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Malta – a bird’s eye view

The island of Malta, located in the heart of the Mediterranean, at the junction between the European and the African continent, is a mere 2-hour flight away from most popular European cities. Maltese and English are the official languages, the former having a Semitic origin but exhibiting the linguistic influences of Malta’s numerous European colonisers throughout history. However, it is English that is used for day to day business in Malta, as well as official documentation and regulations.

Malta is a full member of the European Union and the Eurozone, thus enhancing the country’s appeal for trade due to joint monetary policies. In 2007, Malta also became part of the Schengen Area, allowing citizens to travel freely within the Area to 26 different countries. Families are attracted into relocating to Malta since it is ranked as one of the safest locations in the world. Malta’s stable political climate and economic stability during times of Europe-wide financial turmoil are also pull factors.

Furthermore, Malta also vaunts an internationally credited education system constituted of both public and private schools. Malta is home to its very own University of Malta, as well as different international universities; Bart’s and the London School of Medicine and Dentistry, and the American University of Malta. Malta’s educational success will not stop here – the sector is expected to continue growing and evolving. As regards health care, it is available freely to Maltese citizens and has been ranked amongst the Top 5 medical systems worldwide by a World Health Organisation Report.

Doing Business in Malta

Business in Malta is performed through numerous structures, usually via:

  • limited liability companies (both public and private),
  • partnerships (en commandite and en nom collectif),
  • sole proprietorships,
  • cooperatives,
  • trusts,
  • branches of foreign companies,
  • investment companies with varied share capital (SICAV), or
  • protected cell or incorporated cell companies

The most common means through which business is conducted in Malta is through the limited liability company, while partnerships are more common in professional services. SICAVs are generally used for funding, and the insurance sector sees an abundance of protected cell companies. Moreover, Malta offers numerous tax benefits for non-residents looking to set up a Maltese company.

How does one set up a company in Malta?

A pull factor for business individuals towards setting up a company in Malta, is the ease with which one may be set up or incorporated. The company finalisation process takes as little as 24-48 hours from the receipt of the relevant documentation which is to be compliant with Maltese law. The main document which needs to be presented in this straightforward process is a Memorandum of Association to which all shareholders must subscribe. The Memorandum must include the following:

  • Company name
  • Address and official identification of the subscribers
  • The nature of the company – if it is a public (Plc) or private (Ltd) company
  • The registered office of the company in Malta
  • The object and purpose of the company to be incorporated
  • Details of the authorised shared capital
  • Judicial and legal representation of the company
  • Details on the number of directors and secretaries

A certificate of incorporation is issued once the Registrar receives the Memorandum as well as evidence that 20% of the minimum required share capital has been deposited in a bank account.

Company Taxation – Malta: a tax-efficient jurisdiction

Any company which is registered in Malta is automatically considered to be resident and domiciled in Malta. Therefore, its income is subject to the worldwide basis rate of taxation at the rate of 35%. Despite this, the Maltese corporate tax system has in place what is known as the “Imputation System” which means that Maltese tax resident shareholders receive full credit for any tax paid by the company on profits distributed as dividends by a Maltese company. This is done to prevent the risk of double taxation on that income.

What does this mean? This means that upon receiving a dividend, shareholders of a Malta company are eligible to claim a refund of all or part of the tax paid at company level on this income. The refundable amount of tax paid is determined by considering the type and source of the income received by the company. The refunded amount ranges from a 100% refund, a refund of 5/7ths, 2/3rds, and 6/7ths.

In addition to this, Malta also has in place an effective system for the relief from the double taxation of companies. The prevention of double taxation is achieved in 2 possible ways:

  • Double Tax Treaty Network – presently, Malta has signed more than 70 double tax treaties. These are bilateral treaties through which Malta has reached an agreement with each jurisdiction on the relief from double taxation. Most of these treaties are based on the OECD model.
  • Unilateral relief – this mechanism is in place for when no double tax treaty exists. It works as a virtual double tax treaty between Malta and the rest of the world and provides for when foreign tax has been suffered.

Why should you set up a company in Malta?

In order to be able to set up a company in Malta the relevant process is very straightforward, with no licences or permits being required except in sectors such as gaming, pharma, financial industry, insurance, and medical field.

What are the benefits?

  • Cost-efficient set up and operations – 20 to 30% lower than in other European business hubs
  • Incorporation in 24-48 hours
  • English speaking, highly professional workforce
  • Business incentives by Malta Enterprise (including tax credits, soft loans and training grants)
  • Effective corporate tax rates and extensive double taxation treaty network
  • EU passporting rights for banks and financial services companies

Opportunities and Future Prospects

  • Property market

Malta has been able to maintain economic growth through major international financial crises and has continued to be prominently present on the radar of investors interested in the European property market. Malta’s favourable tax structure has evidently contributed towards the maintenance of a stable economy and thus a resilient property market. The simultaneous growth in property and rental prices, and a substantial growth in disposable income, can explain the current and rising demand for property in Malta. Furthermore, the rise of foreign workers and more limitedly, the Individual Investor Programme, have also contributed to this demand for property.

  • Brexit

With the UK preparing to leave the European Union, various businesses which currently benefit from the EU market and harmonisation, are looking at ways in which they may retain passporting rights within the EU. A Malta company, upon being set up, it automatically regarded as being domiciled in Malta and from this it follows that it is granted passporting rights (apart from benefitting from Malta’s efficient tax regime). Therefore, Malta is seen as an ideal destination amongst such UK businesses.

  • What is next for Fintech and Blockchain?

Fintech, an ever-evolving element in the financial services sector, can be seen as developing hand-in-hand with Blockchain technology. In this regard, Malta is making substantial steps forward and is taking the role of a pioneer with the creation of a Blockchain Committee (under the authority of the Malta Stock Exchange) of which purpose is to regulate and legislate on this fast-growing sector of the Fintech industry.

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