With Malta’s GDP growth rate poised to outpace other countries such as Germany, France, and Ireland, the business-friendly economy in the country is gaining a lot of attention.
It might be the Eurozone’s smallest economy, but Malta, located in the southern part of Europe, packs a big punch. It is, in fact, forecasted to record a 5.2% growth rate in 2019, which is the strongest in the EU. Looking ahead to the UK exiting the European Union, Malta is one of the leading jurisdictions for companies wanting to get an EU entity established.
Malta has a well-known reputation as a stable and secure financial center, with other key industries including aviation, maritime, tourism, online gaming, and business services. If you are planning to get a business set up in Malta, the following is the information you need to know. Don’t hesitate to contact local experts and VAT experts if you have additional questions.
Starting a Business
Getting a company incorporated in Malta is a straight forward process and typically it doesn’t take any longer than 4 hours. To incorporate a company in Malta the minimum share capital that is required is €1,165, with just €245 (20%) required to be paid upfront. Upon incorporation, there is also a payment of €240 due to the Registrar of Companies.
Companies that are incorporated in Malta are deemed to be both a resident and domiciled in Malta and are taxable on their worldwide income. If you have a company that is not incorporated in the country of Malta, but the control and management of the business are based there, then it is deemed to be a resident of Malta. These companies are taxable on a remittance basis in Malta.
A wide range of fiscal benefits is offered by Malta to non-resident shareholders who are getting a company set up. These benefits apply to both trading and holding companies. Through the ‘imputation’ corporate tax system in Malta, Maltese company shareholders are allowed to receive full credit on the tax paid by Maltese companies on profits that are distributed as dividends. By not taxing the recipient on such profits it ensures that shareholders are not subjected to double taxation. Withholding taxes are not levied on outbound dividends in Malta.
Local Tax Treatment in Malta
Holding companies
The EU Parent-Subsidiary Directive has been transposed by Malta to its local tax legislation. That is applied via the Malta Participation Regime. That means that capital gains or dividend income that is derived from participation holds are exempt from any further taxation in Malta. Alternatively, a shareholder can choose to tax the holding at 35% in Malta. However, then can claim a full refund on the Maltese tax that the company pays when a dividend is distributed.
Trading companies
Malta has a standard corporate income tax rate of 35%. It is applied to the net income of a Maltese company. However, Maltese company shareholders have the right to claim 100%, six-sevenths, five-seventh, or two-thirds of the Maltese tax that is paid on qualifying profits where a dividend is distributed. This can result in reducing the effective tax rate from 10% to 0% in Malta, depending on what the source of income is. When a Maltese company incurs trade losses in a specific year it can be carried forward to offset trading come in future years.
Duty on Documents Exemptions
International trading companies that are carrying out foreign interest business are exempt from the duty on documents other than submitting the relevant forms. Therefore, this exempts shareholders from a Maltese company’s increase and transfer of share capital.
Trading across borders
With Malta located in the middle of the Mediterranean, it allows the country to maintain very close ties with the Middle East and North Africa, along with mainland Europe. Freeport is one of Europe’s busiest ports and is situated at the cross of some of the greatest shipping routes in the world.
The main exports of Malta are printed materials, pharmaceutical products, seafood, mechanical appliances, and electrical machinery. The key export partners of Malta include the USA, Hong Kong, Singapore, Italy, France, and Germany. Malta strongly relies on imports – with the most imported goods being raw material and fuel. Key import partners include the UK, Turkey, Russia, Italy, and South Korea. Companies that are established in other jurisdictions already can be re-domiciled in Malta.
Culture
The country of Malta is bilingual and most locals are fluent in English as well as Maltese. In the business world, English dominates, and the typical working hours is 8:30 to 17:30. However, overtime is fairly common. A majority of official documents can be obtained in English.
Those wanting to set set up for business in Malta can expect an informal, relaxed attitude. However, it is very important to build-up trust during the early stages of all business dealings.The Maltese are well-known for having a strong sense of irony and a good sense of humor. They are also known for expressing themselves in naturally direct and sometimes excitable or animated manners. Malta takes great pride in its local traditions and deeply respects other religious beliefs and customs.
