How to Set Up a Company in Malta: A Step-by-Step Guide

Setting up a company in Malta offers a strategic advantage for entrepreneurs and businesses seeking a foothold in Europe. Malta, an archipelago in the central Mediterranean between Sicily and the North African coast, is a member of the European Union and has been an attractive destination for various businesses due to its favorable tax system, well-developed financial services, and a stable political climate. The process of establishing a new business entity in this Mediterranean nation is well-structured and efficient, overseen by the Malta Business Registry.

Potential business owners have the option to select from different types of company structures, including private or public limited liability companies, general or limited partnerships, or sole proprietorships. The decision is generally guided by the business’s scope, size, and objectives. Furthermore, setting up a company requires choosing a unique name that aligns with the business activities and complies with local regulations, avoiding any offensive words and ensuring that the name is not already in use.

Once the company type and name are decided, the next steps involve preparation of the necessary documentation such as the Memorandum and Articles of Association, which outline the company's structure and governance. Companies in  must comply with specific registration requirements, such as appointing directors, a company secretary, and having a registered office in Malta, which solidify the legal presence and operational readiness of the business within the jurisdiction. The process is anchored by transparent procedures that facilitate the integration of businesses into Malta’s dynamic economy.

For more about setting up an Offshore Company in Malta - go here.

Understanding Malta's Business Landscape

Malta's economy is characterized by a strong and resilient structure, where commerce and international trade play a vital role. The island nation, strategically located in the Mediterranean Sea, serves as a gateway between Europe and North Africa, making it an attractive environment for businesses looking to tap into diverse markets.

Key Sectors:

• Financial Services
• Gaming
• Tourism
• Information Technology

A significant factor in Malta's economic attractiveness is its business-friendly environment. The country's legislation and regulatory framework are designed to support and encourage entrepreneurship, making it a pro-business jurisdiction with a clear focus on fostering economic growth.

Trade Networks:

• Extensive connections to both European and North African markets.
• Engaged in international commerce with a robust legal framework to facilitate business operations.

Malta has embraced technology with open arms, seeing a rise in the technology sector's contribution to the economy. This adoption has not only improved operational efficiency in traditional sectors but also attracted innovative enterprises and start-ups, further diversifying Malta's business landscape.

In conclusion, entrepreneurs looking to establish a presence in Malta will find an ecosystem that is supportive and strategically positioned, with a steadily growing economy and opportunities for business expansion both within and beyond the island’s shores.

Types of Business Entities in Malta

When setting up a company in Malta, entrepreneurs have a variety of business entities to choose from, each with its unique features and requirements. These entities range from those suitable for individual business owners to those ideal for larger corporations with many shareholders.

Private Limited Liability Company

A Private Limited Liability Company is the most common form of business entity in Malta. It restricts its number of members to fifty and prohibits public subscription to shares or debentures. It provides limited liability to its shareholders, meaning their personal assets are protected from business debts.

Public Limited Liability Company

Conversely, a Public Limited Liability Company can have an unlimited number of shareholders and is allowed to offer shares to the public. This entity type is typically chosen by larger businesses interested in raising capital from the public equity market.

General Partnership

General Partnerships (En Nom Collectif) consist of two or more partners who share unlimited liability for the debts and obligations of the business. Partners' personal assets can be used to cover business liabilities.

Limited Partnership

A Limited Partnership (En Commandite) has both general partners, with unlimited liability, and limited partners, whose liability extends only up to their investment in the partnership. This entity format allows investors to contribute capital while limiting their liability exposure.

Single Member Company

A Single Member Company is a specialized form of a private limited liability company that is owned by a single shareholder. This entity type keeps the owner's personal and business finances separate while still allowing full control over the company's operations.

En Nom Collectif

En Nom Collectif is another term for a General Partnership in Malta, characterized by the partners' joint responsibility and unlimited liability for all debts and obligations of the partnership.

En Commandite

En Commandite refers to the Limited Partnership entity, where the partnership must include at least one general partner with unlimited liability and one limited partner whose liability is limited to their contribution.

Initial Steps for Company Formation

Setting up a company in Malta requires careful planning and adherence to the specific legal steps. Aspiring business owners should begin with selecting a legal entity name, drafting critical documents, and appointing key management personnel.

Choosing a Unique Company Name

The first crucial step is to choose a unique company name that is not already in use or reserved. This name must be distinctive and cannot contain any offensive language. It should reflect the intended business activities. The name selection process involves checking with the Malta Business Registry to ensure no other company is operating under the same or a confusingly similar name.

Drafting the Memorandum and Articles of Association

The memorandum of association and articles of association are core documents of the company. The memorandum details the company's objectives, structure, and share capital, while the articles set out the rules for the internal management of the company. These must be prepared in compliance with Maltese law and include specifics such as the company's activities, registered office, and details about shareholding.

Identifying Company Directors and Secretary

Every company must have at least one director and a company secretary. The director is responsible for managing the company's affairs, and the secretary ensures compliance with statutory and regulatory requirements. Identity proofs and personal details of the individuals fulfilling these roles must be provided during the registration process. It is crucial to ensure that the persons chosen are eligible and possess the necessary qualifications for these positions in Malta.

Legal Framework and Registration Requirements

In setting up a company in Malta, adherence to specific legal frameworks and registration requirements is paramount. The process demands meticulous compliance with the Maltese Companies Act and involves accurate documentation and adherence to regulatory policies.

Registration with the Malta Business Registry

To register a company in Malta, one must file the necessary documents with the Malta Business Registry (MBR). Initially, the company must choose an original name that’s not misleading or offensive and reflects the business activity. The company formations range from private or public limited liability companies to general or limited partnerships and sole proprietorships.

Requirements:

• A duly signed Memorandum and Articles of Association.
• Information on the shareholders, directors, and company secretary.
• A registered office in Malta, which could be a business premise or the office of legal and accounting services.
• Payment of a registration fee, which is dependent on the company’s authorized share capital.

Obtaining Necessary Licenses and Permits

Different industries may require specific licenses and permits. Entrepreneurs must identify and obtain the necessary permits to operate legally in Malta. Sector-specific regulatory bodies issue these licenses, and it is essential to consult them as part of the preparation for business operations.

Key Steps:

1. Identify industry-specific licensing requirements.
2. Apply to the relevant regulatory authority.
3. Await approval before commencing business operations.

Compliance with Employment Regulations

Companies employing staff in Malta must comply with the country's employment laws. They must register as employers with the Employment and Training Corporation (ETC) and ensure adherence to labor laws, including health and safety regulations, work permits for non-residents, and social security contributions.

Essential Points:

• Ensure that employment contracts fulfill legal standards.
• Register the company and its employees with the necessary social services.
• Understand and implement required health and safety practices in the workplace.

Financial Obligations and Taxation

In setting up a company in Malta, it is crucial to grasp Malta's distinct tax system, prepare for VAT registration and bank account setup, and understand the requirements for account maintenance and annual audits.

Understanding Malta's Tax System

Malta offers a competitive tax framework, featuring a full imputation system which can effectively reduce the corporate tax rate significantly. The headline corporate tax rate is 35%, but due to tax refunds to shareholders, the effective rate may drop considerably, often to 5% or 10% for foreign shareholders. Companies operating in Malta may also benefit from double tax treaties with over 70 countries, potentially reducing the withholding taxes on dividends, interest, and royalties paid from treaty countries.

Setting Up a Bank Account and VAT

To operate a business in Malta, companies must open a bank account and register for Value-Added Tax (VAT) if their taxable activity exceeds the minimum threshold. The VAT rate in Malta generally stands at 18%, with certain goods and services qualifying for reduced rates or exemptions. Registering for VAT is a straightforward process, and companies receive a VAT number, which is essential for intra-Community trade and reclaiming input VAT.

Maintaining Accounts and Annual Audits

Companies in Malta are required to keep accurate accounts that reflect their financial position. Financial statements must be audited annually by a warranted auditor. These audits are essential to ensure compliance with Maltese accounting standards and regulations. Filing of an annual tax return is mandatory, and companies can benefit from various tax credits and exemptions that incentivize economic growth and investment, provided they adhere to the stipulated guidelines.

Minimum Requirements for Shareholders and Share Capital

When setting up a company in Malta, investors need to consider the minimum share capital requirements and shareholder agreements. Determining the appropriate amount of authorized and paid-up share capital is crucial, and measures should be taken to safeguard shareholder interests.

Determining Authorised and Paid-Up Share Capital

Private Limited Company: The minimum authorized share capital is €1,164.69, with a requirement that 20% must be paid upon incorporation.

• Public Limited Company: The authorized share capital must be at least €46,587.47, and 25% of this must be paid-up capital.

For both types of companies, the paid-up capital must be deposited into a bank account in the company's name during the formation process.

Participating Holding Requirements:

• Minimum threshold: A participating holding arises when a company holds at least 10% of the equity shares of a non-resident company, or meets other qualifying conditions.

Shareholder Agreements and Protections

Share Agreements: They outline the rights and obligations of shareholders, addressing issues such as:

• Transferability of shares
• Rights to dividends
• Decision-making processes

Protection Measures: The company's memorandum and articles of association should include clauses that:

• Ensure the protection of minority shareholders
• Define dispute resolution mechanisms
• Prescribe the distribution of assets on winding up

In conclusion, comprehensive understanding and adherence to the guidelines regarding share capital and shareholder agreements are fundamental in establishing and maintaining a company's integrity in Malta.

Incentives for International Investors and Entrepreneurs

Malta offers a range of incentives tailored to attract international investors and entrepreneurs looking to establish or expand their businesses. These benefits are designed to foster a supportive environment for startups and overseas companies, with initiatives that ease the setup process and provide financial advantages.

Malta Startup Residence Programme

The Malta Startup Residence Programme is specifically geared towards non-EU/EEA/Swiss nationals. It grants a residence permit to founders, co-founders, employees, and their families, which is renewable up to three years. The programme benefits international entrepreneurs by allowing them to live and work in Malta while they set up and run their startup. This initiative is also aligned with Malta's visa-free access to the Schengen Area, providing entrepreneurs with the opportunity to travel without a visa within this visa-free zone.

Benefits for Overseas Companies

For overseas companies, Malta presents several incentives, making it an attractive destination for foreign ownership. Notable benefits include:

• Corporate Taxation: Foreign companies can benefit from Malta's full imputation tax system, which can significantly reduce the effective tax rate on foreign income. Additionally, companies that distribute profits to Maltese holding companies can reap further tax advantages.

• Business Registration Process: The registration process for setting up a company in Malta is streamlined and friendly for foreign investors. Entrepreneurs can choose between different company types such as private or public limited liability companies, and partnerships. A unique company name is required, and it must not contain offensive language.

• Holding Company Structures: Malta's holding company regime is advantageous for international entrepreneurs seeking to maximize their financial efficiency. By setting up a holding company, investors can benefit from participation exemptions and mitigate their overall tax liability.

Overall, Malta's economic landscape is constructed with incentives that not only welcome but also facilitate the growth and prosperity of international business ventures.

Annual Requirements and Ongoing Compliance

Maltese companies must adhere to strict annual requirements and ongoing compliance regulations to maintain their good standing. These include timely submissions of annual returns and renewing licenses and company information as required by Maltese law.

Submitting Annual Returns

Companies in Malta are required to submit an Annual Return (Form Bo1) to the Registry of Companies. This document provides updated information about the company and includes:

• Company Formation Details: The Annual Return should reflect any changes in company structure or management.
• Necessary Documents: Certified true copies of identification documents of all involved parties must accompany the submission.
• Certificate of Registration: Companies should ensure that their registration details are current and accurate when filing the Annual Return.
• Financial Statements: Audited financial statements must be approved and submitted within 10 months from the financial year's end, followed by submission to the Maltese Business Registry within 42 days from the approval date.

Renewing Licenses and Company Information

For ongoing compliance, companies in Malta are tasked with regularly:

• Renewing Licenses: Depending on the business sector, various operational licenses may need to be renewed annually or biannually.
• Incorporation: Ensuring all details from the incorporation are updated in the event of changes.
• Registration Compliance: Companies must keep their registration details accurate, including the address, directorships, and shareholders.
• Self-employed: Individuals who are self-employed must also maintain their compliance by regular renewals and accurate paperwork.

Companies that fail to follow these requirements risk penalties, including fines and potentially being struck off the company register.

Professional Assistance and Service Providers

When incorporating a company in Malta, seeking assistance from professional service providers is essential for navigating the legal and regulatory landscape efficiently. These providers offer specialized knowledge on Malta’s strategic location and the numerous benefits of setting up a business on the main island or in Gozo.

Choosing Corporate Services Providers

Selecting the right corporate services provider is a crucial step toward a smooth incorporation process in Malta. It is recommended to look for providers with:

• A comprehensive guide: Providers should offer clear instructions on each step of the incorporating process, including the benefits specific to Malta's business environment.
• Experience: Companies with a history of successful incorporations provide assurance of their effectiveness and understanding of Maltese business regulations.

Legal and Accounting Support

Acquiring expert legal and accounting support is indispensable:

• Legal Consultants: They will ensure that your company adheres to Maltese corporate laws and any international regulations applicable to your business.
• Accountants: A knowledgeable accounting professional is vital to navigate Malta’s tax system, which can be advantageous for companies based on specific criteria.

Conclusion

Establishing a Maltese company presents entrepreneurs with a blend of strategic advantages, underscored by the country's business-friendly climate. A notable attribute of the Maltese legal framework is its favorable tax conditions, which foster economic growth and attract foreign investment.

• Strategic Location: Malta's geographical position at the heart of the Mediterranean serves as a gateway between Europe and Africa, offering advantageous trade opportunities.
• Skilled Workforce: Access to a multilingual and highly educated talent pool is a significant benefit for new businesses.
• Legal Framework: The robustness of Maltese corporate laws provides a reliable structure for company operations.

The process of company formation in Malta is streamlined to ensure efficiency. Entities must adhere to these principal steps:

• Selection of the appropriate company type (e.g., private or public limited liability company).
• Company name registration that reflects the business activity and maintains uniqueness.
• Preparation and submission of necessary documentation.
• Compliance with financial regulations, including registration for VAT.

Investors find Malta a compelling choice not solely due to its economic incentives but also because of the comprehensive support provided during the setup phase. Malta's commitment to fostering a pro-business environment has placed it as a favorable jurisdiction for a variety of industries. Thus, when entities decide to incorporate in Malta, they leverage a confluence of benefits, conducive to nurturing business success.