Ongoing Compliance and Tax Obligations for Companies Incorporated in Malta
Background
Malta has established itself as an attractive European jurisdiction for international businesses seeking an EU base from which to operate, invest and grow.
Its EU membership, English-speaking business environment, extensive network of double taxation agreements and established financial and professional services sectors make Malta an appealing destination for companies across a wide range of industries.
However, incorporating a company is only the beginning.
Once established, a company incorporated in Malta must meet a range of ongoing accounting, tax, corporate and governance obligations. Understanding these requirements and managing them properly is important in order to maintain a successful and credible business in Malta.
Accounting Requirements
Annual Accounts and Deadlines
Companies incorporated in Malta are required to prepare annual financial statements for each financial year. These financial statements must be approved by the Board of Directors within 10 months of the financial year-end and subsequently filed with the Malta Business Registry (MBR).
For a company with a 31 December year-end, this means that the financial statements must be approved by 31 October of the following year and submitted to the MBR by 12 December. Companies should therefore ensure that sufficient time is allowed for the preparation, approval and filing of their annual accounts within these statutory deadlines.
Audit Requirements
As a general rule, companies incorporated in Malta are required to have their annual financial statements audited by a warranted auditor. The auditor's report must then be attached to the financial statements when they are filed with the MBR.
There is, however, an audit exemption available to qualifying small private companies. A company may benefit from the exemption where, in the relevant financial year, it does not exceed any of the following three thresholds:
- Balance sheet total: €46,600
- Turnover: €93,000
- Average number of employees: 2
Where these conditions are satisfied, the company may file abridged accounts without an audit report.
However, companies operating in regulated sectors may be subject to additional requirements. For example, companies operating in sectors such as financial services, gaming and aviation are typically required to maintain a statutory audit irrespective of their size, as a result of sector-specific legislation.
Tax Returns
Every company incorporated in Malta is required to file an income tax return, or self-assessment, within 9 months of the end of its financial year. The return must be based on the company's approved audited financial statements or, where the company qualifies for an audit exemption, its approved financial statements.
The financial statements and tax return should therefore be prepared and approved in sufficient time to meet the applicable filing deadline.
Tax Payment Deadlines
The deadline for payment of any outstanding tax liability is generally 9 months from the end of the company's financial year.
An exception may apply where a company with predominantly non-resident shareholders and business interests outside Malta has obtained a DDT10 determination. Where a DDT10 determination is active, the tax payment deadline is extended to 18 months after the financial year-end.
VAT Obligations
The VAT obligations of a company incorporated in Malta depend on the type of VAT registration applicable to its activities and turnover.
Standard Registration – Article 10
Businesses whose annual turnover exceeds the applicable threshold of €35,000 for goods and services, or which voluntarily opt to register, may be required to register under Article 10. Article 10 registrants charge VAT on taxable supplies and are entitled to recover input VAT. They are issued an MT-prefixed VAT number, which can also be used as an EORI number.
Article 10 businesses generally file VAT returns on a quarterly basis, with each VAT return due within 6 weeks of the end of the relevant three-month VAT period.
Small Undertakings - Article 11
Businesses whose turnover falls below the exemption threshold may instead qualify for Article 11 registration as a small undertaking. Article 11 registrants do not charge VAT on their supplies and cannot recover input VAT.
Rather than filing quarterly VAT returns, they file an annual VAT declaration by 15 March of the following year.
Corporate Requirements
Companies incorporated in Malta are subject to a number of ongoing corporate requirements designed to ensure that the company remains properly managed and its statutory records are kept up to date.
Annual General Meetings
Every company must hold an Annual General Meeting (AGM) at least once in every calendar year to approve the annual accounts and address any other statutory business.
The first AGM must be held within 18 months of incorporation, while subsequent AGMs must not be separated by more than 15 months.
For private companies, the AGM may be held by written resolution of all shareholders instead of a physical meeting, provided that the company's Memorandum and Articles of Association permit this.
Maintaining Corporate Registers
Companies must maintain accurate and up-to-date corporate records, including information relating to their members, directors and Ultimate Beneficial Owners (UBOs).
Reporting Company Changes
Companies must also keep the MBR informed of changes to their corporate details. Changes to issued share capital, directors, the Company Secretary or the registered office must generally be notified to the MBR within 14 days of the change taking effect.
UBO Reporting
The UBO requirements are particularly important. Companies are required to identify and verify their Ultimate Beneficial Owners, being any natural person who ultimately owns or controls more than 25% of the shares or voting rights, or who otherwise exercises ultimate effective control.
UBO information must be filed with the MBR at incorporation. Any change in beneficial ownership must generally be notified to the MBR within 14 days of the change being recorded at company level. Companies must also file a Beneficial Ownership Annual Confirmation on each anniversary of registration, confirming that no changes have occurred or recording any updates.
Payroll Requirements
Where a company has employees, it will also have ongoing payroll obligations. These include the preparation of monthly payslips and FS5s, together with the preparation of FS3s and FS7s on an annual basis.
Maintaining Strong Corporate Governance and Local Substance
Strong corporate governance is important not only for ensuring that a company complies with its statutory obligations, but also for demonstrating that its management and control are genuinely exercised in Malta.
1. Preventing Permanent Establishment Risk
For Malta tax purposes, a company is generally considered tax resident in Malta, and therefore subject to tax in Malta, if it is incorporated in Malta or, where incorporated outside Malta, managed and controlled in Malta.
Other jurisdictions may likewise treat a company incorporated outside their borders as tax resident where its effective management and control is exercised from that jurisdiction. This can create the risk of cross-border tax challenges and competing residence claims.
For companies incorporated in Malta, it is therefore important that effective management and control is demonstrably exercised in Malta.
Maintaining Strong Local Substance
A number of practical measures can support the exercise of effective management and control in Malta.
The majority of the company's board should consist of individuals resident in Malta who actively participate in the management of the company. Board meetings should also be convened and held in Malta on a quarterly basis, with minutes evidencing that strategic decisions were taken in Malta.
Crucial decisions relating to business strategy, investments, financing and key operational matters should demonstrably be made at board level in Malta. Significant contracts, including commercial agreements, financing arrangements and intercompany agreements, should also be negotiated and executed in Malta.
Together, these measures help demonstrate that the company's management and control are genuinely exercised in Malta and support a clear and well-documented governance structure.
2. Supporting Future Mergers and Exits
Strong corporate governance is also particularly important when a company is preparing for a future merger or exit. A company with clear, complete and accurate corporate records can demonstrate a well-managed corporate history and provide evidence of how key decisions were made.
Good corporate governance should therefore include properly documenting important corporate decisions through resolutions, maintaining accurate minutes of AGMs and Board meetings, and ensuring that the company's statutory registers are complete and up to date.
Keeping these records consistently throughout the life of the company is preferable to attempting to reconstruct the company's corporate history when a merger, investment or exit is already being considered.
The Importance of a Professional Company Secretary
A professional Company Secretary plays an important role in maintaining strong corporate governance and ensuring that a company continues to meet its statutory obligations.
The Company Secretary's responsibilities include maintaining the company's statutory registers, filing documents with the MBR, organising Board and general meetings and ensuring ongoing regulatory compliance.
Conclusion
Good compliance is not simply about meeting statutory deadlines. It contributes to sound corporate governance, supports the company's reputation and can become particularly important when a business is seeking investment, restructuring its operations or preparing for a future merger or exit.
The ongoing nature of these obligations also means that compliance should be treated as an integral part of running the company, rather than as a series of isolated annual requirements. Proper corporate governance and timely compliance can help provide clarity, continuity and confidence throughout the company's lifecycle.
Contact Us Today
A Company Service Provider (CSP) such as Zeta can help take the complexity out of ongoing corporate compliance in Malta. From managing statutory filings and maintaining corporate records to coordinating corporate meetings and resolutions, Zeta provides practical support to help companies stay organised, compliant and focused on their business.
With professional support throughout the company's lifecycle, Zeta can help ensure that important corporate and compliance obligations are managed efficiently, giving business owners greater confidence that their company remains in good standing as it grows and evolves.
