Company Formation in Malta
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Company Formation in Malta
Introduction Business In Malta
The Republic of Malta is a small island consisting of an archipelago in the middle of the Mediterranean Sea of which only the three largest islands Malta (Malta), Gozo (Ghawdex) and Comino (Kemmuna) are inhabited. The strategically located islands constituting the Maltese nation have been ruled by various powers and fought over for centuries, and they have a deeply rooted history dating back to neolithic times.
Malta ’s strategic geographical location played a decisive role in its history and continues to play a very important part in its economic, political and cultural development and prosperity today. Having implemented a sound legislative framework over the past decade, Malta’s accession as a member of the European Union has stimulated significant developments in the islands’ economy, brought about principally by a boost of inward direct investment into the country. With its highly educated workforce and the comparatively lower cost of professional services when compared with other EU centres, Malta has become firmly established as a reputable business and financial centre offering attractive business solutions for individuals and international corporations alike.
Company law in Malta, based upon the UK’s Companies’ Act, is a complete, established set of regulations – providing further assurance to the international business community.
Malta’s favourable tax regime results in an effective tax rate of only 0 - 5%, while enjoying all the benefits of being a full member of the EU and a solid reputation as an onshore, regulated jurisdiction.
Added to which, with Malta’s full imputation and refund system, shareholder’s dividends are taxed at 0%.
Limited Company; Trading or Holding
A Malta Holding Company is a company resident in Malta formed with the object of holding shares in other companies as well as any other asset including real estate, cash, movable valuables, shares and securities, and intellectual property whether in or outside Malta. Malta holding companies can be used to distribute income generated by such assets in a tax-efficient manner to shareholders.
Malta does not operate a specific holding company regime. Accordingly, a Maltese Holding’ Company is a regular company having, as its sole object, the acquisition of participations in other companies. Still, the benefits typically available under such regimes are equally available to Maltese companies in respect of their holding activities.
Malta holding companies can be set up in order to hold shares and securities and business assets in any form such as real estate, fixed assets, aircraft, investments, bank accounts and intellectual property as well as personal assets including any luxury items such as yachts, residential property, works of art. Although there is no specific holding company regime, the domestic tax treatment afforded to the different types of income received by such companies as well as the participation exemption regime introduced in 2007 make the setting up of Malta holding companies a very attractive option and an excellent conduit to and from the EU.
The company limited (Ltd) by shares is by far the most popular, tax efficient and flexible type of corporate organisation, not only in Malta but internationally. As in other jurisdictions, any liability of the shareholders is limited to the value of their shares, providing comfort to such shareholders not matter what business venture that may be pursued.
Benefits of a Malta Ltd Company
Generous tax rebates & investment schemes offered by Malta Government and EU
No withholding tax on company dividend, interest orroyalties
Share capital in any currency
Transfer of shares normally tax exempt for non residents if Malta company owns no immovable property in Malta
No restriction of ownership or transfer of immovable property outside of Malta
Low VAT rate & simplified VAT registration
Licensed operations, such as financial & investment services, can offer their services in other EU states
Re-domiciliation both in and out of Malta allowed
Indefinite carry forward of trading losses
No transfer pricing rules
No thin capitalisation rules
A one person Malta company is allowed, along with a Company Secretary who must be a natural person
Low Regulatory Fees
The one – off fee payable to the Registrar of Companies upon incorporation is € 245.
The minimum authorised share capital that must be subscribed is €1,200 of which at least 20% must be paid up, so that €240 need be deposited into a bank account.
For companies subscribed to the minimum share capital, the Annual Return, which must be submitted each year detailing any changes to the companies’ capital structure, shareholders or officials is only €100.
Malta as a Tax Base
A Malta company may consist of only one director and a company secretary. However, there are beneficial tax reasons why a company should wish to have a Malta resident Director and be recognised as having Malta as a tax base.
- A company resident in Malta, by being incorporated in Malta is taxed on a worldwide basis
- Non – Malta domiciled companies resident in Malta, due to it being effectively controlled and managed in Malta – via evidence of Malta resident Directors, its management or Director meetings occurring in Malta or having operations in Malta are only taxed on:
- · income arising in Malta and
- · income arising outside of Malta but received in Malta
- Non – Malta domiciled companies resident in Malta may apply for relief subject to the conditions of the appropriate double taxation treaty
- Non Malta resident shareholders can also benefit from the appropriate tax refunds
Opening Bank Accounts
Now part of the EU, Malta located banks abide by not only the Malta Banking Act, but also various EU banking laws, added to which Malta banks are known for their efficiency and robustness; providing you with added assurance as to their security and financial strength.
An ‘in formation’ account, located in Malta, is a necessity when incorporating a Malta company. Although there is no requirement for you to have an ongoing Malta located bank account – both Malta companies and non resident individuals may open multiple bank accounts, in any currency, in Malta.
There are many types of banks and accounts available in Malta; ranging from commercial ‘high street banks’ to specialist trade and finance banks – the majority of which offer online, as well as credit and debit cards.
Malta’s tax system exempts the payment of interest on money held in an account by a non – resident.
Other Malta Entities
Just as in the UK, you can trade directly – without setting up a limited company – as a sole proprietor; however just as in the UK, you do not benefit from limited liability.
Partnerships may be registered as one of either two types of formal entities - namely general partnerships (also referred to as a Partnership En Nom Collectif) and limited partnerships (also referred to as a Partnership En Commandite).
The fundamental characteristic of a general partnership is that the liability of the partners is unlimited, and partners are jointly and severally liable for every obligation which the partnership incurs.
In a limited partnership, the partnership has its obligations guaranteed by the unlimited, joint and several liability of one or more partners, called general partners, and by the liability, limited to the amount, if any, unpaid, of one or more partners called limited partners.
Both the Partnership En Nom Collectif and Partnership En Commandite, for tax purposes are treated the same as companies.
Joint ventures may be formed under the regular rules of association of participation. This is created through the assigning of one person, by another, a share of the profits and losses.
The aim of a temporary partnership is to work synergistically, to help the specific stages of corporate activity of the partners, or to better and develop their mutual activities.
By choosing to incorporate an offshore company, business owners and investors can set-up a business outside the jurisdiction of its operations. Offshore companies are traditionally, but not exclusively, incorporated for lower fees and taxes. Business owners must abide the regulations of the offshore jurisdiction, and must not trade within the jurisdiction.
- The benefits are vast. As aforesaid, reduced tax and fees are often big factors when considering offshore incorporation. A company may also choose and offshore location to:
- Simplify set-up and maintenance - entrepreneurs may find bureaucracy and red tape less of an obstacle in offshore jurisdictions
- Assume anonymity - the names of owners and directors are not for public record, and references to the company may only be made in its registered agent
- Ensure legal protection - for instance, some jurisdictions favour corporate governance, meaning a company is only liable to offshore laws as opposed to those in its areas of operation
- Protect assets - business owners may opt to arrange their assets and transactions in such way that protects them from liability
Characteristics of an offshore company:
- Memorandum and Articles of Association
- Certificate of Incorporation
- Registered Office/Agent
- Shareholders / Members
- Directors / Managers
- Company secretary
- Statutory Register
Traditional locations for offshore incorporation are tax havens, such as the British Virgin Islands, Panama and Monaco. Other favoured areas include India, the Bahamas, Dubai, the Cayman Islands, Cyprus, Seychelles, Marshall islands, Delaware, Turks & Caicos Islands, Hong Kong, Jersey, Guernsey and the Isle of Man.
A Memorandum of Association must be completed with the following:
- Company name
- Companys registered office in Malta
- Companys aims and objectives
- Description and particulars of shareholders
- Share capital particulars
- Information on the company secretary
Organisations that can assist with Company Formation
Sovereign offers a range of advisory and support services to assist companies of all sizes to establish successful business operations in foreign markets.
Papilio Services Limited is a leading independent Maltese service provider with a focus on corporate, residence and tax advisory services to private clients and businesses worldwide. We provide holistic tailor made solutions for persons or businesses wishing to set up business in Malta.