Malta is preferable for foreign companies to establish their business due to diverse tax incentives, substantial economic growth, and a steady political environment. The World Economic Forum’s 2019 Global Competitiveness Report ranked the country 38th out of 190 economies globally, suggesting it is a decent driver of economic growth.
Establishing a Malta subsidiary helps companies create their presence in the country and gain the maximum advantages of their growing economy. It is among the most accessible and affordable approaches to entering Malta. Moreover, it requires relatively less paperwork and compliance.
The following guide discusses all the essential information you must know before setting up a subsidiary in Malta.
What are the Types of Subsidiaries in Malta?
The section below discusses details of subsidiary types you must know before setting up a subsidiary system in Malta.
i. Private limited liability company:
-To establish a private limited liability company in Malta, a minimum of EUR 1,200 of share capital and a minimum of one shareholder are required.
-It can have up to 50 members.
-It may be unable to list its shares on the Maltese Stock Exchange.
-If the private company’s share capital surpasses the minimum amount required, the founders will only have to deposit 20% of the amount during registration with the Maltese Commercial Register.
ii. Public limited liability company:
-For establishing a public limited liability company in Malta, a minimum of EUR 47,000 share capital is required. 25% of this must be paid during incorporation.
-It can have up to 50 shareholders.
-It can list its shares on the Maltese Stock Exchange.
iii. General partnerships:
-General partnerships in Malta are accountable for the company’s obligations and debts.
-It has one or multiple partners sharing the company’s debts and obligations with all their assets.
-The involved partners should sign a deed of partnership.
iv. Limited partnerships:
-This subsidiary is formed by two types of partners, i.e., a general and a silent partner.
-The general partners are responsible for the company’s management and all assets to the business’s liabilities. They are fully responsible for the company’s debts and obligations.
-The silent partners are responsible only for the amount of their contributions to the company.
-The involved partners should sign a deed of partnership.
v. Joint-stock companies:
-To establish a joint-stock company, at least two shareholders, individuals, or companies are required.
-According to Maltese Commercial Law, it can have a secretary and two directors.
-The minimum share capital of EUR 47,000 must be deposited in a local bank.
-It can be established only after acquiring the necessary licenses and preparing the Articles of Association and Memorandum.
How to Set Up a Subsidiary in Malta?
The following steps shall help you to establish a subsidiary company in Malta:
Step 1: Select a company name
-Companies should start the registration process by deciding the company name.
-The company should prepare multiple names if the first proposed name is inaccessible for registration.
-The company name should not be identical or resemble the existing registered ones in Malta Business Registry.
Step 2: Prepare the necessary documents
-The foreign company should equip its local authorized agent with Powers of Attorney (POA) to register the subsidiary.
-Prepare the memorandum and articles of association. The articles of association should include the following details:
-Subsidiary’s name and address
-Name of the beneficiaries and shareholders
-Shareholders’ contribution to the capital
-Details about the shares and their relevant rights
Step 3: Appoint directors and deposit capital
-Appoint at minimum one director and one shareholder for the subsidiary. They can be individuals or companies.
-Usually, a subsidiary in Malta should be registered within ten days.
-Prepare for a bank account and a lease, pay the initial capital, file for registration, and sign the corporate documents.
Step 4: Register for VAT
-File a VAT registration by submitting Articles 10, 11, and 12 of the Malta VAT Act to the Office of the Commissioner of Revenue in Malta.
-The VAT registration is optional for businesses with turnover in the range of €7,001 – €35,000.
Step 5: Company registration
-Register with the Malta Business Registry. The required details are Annual Financial Statements, Annual Return, and Annual Confirmation BO Form. The registration process takes 1-2 weeks.
Step 6: Business bank account
-Open a bank account for your subsidiary in Malta.
-Based on your subsidiary type, deposit the minimum share capital in the bank account.
Step 7: Register for TIN
-Register with the Maltese Tax Authorities to get a Tax Identification Number (TIN) to fulfill mandatory annual tax returns.
-The Commissioner for Revenue Office will provide a tax registration number.
Step 8: License and permits
-Get a trade license and permits from the Trade Licensing Directorate.
Step 9: Conduct general meetings
-Conduct general meetings of the shareholders or the supervisory board to establish a board of directors.
Benefits of Setting Up a Malta Subsidiary
The outstanding benefits of setting up a subsidiary company in Malta are discussed below.
The Maltese subsidiary provides more flexibility in terms of business structure. Subsidiaries in Malta can benefit from different tax deductions compared to that with a branch office.
Competitive tax regime:
Malta provides a competitive tax system, including 35% of the corporate tax rate. Other tax incentives are available for companies that operate in a specific sector, like gaming and finance. The Maltese Government provides several tax incentives apart from double tax treaties with many countries.
EU and OECD compliance
Malta is fully compliant with the EU (European Union) and OECD (Organization for Economic Co-operation and Development) standards set on Anti-Money Laundering and Combating the Funding of Terrorism (“AML/CFT”) legislation. This compliance offers additional legal security for investors and can help improve a business’s esteem.
Intellectual property protection
Malta provides robust intellectual property protection as it has a standard legal framework for patents, copyrights, and trademarks. It can be advantageous for companies operating in technology and innovative businesses.
Easy access to the European Union
Malta is an EU member and therefore, it provides easy access to a huge and diversified market, and different legal and economic benefits.
The subsidiaries in Malta benefit from a flexible labor market, a streamlined registration process, and an extraordinary level of English proficiency.
Affordable incorporation and maintenance charges:
The minimum share capital to establish a subsidiary in Malta is €1.165. 20% of this amount must be paid up and €245 must be deposited. Moreover, the registry fees are low, so Malta is a very attractive destination to conduct business.
Double taxation treaties:
Malta has contracted more than 70 Double Taxation Treaties. So, when you establish a subsidiary, you don’t have to pay tax twice on the same income
Malta is a member state of the Schengen Area. Hence, there are no travel restrictions between Malta and other countries that fall into the zone.
Documents to Prepare When Opening a Subsidiary in Malta
Companies must prepare the following documents when applying for subsidiary incorporation:
- Memorandum and Articles of Association
- Certificate of incorporation demonstrating that the subsidiary is legally incorporated in Malta
- The company name’s consultation certificate
- Certificate of Registration
- Early declaration of activity
- Identification documents (ID card or passport) of the shareholders, directors, company secretary, and legal and judicial representative.
- An official request for Business License Registration
- A reference letter from a bank stating that the shareholders, directors, and company secretary have an account with the bank
- Bank certificate for proof of deposit of capital
- Evidence of paid-up share capital must be generated and submitted in the format of bank deposit advice.
- Proof of residence for the company partners/administrator
- Tax Identification Number (TIN)
- Evidence of enrollment in Social Security
- Information about the amount of capital
- Complete identification of the subscribers (whether individuals or corporate body)
- A statement stipulating that the partners are not banned by law or by opinion from establishing a company
- Form BO1 (a supplementary document that must be submitted if you want to register as a new company and its shareholder(s) works as a corporate entity)
Note: The Registrar may request you submit a few more supporting documents.
What Business Forms can Malta Subsidiaries Take?
Subsidiaries in Malta can adopt one of the below standard subsidiary forms:
- Limited liability Companies (Public or Private)
- Partnerships (General or Limited)
The company can determine the most appropriate subsidiary form based on its requirements and business plan.
Malta Subsidiary Laws
Companies planning to establish a subsidiary in Malta should consider the following laws:
- Private companies must pay at least 20% of the share capital upon registration, whereas public companies must pay 25%.
- LLCs (limited liability companies) need a company secretary and a director of any nationality who can live outside Malta.
- Before establishing a Maltese subsidiary, the company should own a registered office where official communication can be received and legal documents can be sent.
- Based on the business type, the subsidiary may obtain permits and licenses from the applicable authorities in Malta.
The compliance checklist for incorporation of foreign subsidiaries in Malta entails the following aspects:
- Obtain the business certificate of commencement within 180 days of beginning its business activity.
- You must establish the company’s registered office within 30 days of incorporation of the subsidiary. The relevant office address would support all official communication from various authorities [according to Section 12(1)].
- Obtain the unique company number.
- Obtain the incorporation certificate as issued by the Registrar of companies.
- The shareholder is provided a share certificate within 60 days of the subsidiary’s incorporation date.
- Once your Malta subsidiary is established, you must manage payroll withholdings, banking principles, local tax laws, and employment requirements.
- Send all the details of the shareholders to the Registrar.
- The companies registered in Malta must submit their annual returns to the Registrar at the Malta Business Registry within 42 days of incorporation. The annual returns can be filed in hard copies or electronic format.
- The BOD will engage the first auditor of the company within 30 days of the subsidiary’s incorporation. The first auditor will administer the office administration until the first AGM (Annual General Meeting) lasts.
- If a company intends to modify its memorandum, it must follow the process stated under Article 79 of the Companies Act. Moreover, it must pass an extraordinary resolution to reflect changes in the memorandum.
- If there is a modification in the address of the company’s registered office, the company must send a return to the Registrar of Companies.
Taxes on Subsidiaries in Malta
A subsidiary in Malta is subject to the following taxes:
Personal income tax
0% – 35% (based on income)
Corporate income tax
Property transfer tax
8%: Default rate
10%: For transfers of property purchased before 1 January 2004
Personal income tax rates for expats
15% on income earned up to €5 million
0% on income above €5 million
Tax Incentives for Businesses Setting Up a Subsidiary in Malta
You must consider tax incentives when working on the incorporation of a foreign subsidiary in Malta. Regardless of the business sector, your subsidiary business in Malta can gain advantages from the following tax incentives:
- The Malta Enterprise Act and several other related legislations offer an all-inclusive package of incentives for inbound investment. Such incentives are provided for businesses conducting manufacturing activities in Malta.
- The tax refund is applied to the corporations and is imposed at a standard rate of 35%.
- The participation exemption applies to holding companies that fulfill certain requirements.
- The double taxation relief is provided under Malta’s system of agreements for avoiding double taxation. A broad double tax treaty system manages the double taxation relief.
- Under the company re-domiciliation scheme (released in 2002), a foreign company can move to Malta and continue its business activities here.
- The tax incentives are provided for investment under the Business Promotion Act, Malta Enterprise Act, and Business Promotion Regulations.
Other Important Considerations
In addition to the compliance checklist for incorporation of foreign subsidiaries in Malta, you must also focus on a few other significant considerations, as discussed below.
- Malta Golden Visa is a suitable choice if you can capitalize a minimum EUR 120,000 to get the necessary visa and nationality.
- No capital duty is imposed on the issue of share capital.
- No stamp duty is payable on subsequent transfers.
- Malta doesn’t impose withholding tax on sharing dividends to parent companies or shareholders.
- Malta doesn’t impose capital gains tax on selling shares in Maltese companies.
- Ensure you get familiar with your business undertakings and the objectives of registering before initiating the process of subsidiary company formation in Malta.
- All company members must be familiar with Malta’s subsidiary rules. Else, you’ll have to hire an attorney or another staff member who is proficient in these rules.
- The subsidiary incorporation process must be reliable and precise because errors can cause fines, penalties, and extra setup time.
- You must consider residence permits, insurance, registration with the federal tax administration, and registration for any licenses (if required) to establish a subsidiary system in Malta.
- Based on the business segment, the Government may ask for additional investment capital to set up your subsidiary.
How Can Multiplier’s Employer of Record Help You Hire & Expand in Malta?
Dedicating sufficient time and investment is vital to expanding your business in a foreign nation. It needs substantial time and effort to abide by the industry standards and a country’s labor rules. You can acquire the maximum possible benefits from the services from a third-party service company such as Multiplier to form a subsidiary system in Malta.
Multiplier controls all the regulations, from onboarding talented employees to payroll processing, when expanding the business in a foreign country. It removes the need to establish a subsidiary. Besides, Multiplier helps you recruit local and global talent while guaranteeing compliance with Malta’s regulations and labor laws.