Malta Company Setup

The Malta LTD Company Setup

By far this is the most common Malta company setup for anyone thinking of expanding their business internationally or to set up their first company in Malta. Our services include all of the following -

  • Company set up in Malta
  • Tax redomiciliation
  • Malta bank account
  • VAT registration
  • Registration with the International Tax Unit

Why Malta?

Malta is the smallest country in Europe and has formed part of the European Union since 2004. It is a small island off the coast of Sicily and our main and only currency is the Euro. Many airlines operate to and from Malta linking us with the main Airports throughout Europe.

As a small island with lack of natural resources, the financial services have been the backbone of our economy for a long time. During the 1990s, our taxation system experienced an overhaul with the aim of attracting foreign investors and companies to Malta by offering advantageous tax rates. All companies in Malta are subject to 35% corporate tax. However, foreign companies can avail themselves of the tax refunds which result in foreign companies paying tax as low as 5%.

Shareholders and Directors

Unlike many other countries, the shareholders and directors of a Maltese registered company need not be Maltese residents, and, can be residents in any other country. In addition, Maltese companies can also have only 1 director and only 1 shareholder. 

The directors of a Maltese company can also be body corporates, such as private limited company.

Share Capital

The minimum share capital required to incorporate a company in Malta is Eur1,165 which can be divided into 1,165 ordinary shares of Eur1 each. Furthermore, it is up to the shareholders to decide if they want to pay the share capital in full or in part. 

A good portion of the companies registered in Malta have a share capital which is 20% paid up, meaning that the initial share capital contribution would amount to only Eur233.

Registration Fees

Company incorporation registration fees in Malta are relatively low when compared to other jurisdictions. The fees charged by the Malta Financial Services Authority start from as low as Eur245.

For a full list of the fees chargeable by the MFSA as regulated by subsidiary legislation, kindly click here.

Where do I get started?

The first step for you to start benefiting from the Maltese tax refund is to open a company in Malta. Few restrictions exists on the share capital requirements. Many Maltese companies opt to have a minimum share capital of Eur1,165 divided into 1,165 ordinary shares of Eur1 each which are paid up 20%, meaning that the share capital investment would amount to just Eur233.

The first steps taken at Borg Galea is to understand the business you would like to operate from Malta in order to advise you on the most suitable structure. We are committed in opening new companies in as little as 24 hours following the green light from our due dillegence checks.

After having the company incorporated, we keep providing you with additional services which include: -

  • Registering the company for a VAT number;
  • Assist with Bank account openings with the most reputable banks in the island;
  • Help your firm locate office space;
  • Assist with staff recruitment;
  • Continously advise on taxation matters;
  • Provide you with payroll services;
  • and, ongoing corporate and accounting services.

Additionally, we are also licensed to provide statutory audit services.

Ongoing Reporting Requirements

Reporting requirements vary based on the services the company opted to register for. The bare minimum requirements are as follows: -

  • Annual statutory audit of the financial statements
  • Yearly decleration in the form of an annual return to confirm changes in the company structure, shareholding and involved parties
  • Annual taxation return to determine the tax due
  • Tax refund forms if the shareholders are eligible for a taxation refund.

Additional reporting requirements depend if the company employees personnel and if it is registered for VAT purposes.

How does the tax refund system works?

Taxation in Malta is complex. However, one has to keep in mind that specific taxation laws have been enacted with the main purpose of attracting foreign investors to Malta, which is why so many companies from around the world decide to open their business on our islands.

As previously mentioned, the general rule for corporate tax rate in Malta is at a flat rate of 35%. All expenses incurred in relation to the economical activity of the firm, are deductable as an expense, with few exeptions. Few expenses are disallowed for taxation purposes. Hence, these do not impact the tax computation in general.

Malta embraces the full imputation taxation system. This means that the income is only taxed once and is not taxed again when passed on in the hands of the shareholders.

Let's consider the below example.

A Holding company (Company H) owns 100% of the sharecapital of an Operating company (Company O) in Malta and the 6/7ths tax refund mechanism is applicable.

Company O registers a profit before tax of Eur100,000. 35% Corporate tax must be paid by Company O, which means that Eur65,000 are available for distribution by way of dividend.

Company O distributes gross dividends of Eur100,000, which in actual terms represent a net dividend of Eur65,000.

Once the dividend is received by the Holding company, Company H, this dividend is exempt from taxation as it was already subject to tax at the level of the operating company.

In addition, once a tax refund form has been submitted by the Holding Company for the 6/7ths refund portion of the taxes paid by the Operating Company, the Holding company is entitled to receive Eur30,000 from the Maltese government as a refund of the taxes already paid. Moreover, the refund is also exempt from additional taxation.

This is the most common refund available and implies that the effective tax rate is just 5%.

Other refunds exist which can take the form of 5/7, 2/3, etc...of the taxes paid. However, these type of refunds are uncommon and companies only opt for them if the economic activity of the operating company is not eligible for the 6/7ths refund.

Double Taxation Treaties

In addition, Malta has a number of unilateral agreements with various other countries, even outside of the European Union. These agreements safeguard companies operating in Malta from paying double taxation on the same income.

If a company in Malta suffered taxation on its profits outside of Malta in a country that has a taxation agreement with Malta, the Maltese company only pays additional taxes, if any, on the amount that would have been taxed in Malta.

If for example the Maltese company sufferred 10% taxes on its profits in country X (outside of Malta), and Malta has a unilateral agreement with Country X, the Maltese company does not pay 35% on the profits received in Malta but pays only 25% (35% - 10%).

Lastly, the Maltese company can apply for a refund computed on the portion of taxes which have been paid in Malta.

All of the above examples have been drafted in a simple manner for illustration purposes only. Various factors need to be taken into consideration while computing taxation.

How does the VAT work?

The general VAT rates to be charged by Maltese operating companies stand at 18%. Other lower rates are also possible depending on the economic activity of the company.

Certain industries such as the gaming industry, can also operate without charging VAT, if they satisfy certain number of criterias as prescribed in the VAT Act of the laws of Malta.

Three distinctive Articles (A10, A11 & A12) in the VAT Act, determine if the company should be registered or not for VAT. The Maltese VAT Act, allows a great number of companies to deduct the VAT it incurred on its economic activity and reduces the cost of the expenses incurred.

Furthermore, Maltese companies registered for VAT purposes under Articles 10 & 12 can apply for the Reverse Charge Mechanism when doing intra community trade. Hence, if a Maltese company purchases goods from another member state of the European Union, it neither pays VAT outside of Malta nor in Malta.

Lastly, companies registered under Articles 10 are allowed to deduct the input VAT incurred and end up paying less output VAT.

Gaming Companies

Gaming companies registered in Malta for VAT purposes under Article 12, do not charge VAT on their services if they satisfy the criterias set forth by a number of subsidiary legislations. However, they are not allowed to deduct the input VAT on all of their expenses but must pay VAT on items which are not directly related to the gaming transactions per se.

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