Company Registration in Malta- An Overview
Malta is an island located in Southern Europe. The capital of Malta is Valletta, and the largest city is St. Paul's Bay. An excellent and tranquil country with a primarily English-speaking population, it is a catch for investors worldwide. There are a lot of profitable opportunities in Malta that attract different investors to carry out business. Setting up a company in Malta is hassle-free, as only one shareholder and one director are required to incorporate a company. There is no need for a resident director or shareholder to start a company in Malta. As an added advantage, a company has the option to register with EU VAT, which enables different types of incentives for running and operations of the business.
Benefits of Company Registration in Malta
Following are the benefits of company registration in Malta:
- Corporate Tax benefits-
Prima facie, Malta's corporate tax rate seems overwhelming for the companies as it is set at 35% on the trading profits. However, it is one of the jurisdictions with the lowest net effective tax rates in the European Union. The Malta Taxation Refund System allows the shareholders to claim back a portion of the tax paid in Malta after the distribution of dividends. In case the company owner is not resident and domiciled in Malta,they can generally recover 6/7th of the 35% applicable tax, bringing the net effective tax rate to 5% only where the profits are derived from trading activities only. Where the profits are derived from passive nature, the net effective tax rate can be brought down to 5/7th of the applicable corporate tax. This reduces the net effective corporate tax rate to 10%. Additionally, tax deductions can also be claimed by the companies to reduce the net effective tax rate.
- The lower entry barrier for registration-
Malta allows any overseas company or foreign individual to set up a company in Malta with 100% ownership. Further, the minimum paid-up capital for the registration of a company is €245, and the fee required for the company's registration is also meager. Due to these low entry barriers for the registration of a company, Malta has emerged to be an ideal destination for company registration by overseas investors.
- Double Taxation Avoidance Treaties-
Jurisdictions which protect businesses from the vice of double taxation are viewed to be favourable jurisdictions for businesses to establish their companies. Malta has signed over 70 Double Taxation Avoidance Agreements with various countries protecting businesses from double taxation, making it tempting for overseas investors to open their companies in Malta.
- Geographical Advantage-
The geographical location of Malta in the Mediterranean Sea affords Malta a strategic advantage over other European counterparts as Malta is just a few hours distance from major capitals of Europe and Northern Africa. This makes it viable for businesses to set up their base in Malta for conveniently travelling across Europe and Northern Africa.
- Visa-free zone-
Malta also falls under the Schengen area, and there are no travel restrictions between Malta and other countries in the Schengen area.
- Cultural Diversity-
Although English is a significant language, Malta attracts foreigners worldwide due to its culture and beauty. It has become a melting pot for languages and cultures, significantly increasing business opportunities.
- Exemption on duty on documents-
Malta also offers exemptions on the duty on documents for the transfer of shares and increases of share capital. This makes it cost-effective for the companies to carry out their day-to-day operations and the process efficient.
- Mediterranean weather-
Malta also offers 365 days of sunny weather, offering Mediterranean weather, which is less harsh compared to the harsh weather in the Northern European nations.
Regulatory Authority/ Body for Company Registration in Malta
The primary regulatory authority for company registration in Maltais the Registrar of Companies. The Office of the Commission of Revenue registers the companies for tax purposes in Malta.
Eligible Business Structures under Company Registration in Malta
There are primarily 3 types of business structures in Malta. Following are the business structures that entrepreneurs can adopt in Malta:
- Single Member Company-
A single-member company in Malta can be formed either via route of incorporation or through acquiring all the company shares by one person. In order to qualify as a single member company, the entity must fulfil all the rules of a private exempt company. A private exempt company is a private limited company where the following clauses have been mentioned in the memorandum and articles of association:
- The persons who are holding the debentures in a company should not be more than 50 in number;
- Nobody corporate can be a holder or have any interest in any of the shares and debentures of the company and a director of the same company; and
- Neither the company nor its directors can be a party to an arrangement where the company's policies are determined by persons other than the directors, members or debenture holders of the same company.
A partnership in Malta is a unique entity with its own separate legal personality distinct from its partners. Moreover, a Maltese partnership is capable of owning and holding property under its own name. Further, it can also sue or be sued under its own name.
There are 2 types of partnerships that exist under the Maltese, viz. General partnership (en nom collectif)and Limited Partnership (encommandite).
- General partnership(en nom collect if): A General partnership is one whereby two or more persons come together to undertake any commercial activity to make and share profits amongst themselves.
A General partnership in Malta is created via Partnership Deed, which sets out the name of the partners and objects of the partnership's commercial activities.
Here, the liability of the partners is unlimited, and the partners can be held collectively and personally liable against the debts and obligations of the partnership. A General partnership in Malta exists until a partner's death, retirement and insolvency.
Every General partnership registered under Maltese law must have an office in Malta. With respect to taxation purposes, the partners declare their profit earned from the partnership in their personal tax returns, which are levied according to the applicable personal tax rate.
- Limited Partnership (encommandite):A limited partnership in Malta needs to have at least 2 partners; at least one of them shall be a general partner with unlimited liability. If there is more than one general partner, they have joint and several liabilities. Limited Partnerships also need at least 1 limited partner who agrees to contribute a certain amount of capital to the partnership.
Again, a limited partnership has a separate legal personality distinct from its partners where the liability of the partners does not go beyond the amount contributed to the partnership or agreed to be contributed to the partnership but not yet paid.
The administration of the limited partnership lies in the hands of the general partner. On the other hand, the limited partner is not permitted to perform any managerial functions or transact business on behalf of the partnership unless a power of attorney has been issued to carry out specific acts.
Both the abovementioned partnerships need to register with the Malta Business Registry (MBR) by submitting their partnership deed. Thereafter, the MBR issues a Partnership Certificate. The partnership must register for the Value Added Tax (VAT) registration and obtain a PE number from the Department of Inland Revenue.
- Limited Liability Companies-
Malta's most famous form of business structure is a Limited Liability Company (LLC). Following are the two types of LLCs in Malta:
- Public Limited Liability Companies
- Private Limited Liability Companies
The difference between these two types lies in their capital structure and ability to raise funds and issue securities.
- Public Limited Liability Companies: The Public Limited Liability Companies in Malta have the option of raising capital by offering securities in the form of debentures and shares to the general public. In order to raise capital from the public, these companies are required to get themselves registered and issue a prospectus for the same. The minimum Authorised share capital required to incorporate a Public LLC is forty-six thousand and five hundred and eighty-seven euros and forty-seven cents (46,587.47). This amount should be subscribed to by at least 2 persons.
Additionally, every Public LLC must have at least 25% of its share capital paid up, and at least 2 directorsmust be nominated at the time of incorporation of the company.
There is no limit on the maximum number of shareholders in a Public LLC.
- Private Limited Liability Companies: A Private LLC in Malta, on the other hand, is not permitted to invite the public to subscribe to its shares and debentures. The minimum Authorised share capital required to incorporate a Private LLC is one thousand and one hundred and sixty-four euro and sixty-nine cents (1,164.69). This amount should be subscribed to by at least 2 persons.
The liability of the shareholders of a Private LLC in Malta is restricted to the contribution made in the company. A maximum of 50 shareholders can be a part of a Private LLC. There is no restriction on the number of objects of business operations as long as they are legal and lawful.
A Private LLC must have at least 20% of its share capital paid up and is required to appoint at least 1 Director to manage the affairs of the company and 1 Company Secretary to manage the corporate and administrative functions of the company.
- Overseas Company-
An overseas company is a corporate body that has been incorporated outside Malta. An overseas company wanting to establish and carry out economic activities in Malta has to register itself with the Registrar of Companies in Malta within one month of establishing a branch or place of business in Malta.
Procedure for Company Registration in Malta
An applicant going through the process of company registration in Malta has to follow the procedure mentioned below:
- Choosing anappropriate Business Structure for the company
- Choosing and reserving the desired NAME for the company
- Determination of Authorised share capital, Issued share capital, Officers of the company, Registered address and Duration of the company.
- Preparing the required DOCUMENTATION for the incorporation
- Obtaining a Certificate of Registration
- VAT Registration of the Company
- Post Incorporation Formalities
- Choosing an Appropriate Business Structure for the company -
The first step in the process of registration of a company in Malta involves the selection of an appropriate business structure for the company. Some of the most adopted business structures for companies in Malta are as follows:
- Limited Liability Company (LLC): A Limited Liability Company is the most common form of business structure chosen by foreign investors to register their companies in Malta. Investors can adopt two types of LLCs:
- Private LLC: In a private LLC, there should be at least 2 members at the time of registration, and the maximum limit of members has been set at 50. These companies cannot invite the public to purchase their securities. Some companies have been exempted from certain restrictions. These companies are called Private Exempt Companies.
- Public LLC: Those companies that do not qualify as private LLCs and can offer their shares and debentures to the public are called Public LLCs.
- Single Member Company: As the name suggests, these companies are owned by a single owner. A private LLC can become a single-member company either at the time of incorporation or at the time of acquiring shares by one person.
- Overseas Company: Overseas companies are those companies that have been incorporated outside Malta and have a branch established in Malta. These companies have to register themselves with the Registrar of Companies as a branch office within a period of 1 month of establishing a branch or office in Malta.
- Partnerships: To run small to medium businesses in Malta, investors usually adopt the Partnership structure. There are two types of partnerships in Malta:
- General partnerships (En Non-Collectif): here, the liability of the partners is joint and several. The liability is personal and unlimited.
- Limited Partnerships (EnCommandite):Limited Partnerships have at least one general partner with unlimited personal liability and limited partners with limited liability. The limited partner is not responsible for running the affairs of the partnership. Only a general partner is permitted.
- Choosing and Reserving the desired NAME for the company -
The next step involves choosing the appropriate and desired name for the Maltese company. The name of the company should not be similar or identical to that of an existing company or enterprise. It should not contain such words that are deemed offensive by the public. The company's name should not misrepresent the nature of the business undertaken by the enterprise. Where the company wants to use the terms such as "Insurance", "Blockchain", or "Bank" in its name, then it should demonstrate that it is engaged in these kinds of businesses. Only then using of such a name can be permitted by law. Furthermore, the name of the company should be unique and original.
- Determination of Authorised share capital, Issued share capital, Officers of the company, Registered address and Duration of the company -
Thereafter, the entrepreneur needs to decide on the company's authorised share capital. The authorised share capital must be decided according to the specific limits prescribed by the law as mentioned above. Further, a minimum of 20% of the issued share capital in the case of a Private LLC and a minimum of 25% of the issued share capital in the case of a Public LLC must be paid up at the time of signing the Memorandum of Association. Additionally, the minimum number of shareholders should be decided for incorporation purposes.
Since a company needs to have an office in Malta, the promoters are also required to secure the lease of the property or the title documents for the place where you wish to start the business. Further, the promoters must also appoint the first directors and shareholders of the company. There need to be minimum 2 directors in both private and public LLCs. There can be a sole director in the case of single-member companies. The first shareholders are also required to remit the initial share capital of the company.
- Preparing the required DOCUMENTATION for the incorporation-
Once the above formalities have been fulfilled, the promoter also needs to prepare the necessary documentation required for registering the company, which includes the following:
Memorandum of Association (MoA): An MoA must comprise the following details about the company:
- Type of company
- Identity of the subscribers
- Name of the company
- Registered office address of the company
- Objectives of the company and its main trading activity
- Share capital subscribed, division of shares, number of subscribers along with their share capital, rights attached to each class of shares
- Identity and the number of first directors
- Name and address of the company secretary appointed
- Duration of the company
- Identification of each of the officers and directors of the companies, shareholders, legal representatives
Articles of Incorporation (AoA): Every company has to register a legal document called the AoA, which outlines the internal regulations explaining how the company's internal affairs shall be regulated. If the promoters fail to register a self-drafted AoA, then the model AoA mentioned in the First Schedule of the Companies Act shall be applicable by default.
Form BO1: In case any of the company's shareholders is a corporate body, the company's promoters need to furnish a supplementary document called Form BO1 along with the application. This form contains information about the identity of the company's ultimate beneficial owners.
Evidence of the paid-up share capital: The evidence related to the payment of paid-up share capital in the form of a bank deposit should also be attached at the time of incorporation.
Registration Fee: Depending on the company's authorised share capital, a registration fee is supposed to be paid to the Malta Business Registry for company registration purposes. It can vary between €245- €2250.
Other supporting documents can be attached at the insistence of the Registrar’s office.
- Obtaining a Certificate of Registration -
In case the Registrar is satisfied with the integrity of the application and the documents published along with it, then it issues a certificate of registration. This means that the company has come into existence and is authorised to conduct its business.
The time required for a company registration depends entirely on the type of company and the satisfaction of the documents submitted along with the application. If all the documents are in place and the Office of the Company Registrar is satisfied, the registration process normally lasts 5-10 days.
- VAT Registration of the Company -
Once the company has received the certificate of incorporation from the Registrar of Companies, it has to be registered for the payment of Value Added Tax (VAT) which is fixed at 18% if the business is registered as a 'trading entity and not as a 'holding entity'.
Corporate Tax in Malta
All companies registered in Maltamust pay corporate tax on their worldwide income. The following taxes would be applicable:
- Corporate Tax payable in Maltais 35%. This would be applicable to all businesses which are established in Malta. There is also a provision of double taxation, which the companies can take advantage of to avoid payment of taxes twice on the same product or service.
Documents for Company Registration in Malta
The following documents are required for company formation in Malta:
- Memorandum of Association
- Articles of Association
- Form BO1
- Evidence of paid-up share capital (bank’s advice slip should show the name of the company in formation)
- Identity proofs (such as copies of the passport/ I.D. cards) of the individuals and officers involved in the company, such as directors, secretaries, shareholders etc. Where the directors and shareholders are foreign residents, their respective company registration authority requires a certificate of good standing.
- Beneficial owner form
- Satisfactory bank references for the non-EEA resident shareholders.
- Cheque for the registration fee
- All the documents that are supposed to be submitted in copy are required to be certified by a notary/lawyer.
- Other forms and documents asked by the Registrar's Office.
The following documents are required for the registration of an overseas company in Malta:
- Authentic copy of the charter, statutes or memorandum and articles of incorporation or any other instrument defining the constitution of the overseas company. If such a document is not in English or Maltese law, then a translation must be furnished.
- A list of the directors and secretaries or persons responsible for the administration of the overseas company or persons vested with the power to represent the company in the overseas market. The information regarding such persons involves names, usual residential addresses, nationality and business occupations where such person is a corporate body, its registered or corporate name or registered office address.
- Returns of the overseas company also need to be furnished containing the following particulars:
- The trade name of the company under which it is going to open a branch office if such name is different from that of its parent company
- The address of the branch office in Malta. Where multiple offices have been opened, the address of the principal branch of the business.
- The kind of business activities to be carried out by the branch office in Malta.
- The name and address proof of the resident individual who has been authorised to represent the branch in Malta.
- The extent of the authority of every abovementioned individual to act alone or jointly with other company officers. In case there are more than two persons, the name of the additional person.
- A return containing information about the legal form of the overseas company and the identity of the register in which the overseas company is registered.