Malta Limited Liability Company.
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)
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.
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.
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.
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.
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.
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.
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.
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.
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.