Malta Company Formation Frequently asked questions (FAQs)

In 2007, Malta made the final revisions to its corporate tax system to remove the remnants of positive tax discrimination by extending the possibility to claim tax refunds to residents and non-residents alike.

Certain features such as the participation exemption which serve to make Malta a more attractive tax planning jurisdiction were also introduced at this stage.

Over the years Malta has modified and will continue to modify its tax laws to bring them in line with various EU directives and OECD initiatives thus offering an attractive, competitive, fully EU compliant tax system.

Read more: 

• Malta corporate tax
• Company register Malta
• Malta offshore bank account

Malta offers various forms of partnerships and limited liability companies:

• Public (plc);
• Private (Ltd). Partnerships
• en commandite the capital of which is divided into shares
• en commandite the capital of which is not divided into shares;
• en nom collectif

Read more:

• Malta company register
• Doing business in Malta

Capital Requirements

A private company must have a minimum issued share capital of €1,164.69. 20% of this amount must be paid up on incorporation. Any foreign convertible currency may be used to denominate this capital. The chosen currency will also be the company’s reporting currency and the currency in which tax is paid and any tax refund due is received, a factor which eliminates foreign exchange risks. Furthermore, Maltese company law provides for companies set up with a variable share capital.

Shareholders

Whilst companies are generally set up with more than one shareholder, there is the possibility to set up a company as a single member company. Various persons or entities may hold shares, including individuals, corporate entities, trusts and foundations. Alternatively, a trust companiy such as Chetcuti Cauchi's Claris Capital Limited, our trust company which has been authorised by the Malta Financial Services Authority to act as trustee or fiduciary, may hold shares for the benefit of the beneficiaries.

Objects

The objects of a private limited company are unlimited but must be specified in the Memorandum of Association. In case of a Private exempt limited company, a primary purpose must be stated as well.

Directors and Secretary in Malta company

With respect to directors and company secretary, private and public companies have different requirements. While private companies must have a minimum of one director, a public company must have a minimum of two. It is also possible for a director to be a body corporate. All companies are obliged to have a company secretary. A Malta company secretary must be an individual and there is a possibility for a director to act as a company secretary. In the case of private exempt company Malta, a sole director may also act as the company secretary.

While there are no legal requisites regarding the residence of directors or the company secretary, it is advisable to appoint Malta resident directors as this ensures that the company is managed effectively in Malta. Our professionals are able to act as or recommend officers for client companies under our administration.

Read more: Serviced offices Malta

Confidentiality

Under the Professional Secrecy Act, professional practitioners are bound by a high standard of confidentiality as established by the aforementioned act. These practitioners include advocates, notaries, accountants, auditors, trustees and officers of nominee companies and licensed nominees, amongst others. Section 257 of the Maltese Criminal Code stipulates that professionals who disclose professional secrets may be liable to a maximum fine of € 46,587.47 and/or a 2 year prison sentence.

Meetings

Malta companies are required to hold at least one general meeting every year, with not more than fifteen months elapsing between the date of one annual general meeting and that of the next. A company which holds its first annual general meeting is exempt from holding another general meeting in the year of its registration or in the following year.

Formation Procedure

To register a company, the memorandum and articles of association must be presented to the Registrar of Companies, along with the evidence that the paid up share capital of the company has been deposited in a bank account. Afterwards a certificate of registration will be issued.

Incorporation Time-Scale

Malta companies benefit from a relatively swift incorporation process which takes between 3 to 5 days once all information, receipt of due diligence documents and remittance of funds have been has been provided. For an additional fee, a company may be registered within just 24 hours.

Accounting & Accounting Year

Yearly audited financial statements need to be prepared in accordance with International Financial Reporting Standards (IFRSs). These statements must be filed with the Registry of Companies where they may be inspected by the public. Alternatively, Maltese law provides for a choice of financial year-end.

Read more: 

• Register a company in Malta
• Benefits of setting up a business in Malta

Companies registered in Malta are considered to be resident and domiciled in Malta, thus they are subject to tax on their worldwide income less permitted deductions at the corporate income tax rate which at present stands at 35%.

Imputation System

Maltese tax resident shareholders receive full credit for any tax paid by the company on profits distributed as dividends by a Maltese company, thus preventing the risk of double taxation on that income. In cases where the shareholder is liable to tax in Malta on dividend at a rate which is lower than the company rate of tax (which currently stands at 35%), excess imputation tax credits are refundable.

Tax Refunds

Upon receipt of a dividend, shareholders of a Malta company may claim a refund of all or part of the Malta tax paid at the level of the company on such income. In order to determine the amount of refund which one may claim, the type and source of the income received by the company must be considered. Shareholders of a company that have a branch in Malta and who are receiving dividends out of branch profits subject to tax in Malta qualify for the same Malta tax refunds as shareholders of a Malta company.

Maltese law stipulates that refunds are to be paid within 14 days from the day in which a refund becomes due, that is when a complete and correct tax return for the company and shareholders has been filed, the tax due has been fully paid and a complete and proper refund claim has been made.

Refunds may not be claimed in any case on tax suffered on income derived directly or indirectly, from immovable property.

Read more: Malta double taxation agreements

100% refund

A full refund of the tax paid by the company, resulting in an effective combined tax rate of zero may be claimed by shareholders in respect of:

• income or gains are derived from an investment which qualifies as a Participating Holding; or
• in the case of dividend income, where such Participating Holding falls within the safe harbours or satisfies the anti-abuse provisions.

The 5/7ths refund

There are two cases where a 5/7 refund is given:

• when the income received is passive interest or royalties; or
• in cases of income arising from a participating holding which does not fall within the safe harbours or satisfy the anti-abuse provisions.

The 2/3rds refund

Shareholders who claim double taxation relief in respect of any foreign income received by a Malta company are limited to a 2/3 refund of the Malta tax paid.

The 6/7ths refund

In cases of dividends which are paid to shareholders out of any other income which has not being previously mentioned, these shareholders become entitled to claim a refund of 6/7ths of the Malta tax paid by the company. Thus, shareholders will benefit from an effective rate of Malta tax of 5%.

Read more: 

• How to register a company in Malta?
• Malta company law

Malta companies may benefit from:

• Unilateral relief, including credit system for relief of underlying tax
• Double Tax Treaty Network
• Flat Rate Foreign Tax Credit system (FRFTC)

Unilateral Relief

The unilateral relief mechanism creates a virtual double tax treaty between Malta and a large number of countries around the world which provides for a tax credit in cases where foreign tax has been suffered irrespective of whether Malta has a double tax treaty with such jurisdiction or not. To benefit from unilateral relief, a taxpayer must provide evidence to the satisfaction of the Commissioner that:

• that the income arose overseas;
• that the income suffered foreign tax; and
• the amount of foreign tax suffered.

The foreign tax suffered will be compensated through in the form of credit against the tax chargeable in Malta on the gross chargeable income. The credit shall not exceed the total tax liability in Malta on the foreign sourced income.

OECD based Tax Treaty Network

To date, Malta has signed over 70 double tax treaties. Most treaties are based on the OECD model, including the treaties signed with other EU member states.

Also read: Accounting in Malta

EU Parent and Subsidiary Directive

As an EU member state, Malta has adopted the EU Parent-Subsidiary Directive which disposes of cross border transfer of dividends from subsidiary to parent companies within the EU.

Interest and Royalties Directive

The Interest and Royalties Directive exempts interest and royalty payments payable to a company in a member state from tax in the source member state.

Participating Exemption

Malta holding companies may be structured to hold shares in other companies and such participations in other companies qualify as participating holding. Holding Companies which meet either of the conditions mentioned below may benefit from this participating exemption based on participating holding rules both on dividends from such holdings and gains arising on the disposal of such holdings:

• a company holds directly a minimum of 5% of the equity shares of a company whose capital is completely or partly divided into shares, which holding confers an entitlement to at least 5% of any two of the following (“Equity holding rights”)
  • right to vote;
  • profits available for distribution; and
  • assets available for distribution on a winding up; or
• a company is an equity shareholder in a company, therefore it is entitled to call for and acquire the entire balance of the equity shares not held by that equity shareholder company to the extent permitted by the law of the country in which the equity shares are held; or
• a company is an equity shareholder in a company, therefore it is entitled to first refusal in the event of the proposed disposal, redemption, or cancellation of all the equity shares of that company not held by that equity shareholder company; or
• a company is an equity shareholder in a company and is entitled to either sit on the Board or appoint a person to sit on the Board of that company as a director; or
• a company is an equity shareholder which holds an investment representing a minimum total value of €1,164,000 or its equivalent in a foreign currency, as on the date or dates on which it was acquired, in a company and that holding in a company must be held for an interrupted period of a minimum of 183 days; or
• a company is an equity shareholder in a company and where the holding of such shares is for the furtherance of its own business and the holding is not held as trading stock for the purpose of trade.
  Equity shares deal with the holding of the share capital in a company which is not a property company and which entitles the shareholder to at least any two of the following three years: the right to vote, the right to profits available for distribution to shareholders and the right to assets available for distribution on a winding up of the company.

Participation exemption can also apply to holdings in other entities which could be a Maltese limited partnership, a non resident body of persons with similar characteristics, and even a collective investment vehicle where the liability of the investors is limited, as long as a holding satisfies the criteria for the exemption outlined below:

• it is resident or incorporated in the EU;
• it is subject to any foreign tax at a rate of at least 15%; or
• less than 50% of its income is derived from passive interest or royalties.

The above are the safe harbours set. In cases where the company in which the participating holding is held does not fall within one of the aforementioned safe harbours, the income which is derived therefore may nevertheless be exempt from tax in Malta if both the conditions below are satisfied:

• the equity shares held in the non-resident company must not represent a portfolio investment; and
• the non-resident company or its passive interest or royalties have been subject to tax at a rate which is not less than 5%

Flat Rate Foreign Tax Credit

Companies which are receiving overseas income may benefit from the FRTC, provided that they provide an auditor’s certificate stating that the income arose overseas. The FRFTC mechanism assumes a foreign tax suffered of 25%. A 35% tax is imposed on the company’s net income grossed up by 25% FRFTC, with the 25% credit being applied against the Malta tax due.

Read more: 

• Benefits of setting up a business in Malta
• Malta company register

• There are no withholding taxes on the distribution of dividends to shareholders;
• No taxes or restrictions on the distribution of the dividends from the Malta company;
• Tax is paid and refund is received in same currency of company’s share capital.
• No withholding taxes on interest and royalties to non-residents;
• No capital duties;
• No wealth taxes;

Read more:

• Why incorporate in Malta?
• Malta company tax

In certain cases specified at law, it is possible to request a formal ruling to provide certainty on the application of domestic tax law to a specific transaction.

Such rulings will be binding on the Inland Revenue for five years and survive a change in law for 2 years, and it is generally issued within 30 days of application. An informal system of Revenue feedback has been created through which a letter of guidance may be given.

Read more: 

• Malta corporate tax
• Malta company register

As a member of the European Union, Malta has implemented all the relevant EU directives that concern the subject of corporate taxation, including the EU Parent-Subsidiary Directive and the Interest and Royalties Directive.

This makes Malta’s corporate legal framework fully compliant with EU law and further harmonises the Maltese laws with the laws of all other member states.

Read more: 

• How to set up a company in Malta?
• Malta corporate tax

In force: Albania, Australia, Austria, Bahrain, Barbados, Belgium, Bulgaria, Canada, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Greece, Guernsey, Hong Kong, Hungary, Iceland, India, Ireland, Isle of Man, Israel, Italy, Jersey, Jordan, Korea, Kuwait, Latvia, Lebanon, Libya, Lichtenstein, Lithuania, Luxembourg, Malaysia, Mauritius, Mexico, Moldova, Montenegro, Morocco, Netherlands, Norway, Pakistan, Poland, Portugal, Qatar, Romania, San Marino, Russia, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Syria, Tunisia, Turkey, United Arab Emirates, United Kingdom, USA, Uruguay and Vietnam.

Treaties signed but not yet in force: Belgium, Ukraine, Curaçao

Tax Information Exchange Agreements in Force: Bahamas, Bermuda, Cayman Islands, Gibraltar, USA.

Tax Information Exchange Agreements – signed but not in force: Macao

Read more: 

• How to set up a company in Malta?
• Malta corporate tax

In Malta, logistics and courier companies serve unmistakablepartsinside the supply chain. Logistic companies give comprehensive supply chain arrangements, counting transportation, warehousing, stockadministration, and dispersion for large-scale operations. These companies handle complex logisticsystems and cater to businesses that require productiveadministration of merchandiseoverdifferent stages of the supply chain. Cases of coordination companies in Malta incorporate Medserv and Express Trailers.

On the other hand, courier companies specialize within thequick and secure conveyance of littlebundles and reports. Their essentialcenter is on last-mile conveyanceadministrations, catering to both people and businesses that requirefast shipment of things. Courier services are characterized by their speed, unwavering quality, and capacity to handle a tall volume of littleconveyances. Outstandingcourier companies in Malta incorporate DHL Express and MaltaPost.

The key distinction lies within the scope and center of their administrations: logistics companies overseebroad, large-scale operations includingnumerous supply chain forms, whereascourier companies concentrate on quick, last-mile conveyance of littlerbundles.

In Malta, tech companies are primarily concentrated in a few key areas. Notably, San Ġwann and Birkirkara are significant hubs for tech and IT services. San Ġwann hosts companies like River Tech, known for its B2B software and technology services, and Konnekt, an agency offering IT strategy consulting and accounting services. Birkirkara is home to J2 Group Malta, which provides unified communications and IT managed services.

Other notable locations include Sliema, where Trust Stamp operates, offering AI and cybersecurity services, and Attard, home to YOT LTD, which specializes in IT strategy consulting and managed services. Neural AI, focusing on data analytics and artificial intelligence, is based in Tal-Pietà.

These areas are significant tech hubs in Malta, providing a wide range of services from software development and IT consulting to AI and big data analytics, supporting both local and international clients in various sectors.

Additionally, Valletta has emerged as a growing tech hub, hosting various startups and established companies. Notable companies in Valletta include EBO.ai, which specializes in conversational AI and automation solutions, and ICON, a digital agency focusing on web development and digital marketing services. This diversification across different cities highlights Malta's expanding tech landscape, catering to diverse technological needs and innovations.

Yes, small businesses in Malta can get assess discounts beneath certain conditions:

1. VAT Discounts

• Nearby Businesses: VAT-registered businesses can claim discounts on the VAT paid on commerce buys on the off chance that their input charge surpasses yield assess. This requires intermittent VAT returns.
• Outside Businesses: Non-Maltese businesses causing VAT in Malta can moreover claim discounts beneath particular conditions.

2. Corporate Tax Refunds

• Assess Credits and Motivations: Different assess motivations and credits, such as those for R&D or speculation in innovation, can decrease assets liabilities and possibly result in discounts.
• Exchanging Companies: Shareholders of Maltese exchanging companies can claim discounts on portions of the corporate access paid when profits are disseminated, maintaining a strategic distance from twofold tax assessment.

3. Particular Plans

• Small scale Contribute Plot: Gives assess credits for ventures within the trade, which can diminish assess payable and lead to discounts in the event that credits surpass liabilities.

4. Necessities

• Recording and Compliance: Businesses must comply with recording necessities and keep up appropriate records to claim refunds.

For detailed guidance, counsel a charge proficient or allude to the Malta Inland Revenue Department website.

In Malta, real estate taxes are not part of the standard deduction. Not at all like in a few other wards, Malta does not force an yearly property assessment on real estate taxes are not part. Instep, charges are connected at particular focuses of property exchanges. For case, when offering a property, the vender as a rule pays an 8% assess on the property's esteem, in spite of the fact that this rate can be diminished beneath certain conditions, such as offering inside a particular period or exchanging the property to coordinate beneficiaries. Furthermore, rental salary from real estate taxes are not part is burdened at a level rate of 15%.

These real estate taxes are not part of the standard deduction system, meaning they must be itemized independently instead of being included in a standard deduction. The Maltese charge framework does give different exceptions and diminished rates beneath particular circumstances, such as for first-time homebuyers or property exchanges between spouses. Be that as it may, these don't constitute a portion of the standard deduction but are or maybe extraordinary contemplations inside the charge code. Hence, whereas real estate taxes are not part of a noteworthy viewpoint of property ownership and exchanges in Malta, they don't coordinate into the standard derivation preparation, requiring isolated dealing with and documentation.

In Malta, the terms "property assess" and "genuine bequest assess" by and large allude to the same concept. Be that as it may, Malta does not have an yearly property charge that's common in numerous other nations. Instep, there are particular charges related to genuine bequest exchanges and proprietorship. Here's a brief diagram:

I. Real Estate Taxes in Malta

1. Stamp Duty: Typically a charge paid when acquiring property. The standard rate is ordinarily 5% of the property's esteem, in spite of the fact that decreased rates may apply beneath certain conditions, such as for first-time buyers​​.
2. Capital Picks upAssess: This charge is appropriate when offering property on the off chance that it isn't the seller's essential home or in case it is sold inside a certain period after buy. The rate can shift, and particular exceptions might apply​​.

II. Absence of Annual Property Tax:

Malta does not force an yearly property assessment on the possession of genuine bequest. This contrasts with numerous other nations where property proprietors must pay a repeating assessment based on the surveyed esteem of their property.

Summary

Whereas both terms can allude to charges related to genuine bequest, in Malta, the center is on transaction-based charges such as stamp obligation and capital picks up access, instead of an yearly property charge. For detailed and upgraded data, counseling with a charge proficient or the Malta Inland Income Division is fitting.

Beginning a commerce in Malta can be encouraged through a few monetary teach and bolster programs that offer business loans and subsidizing particularly for new companies. Here are a few key alternatives:

1. HSBC Malta: HSBC offers unsecured business loans ranging from €2,000 to €30,000 with settled intrigued rates beginning from 6% per annum. The credit can be utilized for different trade needs, counting obtaining gear or restoring commerce premises. Credit reimbursements can be spread over a period of up to 7 a long time. You'll apply for these credits through the HSBC Combination service​​.
2. Bank of Valletta (BOV): BOV gives various business loan options tailored to back new businesses. These include both secured and unsecured credits with adaptable reimbursement terms. BOV could be a noticeable bank in Malta advertising broad budgetary items to bolster commerce development and development​.
3. Malta Endeavor: The Trade Begin conspired by Malta Enterprise offers seed financing and development financing for little new companies. Beginning gifts can go up to €10,000 to assist create a trade proposition and conduct a feasibility study. Extra bolster connected to full-time business can reach up to €25,000 per quarter, with a maximum of €200,000 accessible for qualified startups​​.

These alternatives give a run of money related back instruments to assist startup businesses in Malta secure the vital stores to develop and succeed. For nitty gritty data and to apply, it is fitting to contact the individual budgetary education or visit their official websites.

In Malta, a non-dentist can possess the physical resources and premises of a dental home, but there are particular confinements with respect to the genuine dental home and clinical operations.

Possession and Confinements

1. Possession of Resources: A non-dentist can possess or rent the premises and physical resources of a dental practice. They can act as a proprietor to a dental specialist who works the dental practice inside these premises.
2. Control and Benefit: As it were an authorized dental specialist can possess and control the clinical angles of a dental practice. This incorporates having guardianship and control of dental records and the goodwill parcel of the home. Non-dentists cannot benefit straightforwardly from the home of dentistry. The dental practitioner must have supervisory control over clinical operations to guarantee compliance with wellbeing controls.
3. Lawful and Administrative Compliance: A dental practitioner cannot lock in expense or salary sharing with a non-dentist, but in particular scenarios such as utilizing dental hygienists. The home must comply with the administrative necessities set forward by the important wellbeing specialists.

Commonsense Courses of action

• Renting and Leasing: A non-dentist can rent completely prepared and staffed offices to a dental specialist, but the dental practitioner must keep up control over the clinical operations. The lease can incorporate the utilization of offices, gear, and staff administrations, but cannot be based on a rate of dental expenses collected.
• Organizations: Non-dentists can enter into commerce associations with dental practitioners with respect to the possession or renting of the premises and physical resources but cannot take an interest within the clinical perspectives or benefits from dental administrations.

Conclusion

Whereas non-dentists can possess the premises and non-clinical resources of a dental practice in Malta, as it were authorized dental practitioners can control and benefit from the clinical operations. This administrative system guarantees that dental administrations are given by qualified experts whereas permitting for speculation and commerce openings for non-dentists.

For more point by point data and particular legitimate counsel, counseling with a lawful proficient or the Wellbeing Control Division Malta is prescribed.

Contributing to a guest house in Malta can be a great opportunity, but it comes with a few contemplations that ought to be evaluated.

1. Tourism Request: Malta may be a well known visitor goal with a consistent convergence of guests year-round, which can give a steady inhabitants rate for guest houses. Regions like Valletta, Sliema, and St. Julian's are especially looked for due to their blend of authentic centrality, urban conveniences, and oceanside charm.
2. Property Costs and Costs: The toll of property in Malta shifts altogether based on area, sort, and condition of the property. For instance, a guest house in a prime area like St. Julian's can be very costly, frequently running into millions of euros. Be that as it may, properties in less central zones or those requiring redesign can be more reasonable but require extra speculation.
3. Lawful and AssessContemplations: Contributing in genuine bequest in Malta includes different charges and expenses. These incorporate stamp obligation (ordinarily 5% of the buy cost), legal official expenses (1-2%), and yearly property charges. Rental wage is saddled at a level rate of 15%, which can be advantageous for keeping up profitability.
4. Administration and Operations: Compelling property administration is significant for maximizing rental yields. This incorporates keeping up the property, managing bookings, and guaranteeing compliance with nearby directions. Numerous investors opt for proficient property administration administrations, particularly on the off chance that they don't dwell in Malta.
5. AdvertisePatterns and Openings: Compelling property administration is significant for maximizing rental yields. This incorporates keeping up the property, managing bookings, and guaranteeing compliance with nearby directions. Numerous investors opt for proficient property administration administrations, particularly on the off chance that they don't dwell in Malta.

In outline, a guest house can be a great venture in Malta, especially in high-demand traveler regions. In any case, it is fundamental to conduct an exhaustive investigation, get the monetary and lawful suggestions, and consider proficient administration to optimize the investment.

Yes, you can get a business loan to open a franchise in Malta. Here are some key points to consider:

1. Types of Loans Available: Maltese banks, such as HSBC, offer business loans that can be used for various purposes, including purchasing or upgrading business premises, buying equipment, or funding business expansion. These loans typically come with fixed interest rates and flexible repayment terms ranging from six months to seven years.
2. Eligibility Requirements: To qualify for a business loan in Malta, your business should be registered in Malta and you must be paying income or corporate tax in Malta. You will also need to provide documentation such as identity proof, income evidence, and financial statements for the past two years.
3. Startup Costs: Starting a business in Malta involves several costs, including fees for business name reservation, company registration, and licensing. The overall startup costs can be relatively low compared to other countries, making Malta an attractive destination for new businesses.
4. Loan Application Process: Applying for a business loan generally involves submitting a detailed application, including a business plan, personal and business financial statements, and sometimes, proof of a signed franchise agreement. Different lenders may have specific requirements, so it’s important to check with the bank or financial institution you plan to apply to.
5. Alternative Financing Options: Besides traditional bank loans, you can explore other financing options such as microloans, online business loans, or government-backed loans. These alternatives might offer easier qualification criteria and faster approval times compared to traditional bank loans.

By carefully evaluating these options and ensuring you meet the necessary requirements, you can secure financing to open a franchise in Malta and start your business venture.