Malta
Company formation

Nestled in the heart of the Mediterranean, Malta stands as a beacon of stability and economic growth. This southern European country, known for its historic fortresses, megalithic temples, and clear blue waters, has swiftly transformed itself into a modern, business-friendly environment. Beyond its rich history and vibrant culture, Malta has become a strategic hub for international businesses, owing to its well-established legal framework, advantageous tax regime, and efficient incorporation processes. Entrepreneurs eyeing Europe as a potential market would do well to consider Malta, where business and culture converge in the most unique of ways.

The Republic of Malta is not just a tourist’s haven; it’s a business paradise too. With a robust economy, strategic geographical location, and a multilingual workforce proficient in English and Maltese, Malta presents numerous opportunities for budding and established businesses alike. The government’s pro-business stance is evidenced by various incentives for investors, and a regulatory framework that fosters both local and international business growth. The island’s full membership in the European Union further augments its appeal, granting businesses here unfettered access to the European single market.

Why opening a company in Malta

Opening a company in Malta is an astute move for entrepreneurs seeking a European foothold. With its competitive corporate tax system, often resulting in an effective tax rate far lower than the nominal 35%, it presents fiscal attractions hard to overlook. Malta’s EU membership means businesses enjoy access to the vast European market. The country’s regulatory framework is particularly favorable for fintech, iGaming, and maritime businesses, making it an ideal location for entrepreneurs in these sectors.

Advantages

Strategic Location

Malta’s central Mediterranean position offers easy access to European, North African, and Middle Eastern markets. This strategic location is especially advantageous for trading, logistics, and maritime operations.

Pro-business Regulations

The Maltese government has consistently exhibited a commitment to fostering business. Regulatory measures, combined with incentives for foreign investments, make Malta a top choice for entrepreneurs.

Competitive Tax Regime

While the headline corporate tax rate is 35%, numerous incentives and refunds can reduce this substantially, often making effective rates one of the most competitive in the EU.

Disadvantages

Small Domestic Market

Given its small population and geographic size, the domestic market in Malta is limited, potentially posing challenges for businesses that do not have an export-oriented model.

Limited Natural Resources

Malta lacks significant natural resources, often requiring businesses to import necessary raw materials, which could lead to increased operational costs.

Infrastructure Concerns

Despite its modernization efforts, there are occasional concerns about infrastructure, especially during peak tourist seasons which can affect business operations.

Taxes

Malta operates a progressive tax system for individuals, with rates ranging from 0% to 35% based on income. Its corporate tax system, at a glance, seems steep with a rate of 35%. However, Malta’s full imputation system can result in significant refunds for shareholders when dividends are distributed, often bringing the effective tax rate to between 5% and 10%. Additionally, Malta has a wide network of double taxation treaties, which further solidify its reputation as a tax-efficient jurisdiction for international business operations.

Company types in Malta

Limited Liability Company (Ltd)

The Limited Liability Company (Ltd) in Malta is the most popular form of business entity for both local and foreign entrepreneurs. It provides a clear structure and offers its shareholders protection, as their liability is limited to the amount they invested. An Ltd can be set up by both individuals and corporate entities and requires a minimum of two shareholders. Despite the headline corporate tax rate of 35%, various refunds and incentives can significantly reduce this rate upon dividend distribution, making it a tax-efficient choice for many businesses.

Public Limited Company (plc)

The Public Limited Company (plc) is designed for larger businesses, especially those looking to list on a stock exchange. It demands higher capital requirements compared to an Ltd, reflecting its suitability for sizable operations. The governance requirements are more stringent to ensure public transparency and investor protection. A plc is particularly suitable for businesses that seek to raise capital publicly through the issuance of shares or bonds.

Partnership En Nom Collectif (ENNC)

The Partnership En Nom Collectif (ENNC) is a general partnership where all partners have unlimited liability. This means that each partner is personally and jointly liable for the debts of the partnership. It’s typically suited for professional services where partners prefer or are mandated to have personal responsibility, like law firms or accountancy practices.

Partnership En Commandite (ENC)

The Partnership En Commandite (ENC) is similar to the ENNC but has two types of partners: general partners with unlimited liability and limited partners whose liability is capped to their contribution. This structure is often chosen when investors want to invest capital without being involved in the management or having unlimited liability, while others manage the business and assume full responsibility. It can be a suitable option for venture capital arrangements.

VAT in Malta

VAT in Malta operates under a tiered system. The standard rate is 18%, but there are reduced rates of 7% primarily for accommodation and 5% for specific goods and services. Some items even enjoy a zero rate (0%). Registration for VAT is mandatory for businesses that surpass certain thresholds, and regular filings are required.

Common questions