Insights

This article was first published on corporatelivewire.com.

Malta is an independent member state of the European Union centrally located in the Mediterranean, benefiting from good international connections to major European cities and financial centres, including London, Frankfurt and Paris, and a modern communications infrastructure. A robust legal system and an attractive onshore tax regime form the bedrock of the country’s success in this sector. Financial services today continue to be an important contributor to Malta’s economic growth and as at Q1 2013 contributed 9% to GVA, while employment in this area continues to grow.

Corporate services are one of the country’s key offerings. Malta has continued to develop its presence in this field for well over two decades and more than 60,000 companies have been registered in Malta. Investors establishing corporate structures benefit from:

• a well-developed legal regime predominantly modelled on English law;
• effective regulation of corporate service providers by serious, but accessible and responsive, regulators;
• cost-effective solutions delivered by legal, tax and accounting specialists;
• English-speaking professionals driven by a strong work ethic and supported by a pro-business government administration;
• industry-leading anti-money laundering and transparency protocols;
• absence of exchange control regulations; and
• a double tax-treaty network extending to 65 states.

Malta companies have been used for a wide variety of objects including, trading activities such as the provision of commercial, management, technical and other services, group treasury operations and the international purchase and sale of goods, and holding activities, such as the holding of shares in other companies, intellectual property rights, loan rights, bank accounts and other assets, whether tangible or intangible, movable or immovable.

Forms of Companies

Malta companies may take a wide variety of forms, including:

• private limited liability companies;
• public limited liability companies;
• shipping organisations established for the purpose of holding vessels;
• investment companies with variable share capital having objects limited to acting as investment companies;
• protected cell companies with objects limited to carrying on the business of insurance;
• incorporated cell companies with objects limited to carrying on the business of insurance; and
• recognised incorporated cell companies with objects limited to carrying on permitted investment services activities.

The Private Limited Liability Company

Private limited liability companies are by far the most common form of company incorporated in Malta. Our companies’ law is modelled closely on the U.K. Companies Act, 1985 and all the applicable EU Directives. Maltese courts frequently refer to judgements of the courts in England and Wales when interpreting the equivalent provisions of our Companies Act.

Minimum Requirements of a Private Limited Liability Company

A private limited liability company is normally established with a minimum of two shareholders, but establishing single member companies is also possible in certain instances.

A private limited liability company must have a minimum share capital of €1,165 (at least 20% paid up) for incorporation purposes and at least one director and a company secretary. There is no local residence or nationality requirement for any of these offices and corporate directors are permitted. Most corporate service providers in Malta provide company secretarial and administration services at competitive rates.

Company Constitutive Documents

The constitutive documents of a private limited liability company (memorandum and articles of association) take the form of a memorandum of association which contains information on the owners, the capital of the company and its legal representation, while the articles of association contain mainly procedural rules that govern its administration. It is not required that these documents are notarised or deposited in a court registry, thus saving on the time needed for incorporation.

Fiduciary and Trustee Holding Arrangements

It is possible for licensed fiduciaries, trustees and foundations to hold shares for beneficiaries. Malta has enacted legislation governing the ownership of shares by fiduciaries, trustees and foundations in full respect of anti-money laundering legislation.

Registration of Constitutive Documents

The constitutive documents of a company must be registered with the Registry of Companies, and delivered along with certain due diligence documents. Registration fees are due on submission of all incorporation documents. The fee varies depending on the amount of the authorised share capital with the lowest being €245.

Transparency and Anti-Money Laundering

In relation to the above activities, Malta has transposed all EU anti-money laundering and prevention of financing of terrorism legislation. Corporate service providers and professional advisers assisting with company incorporations and corporate structuring are required to identify ultimate beneficial ownership and perform appropriate due diligence in their regard.

Company records held by the Registry of Companies, such as the names of shareholders and directors, share capital, pledged shares and audited financial statements, are accessible for public inspection.

Company Continuation

Non-Maltese companies may transfer their corporate registration into Malta by means of a procedure known as continuation (or redomiciliation) of companies, but notice to potential creditors must be given to allow them to preserve their rights. Companies registered here may also continue into another jurisdiction.

Tax Overview

Maltese companies are automatically tax resident in Malta, irrespective of their place of effective management and control. Malta operates a full imputation tax system under which companies are taxed at a flat rate of 35% on their taxable profits unless they can benefit from a participation exemption. As a result of the imputed credit for shareholders in respect of any such tax payment, and following a distribution of dividends by the company, the shareholders may be entitled to a refund of a significant part of the tax paid by the company. The amount of the refund will vary depending on the source of the company’s taxed profits from which the dividend was distributed to the shareholders.

On-going Compliance Requirements

Malta companies are required to file with the Registry of Companies on payment of the relevant fee an annual return outlining key company information. The fee payable depends on the authorised share capital and a minimum of €100 applies. Annual audited accounts also need to be filed with the Registry of Companies within 10 months from the end of the financial year. If a company carries on more than 90% of its activities outside Malta and files a declaration to the effect, then, it may file its annual audited accounts with the Registry of Companies within 18 months from the end of the financial year.

The article was co-authored by Matthew Mizzi.

Disclaimer: This article is not intended to impart advice and readers are asked to seek verification of statements made before acting on them.