The Complete Guide to Setting Up a Malta Ltd Company & Getting 5% Tax

Getting 5% tax with Malta structure

Many business minded people choose to start a Limited Liability Company in Malta because the tax burden on business in Malta is much lower than it is in most other countries.

Not only great, well established business have opted for setting up in Malta but also small business owners have opened their eyes to the benefits that come from operating in Malta.

It enables big business to increase their profits and smaller businesses to grow.

Setting up a Malta company

Starting a Limited Company in Malta is uncomplicated and citizens of countries within the European Union are welcome to relocate without any hassle from the authorities.

However, it is not necessary to reside in Malta in order to establish a business there.

Essentials of a Malta Ltd

Share Capital. When starting a Limited Company in Malta, all you need is 1200 Euros in share capital which is not much compared to the requirements in many other countries. In Sweden, for example, the minimum is approximately 5400 Euros.

Address in Malta

A Limited Liability Company has to have a physical address in Malta. If you reside in Malta you can use your home address but if you live elsewhere there are solicitors (lawyers) who will not only arrange for an address but also handle your business mail. All of this is completely legal and will not in any way compromise your company or yourself.

Owner

If the owner of a Limited Liability Company is a natural person one authorized signatory is enough, but if there are separate legal entities two authorized signatories are required.

Bank account

Your Limited Liability Company is required to have a bank account in Malta but the bank you choose does not necessarily have to be a Maltese bank. Opening a bank account is a simple process but you will need to show a bank reference from your bank in your home country.

VAT-registration

Two weeks after your Limited Company is registered you will receive your VAT number and you can start billing your customers.

Hiring a lawyer in Malta

The best way to register a new business in Malta is to hire a lawyer to set everything up. He/she will handle your dealings with authorities and take care of your bookkeeping and VAT. Your lawyer will also answer any questions you may have regarding taxes and will make sure you get the most profit out of your business.

Corporation tax in Malta

Corporation tax in Malta is 35 % which may seem like a lot but remember that income tax is extremely low and there are plenty of generous deductions. For example, you may deduct half of the cost for your home if you reside in Malta and your company is registered to your home address. This is how much income tax you will be paying in Malta (the numbers in parentheses are for married people):

• Free of tax: 0 – 8500 Euros (11 900 Euros)
• 15 % tax: 8 501 – 14 500 Euros (11 901 – 21 200 Euros)
• 25 % tax: 14 501 – 19 500 Euros (21 201 – 28 700 Euros)
• 35 % tax: 19 500 Euros or more (28 701 Euros or more)
• In addition to income tax, 10 % will go to social security contributions.

How to pay 5% in corporation tax in Malta

In order to minimize corporation tax, many choose to start an offshore company in Cyprus. If your Maltese Limited Company is owned by your company in Cyprus you will receive a refund of close to 86 % of your taxes. This means that if you have paid 35 % corporate tax in Malta you get 86 % back, which in the end equals paying only 5 % in corporate tax.

When starting a business in Malta, the share capital requirement is as low as 1164.96 Euros which is much lower than what many other countries require. Your fee for starting up a new business is only 245 Euros but if you do it electronically it will cost you even less. To start a company electronically you will need a Maltese e-identification though.

Advantages of setting up your business in Malta

1. Low social security contributions

Your employer’s contribution is only 10 % of the employee’s gross salary. Because of this, in addition to lower salaries, your company will be more profitable and your business will grow faster.

2. Lower wages

The cost of living in Malta is fairly low, therefore the wages are low. Minimum wage for people who are 18 years of age or older is 165.68 Euros/week and according to Malta Times the average salary in 2011 was 14 466 Euros/year. As you can see, when taking into consideration the low employer’s contributions, it’s quite a lot cheaper to hire personnel in Malta than it is in most other countries.

3. Lower income tax

Social security contributions is always 10% of your salary but how much income tax you pay depends on how high your salary is, but compared to many other countries the percentages are low. If you give yourself an 8 500 Euro salary you will be paying no income tax at all and if your salary is 14 500 Euros/year your income tax is 15 %.

4. Generous deductions

If you have a business registered in Malta you are entitled to many generous deductions, for example the cost of broadband, work related trips, computers and part of your rent if your company is registered to your home address.

5. Lower your corporation tax to 5%

In Malta, corporation tax is 35 % of all profits taken out of the business but if you set up a holding company in a different country you will get an 86 % tax refund. This is because you’re not taxed in Malta, so you finally end up with a 5 % corporation tax.

A good way to get started is to hire a lawyer who is experienced in both the start-up of businesses in Malta and holding companies in Cyprus.

Read more about setting up a Malta company.

Formation of a Malta company

There are two ways to set up a business in Malta, you can either do it yourself or you can hire a Law firm to do it for you. Naturally, doing it yourself will save you some money but by letting someone with experience handle it for you will save you a lot of time and it will also allow you to concentrate on your future business actions.

Opening a bank account in Malta

The very first thing you need to is to open a bank account in Malta and when doing so you will need the following documents:

• Your valid passport.
• A rental agreement or proof of residential ownership in Malta. However, if you choose to live elsewhere, any address on which you will register your company will do, including a PO Box.
• A copy of a utility bill showing your address in your home country.
• A bank reference in English from your bank in your home country showing that you are in good standing. This should be done before your depart for Malta and your bank reference needs to be addressed directly to the Maltese bank.

Register your business in Malta

You will find all the information you need regarding how to register your business and access to all the necessary legal forms on Malta Financial Services Authority’s website. What you need is documentation of the following:

• Name of your business.
• The address on which your business will be registered.
• Number of owners, board members and secretaries. All parties involved will be required to show identification.
• Home addresses of the owner/owners.
• Business operations.
• A minimum of 1164.96 Euros in share capital. The fee for setting up your business is only 245 Euros, however, if your share capital is exceeding 1500 Euros the fee will increase.

Once you have all your papers in order it’s time to set up an appointment with:

• The Registry of Companies
• Malta Financial Services Authority,
• Notabile Road,
• Attard BKR14,
• Malta

If you, instead of visiting The Registry of Companies, choose to register your business electronically it will be cheaper but you will need a Maltese e-identification. Two weeks after registering your business you will receive your VAT number and you can start billing your customers.

Need help setting up your business?

If you feel it’s too complicated setting up your business in Malta or if your time is limited you can always hire a law firm to do the job for you. This is a great alternative if you are moving an already existing business to Malta, if you want to start a holding company or if you want to start a business while residing in another country. This is how it’s done:

• Let your lawyer know if you are intending to start a new business, move an existing business or start a holding company.
• Send a notarized copy of your passport, a bank reference in English and a copy of a utility bill showing your current address in your home country. You will also need to send a completed Maltese bank account application form. This form will be sent to by your lawyer. If you send these documents by e-mail before putting them in the regular mail, your lawyer will be able to get started right away.
• Sign necessary forms to authorize your lawyer to set up your business for you.
• Deposit your share capital once your lawyer has opened your Maltese bank account.
• An advance notice for the start of your business can be collected in Malta within three weeks.
• Your business will be set up, your bank account will be ready to use and you have received your Maltese VAT number.
• Done!

Frequently asked questions

Can I start up a business in Malta while still residing in another country?

Yes, you can but only if you hire a lawyer (solicitor) to handle the start-up for you. If you give him power of attorney he can make all the arrangements but if you choose to do it on your own you have to be present to identify yourself in Malta.

How much does a business start-up in Malta cost?

You will need a share capital of 1164 Euros, however, the actual cost for the start-up of a business in Malta is only 245 Euros.

Am I required to live in Malta in order to have a business there?

No, you can either rent a cheap office space or register your business to a PO Box. This is completely legal and your lawyer can make these arrangements.

How high are income tax and social security contributions in Malta?

Your income tax is based on your salary. If you take out a salary of 8 500 Euros/year you will be exempted from taxation but if your salary is 14 500 Euros/year the tax rate is 15 %.
Social security contribution is 10 % for both employers and employees.

Is it really possible to pay as little as 5 % in corporation tax?

Well, corporation tax is always 35 % of your profits but if your business is owned by a holding company in a different country, for example Cyprus, you will get an 86 % tax refund since offshore companies aren’t taxed in Malta. You will end up paying only 5 % in corporation tax which is completely legal.

Can I really deduct half of my rent if my business is registered to my home address in Malta?

Yes, this is true. There are also several other generous deductions for broadband, computers and vehicles.

How long does it take to get a business set up in Malta?

According to Malta Financial Services Authority it can be done in as little as 24 hours if all the necessary documents have been filled out and submitted correctly. However, taxclimate.com has never actually heard of a business start-up that fast and we advise you to expect it to take a few weeks.

Do I have to have a Maltese bank account?

Yes, you do. When you apply for an account you will be required to show your valid passport, a copy of a rental agreement and a business address. If you are residing in Malta you can use your Maltese home address. You will also need a bank reference from the bank in your home country and this reference should be addressed directly to the bank in Malta.

How long does it take to open a bank account in Malta?

This depends on the bank and the administrator but expect it to take at least a week. The two main banks in Malta are Bank of Valletta (BOV) and HSBC. We recommend that you choose Bank of Valletta for a speedy opening of an account since HSBC is known for being a bit more “picky”.

How do I register my company?

This is done at The Registry of Companies, Malta Financial Services Authority in Attard. If you have a Maltese e-identification you can register your business on the internet which will be cheaper.

Can opening a bank account, acquiring a Maltese e-identification and the start-up of a business be done at the same time?

Yes, if you hire a lawyer in Malta he/she will take care of everything for you.