Malta, a southern European island, has quietly emerged as one of Europe’s most stable and innovative financial domiciles. Despite Malta drawing a large influx of tourists due to its warm climate and vast culture, the small and densely populated state has much more to offer. Malta’s decision to join the European Union in 2004 and the Eurozone in 2008 have proved critical to its development as a major finance and business centre.
Malta has strong banking, insurance fund and wealth management sectors that have attracted investment from the world’s leading financial institutions, blue-chip multinationals, and high-net-worth individuals.
Malta offers several benefits for potential business ventures:
- It is one of Europe’s top performers. In recent years, Malta has been ranked among the strongest EU economies in terms of GDP growth;
- English is the nation’s official language, with Italian and French being spoken by many;
- A region of opportunities. Malta is conveniently situated within two to three hours direct flight time from Europe’s major cities;
- A credible challenger. In 2011, the European Commission viewed the competitiveness of Malta’s economy in terms of labour productivity as above average in an EU-wide comparison, while the country has retained its ranking in the Global Competitiveness Report 2011-2012, placing 51st of 142 countries;
- Flexible regulatory framework and regulator. All financial services fall under one regulator, the Malta Financial Services Authority (MFSA). Companies benefit from streamlined procedures, lower regulatory fees, and reduced bureaucracy.
Malta’s Companies Act is primarily formulated around English Law and EU directives and defines the type of Maltese corporate entities or commercial partnerships that may be formed.
The following types of companies are available:
- A limited liability company;
- Limited partnership;
- General partnership.
The incorporation of a Maltese private limited liability company will typically take between three to five working days, from the time the appropriate documents are presented to the Malta Registrar of Companies, to be processed and finalised.
Incorporated companies must comply with the following:
A minimum of two shareholders is required for every private company. In order to meet this requirement, a third party must hold a single share with all the other shares being held by the intended beneficiary. Alternatively, a private exempt company may opt to have a single shareholder.
Registered office and establishment of a branch office in Malta
All companies must have a registered office situated in Malta and Zeta offers exactly this. Companies aiming to expand their organisation abroad may wish to register a branch as an overseas company. Some companies receive tax breaks by continuing to be incorporated in their home country while they attempt to establish a Malta operation.
Registration of a Maltese company
A company is set up by a Memorandum of Association being entered into and subscribed to by the shareholder(s) and a certificate of registration being issued in respect thereof. Included in the Memorandum should be:
- Company name;
- Address and official identification of the subscribers thereto;
- The nature of the company (private or public);
- The registered office of the company in Malta;
- The object and purpose of the company to be incorporated;
- Details of the authorised;
- Issued and paid up share capital;
- The way in which the representation of the company is to be exercised;
- The number of directors and the particulars of the first directors and secretary.
Fees payable to the Maltese authorities
Registration fees upon incorporation of a company are subject to the amount of authorised share capital. The minimum charge is €245 on an authorised share capital of €1,500 increasing up to a maximum of €2,250.
The annual company registration fee is also contingent on the amount of authorised share capital. The minimum fee is €100 increasing up to a maximum of €1,400.
Taxation and Double Taxation Treaties
The company rate of tax is 35% on the chargeable profits based on the audited accounts of the company. Despite this, a system of tax refunds rewarded to shareholders provides substantial fiscal benefits, reducing Malta tax to shareholders to 0% in the case of holding companies, and 5% in the case of trading companies. In both instances, there are specific legal requirements that must be satisfied in order for shareholders to benefit from such refunds.
Accounting and auditing requirements
All accounting records have to be audited at the end of each financial year, in accordance with Malta’s Companies Act (1995) and International Accounting Standards. Financial statements constitute the directors’ report, the auditors’ report, balance sheet, profit and loss account, notes recording the financial statements together with schedules for the profit and loss account.
Malta as a Holding Company Jurisdiction
Particularly by virtue of a participation exemption introduced in 2007, Malta has enhanced its position as a premier EU holding company location. Malta is, in fact, the quintessential destination in Europe to establish a company to hold shares in one or more entities.
Malta Income Tax
Income derived by a Maltese company from a qualifying ‘participating holding’ in a subsidiary company would be wholly exempt from tax in Malta. Furthermore, capital gains realised upon a disposal of the said ‘participating holding’ would likewise be wholly exempt from tax in Malta.
A Maltese company would have a ‘participating Holding’ in a subsidiary should the shares held by the company in the subsidiary carry at least two of the following rights:
- A right to votes; and/or a right to profits available for distribution; and/or
- A right to assets available for distribution in the event of a winding up;
The subsidiary does not own immovable property situated in Malta or any real rights over such property or, directly or indirectly, any shares or interests in any entity or person which owns immovable property situated in Malta. Any real rights over such property where 5% or more of the total value of the said shares may not be owned, nor other interests so held are attributable to such immovable property or rights.
At least one of the six following criteria must also be met:
- The Maltese company holds more than 10% of the shares in the subsidiary; or
- The Maltese company holds shares in the subsidiary having an acquisition value of at least €1,164,000 and its shares are retained for an uninterrupted period of at least 183 days; or
- The Maltese company holds shares in the subsidiary and is entitled, at its option, to call for and acquire the balance of shares in the subsidiary; or
- The company holds shares in the subsidiary and is entitled to first refusal in the event of the proposed disposal, redemption or cancellation of the shares in the subsidiary; or
- The Maltese company holds shares in the subsidiary and is entitled to sit on the board or to appoint a person to sit on the board of the subsidiary as a director; or
- The Maltese company holds shares in the subsidiary for the furtherance of its own business and not as trading stock.
The participation exemption is always available in respect of capital gains realised upon a disposal of a participating holding. However, the participation exemption would only be available in respect of dividends derived from a participating holding in a non-resident subsidiary and, additionally, provided that any one of the following additional conditions is satisfied:
- The subsidiary is resident or incorporated in a country or territory which forms part of the European Union; or
- The subsidiary is subject to foreign tax at a rate of at least 15%; or
- No more than 50% of the subsidiary’s income is derived from passive interest or royalties; or
- The Maltese company’s holding in the subsidiary is not a portfolio investment and the said subsidiary is subject to any foreign tax at a rate which is not less than 5%.
Non-qualifying participating Holdings
Should a Maltese company’s investment in a subsidiary not represent a qualifying participating holding, dividends derived by the company would be subject to tax in Malta at the standard rate of 35%. However, by application of Malta’s double tax relief mechanisms and refundable tax credit system, the combined overall effective Malta tax rate should be reduced to a rate not exceeding 6.25%. Capital gains derived from the disposal of the participating holding would nevertheless be exempt from tax in Malta as aforesaid.
Disposal of shares in the Maltese company
Capital gains realised by any non-resident shareholder upon the disposal of shares in the Maltese Company would generally be exempt from tax in Malta.
Any company and/or corporation may establish a branch in Malta. The establishment of a branch in Malta confers upon its parent entity many advantages. The process to set up such a branch is straightforward. There is no requirement to establish a physical presence, although a local representative must be appointed for this branch. Such a branch may confer certain fiscal advantages, as well as offer facilities for maximising tax efficiency. Malta has a strong double-tax treaty with over 65 countries. The country’s booming financial sector is underpinned by unanimous political support as well as the support of the general population. Moreover, it offers a predominantly English-speaking but also multi-lingual and highly trained workforce.
Setting up a company branch in Malta is straightforward and requires little more than the submission of a particular form to the Malta Registry of Companies within one month from the establish of the branch. This form contains all relevant information needed for compliance with local legislation. Documents must be submitted with these forms, and they must be either originals or suitably certified. Very reasonable fees are payable on submission of this form.
Partnership en Commandite
A Partnership en Commandite, also called a limited partnership, offers the possibility to two or more shareholders to operate under a partnership name. It is a limited partnership because its obligations are guaranteed by the liability of its partners, known as the general partners. The partners shoulder unlimited, joint and/or several liability.
The capital of this limited partnership is funded by the shareholders and can be represented by shares. The Partnership en Commandite operating in Malta needs to be registered in Malta and its company headquarters must be in Malta.
Partnership en nom Collectif
A Partnership en nom Collectif is also known as a general partnership. It may be formed by a plurality of partners, from two upwards. These partners come together to operate under the name of partnership. Its obligations are guaranteed by the unlimited and joint and several liability of all of its partners.
In Malta, a partnership en nom collectif registered locally must have a registered office on the island. It is transparent for tax purposes and the partners declare their respective profits in their personal tax returns.
Private Limited Companies
A private limited company is one that that restricts the right to transfer its shares, limits the number of its shareholders to not more than 50, and prohibits the sale of its shares to the public. Such a company must have the name of the company ending with “limited” (abbreviated to ‘ltd.’) and have an authorised share capital of at least €1165, at least 20% of which must be paid up.
When setting up a private limited company, it is necessary to list in detail the main activities and powers of the company. The business of the company must principally consist of the activities laid out in this list. These companies need at least one director, though this director does not need to be a Maltese resident. A company secretary is also necessary. An auditor must be appointed and must be resident in Malta. The company has to have its registered office in Malta.
All these details and other relevant details are to be worked out and put down in the Memorandum of Association. There are provisions to turn the private limited company into a public one by altering the Memorandum and Articles of Association.
Public Limited Companies (Limited/ltd.)
When the needs of a company fall outside the parameters of a primate limited company, then it is set up as a public limited company. Essentially, a public limited company is a limited liability company that can offer its shares and bonds to the public. However, to do so, they must be registered and they are obliged to produce a prospectus when they come to issue their shares and bonds.
The requirements to form a PLC are not onerous. While private limited companies have a name ending in “limited” or “ltd.”, the public limited company needs to add the abbreviation “PLC” to its name. As long as the Company Register raises no objections, the PLC may take any name it pleases. The PLC needs a minimum of two shareholders and it must have a registered office in Malta. It must also have a minimum authorised and issued share capital of €46,587.47, at least 25% of which must be paid up. Responsibility for, and representation of, the PLC is vested in the board of directors, which is responsible for running the PLC in compliance with all relevant regulations and norms. The PLC also needs an auditor who is resident in Malta, and it must produce regular and annually audited financial statements.
A number of factors make Gibraltar attractive for offshore business conduct:
- Good geographical location and bilingual (English and Spanish) territory;
- Cost effectiveness and attractive fiscal regime for offshore investors;
- Excellent reputation, stable government, and special status within the European Union;
- Excellent infrastructure and communications;
- Favourable tax status for offshore banks;
- No exchange controls.
In addition to the opportunities arising from Gibraltar’s status in the EU, it is also the only jurisdiction that offers a flexible tax regime (25-year certificates), a specific exclusion from the EU requirement to levy VAT, and regulatory standards matching the EU and UK but retaining the flexibility of a small jurisdiction. All these factors make Gibraltar unique in many respects, and all of them are able to attract offshore investors.
The Gibraltar Companies Act is based on English Legislation and has recently been amended to include relevant EU Directives. A Gibraltar company can be incorporated within two to three days. However, upon payment of an additional fee, same day incorporation can be affected. Clearance of the company’s name is required prior to incorporation.
The following types of companies are available:
- Limited by shares, public or private;
- Limited by guarantee, with or without share capital;
- Unlimited, with or without share capital.
Incorporated companies must comply with the following:
- For a private company, the minimum number of shareholders is one;
- For public companies, the minimum number of shareholders is seven (Corporate and Nominee shareholders are permitted).
A Gibraltar company is required to maintain a registered office in Gibraltar where the Statutory Books are kept. In the case of a private company a sole director is permitted, although a minimum of two is advisable. A public company, on the other hand, must have at least two directors. Directors are not required to hold qualifying shares and corporate directors are also permitted.
An AGM of shareholders is required to be held once a year albeit anywhere in the world (the AGM can be dispensed with if all the shareholders agree).
Many of the facilities available in Company Management in Gibraltar are unique within the European Union. The benefits include swift incorporation, extensive company management services, and favourable fiscal advantages.
There are some points that need to be noted on the subject of company incorporation:
- All companies must comply with the provisions of the Companies Act;
- There are normally fees for the management of a company;
- Company details can be disclosed even if the company is limited by shares;
- Accounts and other returns are necessary and are by and large an annual requirement.
There are numerous regulations governing the administration of a company, with the duties, responsibilities, and liabilities of directors being set out in the Companies Act.
The first step when forming a Gibraltar company is to ensure that the proposed name is acceptable to the Company Registrar. Once the name is approved, the following documents need to be submitted in accordance with the provisions of the Companies Act:
- Memorandum of Association;
- Articles of Association;
- Declaration of Compliance;
- Notice of Situation of Registered Office;
- Statement of Nominal Share Capital.
A registration fee of GIP 50 (GIP 100 as from 1 January 2014) is currently payable at the time of presentation of the documents. The Memorandum and Articles of Association must be embossed with the appropriate stamp duty.
The time taken to incorporate a company in Gibraltar is normally three to five working days, although a company may be incorporated within 24 hours if necessary, for a fee of GIP 100 (GIP 200 as from 1 January 2014). Once a company is incorporated, a Certificate of Incorporation is issued. Under Gibraltar legislation, only barristers or acting solicitors of the Supreme Court may incorporate companies for gain.
Gibraltar companies will not be designed to accommodate bearer shares.
The identity of the directors and shareholders of Gibraltar companies must be filed at the Gibraltar Companies Registry, although these may be corporate directors and/or nominee shareholders.
A minimum of one director and one shareholder (corporate or individual) must be appointed to a Gibraltar company. The director and the shareholder may be the same person or corporation.
Gibraltar companies are required to identify commencement dates for their financial years and to file accounts at the Gibraltar Companies Registry relating to their chosen year-long fiscal period within 13 months of the chosen financial year-end. The year-end date chosen can be any date of the year and there is no set minimum for this date to be amended.
Companies that are classified as ‘small’ are not required to file audited accounts and are able to file balance sheets signed by the directors of the company instead.
All companies with a turnover of over GIP 1,000,000 are subject to a statutory audit. The financial statements may be produced under IFRS or Gibraltar (which is similar to the UK) GAAP and must be signed off by a Gibraltar-registered auditor.
The Gibraltar Companies Registry, which operated solely on a commercial basis (Companies House, Gibraltar), is now fully automated. A company is required to file returns to include the registered office, directors, allotments of shares and an annual return. Moreover, company searches and name clearances can be carried out within a matter of hours.
It should be noted that companies undertaking financial services are subject to licensing and regulation by the Financial Services Commission (FSC). These requirements are distinct and an addition to those that are outlined in the section.
Zeta provides advice on the most suited corporate structure to suit your requirements. There are various options of corporate structures that can be formed in Luxembourg, with the most common being a Limited company locally know as a S.A.R.L.
The jurisdiction of Luxembourg is also an ideal place to incorporate a Holding Company, which allows our clients to legally minimize tax earnings sourced from other European Countries. Corporate Structuring is common in Luxembourg for cross-border investments. The country is a member of the EU and has a stable Government. The country’s economy significantly lies in the Financial Sector having more than 200 banks, over 3,900 investment funds and approximately 20,000 Holding Companies.
The local authorities encourage foreign investors to set up a fund in Luxembourg. Luxembourg investment funds are split into 3 areas:
- UCI (Undertaking for Collective Investment);
- UCITS (Undertaking for Collective Investment in Transferable Securities – designed for retail investors);
- SIF (Specialised Investment Funds).
All the above-mentioned investment funds are not taxed on their income nor on capital gains obtained in Luxembourg. A stamp duty on the share issues or transfers is not required.
Luxembourg has a large number of double tax treaties concluded by the Grand Duchy with many countries worldwide.
Shelf companies are available for those who want to start doing business without having to wait for the normal length of the incorporation process.
Switzerland is strategically located in the heart of Europe, from a trading perspective, with the neighbouring countries of the European Union. Switzerland ranks as an international financial centre with an excellent reputation.
This confederation is made up of 26 autonomous cantons. Thanks to a flexible fiscal policy based on discretion (confidentiality and anonymity: two strong points of this jurisdiction), as well as its’ wealthy economy, Switzerland allows entrepreneurs to enjoy a number of advantages in order to optimise company’s profits.
- Although Switzerland is not considered a tax haven by the OECD, those who set up their company here can carry out their business enjoying a professional image and excellent reputation at a global level
- Companies most frequently used are the Société Anonyme (S.A.) and the Société à Responsabilité Limitée (S.A.R.L.)
- There are zero limitations regarding the number of shareholders. A single shareholder may be sufficient who can also be an employee of the company. However, it is mandatory that the company has at least one Director resident in Switzerland (Zeta can put you in touch with resident Directors if necessary)
- The minimum capital requirement to be paid at the time of the incorporation of the company is CHF 100,000 for the S.A. and CHF 20,000 for the S.A.R.L.
- Shareholders who set up a S.A.R.L are not anonymous and their identity is listed in the local registry. In some cases, we can offer solutions to preserve their anonymity
- Shareholders who set up a S.A. may choose the bearer report system and thus not appear in the Commercial Register
- By being "out of Europe", Switzerland is not obliged to comply with the decisions of the Euro Zone for fiscal and financial matters. However, in order to nurture relationships with international partners and avoid appearing on blacklists, Switzerland has introduced a new tax convention model. Every company set up in Switzerland pays a tax or duty on the profits that vary depending on both the canton in which it was set up and on its activity
- Similarly, Swiss companies are required to maintain their accounts and file their annual statement