Business in Malta

Almost 60 years ago, Malta ceased to be a British colony – it first gained independence, after some time became a republic, and in 2004 joined the European Union. This picturesque state, located in the Mediterranean Sea, today attracts tourists from all over the world with its beautiful architecture and hospitable population, numbering just over 360,000 people, as well as a mild, favorable climate, calm, measured life.

For foreign investors, the opportunity to start a business in any field on favorable terms is of particular value in Malta. Entrepreneurial activity here can bring considerable income, which is facilitated by an improved tax system, political and economic stability. In general, the conditions for business development here are among the most comfortable in the EU. Therefore, if you are interested in registering a startup in Malta or opening a holding company or any other company, then you are on the right track. The government of this jurisdiction recognizes the full value of foreign investment, and therefore offers every non-resident entrepreneur to take advantage of favorable benefits, government programs and schemes. Next, we suggest that you familiarize yourself in more detail with the features of establishing a business in the Republic of Malta.

Why Choose Malta

This jurisdiction has a number of advantages:

• No problems with the economy – Malta has survived almost all global crises, including the global pandemic of recent years, with minimal economic losses. For example, at the height of the global epidemic and a year after it, rating agencies assigned the republic an A or A+ rating, which is considered a good indicator.
• Access to hard currency and reliable banks – participation in the EU, as well as the European Economic Area, frees entrepreneurs from having to worry about the safety of their assets. Banks provide high-quality, varied services.
• Government assistance to business – here you can take advantage of programs that really help in business development. There are also grants from the state ranging from 200,000 euros.
• Possibility of obtaining a second citizenship for special merits in the field of direct investment (within 1.5 years).
• Access to the international market – dozens of large international corporations and companies have settled here.
• The ability to quickly register a business in Malta – it may take about 10 working days. You can also register a company in this jurisdiction remotely.
• No taxation on the capital and property of the company, as well as on dividends that are transferred abroad. Over 7 dozen agreements to avoid double taxation have been concluded.

If we summarize all the advantages, we can come to the following conclusion: Malta offers entrepreneurs the opportunity to take advantage of all the advantages of doing business in the EU, while freeing them from all sorts of restrictions characteristic of most European jurisdictions.

Economy of Malta: What is Worth Investing In

Since the Republic of Malta is located at the intersection of Mediterranean trade routes from Asia to Europe, Africa and back, here, quite logically, the maritime business is especially actively developing, as well as the sphere of providing financial services to various companies. Tourism plays a special role in maintaining the country’s GDP. For this reason, most of the real estate is represented by apartments for rent by foreign guests. Any well-organized business in the tourist service industry can bring considerable income in Malta.

Also in the Republic of Malta, the following business areas are considered particularly successful:

• IT technologies, electronics, programming.
• Seafood processing.
• Linguistic schools, training centers, educational services.
• Production and sale of generic pharmaceuticals.
• Outsourcing for business centers.
• Gambling business.
• Film industry, video content creation.

All types of gambling are legalized in Malta. This sector is clearly regulated by legislation that determines the procedure for conducting gambling activities on the Internet. It is in Malta that foreigners prefer to register online gambling companies, and all because the rules for obtaining a license are strictly regulated, and the republic itself is on the White List of the UK Gambling Commission.

Legal Entity Forms in Malta

Before registering a startup in Malta, it is worth familiarizing yourself with the organizational and legal forms of business available here:

Individual entrepreneurship – the sole owner of the business is a private person; the least requirements are put forward for this organizational and legal form.

• LP (partnership) – there can be at least two participants, there are no restrictions on ownership. Individuals and organizations can have full or limited control over a business. Partnerships are either full or limited.
• LLC is the most common self-propelled proprietorship in Malta. There are two types, necessarily with limitation of liability: private and public society. The first option provides for a minimum starting capital of 200 euros. But to open a public LLC, you must pay at least 25% of 47,000 euros (the remaining amount within a year).
• Branch (representative office) – in Malta, subsidiaries are not considered legal entities, but they must be entered into the local Register of Companies strictly within the first 30 days from the date of registration. Branch profits are not taxed either at the time of receipt or after.
• Holding – enterprises with this form can operate not only within the Eurozone, but also outside it. Holdings in Malta are exempt from taxation of income from equity participation, capital, etc.

Also on the territory of the republic, you can register a cooperative, trust, foundation and association, but, as mentioned above, the most popular in terms of all the benefits for business is the Private Limited Liability Company.

How to Register Your Startup in Malta

Registration of a company in Malta is quite quick and is carried out in several stages:

• Choosing the legal form and name of the future company must be based on the characteristics of the business, the available budget, and also take into account local legislation. It is important that the name is unique and relevant to the activities of the enterprise.
• Drawing up a memorandum and articles of association of the company – the Memorandum contains all the important information about the legal entity, including the address, property owned, etc. The articles of association are needed to regulate the work of the company.
• Depositing start-up capital into the account – for example, a public LLC must pay 46,000 euros or 20-25% of this amount.
• Submitting an application for registration to the Register of Enterprises – online and offline submission is possible. A package of documentation is submitted along with the application. Entering data into the Register is accompanied by the payment of a state fee, the amount of which is determined by the authorized capital and the method of submitting documents. The application is usually processed within 5-10 business days.
• Obtaining a license – special permission is required for many, but not all, activities in Malta. Those who need it include financial and trading companies. The license is issued not by one universal government agency, but by a separate institution. For example, the MFSA is responsible for banking licensing, while the issuance of a trading license is carried out by the Trade Licensing Department.
• Internal Revenue Service Registration – The company obtains a TIN number from the Office of the Commissioner of Revenue. From the moment of registration, owners are required to hold an annual constituent meeting and submit tax returns on time.
• Obtaining a PE number (Permission to Employee number) with subsequent registration of workers in the Personnel Training Organization.

If you are interested in relocating an existing business, you must submit a corresponding request to the Register of Enterprises. In this case, prepare a package of documents consisting of:

• Constituent documentation.
• List of directors.
• Declarations with legal entity data.
• Evidence of solvency and reliability.

As a result, the owner is issued a Certificate of Incorporation, which is uploaded to the Registrar of Companies website.

List of Registration Documents

You can register a business if you have a Memorandum of Association and Articles of Association, which specifies:

• Name.
• Amount of capital.
• Passport details of directors, shareholders, secretary.
• Legal address, etc.
• Type of company activity.
• The number of persons holding debt obligations (there should not be more than 50).

Documents are submitted along with the Application and deposit receipt. A specific KYC form and beneficiary information must also be provided. All documents must be translated into English and notarized.

Important! In Malta, business activities can only be carried out with a registered office. You can rent or buy a legal address.

Opening an Account for a Startup in a Maltese Bank

To open a corporate account, you can contact a number of large Maltese banks, for example, HSBC, BNF, Bank of Valletta, etc. Most banking institutions belong to companies from Turkey, the EU, Australia and the UK. The stability of the Maltese banking system is ensured by the European Central Bank.

To open an account in Malta, you must first register a legal entity here. After this, a package of documents is prepared for the bank, consisting, among other things, of:

• passports of the owner and shareholders of the company;
• certificate of registration of a legal entity;
• personal data of shareholders;
• documents that will serve as proof of the legal origin of the money used to open the company.

The above list is not complete, since each bank has its own requirements for the package of necessary documentation. The applicant will be required to undergo a bank due diligence check – thus complying with European anti-money laundering requirements. The Malta Authority for Financial Services (MAFS) is responsible for enforcing banking regulations. This body not only issues banking licenses and monitors compliance with industry regulations, but also monitors the activities of Maltese companies, as well as the insurance and investment sectors.

What Taxes Do Companies Pay in Malta?

This jurisdiction has a 35% corporate tax rate, which is clearly not attractive to most companies. In fact, it only applies to legal entities that operate exclusively in Malta with a rapid increase in income (by more than 10% per year). But for all other companies, including those that are part of international structures whose profits are accumulated in other countries, the corporate tax rate is only 5%.

Businesses registered in Malta are also required to pay VAT (this tax is called VAT). The base rate is 18%, but it can be much lower, up to 5%, depending on the type of activity of the company. For example, companies involved in electricity supply pay 5% VAT, hotels and hotels – 7%, companies working in the food and pharmaceutical industries do not pay VAT.

Other fees:

• Excise tax – the rate is determined by the type of imported product, its country of origin, etc.
• Stamp duty 2-5% on purchase and sale of securities or real estate.
• As for taxes on authorized capital, dividends and royalties, there are none in this country.

A Few Words About Government Preferential Financing

Next, we will tell you how to register a business in Malta with maximum benefit. To do this, you need to take part in some preferential government program. The local government is actively involved in supporting startups. So, you can count on a preferential loan of up to 33% of the project costs. In some cases, financial support from the government of up to 50% is possible. There is also a business support organization in Malta called Malta Enterprise, which can finance up to 75% of the cost of your project.

Entrepreneurs registered in this jurisdiction have access to the opportunity to participate in the European Regional Development Fund program. This institution can bear up to 50% of the approved costs for the maintenance and operation of the company. Beginning entrepreneurs can be given up to 200,000 euros for business development.

How to Become a Malta Resident

Foreign investors are attracted to Malta by the possibility of obtaining permanent residence. Since 2020, programs for obtaining citizenship for direct investment have been operating in the republic. Investors are offered to obtain a residence permit, then after 12 or 36 months they can apply for citizenship. In most cases, you can become a resident of a prestigious EU country in 14 months. But for this, in addition to investments, you will need to undergo a thorough due diligence check. It is worth noting that in Malta it is the strictest among all the states that offer citizenship by investment.

A residence permit in Malta is often preferred for study and work. Participation in the Malta Global Residence Program gives entrepreneurs access to a special tax regime:

• Zero tax on foreign income that is not remitted to Malta.
• 15% tax (minimum 15,000 euros) on income that comes to the republic from abroad.

The applicant is required to purchase or rent a property in Malta, as well as pay an administration fee.

Permanent residence is obtained under the Malta Permanent Residence Programme. The Regulator may take up to 4-6 months to consider the application. To participate in the program, it is important to fulfill the following conditions:

• Purchase of real estate worth from 300,000 euros in the southern regions of Malta, from 350,000 euros in other regions. You can also rent a property worth 10,000-15,000 euros per year.
• Payment of administration fee (40,000 euros) and state tax (28,000 euros in case of purchasing real estate, or 58,000 euros when renting).
• Making a charitable donation to a non-governmental organization in the amount of 10,000 euros.

Together with the applicant, members of his family have the right to obtain permanent residence: spouse, children, parents, grandparents.

Foreigners can obtain citizenship by naturalization for exceptional merit, for which they need to invest at least 690,000 euros in the country’s economy. This can be the purchase or rental of real estate with a mandatory contribution to the Malta National Development Fund and to a charitable institution.

Important! With a Maltese passport, you have free access to over 180 countries, including the USA and the Schengen area. In addition, residents of Malta can live, study and work not only in this republic, but also in any other EU country.

Costs of Obtaining Maltese Citizenship

Before opening a company in Malta, we suggest taking a look at the approximate cost items:

In addition to complying with the investment conditions, the main applicant will need to pay health insurance and a number of administrative fees totaling 6,000 euros. The due diligence check also requires a payment of 15,000 euros.

When applying for citizenship for the entire family, consisting of the applicant, spouse, children and parents of the applicant or spouse, the total investment amount can start from 940,000 euros. In addition to the fact that 50,000 euros are contributed to the state fund for each family member, administrative fees of 2,000 euros are provided, and payment for health insurance and security checks is 10,000 euros for each.

Is it Worth Setting Up a Business in Malta?

If you are looking for opportunities to successfully expand your business in Europe, then Malta is the right choice. The country has an advantageous geographical location and a favorable political, economic and business climate, making it the choice of both young start-ups and established businesses. Malta offers businesses the opportunity to explore not only the European market, but also Africa and the Middle East.

Although the Republic of Malta is one of the smallest EU countries, its economy has great potential and resilience. The financial services, tourism, shipping, and international trade sectors are rapidly developing in this country. This means that there are truly great opportunities here for many types of businesses.

English in Malta has the status of a second state language; most of the population, including qualified personnel, speak English perfectly. Thus, by opening a business in Malta, investors are freed from the problem of the language barrier (all documentation is in English).

Well, and perhaps the most important reason to open a business in Malta is its favorable tax policy. In addition to the fact that a number of benefits become available to entrepreneurs in the form of tax exemptions or reduced interest rates on certain types of taxes, it is also worth considering the high level of security and legality of the Maltese tax system, which is strictly controlled by the EU.

Conclusions

Malta, as a dynamic business environment with a strong concentration of opportunities, will be an ideal place to establish a company. Whether you want to register a startup or a branch of an existing corporation, you will have a variety of tools at your disposal to meet your basic business needs.

However, it is not enough to know about all the advantages of doing business in Malta; it is also extremely important to comply with all the legal, financial and other requirements that the Maltese government puts forward for foreign investors. Not every entrepreneur is aware of all the legal, tax and other nuances of opening a company in this jurisdiction. You can protect yourself from mistakes when registering a business in Malta with the help of the Attorneys Association Lawrange.

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