To open a company in Malta as a foreigner is to tap into a world of economic opportunity within a thriving Mediterranean business hub. Malta’s welcoming business climate is underpinned by robust economic growth and an array of sectors ripe for investment, from tourism to fintech and blockchain technologies. With a competitive and appealing tax system, Malta offers a complete imputation system that can significantly reduce corporate tax rates for foreign investors.
The strategic geographical location of Malta not only provides a gateway to European, North African, and Middle Eastern markets but also promises a straightforward company incorporation process. This guide will navigate the nuances of setting up your business in Malta, covering everything from choosing the right business structure and understanding local tax benefits to the practical steps of registering your company and getting started in this dynamic economy.
The Maltese Business Climate
Economic Overview and Opportunities
Malta’s economy is a vibrant and dynamic environment, attracting foreign investors looking to set up shop. The nation’s GDP growth has consistently outpaced the Euro Area average. You can expect Malta to keep up its healthy economic expansion, with forecasts suggesting a growth of 4.0% in 2024 and a steady rate in the years to come.
This growth is bolstered by a strong resurgence in tourism, which has bounced back beyond pre-pandemic levels. Employment growth is also robust, with the unemployment rate dropping to an impressive 2.9% in 2022. The government’s decision to stabilize energy prices until 2025 provides additional certainty, ensuring that energy costs won’t be a worry for businesses in the near term.
Sectors with Potential for Investment
Malta boasts a diverse economy with plenty of investment opportunities across various sectors. Tourism is a major economic driver, showing strong growth and resilience. Other key sectors include iGaming, fintech, financial services, information technology, and eCommerce.
Emerging industries like cryptocurrency and blockchain technology are also making waves in Malta. The real estate market has seen consistent growth over the past decade, signaling promising investment prospects in property and development.
Legal Framework and Incentives for Businesses
As an EU Member State, Malta offers a business-friendly legal framework with a thorough due diligence process to ensure compliance and integrity. The country provides a range of programs and incentives designed to attract foreign investment. One such program is the Malta Permanent Residence Programme (MPRP), which allows third-country nationals and their families to live and work in Malta.
Moreover, investors have the option to acquire Maltese citizenship, which offers visa-free travel to over 170 countries, residency in the EU, and favorable business and tax conditions.
Malta’s Tax System
Malta’s tax system is highly attractive to foreign investors because of its full imputation system. This system can effectively reduce corporate tax rates from 35% to as low as 5%. Along with an extensive network of double taxation treaties, Malta stands as a tax-efficient hub for international business.
The corporate service sector in Malta is both well-established and professional. It offers support and expertise to companies looking to establish a presence on the island. With its strategic location acting as a gateway between Europe, North Africa, and the Middle East, Malta is an enticing destination for foreigners eager to start a business.
Choosing the Right Business Structure
Different Types of Maltese Companies
When you’re considering opening a company in Malta as a foreigner, it’s important to get familiar with the different types of business entities available. Malta, known for its reputable financial center status in Europe, offers two main business structures: limited liability companies (LLCs) and partnerships. Governed by the Companies Act of 1995, both structures require registration with the Malta Registry of Companies under the Malta Financial Services Authority’s watchful eye.
You can set up an LLC as either a private or a public company. Private limited companies are popular with investors because they’re flexible and provide limited liability protection. These companies need at least one director and a company secretary, who must be an individual.
The minimum share capital for a private limited company is $1,276, with at least 20% paid up. A private company can have up to 50 shareholders or be a single-member company with just one shareholder. Public limited companies, however, require a higher minimum share capital of $51,100, with 25% paid up, and must have at least two directors.
Pros and Cons of Limited Liability Company (LLC)
Choosing an LLC structure in Malta has several advantages, such as protecting shareholders’ personal assets from business debts and liabilities. LLCs also benefit from the country’s tax system, which includes an effective corporate tax rate that can be significantly reduced through refunds and the extensive network of double taxation treaties. Also, LLCs can have shareholders, directors, and secretaries from around the world. However, having a majority of local directors can be advantageous for leveraging local expertise and networks.
However, there are considerations to keep in mind. LLCs must maintain a registered office in Malta and are obligated to produce annual audited financial statements. Since 2018, companies in Malta are also required to maintain a Register of Beneficial Ownership, adding another layer of compliance.
Partnerships and Sole Proprietorships: When Are They Suitable?
Partnerships in Malta come in two forms: general (en nom collectif) or limited (en commandite). General partnerships entail that all partners share unlimited, joint, and several liabilities. In contrast, limited partnerships have general partners, who are fully liable, and limited partners, whose liability is restricted to their unpaid contributions. Partnerships are well-suited for smaller ventures or when professionals collaborate, as they are simple in structure and offer tax transparency – profits are directly reported on personal tax returns.
The European Economic Interest Grouping (EEIG) provides a collaborative structure for operations across the European Single Market. It allows businesses to work together and operate throughout EU Member States. The EEIG is a legal entity that facilitates the economic activities of its members and is taxed transparently, with members taxed individually in their respective countries.
Considerations for Foreign Entrepreneurs
Foreign entrepreneurs considering Malta must consider several factors. The country’s adherence to OECD and Financial Action Task Force (FATF) standards, its robust legal system, and one of the lowest effective corporate tax rates in Europe make it an attractive location for business. The tax system is particularly appealing, offering various refunds on the standard corporate tax rate, which can effectively drop to between 0-5% for certain types of income.
Additionally, Malta’s EU membership enhances its appeal as a business hub. Entrepreneurs should also note the requirements for company formation, such as the necessity for a registered office in Malta and the obligation to file annual audited financial statements. The process is generally straightforward if you’re considering relocating your business to Malta, provided your current jurisdiction’s laws permit it. This relocation can allow you to benefit from Malta’s tax advantages and provide access to European markets.
The Company Incorporation Process
Registering Your Company Name
Selecting a company name is the initial step in the incorporation process. The chosen name should be distinctive and not cause confusion or be deemed inappropriate. It should accurately represent the business’s activities and not be identical to any other registered name. Certain terms may require authorization due to their significance.
The “Company Search” tool on the MBR’s website verifies name availability and reserves the chosen name. The MBR is tasked with the registration of new commercial partnerships and maintaining the registry.
Preparing the Memorandum and Articles of Association
The Memorandum and Articles of Association are foundational documents that delineate the company’s structure, subscribers, official location, capital, and the process for appointing directors. These documents govern the company’s internal affairs and the interactions between shareholders and directors.
Form BO1 must be completed for companies with corporate shareholders to disclose the ownership and control structure.
Complying with Maltese Company Law
Businesses must comply with the stipulations of Maltese Company Law, including the minimum share capital requirements. A private company must have its share capital of at least 20% paid up when the Memorandum is signed.
A minimum of one director and one shareholder, along with a local registered office, is mandatory. Post-registration, companies are required to file annual audited financial statements, tax returns, and an annual return with the Maltese authorities.
Required Documents and Information
A collection of documents is necessary for registration, including the Memorandum and Articles of Association, Form BO1 for corporate shareholders, and evidence of paid-up share capital, usually through a bank deposit slip. Identification of the individuals and officers involved is also required.
Non-EEA resident shareholders must provide satisfactory bank references. A beneficial owner form must be completed as well. All copies of documents should be certified by a notary or lawyer.
The registration fee to the MBR is scaled according to the authorized share capital. For companies with a share capital of less than $1,645, the fee is $269, and for those with more than $2.7 million, the fee reaches $2,467. SICAVs are charged a flat rate of $1,919.
Following the acceptance of all documents by the Registrar, a certificate of registration is issued, confirming the company’s legal status and its eligibility to commence operations. The process is expedient, often completed within 24 to 48 hours, assuming all paperwork is in order and properly filed.
If the company engages in trading, VAT registration is necessary at the standard rate of 18%. The VAT registration procedure varies based on the applicant’s status, with certain goods and services subject to reduced rates or exemptions.
Opening Your Business in Malta
Acquiring Necessary Licenses and Permits
After registering your company, obtaining the appropriate licenses and permits is essential. The specific requirements will vary based on the nature and location of your business. For instance, launching a food-related enterprise necessitates a food handling license from the Malta Food Authority. The registration process involves a disbursement fee of $351 to the authorities, in addition to professional fees.
The country’s policies do not impose restrictions on foreign ownership, which simplifies the process for international entrepreneurs to establish and operate their ventures.
Understanding the VAT Registration Process
VAT registration is mandatory from the outset for businesses engaging in taxable supplies, as Malta does not have a VAT registration threshold for such companies. The threshold for online retailers targeting Maltese consumers is set at $38,400 in annual sales.
The application for a VAT number can take up to a month. There are three VAT categories, each with specific regulations. Non-resident companies must apply for VAT registration, providing documents like the Articles of Association.
Compliance with VAT regulations is crucial, including the submission of VAT returns every three months within the prescribed deadlines.
Setting Up a Corporate Bank Account
Establishing a corporate bank account is crucial for managing your business’s financial transactions. The account is used for the initial share capital deposit and ongoing financial activities.
When choosing a banking institution, consider the services that align with your business needs, such as multi-currency access and online banking capabilities. Malta has a variety of MFSA-approved credit institutions that comply with EU banking standards.
Your selection should reflect your business’s specific financial needs, including considerations for minimum deposits and available credit facilities.
Hiring Employees and Labour Laws
With your business infrastructure in place, recruiting staff is next. It’s crucial to understand Malta’s employment regulations, which cover aspects such as contracts, remuneration, working hours, and mutual rights and responsibilities.
Adherence to these regulations is essential for the successful management of your workforce and fostering a harmonious work environment.
Benefits Of Setting Up A Company In Malta
Friendly Tax Environment
The nation’s tax regime is designed to be advantageous for businesses, particularly with its refund system allowing non-resident shareholders to lower their tax rate significantly. Dividends from a Maltese company are issued with a tax credit equivalent to the tax already paid by the company, preventing double taxation at the shareholder level. Depending on the circumstances, shareholders could receive up to a full refund of the income tax paid by the company.
Malta’s network of Double Tax Treaties and Tax Information Exchange Agreements further protects businesses from double taxation. Companies that are registered or resident in Malta are taxed on their chargeable income. In contrast, those not incorporated but operating within Malta are taxed only on the income generated there. The country’s tax system is aligned with EU standards. It offers additional benefits such as exemptions on duties for share transfers and increases in share capital.
The Malta Enterprise Act and related legislation provide incentives like tax credits, cash grants, and subsidies to foster foreign investment.
Quick Company Registration Process
The incorporation process in Malta is designed for efficiency, allowing entrepreneurs to commence their business activities promptly. The island’s location facilitates easy travel and commerce within Europe and into North Africa.
For non-EU nationals, the Malta Start-up Residence Programme provides a three-year residence permit, simplifying the process of initiating a new enterprise in Malta.
Reliable Financial System
Malta adheres to EU Directives, ensuring its financial practices comply with stringent regulatory standards. The country has provisions for establishing protected or segregated cell companies in specific sectors, offering additional financial security and adaptability. There are also advantageous tax conditions for collective investment schemes.
The tax treatment for securitized vehicles and reinsurance special purpose vehicles is supportive of financial innovation. Trusts and private foundations offer fiscal planning opportunities tailored to the residency of trustees, administrators, or beneficiaries.
The Micro Invest Scheme encourages micro-enterprises growth by offering a tax credit for qualifying capital expenditure and wage costs. The Research and Development Regulations also provide a supportive framework for businesses engaged in projects that aim to innovate or enhance products, services, or processes.
Launching Your Venture in Malta
With its strategic Mediterranean location and business-oriented environment, Malta is an excellent launching pad for entrepreneurs from around the globe. The prospects of a robust economy, advantageous tax structure, and an array of financial incentives are compelling reasons to consider Malta for your business endeavors.
Whether you’re looking to benefit from Malta’s burgeoning sectors or leverage its European Union membership for broader market access, the country’s streamlined company incorporation process and supportive legal framework provide a solid foundation for growth.
Embarking on a business journey in Malta could be the strategic move that propels your company towards success. With the proper guidance and a clear understanding of the necessary steps and legal requirements, opening a company in Malta as a foreigner is achievable and a promising opportunity to expand your global footprint.
FAQs
Can a foreigner start a business in Malta?
Yes, a foreigner can start a business in Malta. The country offers a favorable business environment with relatively straightforward procedures for foreigners. Non-EU nationals may need to fulfill additional requirements, such as obtaining specific permits or meeting certain investment thresholds.
How much does it cost to open a company in Malta?
The cost to open a company in Malta varies based on the type of business and its specific needs. Generally, the minimum share capital for a private company is $1,277, of which 20% must be paid upfront. Additional costs may include registration fees, legal fees, and expenses related to compliance with local regulations.
What is required for a company in Malta?
To establish a company in Malta, one must register the company with the Malta Business Registry, provide a registered office in Malta, appoint a company secretary and at least one director, and comply with local tax and legal requirements. Companies must also submit annual returns and financial statements.
How long does it take to open a company in Malta?
Opening a Malta company typically takes 2-3 days after all necessary documents are submitted. The process can be expedited with the help of legal and financial professionals familiar with Maltese corporate law and regulations.
How do I get citizenship in Malta?
Citizenship in Malta can be obtained through naturalization, which generally requires residing in Malta for five years. Alternatively, Malta offers a citizenship-by-investment program known as the Malta Individual Investor Programme (MIIP), which requires a significant financial investment in the country, including a combination of donations, real estate purchases, and investments in government-approved financial instruments.
