Businessman signing contract

Malta Limited Liability Company.

mouse cursor imageRegistration of Companies in Malta

The  following  are  just  a  number  of  the  advantages  that  companies  registered  in  Malta offer (Malta Limited Liability Company).

  • Malta is the only EU state with the full imputation system
  • Effective tax rate of 5% on company’s trading profits ‐ following refunds (10% in the case of passive interest and royalties)
  • Participation exemption on dividends or gains from qualifying holdings (no tax paid in Malta)
  • Certainty –Malta reached an agreement with the EU in 2006 regarding changes implemented to its corporate tax regime o Low annual company maintenance costs
  • No thin capitalisation or anti‐controlled foreign company regimes
  • No duty payable on transfers of shares in companies having the majority of their business interests situated outside Malta
  • Company law based on the UK company law and in line with EU Directives
  • Malta is an EU Member since 2004 and Maltese Companies enjoy the benefit of relevant Directives
  • Possibility for companies to denominate their share capital in major foreign currencies – tax is paid and refunded in the same currency thereby minimising exchange rate risks
  • Political and economic stability – bipartisan system and both parties have a political track record of achieving consensus on issues related to international business
  • Malta is a member of the Eurozone having adopted the euro in January 2008
  • English is an official language in Malta and all legislation and official documentation must be both in Maltese and in English
  • 50 Double Tax Treaties signed and ratified and more are under negotiation (if double tax relief is resorted to, a refund of 2/3 of the Malta Tax Paid is available)

mouse cursor imagePrivate Limited Liability Company in Malta

Business  corporate  entities  in  Malta  are incorporated  and  regulated  by  the  Companies Act 1995 with the most common business entity being  the  limited  liability  company.  A  company has  separate  legal  personality  from  the shareholders  and  it  is  unlimitedly  liable  for  its obligations.  A  limited  liability  company’s  capital is  divided  into  shares  which  are  in  turn subscribed  to  by  the  company’s  shareholders.

The  company provides its  shareholders  with  the benefit  of  limiting  their  liability  to  the  amount if any, still unpaid on the shares that they hold. A  private  company  is  a  company  in  which  the transfer  of  its  shares  is  restricted and  the number  of  its  shareholders  is  limited  to  fifty.  A company’s  name  must  have  the  suffix  Limited or  Ltd.,  while  the  authorised  and  issued  share capital  of  the  company  is  normally  not  lower than  €1,200  which  must  be  at  least  20%  paid up.  As  a general  rule  each  company  must  have at  least  two  shareholders,  however  there  is  an exception  to  this  rule  and  subject  to  certain conditions, companies may also be registered as single  member  companies  –  such  a  company  is usually only feasible for very small operations.

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A company’s  Memorandum  and  Articles  of Association  must  contain  the  following information:

  • The name of the Company
  • Whether it  is  a  public  or  private  limited liability company
  • The Registered  Office  (which  must  be situated in Malta)
  • The Objects of the Company
  • Details of  the  issued  and  authorised share capital of the Company
  • The name  and  residence  of  the shareholders of the Company
  • The number  of  the  directors  together with the name and residence of the first directors  of  the  Company  (if  the directors  are  corporate  entities  similar information would be required)
  • The name  and  residence  of  the  first company secretary of the Company

The company’s  Memorandum  and  Articles  of Association  of  a  company  may  either  be  signed by  the  company’s  subscriber  or  by  their authorised  agent.  A  private  limited  liability company  is established  on  the  submission  of the  Memorandum  &  Articles  of  Association  to the  Registrar  of  Companies  together  with  the registration  fee  which  increases  with  the authorised  share  capital  of  the  company.  The incorporation  of  a  company  is  normally completed  within  twenty‐four  to  forty‐eight hours  from  submission  of  the  relevant documents.

The  management  and  administration  of  a company  is  vested  in  its  Directors  who  enjoy  all powers  except  those  that  have  been specifically reserved  to  the  shareholders  of  the  company, exercised  in  general  meetings.  A  private company  must  have  at  least  one  director  and unless  the  company  is  an  exempt  company  the sole  director  may  not  be  the  company  secretary of  the  company  (who  must  be  an  individual).

The directors are bound to act honestly and in good faith in the best interests of the company.  The  company’s  directors  also  have  a  number  of duties  that  must  be  fulfilled  including  the keeping  of  proper  accounts,  having  the company’s  accounts  audited  annually, presenting  the  audited  accounts  at  the  annual general  meeting,  the  preparation  and submission  of  the  official  forms  indicating changes  within  the  company,  the  filing  of income tax and VAT returns.

The company’s share capital may be denominated in all major currencies.  As  a  result the  company’s  accounts  will  be  prepared  in  the currency  of  its  share  capital  while  tax  and refunds  are  all  paid  in  the  same  currency  as  the company’s  share  capital.  This effectively reduces exchange rate risks.

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Taxation of Companies in Malta – Malta Limited Liability Company

Malta’s  fiscal  regime  applicable  to  companies has  been  one  of  Malta’s  primary  magnets  for international  business  over  the  last  decade. Starting  with  the  introduction  of  an  onshore company tax regime in the mid‐1990’s providing an  attractive  effective  tax  rate  for  international businesses  and  further  developments  in  line with  an  agreement  reached  with  the  European Union  in  2006,  the  taxation  of  Maltese companies  has  gone  through  dramatic  changes implemented with effect from 2007.

In  terms  of  Maltese  law,  a  company  registered in  Malta  is  domiciled  and  resident  in  Malta  and therefore  taxable  on  all  of  its  profits.  However should  the  board of  directors  meet  regularly outside  of  Malta,  a  foreign  jurisdiction  may attempt  to  tax  the  profits  of  the  Maltese company  on  the  basis  that  its  management  and control  is  exercised  outside  of  Malta.  For  this reason it  is  recommended  that  approximately four  board  meetings  are  held  in  Malta  and/or  a Maltese resident Director is appointed.

Profits of Maltese companies are taxed according to the nature of their source. In order to  differentiate  the  different  sources  of  income for  tax  purposes,  Maltese  law  provides  for  the distribution  of  a  company’s  profits  into  five different  tax  accounts.  These accounts are the Immovable Property

Account,  the  Final  Tax Account,  the  Foreign  Income  Account,  the Maltese  Taxed  Account,  and  the  Untaxed Account.  The  standard  corporate  tax  rate  in Malta  is  35%  however  due  to  the  full imputation  system  the  tax  paid  by  the  company is  attributed  to  that  due  by  the  shareholder  on the company’s profits therefore the shareholder will  pay  no  further  tax  in  Malta  on  receipt  of dividends.  Malta is the only EU state that has maintained the full imputation system.

Furthermore,  Malta’s  corporate  tax  system provides  a  number  of  refunds  of  the  tax  paid  by the  company  on  the  distribution  of  dividends.

These refunds  vary  according  to  which  tax account  the  dividends  had  been  distributed from.  The  amount  of  refund  is  set  at  6/7  of the  tax  paid  by  the  company  on  income distributed  from  the  Foreign  Income  Account and  the  Maltese  Taxed  Account  –  thereby  the effective  rate  of  tax  in  Malta  paid  on  the company’s  profits  would  be  reduced  to  5%.  The refund  is  reduced  to  5/7  if  the  income  from which  the  dividend  has  been  distributed  was derived  from  passive  interest  and  royalties (with an effective rate of 10%). In the event that the  company  had  claimed  double  taxation relief,  a  refund  of  2/3  of  the  tax  paid  by  the company would be available.

In  order  to  fully  benefit  from  this  refund structure  we  recommend  that  a  two  tier company  structure  is  established  whereby  a holding  company  will  receive  dividends  from  an operating  company  and  also  tax  refunds  from the relevant authorities.

Further  to the  2007  amendments,  Maltese companies  also  benefit  from  a  participating exemption  regime  in  which  dividends  or  gains derived  from  a  qualifying  shareholding  in  a foreign  company  (whether  located  in  the  EU  or not  –  subject  to  certain  conditions)  will  either be  taxed  at  35%  and  on  distribution  of  a dividend  the  shareholder  may  apply  for  a  full refund  of  the  Malta  tax  paid  or  alternatively, said  dividends  or  gains  may  not  be  taxed  in  the hands  of  the  company  –  thereby  leaving  the income with a nil liability of Maltese tax.

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Malta Limited Liability Company – Additional Info.  Why use a Maltese Company?

Maltese  companies  are  versatile  and  through the  innovate  fiscal  regime  applicable  to companies  registered  in  Malta,  they  may  be used  in  a  wide  number  of  corporate  structures and for various business operations.

Maltese  companies  may  be  used  for  trade  in general  and  benefit  from  a  low  effective  rate  of taxation  in  a  number  of  group  structures  – including  group  financing  companies,  service companies,  sales  &  promotion  companies, support  companies  and  holding  companies  just to name a few.

Is the 5% tax rate in compliance with EU law? Prior  to  negotiations  with  the  European  Union concluded  in 2006,  Malta  provided  a  tax  regime available  to  onshore  companies  that  was  aimed at  international  business  through  what  was known  as  the  International  Trading  Company (ITC).  Through a series of refunds the profits of the ITC were taxed at an effective rate of 4.17%.

The  ITC  was  necessarily  limited  to  trading outside  of  Malta  in  its  objects  clause  and  the refunds were only available to non‐residents.  Both  of  these  discriminatory  features  were deemed  to  be  unacceptable  by  the  EU  and  the new  system  has  removed  these  discriminatory provisions.  Under  the  new  system,  refunds  are available  to  both  residents  and  non‐residents and  on  income  derived  from  activities  carried out  both  within  and  outside  of  Malta  subject  to certain conditions and restrictions.

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Malta Limited Liability Company. What can I name the Company?

A  Maltese  company  may  be  designated  with any  name  but  must  be  followed  by  private limited  company  or  Limited  or  its  abbreviation Ltd.

Before  the  actual  registration  of  a  company, the  shareholders  may  reserve  their  desired company  name  for  a  period  of  three  months. The  name  of  the  company  may  not  be  already taken  or  similar  to  that  of  another  company already  registered  in  Malta,  nor  may  it  have  a name  that  is  deemed  to  be  offensive  or otherwise  undesirable  by  the  Registrar  of Companies.  Furthermore,  in  the  interests  of customer  protection,  the  name  may  not  include words  denoting  a  particular  activity  that  is regulated  in  terms  of  Maltese  law  –  such  as fiduciary, trustee or other similar names.

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Is there an audit requirement for Malta Limited Liability Company?

Presently,  all  Maltese  companies  must  ensure that  their  financial  statements  are  audited  by  a qualified  and  registered  auditor  in  Malta in accordance  with  International  Standards  on Auditing.  The  auditor  must  also  submit  a  report on  his/her  findings  to  the  shareholders  of  the company  at  general  meeting.  A  company  must submit  its  audited  financial  statements  to  the Registrar  of  Companies  annually,  within  ten months from the end of the company’s financial year,  provided  that  for  the  first  accounting period,  the  company  may  submit  accounts covering  a  period  of  not  more  than  eighteen months.  Furthermore,  the  company  may change the financial year end of the company of the  current  and  all  subsequent  years  by submitting  the  relative  Form  to  the  Registrar  of Companies. Depending on the size and status of the  company,  certain  information  may  be omitted  from  the  submitted  financial statements  in  the  form  of  abridged  financial statements.

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Are there any annual requirements for Malta Limited Liability Company?

There  are  a  number  of  annual  requirements that  Maltese  companies  must  adhere  to,  all  of which may assist you with. Malta Limited Liability Company – requirements:

  • Maltese companies  must  hold  a  general meeting  of  the  shareholders  every  year, at  a  date  no  later  than  15  months  from the  previous  general    During the general meeting the directors are to present the company’s audited financial statement together with the auditor’s and director’s report.
  • Maltese companies must also submit an annual return  to  the  Registrar  of Companies  providing  information related  to  the  share  capital,  directors and  similar  information together  with its  annual  registration  fee  which  varies according  to  the  authorised  share capital of the company. This must either be  signed  and  submitted  by  one  of  the company’s  officers  or  submitted electronically  by  an  individual  duly authorised  either  in  the  company’s memorandum,  by  a  resolution  of  the board  of  directors  or  an  extra‐ordinary resolution.
  • Maltese companies  are  to  compile  and submit an annual tax return which is the   responsibility  of  the  Directors,  however in  practice  it  is  often  a  function delegated  to  the  company’s accountants.

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How do I manage and administer the Company – Malta Limited Liability Company?

The  management,  administration  and representation of  the  company  are  vested  in the  Board  of  Directors  or  any  member  thereof as  may  be  determined  by  the  memorandum and  articles  of  association  and  or  the  Board  of Directors.  The  Directors  may  also  appoint representatives  of the  company  should  they deem  such  necessary.

BRIS GROUP  may  provide your  company  with   a  Maltese  resident corporate director should you so require.

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How do I register the company for VAT purposes in Malta – Malta Limited Liability Company?

Malta Limited Liability Company. Your  Maltese  company  must  register  for  VAT  if it  is  carrying  out  an  activity  which  is  subject  to VAT.  We may assist you in your company’s registration for VAT. The standard rate of VAT in Malta  is  18%  and  Maltese  VAT  law  is  in conformity  with  all  relevant  EU  Directives. Returns  for  VAT  must  be  submitted  every  three months  and  the  relevant  VAT  collected  should be  forwarded  to  the  Commissioner  of  VAT together with the return.