We advise investors who run international business and want to find a more advantageous tax regime to get Malta citizenship and register a company there.
The Maltese government financially supports business development by issuing soft loans, grants, and government loans. These subsidies primarily apply to companies that create high-tech solutions in the financial industry or work in green energy, IT, and pharmaceuticals.
To legally reside in Malta and conduct business in the country, an entrepreneur needs to be a Maltese citizen or a Maltese residence permit holder. The easiest and fastest way for this is to participate in the state-sponsored temporary or permanent residence permit by investment program. It is also possible to obtain Maltese citizenship through naturalisation for exceptional services by direct investment.
10 benefits for business in Malta
Many entrepreneurs benefit from registering a business in Malta. Management companies registered in Malta that receive income from subsidiaries in other countries can benefit from lower VAT and income tax rates. The minimum tax rates are 5%.
This article lists 10 other reasons why it is profitable to open a business in Malta.
1. Company registration time in Malta: 1-2 weeks
A company can be registered in Malta in just 1-2 weeks, and citizenship by naturalization for exceptional services by direct investment can be attained in 14-36 months. Applicants first receive a Maltese residence permit, which allows them to stay in the country for an unlimited period, apply for tax residency, and register a company.
2. Corporate tax rates
Malta offers one of the most favourable company tax regimes in the EU. The base VAT rate in Malta is 18%, compared to 23.1% on average in the EU.
The tax system in Malta offers many benefits to companies registered there, allowing them to reduce their VAT and income tax liabilities significantly.
Tax breaks for Maltese companies:
- The tax rate on income earned outside Malta for Maltese-registered companies is only 5%;
- Dividends paid out by an international company tax-resident in Malta are not taxed;
- VAT in Malta is charged at 5-7%, depending on the business activity.
Shareholders of a Maltese company, both tax residents and non-residents, can apply for a refund of 6/7th of the tax paid at a rate of 35% on trading income and a refund of 5/7th of the income tax paid on interest and royalties received from activities outside of their main business activity.
In cases of qualified participation, i.e., a participating holding, Malta’s participation exemption relieves 100% of the income tax on dividends received from the shares of a foreign company owned by a Maltese company.
Head of the Maltese office of Immigrant Invest
Individuals are not taxed on dividends and royalties.
We explain how to register a company in Malta in our article "Business in Malta: benefits, taxes, and specifics".
3. Project financing
In addition to low tax rates, entrepreneurs in Malta can also benefit from preferential financing terms, including state financing:
- a business can receive a preferential loan of up to 33% of the total investment amount;
- the Maltese government can provide up to 50% of the collateral for a business development loan;
- Malta Enterprise, a government organisation set up to support businesses, can finance up to 75% of the cost of a project;
- the European Regional Development Fund can finance up to 50% of business development costs;
- startups can receive grants of up to $200,000;
- there are several benefits to research activities.
4. Protection of intellectual property rights
A mobile business that can easily be transferred to another country is usually related to intellectual property. Malta's intellectual property laws comply with strict international and EU legislation.
Malta is a member of the European Patent Convention, Community Trademark, and Community Design.
Malta is a participant in the following agreements:
- the Patent Cooperation Treaty;
- the World Intellectual Property Organisation Copyright Treaty, or WIPO Copyright Treaty;
- World Intellectual Property Organisation Performances and Phonograms Treaty, or WIPO Performances and Phonograms Treaty.
5. Double tax agreements
The Maltese government has signed double tax treaties (DTTs) regulating the taxation of income and property of companies and individuals who are residents of one state on the territory of another state.
It is essential to consider the terms of the agreements for companies registered in Malta and receive income from other countries. They are obliged to pay tax in Malta at a rate of 15% on dividends received and interest earned on the condition that a Maltese company is the ultimate beneficiary of the income. Otherwise, the DTT rates do not apply.
6. Low rates of social security contributions
Under the Social Security Act, any contract of service, written or oral, whether expressed or implied, is insurable employment.
There can only be one job insured at a time, and in the case of several simultaneous jobs, the job insured will be the one that provides the most income or earnings.
The social insurance rates are 20%. But half of them, 10%, are deducted from the employee's salary. The company's social security costs are only 10%.
7. Lower minimum wage
The minimum wage in Malta is around €800. And the average salary is approximately €2,000 for ordinary employees. This is one of the advantages of doing business in Malta.
8. Share capital requirement
A limited liability company must have a minimum share capital of €1,250. Of this amount, 20% is deposited in the company’s bank account during the registration process.
A registration fee is calculated on a progressive scale depending on the authorised capital declared when setting up a company. When incorporating a company with a minimum share capital, the fee is 7.5% of that amount, and with a higher share capital, the fee can be reduced to just 1%.
9. Reliable banking system
Malta joined the European Union in 2004 and adopted the euro as its currency in 2008. These actions led the country down a path away from offshore banking.
Maltese banks currently comply with European banking rules, which means that if the account belongs to an EU citizen, all interest is reported to the tax authorities. This ensures that Malta remains in compliance and is out of the list of tax havens.
Malta has an open and modern banking system, and Maltese banks may require more documents than usual to open an account. The two largest banks in the country are HSBC Malta and the Bank of Valletta.
10. High security and low crime rates in Malta
Apart from the high quality and standard of living, Malta is safe and secure in most aspects. For example, it has a low crime rate. Malta ranks high on the World Risk Report's Safety and Disaster Resilience Index.
The Global Risks Report series tracks the perceptions of global risks by risk experts and global leaders in business, government and civil society. It looks at risks in five categories: economic, environmental, geopolitical, social and technological.
Malta's scores are high in the security rankings by French travel insurance company Insurly. The authors of the ranking assessed 180 countries according to several criteria: frequency of natural disasters, quality of medicine, risk of terrorism, number of crimes, and number of road accidents.
Frequently asked questions
Many entrepreneurs take advantage of registering a business in Malta. Management companies registered in Malta that receive income from subsidiaries in other countries can benefit from lower VAT rates and income tax. The minimum tax rate is 5%.
There are numerous benefits of doing business in Malta: a low VAT rate and government-assisted financing and loan programs. A company can be registered in Malta in two weeks.
A Maltese tax resident pays up to 35% tax on income and is entitled to tax deductions. The amount of the deduction depends on the marital status of the resident. For example, a married man without children with an annual income of over €60,000 is eligible for a deduction of €9,905.
Shareholders may return a portion of the tax paid by the company:
- 100% if the holding company owns an interest in a foreign enterprise and falls into the Participating Holding category;
- 6/7 if the company is engaged in trading;
- 5/7 if the company earns income from royalties and interest;
- 2/3 if the company receives income from another country with which Malta has a double taxation agreement.
VAT in Malta is 18%. The VAT rate is one of the lowest rates in the EU – lower only in Luxembourg and Switzerland.
There are no gifts, inheritance or, in some cases, property taxes in Malta.
Another significant advantage of the Maltese tax system is that you may be a tax resident even if you spend less than 183 days in the country. For this, you need to obtain the status of domicile.
Malta is one of the six EU countries with a VAT rate below 20%. By comparison, the average base VAT rate in EU countries is 23.1%.
The cost of company registration in Malta depends on the type of company and share capital.
A limited liability company is required to have a minimum authorised share capital of €1,250. The company needs to deposit 20% of the share capital into its bank account during the incorporation process.
Additional fees for company incorporation in Malta:
- €8 — reservation of company name;
- €23 — registration with the Data Protection Commissioner’s office;
- €100 to €1900 — company registration with the Registrar of Companies. Fees depend on the company type;
- €1,000 — a trade licence for a calendar year.
It usually takes 1-2 weeks to register a company in Malta. The company must have a registered office in Malta before starting the registration process.
To live in Malta and run a business there, you need to obtain a Maltese residence permit or citizenship. The Maltese Citizenship Act offers citizenship by naturalization for exceptional services by a direct investment over 14 months or longer. For this, you need to invest €690,000 in the Maltese economy and undergo a strict Due Diligence check.
To start a business in Malta, you have to register your company charter with the Malta Financial Services Authority and make a registration fee.
You should contact the Commerce Department to find out if you will need a license. You have to fill out a business application to get a license.
You have to pay one or a few yearly fees for each licence.