Company limited by shares
Malta is a reputable, compliant and transparent financial hub, and the gateway to the European Union, a market of more than 500 million people.
Due to its advantageous tax regime, Malta is the jurisdiction chosen by a large number of international companies and holding companies, to establish their headquarters and do business in the European Union.
Although its corporate standard rate is 35%, in practice there is a system of tax credits and refunds for individuals and corporate shareholders of part of the tax suffered on the distribution of profits.
The tax refund may be either a six-sevenths refund for trading income, a five-sevenths refund for passive interest and royalties, or a two-thirds refund for passive income. This may lead to a reduction of corporate tax to effective tax rates of between 5 and 10 percent, the lowest across the European Union.
Holding companies may benefit from a participation exemption. Dividend income, profits from a foreign P.E., and capital gains may be tax-exempt if the holding fulfills certain participation conditions. Furthermore, certain investments that yield a fixed rate of return may also be tax-exempt.
Malta is a full member of the EU and since 2008 has adopted the Euro as its official currency, with the benefits that it entails, such as the availability of funding opportunities or the European tax directives, including the Parent-Subsidiary Directive, the EU Mergers Directive, and the EU Interest & Royalties Directive.
Malta has also signed a large list of Double Taxation Agreements, and companies doing business in Malta have access to an English-speaking high-skilled workforce, make it even more attractive to incorporate in the jurisdiction.
Malta costs to obtain and administrate licenses are one of the lowest of the European Union and often valid for the whole EU territory. This makes Malta an attractive jurisdiction to establish businesses related to e-gaming, shipping, airline or investment funds.
In addition, Malta company registration process is simple and straightforward, being possible in as little as 1 day to incorporate a company.
It is important to note that corporate tax residence in Malta is defined by the place of management and control, so to qualify for tax residency it may not be sufficient to just hold annual general meetings in Malta, decisions have to be really taken there. A company incorporated in Malta but not ordinarily resident is subject to taxation on Malta-source profits and profits remitted to Malta.
Malta is a compliant jurisdiction leading OECD and FATF compliance, and it has implemented the OECD’s automatic exchange of information for tax purposes (AEoI).
All in all, Malta is a reputable jurisdiction and its private company limited by shares an excellent vehicle, whether to conduct international trading, hold immovable assets and intellectual property, conduct e-gaming business, or as a holding group company, a ship-owning company, an investment vehicle or a captive insurance company.
Country code - MT
Legal basis – Mixed (Civil and Common law)
Legal framework - Companies Act
Company form – Private company limited by shares (Ltd.).
Liability - The liability of the shareholders for the company is limited to the amount of their respective shareholdings.
Share capital – Minimum issued share capital required is EUR 1,164.69, of which twenty percent (20%) of the nominal value of each share must be paid up. It may be denominated in EUR or any other currency. Bearer shares are not allowed.
Shareholders – Limited companies may be formed by one shareholder and not more than 50, who can be either natural or legal persons, residents or non-residents, without limitations. A minimum of two shareholders may be required if the director is a corporation. Details of shareholders are publicly accessible.
Directors – At least one director, who may be a natural person or a legal entity, resident or non-resident. A shareholder may be the company director. Directors’ details are available to the public.
Secretary – A secretary is required who must be an individual, resident or non-resident. In certain cases, the director may also act as company secretary. Secretary must fulfill requirements stated in the Companies Act.
Registered Address – Private limited companies must have a registered physical office address located in Malta, where the company must keep all statutory records and other documents which must be available for review.
General Meeting – Every company must hold one annual general meeting, which can be held in Malta or abroad, in addition to any other meetings held during the year. The first general meeting must be held no later than 18 months after the company is formed. No more than 15 months may elapse between one general meeting and the next one. A corporate shareholder would have to appoint a corporate representative to sign documents on behalf of the company, individual shareholders may appoint proxies to attend on their behalf.
Electronic Signature – Permitted.
Re-domiciliation – Inward and outward re-domiciliation is allowed.
Compliance – Limited companies are required to include financial statements audited or certified by officially authorized auditors or accountants and a declaration on the Income Tax Return. This requirements also apply to companies with no taxable income or dormant companies.
Directors are required to file to the Registrar a copy of the company’s annual accounts laid before the company in general meeting, together with a copy of the auditor’s report and the directors’ report.
Audit and director's report requirements may be waived for a company that qualifies as a small company.
Limited companies are required to submit annually an Annual Return to the Registrar of Companies. Annual returns of the company are calculated according to the authorized share capital.
- Shareholders not disclosed *
- Directors not disclosed *
- Corporate shareholders permitted * *
- Corporate directors permitted * *
- Local director required * *
- Secretary required * *
- Local secretary required * *
- Annual general meetings required * *
- Redomiciliation permitted * *
- Electronic signature * *
- Annual return * *
- Audited accounts * *
- Audited accounts exemption * *
- Exchange controls * *
- Mixed (Civil and Common) Base legal
- 1 Minimum shareholders *
- 1 Minimum directors *
- EUR 1,164.69 Minimum issued capital *
- EUR 232.938 Minimum paid up capital *
- EURAny Capital currency *
- Anywhere Location of annual general meeting *
- 2017 AEOI *
Tax residency – A company is tax resident in Malta if it is incorporated in Malta or the management and control of its business is exercised in Malta
Basis – Companies both domiciled and resident in Malta and is consequently taxable on a worldwide basis. A non-Maltese incorporated company that is resident in Malta through management and control is subject to Maltese tax on income arising in Malta and on income remitted to Malta.
Tax rate – Corporate tax standard rate is 35%.
However, relief of double taxation upon the distribution of taxed profits is ensured, granting a shareholder the right to claim a refund of all or a part of the Malta tax paid on the qualifying profits out of which the dividend was distributed, reducing the effective tax rate to 0%-10%.
In addition, certain investment income is taxed at a CIT rate of 10% or 15% and certain categories of rental income are taxed at 15%.
Capital gains - Capital Gains are included in the corporate income tax base. An exemption may apply for gains derived from the disposal of a participating holding or a P.E. outside Malta, subject to certain conditions. Certain investments that yield a fixed rate of return may be tax-exempt.
Capital Gains derived from the transfer of immovable property situated in Malta may be taxed at a final tax of 8% of the transfer value. Rates from 2% to 12% may apply in certain cases.
Dividends - Dividends received from a resident company are taxable on the gross amount in the recipient’s hands. If the distributed profits have been taxed, no further tax should be chargeable to the recipient company. Dividends received from a non-resident company and remitted profits from a foreign PE, may be tax-exempt, subject to certain participation conditions.
Interests - Interest income is subject to taxation at standard rates.
Royalties – Royalty income is subject to income tax.
Foreign-source income – Companies ordinarily residents and domiciled in Malta are taxed on their worldwide income. Companies that are not ordinarily resident or not domiciled are taxed on income accrued in Malta or remitted to Malta.
However, taxable profits of Maltese-resident companies derived from foreign investments; profits of a foreign PE; and profits derived from foreign investments, assets, or liabilities of an onshore bank licensed in Malta, for which no evidence of tax paid is available can qualify for a flat-rate foreign tax credit of 25%.
In addition, shareholders may be entitled to a tax refund of part of the tax suffered on the distribution of profits. The tax refund may be either a six-sevenths refund, a five-sevenths refund, or a two-thirds refund, depending on the type of income.
Withholding taxes – Malta does not levy withholding tax on dividends paid to non-residents. A 0% withholding tax applies to royalty and interest payments, provided that the recipient does not act on behalf of a Maltese domiciled resident.
Losses – Losses arising from taxable income may be carried forward indefinitely. Carryback of losses is not allowed.
Inventory - Inventory valuations are usually made at the lower of cost or market value. In general, the book and tax methods of inventory valuation will be acceptable. Last in first out method (LIFO) is not allowed for taxation purposes.
Anti-avoidance rules – The transfer pricing regime in Malta is not sophisticated. There are included some anti-avoidance provisions and brief references to transactions at arm’s length.
Malta conscripted into local law the EU Anti-Tax Avoidance Directive (ATAD 1) via the L.N. 411 of 2018 – which is now in force since January 1, 2019.
Under the L.N. 411 of 2018, Malta has implemented controlled foreign company (CFC) rules.
Under Maltese law, a CFC may be a Malta’s company foreign permanent establishment (PE) or a subsidiary in which the parent company holds directly or indirectly more than 50% of its voting rights/capital or is entitled to receive more than 50% of the profits – which corporate tax paid is lower than half of the tax that would have been charged on the company or PE under the Malta Income Tax Act.
Malta taxes non-distributed income of the CFC if this is derived from a non-genuine arrangement to create a tax advantage.
CFC rules don’t apply to subsidiaries and PEs with no more than EUR 750,000 of trading profits and non-trading income of EUR 75,000 or less, or companies which profit amount does not exceed 10% of its operating costs.
Malta has also transposed into law the interest deductibility rule, whereby a company can only deduct net interest expenses up to the higher of 30% of its EBITDA or EUR 3 mil.
An Exit tax will become effective from January 1, 2020. A Maltese company that transfer assets to a PE outside of Malta, a non-resident operating through a PE that transfer assets or business to outside Malta, or a Malta company that transfers its tax residency from Malta to outside Malta – would be deemed to have accrued a capital gain, which will be subject to tax. The capital gain would be calculated by the market value of the transferred assets less their base cost for tax purposes.
Labor taxes – Employers and employees are required to make contributions to the Social security fund at 10% on employees’ monthly income, each one, without a maximum limit amount.
Tax credits and incentives – A tax credit for foreign tax paid is usually available. When no evidence of tax paid is available, a company may qualify for a flat-rate foreign tax credit of 25%.
The Malta Enterprise Act and other related legislation provide comprehensive tax incentives for foreign investment on certain activities in Malta, such as manufacturing activities.
There are also tax incentives for securitization vehicles, re-insurance special purpose vehicles and collective investment schemes.
The Micro Invest Scheme provides tax credits up to EUR 30,000 for micro-enterprises. A tax credit may be increased to EUR 50,000 for self-employed women, businesses that are majority owned by women, and start-ups established in Gozo.
Compliance – On average, a Limited company in Malta may require 8 payments and 138 hours per year to prepare, file and pay taxes.
Personal income tax - Maltese ordinarily residents and domiciled in Malta are subject to personal income tax on their worldwide income and capital gains.
Maltese ordinarily residents and not domiciled in Malta are taxed on their income and capital gains arising in Malta and on income arising outside Malta that is remitted to Malta.
This means that if you are a Maltese resident non-domiciled (permanent home) in Malta, only your Maltese-source income and capital gains and your income remitted to Malta may be subject to tax.
Foreign-source income not remitted and capital gains (remitted or not) may be tax-exempt.
Non-residents are only taxed on their income and capital gains from Malta.
Personal income tax rates are progressive from 0% to 30%. Capital Gains are taxable income. However, gains from the disposal of immovable property are taxed at lower rates of 8%, 10% or 12% depending on the circumstances.
Other taxes – In Malta, there are no inheritance, real property, net wealth and municipal taxes. There is a stamp duty applied on certain transfers such as real property or securities. Value-added tax is 18%.
- Offshore Income Tax Exemption * *
- Offshore capital gains tax exemption * *
- Offshore dividends tax exemption * *
- CFC Rules * *
- Thin Capitalisation Rules * *
- Patent Box * *
- Tax Incentives & Credits * *
- Property Tax * *
- Wealth tax * *
- Estate inheritance tax * *
- Transfer tax * *
- Capital duties * *
- 5% Offshore Income Tax Rate *
- 5% Corporate Tax Rate *
- 35% Capital Gains Tax Rate *
- 35% Dividends Received *
- 0% Dividends Withholding Tax Rate *
- 0% Interests Withholding Tax Rate *
- 0% Royalties Withholding Tax Rate *
- 0 Losses carryback (years) *
- 100 Losses carryforward (years) *
- 139 Tax time (hours) *
- 8 Tax payments per year *
- 10% Social Security Employee *
- 10% Social Security Employer *
- 35% Personal Income Tax Rate *
- 18% VAT Rate *
- 75 Tax Treaties *
Country details *
The Republic of Malta is a densely populated archipelago, located in the center of the Mediterranean, in the south of Italy, east of Tunisia and north of Libya. Malta is a former British colony, and currently a member of the European Union and the Commonwealth.
It has about half a million inhabitants. Its capital is Valletta, although its most populated urban center is Birkirkara, with over 22,000 inhabitants. Its official languages are Maltese and English. Since 2008 its legal tender currency is the Euro (EUR).
Malta has a House of Representatives, known in Maltese as Kamra tar-Rappreżentanti, which is elected by direct universal suffrage by simple transferable vote every five years unless the House is dissolved by the President in consultation with the Prime Minister.
The President of the Republic is elected every five years by the House of Representatives.
Malta is strategically located in the center of the Mediterranean Sea at a crossroads between Europe, North Africa, and the Middle East.
Its economy depends mainly on tourism, foreign trade, serving as a transshipment port for ships, manufactures, especially electronics and textiles, and on its developed ICTs and financial clusters.
The country produces only 20% of the food it consumes. It also has limited reserves of fresh water and does not have its own sources of energy.
Film production is a growth factor for the Maltese economy, with several large-budget foreign films being shot annually.
The country has increased exports of many other types of services such as banking and finance. The financial sector has grown in recent years and managed to escape the economic crisis of 2008. Locally attributed to the stability of the country's banking sector and its prudent practices in granting loans.
It also stands out its fully developed mixed market economy and its low effective corporate tax compared to the European Union average, which encourages the location of foreign companies' headquarters.
Malta also has an approved EU citizenship by investment program, where it is possible in a period of 12 months, to be granted as Maltese citizen, through a contribution to the National Development and Social Fund, among other requirements.