The extensive guide to setting up a business in Malta

Anyone who wants to start operating a business in Malta (and there are many reasons to do so) will need to register themselves accordingly. There are a few options available, each with its own requirements and features that may make it a better fit, depending on one’s needs.

For both trading and holding purposes, the private limited liability company is the preferred vehicle for foreign investment, although public companies, partnerships, and sole traderships are also possible.

Depending on the type and size of the company, registration generally takes from two to 14 days, can be done remotely, and is relatively inexpensive, starting from €100 and capped at €2,250.

While not a highly complicated process in itself, investors typically engage a local services provider, not least because of the requirement for a local address.

Companies offering such one-stop-shop corporate services solutions include accountancy, management consultancy, and legal firms of stature.

Registration entails submitting the new company’s bylaws, including the authorised and issued share capital, details of the shareholders, directors, and other key persons, and a deposit slip showing the paid-up share capital credited to the company’s (not necessarily local) bank account.

The Registry of Companies will then issue a certificate as proof that the company is authorised to commence business, although further operating licences are needed if the company is active in regulated sectors like financial services and pharmaceuticals.

No licences or permits are needed for non-regulated business activities.

Shares may be held directly, by nominee, or in trust, and there are no restrictions on the nationality or residency of Maltese company shareholders. Additionally, foreign companies can transfer their domicile to Malta without dissolving and setting up a new entity, reducing the time and costs associated.

Company Name

The first step to setting up a Maltese company is choosing a name. This must be in Latin script, must not be offensive, and must not be the same or very similar to the name of an existing company. It should also adequately represent the nature of the enterprise. If it includes particular terms like ‘bank’ or ‘insurance’, evidence of the company’s business intentions must be presented accordingly. The Registrar can reserve a name for up to three months during the incorporation process.

Key Personnel

A company must appoint at least one director and a secretary. Directors are responsible for the company’s proper administration and management, including compliance with Maltese legislation. The directors appoint a company secretary, who must be a natural person and can also be a director. They may not, however, be the sole director, unless the enterprise is registered as a private exempt company.

As the company’s factotum, it is in investors’ best interests to appoint a secretary with expertise on local corporate governance whose guidance the directors can rest on.

The secretary’s tasks include taking minutes of board meetings and ensuring the timely submission of statutory documentation, related to, among others, the appointment of new directors, a change in address, an increase in share capital, a transfer of shares, and the annual return. The latter must be filed each year within 42 days of the company’s registration date, subject to penalties, and must include the company’s name, address, share capital, and percentage of which is paid up, and the identities of all shareholders, directors, secretaries, and corporate bodies, along with a payment of between €100 and €1,400, depending on the authorised share capital.

Accounting and Audit Requirements

Company accounting in Malta follows the EU Single Accounting Directive, transposed into Maltese law through the introduction of the General Accounting Principles for Small and Medium-Sized Entities (GAPSME).

Public companies must however conform to the International Accounting Standards Board’s (IASB) Financial Reporting Standards (IFRS). Private companies may opt to follow the latter (more onerous) requirements if desired.

Either way, investors are assured that financial statements are in line with prevailing European and global standards of clarity, accuracy, and usefulness, generally including a balance sheet, a profit and loss account, notes to the accounts, a directors’ report, and an auditor’s report (with certain allowances for small companies). These must give a true and fair view of the company’s assets, liabilities, financial position, and profit and loss, and should be approved by shareholders within 10 months of the end of the financial year. The approved financial statements must be submitted to the Registry up to 42 days after the 10-month period has elapsed. Failure to do so is subject to late penalties.

Other Requirements

After getting a Certificate of Registration from the Malta Business Registry, a new company will also need to register for VAT and income tax with the Commissioner of Revenue before commencing its business activities.

Similarly, prior to engaging employees, it must obtain an employer identification number from JobsPlus. Altogether, these registrations can be expected to take up to one week, after which the company is fully set up and ready to operate.

Company Types

Sole Trader

Certain professionals may find self-employment to be the best way of operating in Malta. Sole traders will need a Maltese home or office address, a bank account, and a social security number. They must also register with the tax authorities and VAT department. Non-EEA/Switzerland nationals will also need a residence permit. As like any other company, sole traders must obtain the necessary licence if working in regulated sectors, but do not need to sign up to the Registry of Companies.

Partnership

Individual operators who decide to work together can draw up a deed specifying the terms of the partnership. Maltese law allows for limited liability on some (but not all) members of a partnership. A dedicated bank account and tax number are required.

Private Limited Liability Company (Ltd)

Whether you are looking for an effective asset-holding structure like a holding company, an operational trading company, a ship-owning company, a vehicle for investment, a captive insurance company, or for any other use, the private limited liability company is likely to be your go-to solution.

It should be noted that although the tax code contains special provisions for some types, like holding companies or fiscal units, company registration is effectively uniform all across.

Private companies have a distinct legal personality, and their assets and liabilities are separate from those of their owners, with the up to 50 shareholders’ liability being limited to the unpaid capital amounts on the shares they each hold.

Private companies can also be of the following types:

Small company

Maltese company law allows small private companies to submit audited abridged accounts if they do not exceed two of these criteria: (a) a balance sheet total of €4 million, (b) turnover of €8 million, and (c) an average of 50 employees during the accounting period.

Private exempt company

Account audits are not required if a company meets certain criteria.

First, the Memorandum of Association must restrict the number of persons holding bonds or any other form of debenture to no more than 50, prohibit body corporates from taking on directorship of the company, and prohibit any arrangement whereby the policy of the company is capable of being determined by anyone other than the directors, members, or debenture holders.

Secondly, the company must also satisfy at least two of the following criteria: (a) a balance sheet total of €46,600 or less, (b) an annual turnover of €93,000 or less, and (c) an average of two employees or fewer over the accounting period. Although these companies are exempt from audit requirements, the profit and loss account, abridged balance sheet, and notes must still be delivered to the Registrar.

Only those companies registered as private exempt may be single-member companies, where the sole shareholder is also the sole director and company secretary.

Overseas Company

Companies constituted outside of Malta that wish to open a branch in the country need to submit basic information like the company’s constitutive documents (translated, if required, into English) and particulars of the company’s representatives both locally and abroad.

Branches are only taxed on income arising in Malta, and have no separate legal personality to that of their foreign head office, which is bound to uphold any contract signed by the legal branch.

This option is typically chosen when the presence in Malta is expected to be temporary, as incorporating a private company carries comparable compliance requirements with the additional benefits of a global tax net and easier access to local finance.

Public Limited Liability Company (Plc)

Large businesses may be better served by opening a public company. These companies have no limit on the number of shareholders, although they must have at least two upon registration. They are also required to have at least two directors (which may be corporate bodies), and have a higher minimum share capital. While these companies may offer shares or bonds to the public, these issues must take place through the Malta Stock Exchange and be accompanied by a prospectus for potential investors.

Documentation

The most important statutory documents required by the Malta Business Registry to set up a company are the Memorandum and Articles of Association, also referred to as the company’s bylaws.

• The Memorandum of Association contains basic information about the company:
• The company’s name.
• Its registered office in Malta, including a lease agreement.
• Designation as private or public company.
• Operating lines in the objects of the company (and main trading activity in the case of a single member company).
• Details of the company’s shareholders, including copies of identification documents.
• The amount of authorised share capital, the number and price of shares taken up by each shareholder, and where shares are divided into different classes, the rights attaching to each class.
• Details of the directors, company secretary, and legal representative.
• Whether the company will be registered indefinitely or for a specified fixed period of time.

In the case of a public company, the Registry will require additional information on the costs payable or chargeable to the company in relation to its formation and any special advantage granted to anyone involved.

As for the Articles of Association, these establish the internal regulations governing the company, including, for example, details on directors’ roles and special shareholder rights. The Companies Act provides a template with model articles, which are implicitly adopted if it is not submitted.

Shareholders can always change provisions in these bylaws through a simple majority vote.

Corporate and Fiduciary Shareholders

In the case of corporate shareholders, identifying documentation on the natural person who is the ultimate beneficial owner is also required. Should no body corporate hold more than 25 per cent ownership, details on the senior managing official must be provided.

Where shares are held through a fiduciary or a trust, the beneficial owner does not need to be identified in the Memorandum of Association. Nonetheless, the Registry will require disclosure of their identity upon incorporation.

The efforts made to combat financial crime and money laundering in the run-up to and following Malta’s greylisting have resulted in stringent enforcement of the regulatory framework, requiring utmost compliance with disclosure requirements.

Capital Deposit and Registration Fee

A bank deposit slip should be presented as proof of the deposit of capital. For private companies, this must be at least 20 per cent of the minimum share capital of €1,165. For public companies, this goes up to €44,588, with at least 25 per cent being paid up.

The Registry’s fee is linked to the company’s authorised share capital. This starts at €245 for companies with a share capital of up to €1,500, and is capped at €2,250 for those with €2.5 million and over. Registration in electronic format qualifies for even lower fees

This feature was first carried in the Malta Invest 2023 edition. Malta Invest is the first-ever comprehensive international investment guide focusing on Malta as a destination. It is produced by Content House Group.