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With tens of thousands of Companies registered through the Maltese Registry of Companies, and with several thousands more Companies registered each year, Malta has become a center for corporate structures worldwide.

Regulated under the Companies Act, Chapter 386 of the Laws of Malta, the local legislation provides for various options for the aspiring businessman under which to structure his enterprise. Apart from the traditional Private Limited Liability Company, which requires less than 300 Euros of capital to be set up, the aspiring businessman can also opt for numerous partnership structures with varying levels of liability. Additionally, a Maltese Private Company can be incorporated and registered in a few days and are not expensive to operate and maintain. The Maltese Company can also be used as a vehicle for numerous other structures such as a collective investment scheme or a special purpose vehicle to hold assets or debt. Public Limited Liability Companies can also be established, which can issue shares or other securities on the primary or secondary markets on the local stock exchange following the finalization of the listing procedure.

Apart from the standard Limited Liability Company, shareholders can also opt for a Limited Liability Company with Exempt Status. This option reduces costs for Companies not surpassing certain thresholds. Individuals, wishing to set up a Company in Malta on their own can also have the option of establishing a Single Member Company which will have only one shareholder and benefit from all the benefits a Private Exempt Company benefits from, although a Single Member Company can only have one primary function. Thus, larger Companies will usually opt for the standard Private Limited Liability Company, while smaller family oriented businesses will most likely opt for the simpler Private Exempt Company. Individuals wishing to establish a Company on their own will then opt for the Single Member Company.

Every Company must have at least one director who will take care of the day to day and management decisions of the Company. Additionally, every Company must also have a secretary who shall be responsible for all the filing duties with the Registry of Companies. A director in the Company may also be the Company’s secretary however the secretary must always be an individual. Thus if a corporate entity acts as a director, an individual needs to be separately appointed to act as the secretary.  Furthermore, every Company must have at least two shareholders, unless the shareholders opt for a single member company. One further compulsory legal requirement under Maltese law is that a Malta Company must each year submit annual audited accounts to the Registry of Companies.

Foreign domiciled entities also have the option to re-domicile their operations to Malta. Under Maltese Law, the Company wishing to re-domicile its operations into Malta does not require to windup its affairs in the jurisdiction which it is departing from. The same can be said if the Company wishes to re-domicile its operations from Malta to another jurisdiction. The Company would simply, following a standard procedure, acquire registration in the local registry and de-register from its current. Furthermore, Maltese law imposes no entry or exit taxes on the assets of a re-domiciling Company.

In additional to very versatile structuring options, Malta offers numerous tax benefits for non-residents opting for a Maltese Company structure. Although the Corporate tax rate in Malta is set at 35%, depending on the type of income generated by the Company, the effective tax rate of said company can be reduced to a final effective tax rate ranging between 0% and 6.25% through the Malta tax refund system. Maltese law also provides for a highly attractive Participation Exemption which eliminates any Maltese taxation in a parent-subsidiary relationship. Furthermore Malta has over 60 double taxation treaties with numerous jurisdictions under which double taxation can be reduced or eliminated. Nonetheless, apart from Treaty Relief, the Maltese taxation system provides for numerous ways how to avoid double taxation.  Particularly,  a company may opt for Flat Rate Foreign Tax Credit which is a deemed credit on tax paid on foreign source income which can be applied even if no actual foreign tax would have been paid. In this regard, a Company is free to opt for the double taxation relief system which suits its needs the best.

The versatile structuring possibilities and tax benefits under Maltese law allows for Maltese companies to be used for a number of purposes. With low effective tax rates and no withholding taxes from interest and royalty payments, it is very common that Malta is used as an IP Box jurisdiction where a company is incorporated in Malta to hold intellectual property and license such intellectual property to third parties. Maltese Companies can also be used as a financing company to finance large structural projects. One of the most convenient Malta based corporate structures involves a two tier structure as illustrated below:

2

  • (1) Trading Profits
  • (2) Dividend Payments
  • (3) Application for refund
  • (4) Payment of refund

Through the two-tier structure, profits made by the Trading Company are distributed as dividends (or bonus shares) to the Holding Company which in return would be in a position to apply for the tax refunds.  Henceforth, such structure ensures that final individual shareholders behind the corporate structure will not receive any funds in their name in their home jurisdiction.

Malta also does not have any thin capitalization rules, CFC rules or transfer pricing rules.

KSi Malta is a Maltese firm specialised in providing Malta Company Formation services. Through our experienced team of specialists we can assist you in incorporating any entity you require, and compliment this by providing you with specialised tax advice, assistance with acquiring any necessary licenses and accounting and auditing services.

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