With a GDP growth rate set to out-pace the likes of Ireland, France and Germany, Malta's business-friendly economy is taking centre stage.
It may be the smallest economy in the Eurozone, but the southern European country of Malta packs quite a punch. In fact, it's forecast to record the strongest EU growth in 2019 at 5.2%. And ahead of the UK's exit from the European Union, it's among the top jurisdictions for companies looking to establish an EU entity.
Malta's reputation as a secure and stable financial centre is well known, with business services, online gaming, tourism, maritime and aviation among its other key industries. If you're looking at setting up in Malta, here's what you need to know. And if you have any questions, don't hesitate to get in touch with our local experts.
Starting a business
Incorporating a company in the country is quite straight forward, and the process typically takes no longer than 48 hours. The minimum share capital required to incorporate a Maltese company is €1,165, with only €245 (20%) required to be paid up. A payment to the Registrar of Companies of €240 is also due upon incorporation.
A company incorporated in Malta is deemed to be both domiciled and resident in Malta and is taxable on its worldwide income. If your company is not incorporated in Malta, but the management and control of the business is based in the country, it is deemed to be resident in Malta. Such companies are taxable in Malta on a remittance basis.
Malta offers a wide array of fiscal benefits for non-resident shareholders setting up a company. The benefits apply for both holding and trading companies. Through Malta's 'imputation' corporate tax system, shareholders of Maltese companies are allowed to receive a full credit of the tax paid by the Maltese company on profits distributed as dividends. Not taxing such profits in the hands of the recipient ensures that the shareholder is not subject to double taxation. Malta does not levy withholding tax on outbound dividends.
Local tax treatment
Malta has transposed the EU Parent-Subsidiary Directive to its local tax legislation and this has been applied through the Malta Participation Regime. This means that dividend income or capital gains derived from a participation holding are exempt from further tax in Malta. Any capital gains derived from the disposal of such holding are not subject to further tax in Malta. Alternatively, the shareholder may opt to tax the holding in Malta at 35%, however, can then claim a full refund of the Maltese tax paid by the company upon the distribution of a dividend.
The standard corporate income tax rate in Malta is 35% and is applied to the net income generated by the Maltese company. However, a shareholder of the Maltese company has the right to claim two-thirds, five-seventh, six-sevenths or 100% of the Maltese tax paid on the qualifying profits out of which the dividend was distributed. As a result, this would reduce the effective tax rate in Malta from 10% to 0%, depending on the source of income. Trade losses incurred by a Maltese company in a particular year may be carried forward and set off against trading income registered in subsequent years.
Exemption from Duty on Documents
International trading companies carrying out business in foreign interest are exempt from duty on documents, save that the relevant forms are submitted. This would thus exempt the shareholders from the transfer and increase of share capital of the Maltese company.
Trading across borders
Malta's position in the centre of the Mediterranean allows it to maintain close ties with mainland Europe but also North Africa and the Middle East. The country's Freeport is one of the busiest ports in Europe, located at the crossroads of some of the world's greatest shipping routes.
Malta's main exports are electrical machinery, mechanical appliances, seafood, pharmaceutical products and printed materials. Its key export partners include Germany, France, Italy, Singapore, Hong Kong and the USA. Malta has a strong reliance on imports - fuel and raw material being the most imported goods. South Korea, Italy, Russia, Turkey and the UK are key import partners. Companies already established in other jurisdictions may be re-domiciled into Malta. Learn more about the re-domiciliation of companies to Malta.
Malta is a bilingual country and the majority of locals are fluent in both Maltese and English. English dominates in the business world, and working hours are typically from 8:30 to 17:30, but overtime is not uncommon. Most official documents are available in English.
Those looking to set up in the country can expect relaxed, informal attitudes, but it's important to build trust at the early stage of any business dealings. The Maltese are known for their good sense of humour and strong sense of irony. They can also express themselves in a naturally direct and sometimes animated or excitable manner. Malta is very proud of its local traditions and has a deep respect for the customs and religious beliefs of others.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.