Registry of Companies or in person. The reservation confirmation will be sent by email.
Deposit the paid-in minimum capital
The Bank will open a company account the moment it receives reference letters from the signatories’ respective banks. In order to open a bank account it is necessary to provide the following documents:
- A duly filled in Know-Your-Client (KYC) form;
- A request to open an account specifying the type of account, the currency and the preferred mode of tax payment;
- Copy of the Memorandum and Articles of Association together with a certified copy of the Certificate of Registration issued by the Registry of Companies once the company is registered.
- Confirmation of the permanent address of the Directors through a completed identification statement certified by a Prime bank or Maltese Embassy in the country of residence. The bank also requires the authenticated identification documents for all the directors, signatories, beneficial owners and secretaries.
- A signed form by the directors of the company appointing the bankers.
Register at the Companies Registry
- Confirmation of name reservation
- Signed memorandum and articles of association
- Confirmation of deposit of share capital
- Copy of the passport/ID of each shareholder, director and company secretary.
Processing time: The Registry will take between 2 and 3 days to incorporate the company at which point the official memorandum and articles along with the certificate of registration bearing the registration number and registration date of the company are issued.
These documents are then uploaded to the website of the Registry of Companies. The Registrar of Companies provides then an alternative service for the registration of Companies. Registration may now be carried out online through the Registry’s portal. Prior to registration, an applicant must register for an account and obtain a personal Digital Certificate by registering for an e-ID. The MFSA would then vet the application within 5 working days.
Obtain a trade license
Businesses can obtain licenses from the Trade Licensing Unit Commerce Department. There are 2 main types of trading licenses depending on whether your business activity involves the handling of food and/or beverages and activities involving hairdressing, beauty treatment, fitness or physical well-being where a No Objection Declaration issued by the Environmental Health Directorate is required.
Documents required are:
- Notification Form.
- Copy of Passport or ID Card.
- Declaration of Shareholders or by Board of Directors in case the applicant is the legal representative of a partnership or company.
- Development Class Number allocated by MEPA (where applicable) and Building Permit Number issued by MEPA and date issued.
Obtain a company Tax Identification Number (TIN)
The company’s certificate of incorporation (and Registrar of Companies number), as well as a copy of the memorandum and articles of association, are needed in order to obtain the TIN number. The company founder can also log in to the electronic service of the Inland Revenue Department and retrieve the TIN. Through an automated interface with the Registrar of Companies (ROC), the TIN is automatically generated by IRD as soon as the ROC issues the ROC number. The TIN is available for retrieval within a day or two from the date of issuance of the ROC Number.
Register for VAT
To register for VAT, the entrepreneur submits the application form S.L. 406.09 “Value Added Tax (Forms) Regulations”, along with the company Tax Identification Number (TIN). Furthermore, a copy of the memorandum and articles of association, and a copy of the original certificate of registration including the stamp of the Malta Financial Services Authority (MFSA) should be produced.
Obtain a PE number (employer identification number) and register employees
Both the VAT number and the Income Tax number are required to obtain the PE number.
For PE number: the registration form is available, the entrepreneur can either complete it online or print it and send it to IRD. The entrepreneur has to provide: – The tax ID number – The number of employees – Details of the business – Date of first employment
Register the employees with Employment Training Corporation (ETC)
The entrepreneur must declare the company’s recruits to the ETC. The PE number is required.
Register for Data Protection
Such registration must be done before the company carries out any data processing operations. VAT and registration numbers are required according to the form to be submitted.
Cost: Between €1500 and 2000
Processing Time: Approx. 4 weeks
Partnership En Commandite
This form of commercial partnership has its obligations guaranteed by the unlimited, joint and several liabilities of one or more “general partners” and by the liability, limited to the amount unpaid on the contribution, if any, of one or more “limited partners”.
At least one of the general partners must be either an individual or a body corporate with its obligations guaranteed by the unlimited and joint and several liabilities of one or more of its members.
A company is formed by a memorandum of association, which must contain some mandatory details, namely:
- Registered office in Malta;
- Object of the company;
- Whether it is a private (Ltd) or public (PLC) company;
- Duration or term of the company;
- Shareholder details and their paid in capital;
- Amount of capital and any information about this (split, paid-in, preference shares etc.);
- Managers’ or Directors’ details.
The Partnership en Commandite accounts do not need to be audited, unless its capital is represented by shares, in which case auditors need to be appointed and its accounts organized in the same way as for a limited liability company.
The shareholders may simultaneously agree to the articles of association, governing the company’s internal workings of the company. The company can take any name that is accepted by the Companies’ Register and generally the Register will not object to any name as long as it is not being used by another company, is not easily confused with another company and is not offensive or undesirable in any way.
The company share capital must be deposited in a domestic bank account under the name of the company being formed, before registering it. Proof of deposit will be required at the time of registration.
If the company is a Public limited company (Plc), in addition to the memorandum of association, an additional document is required, which:
- gives an estimate of all the costs to be borne by the company until it is authorized to begin its activity, and
- describes any special advantage granted to anyone who has taken part in the formation of the company or in the process to gain authorization, before the company is authorized to begin its activity.
The registration certificate is issued within a few days after the papers have been submitted. The company can begin trading as soon as it is registered.
The Registration is subject to a fee which varies according to the share capital. If the share capital is later increased, fees will be levied on the difference.
Partnership En Nom Collectif
A partnership en nom collectif (referred to as a “partnership” in the following provisions of this Part) may be formed by two or more partners and operates under a partnership name and has its obligations guaranteed by the unlimited and joint and several liability of all the partners.
On formation or at any time thereafter, a partnership becomes subject to the provisions of the Companies Act and shall, within fourteen days, deliver to the Registrar for registration a notice specifying that it is subject to this article and that it shall comply with the provisions laid down in this article.
When a partnership ceases to be subject to the provisions of the Maltese Company Act, the partnership shall, within fourteen days of such cessation, deliver to the Registrar for registration a notice specifying that it is no longer subject to this article and that the provisions of this article shall not apply to such partnership as from the date that it has ceased to be so subject.
An agreement to pay a share of the profits of a partnership to a person in total or partial remuneration for his services shall not, of itself, make him a partner.
A partnership shall not be registered by a name which:
- is the same as the name of another commercial; partnership or so nearly similar as in the opinion of the Registrar it could create confusion; or
- is in the opinion of the Registrar offensive or otherwise undesirable; or
- has been reserved for registration for another commercial partnership by notice in writing to the Registrar given not more than three months before the date of the second request.
Provided that the Registrar shall notify any refusal under this sub article without delay to the person requesting the registration.
Unless specifically provided in the deed of partnership, things contributed to the partnership shall be deemed to have been transferred in full ownership: Provided that, where any of the partners has contributed his own services only, the contributions made by the other partners shall, unless specifically provided in the deed of partnership, be deemed to have been made in usufruct.
A partnership shall not be validly constituted unless a deed of partnership is entered into and signed and a certificate of registration is issued under this Act in respect thereof.
The partners draw up the Deed of Partnership. A partnership shall not be validly constituted unless such Deed is entered into and signed and a certificate of registration is issued. The Deed of
Partnership must state:
- the name and residence of each of the partners;
- the partnership’s name;
- the registered office of the partnership in Malta;
- the objects of the partnership, i.e. whether the objects are trade in general or a particular branch of trade, and in the latter case, the nature of the trade;
- the contribution of each of the partners, specifying the value of the respective contribution of every partner; and
- the period, if any, fixed for the duration of the partnership.
The deed of partnership shall be delivered for registration to the Registrar who shall register it.
On the registration of the deed of partnership the Registrar shall certify under his hand that the partnership is registered and the partnership shall come into existence and shall be authorized to commence business under the partnership name as from the date of the certificate: Provided that, if registration is obtained before the date fixed in the deed of partnership for the commencement of the partnership, the certificate shall indicate such date, and the partnership shall come into existence and shall be authorized to commence business as from such later date.
A certificate of registration given in respect of a partnership is conclusive evidence that the requirements of this Act in respect of registration and of matters precedent and incidental to it have been complied with and that the partnership is duly registered, under this Act.
The registration of a partnership by the Registrar under this article shall be without prejudice to any other license or other authorization as may be required in respect of the activities to be carried on by the partnership under any other law.
Unless and until a certificate of registration is issued under this Act in respect of a partnership or until the date indicated in a certificate of registration as the date on which a partnership shall come into existence:
- any two or more persons carrying on business under a name falsely implying the existence of a partnership shall have, as against one another and limitedly to property acquired from such business, such rights only as are by law conferred on joint owners;
- any obligation contracted in favour of third parties in good faith under a name falsely implying the existence of a partnership shall be jointly and severally binding on those persons, who, if a certificate of registration had been issued, would have been partners carrying on business under that name.
Statutory costs payable to the Maltese authorities
- Registration fees upon incorporation of a company are dependent on the amount of authorized share capital. The minimum charge is €245 on an authorized share capital of €1,500 increasing up to a maximum of €2,250.
- The annual company registration fee payable is also dependent on the amount of authorized share capital. The minimum fee is €100 increasing up to a maximum of €1,400.
International Business Company (IBC)
A Malta International Business Company (IBC) is governed by the Malta Companies Act of 1995. This is considered a business friendly law allowing IBC’s great autonomy to engage in business with little red tape. The Maltese Registry of Companies processes applications for IBC’s usually within two business days. Foreigners can own 100% of the corporate shares in an IBC.
Malta International Business Company (IBC) Name
- Maltese companies must select a company name not identical or similar to the names of other Malta companies. Company names can be in any language using the Latin alphabet.
- An IBC must use the words “International Business Company” or its initials “IBC” at the end of its company name.
- Typically, either a lawyer or the registered agent files an application with the Registrar of Companies to become an IBC. The Articles of Association along with a Memorandum are filed with the application. Upon approval, the Registrar provides a Certificate of Registration as proof of the IBC’s existence.
- The subscriber files the company’s Memorandum and Articles of Association with the Malta Registrar of Companies. The Registrar then issues a Certificate of Registration after approval.
Trade Restrictions: While there are no restrictions upon the types of trade an IBC may engage in, certain business activities may require a license such as insurance business, investment services, and other financial services.
- The minimum requirement is only one shareholder to form an IBC. Shareholders can be reside and be citizens of any country. Shareholders can also be individuals or corporate bodies.
- Different types of corporate shares can be issued including: registered shares, ordinary shares, redeemable shares, preference shares and shares with par value.
- However, bearer shares and shares of no par value are prohibited.
- Nominee shareholders are permitted for privacy of the beneficial owners.
- Only one director is required to form an IBC.
- Directors may be individuals or corporations.
- Directors do have to be local residents and can reside in any country.
- Nominee directors are permitted for privacy.
Company Secretary: IBC’s are required to have a company secretary. The secretary must be an individual who does not have to be a resident of Malta and can reside in anywhere.
Registered Office and Agent: IBC’s must maintain a registered office in Malta. In addition, they are required to appoint a licensed registered agent service provider.
Minimum Share Capital
- The minimum authorized share capital is 1,250 Euro.
- The minimum paid up capital is 250 Euro.
All shares must remain private and cannot be sold on the Malta public stock exchange.