Business in Malta: benefits, taxes, and features

To the south of Sicily, the Maltese Islands are located on trade routes from Asia and Africa to Europe. The maritime logistics business and financial services for various enterprises are thriving here.

Malta has a population of slightly more than 400,000, and 1.2 million tourists visit the country every year. Tourism provides 35% of the country’s GDP, and most of the real estate, consisting primarily of apartments, is rented out. Serving tourists is an entire industry, and almost any well-organized business is profitable.

The electronics and software programming sectors are among the well-developed industries in Malta. International companies, such as ST Electronics, Playmobil, Trelleborg, and TRC Media Group, have invested in the Maltese high technology sector.

Until 1964, Malta was part of the British Empire, and it is still considered one of the world’s leading centres for learning English. Specialists with international diplomas work here, and private schools earn high incomes.

However, the agricultural sector is poorly developed due to a lack of land. Mainly just, potatoes are grown for sale. At the same time, seafood processing remains a fairly profitable business, and Malta is also known for its pharmaceuticals.

Investors in Maltese businesses benefit for several reasons:

• Malta’s stable economy survives economic and financial crises when they occur, with minimal losses. For example, in 2020, despite the severe economic impact of the covid‑19 pandemic, Malta’s credit rating was maintained at A or A+.

• International business centre. There are numerous representative offices of well-known global corporations and large companies in Malta.

• Hard currency zone and reliable banks. Since 2008, the country has been a member of the eurozone, resulting in investors and their assets being given even more protection than in the past.

• Personal safety. Malta is recognized as one of the safest countries in the European Union in terms of crime.

• Government support for business. There are government programs in operation that are designed to help develop entrepreneurship.

• Beneficial tax regime. Maltese tax residents receive significant tax benefits.

Second citizenship. Malta grants investors who have undergone its strict Due Diligence check citizenship for exceptional services by direct investment. A second passport can be obtained within 14 months.

At first glance, the Maltese income tax rate of 35% is not particularly appealing to investors. However, this rate applies only to companies in Malta whose income grows by more than 10% per annum.

If a Maltese company is used as part of an international structure accumulating profits from other countries, then the lion’s share of the tax is returned. The state keeps only 5% for itself, making it extremely attractive for any international company.

Part of the tax is also refunded when dividends are distributed. In this case, income is taxed at an effective rate of just 10%. If an international company pays dividends to the owners of a Maltese company, such payments are not subject to tax in Malta.

A company can become a Maltese tax resident by registering in Malta or opening its main office here.We also discussed tax incentives for businesses in Malta in our article Taxes in Malta. The attraction of the Maltese tax system.

The Government of Malta finances business projects in Malta and can offer concessional loans for up to 33% of a project’s costs. Sometimes the state even provides up to half of the loan amount. Malta Enterprise, the government agency focused on supporting business in Malta, has developed various incentives to promote investment and support the expansion of industry and innovative enterprises. It can finance up to 75% of a project.

Entrepreneurs in Malta also have access to the European Regional Development Fund, which can provide up to 50% of the cost of approved projects. Business startups can receive grants of up to €200,000 for business development in Malta.

There are three main forms of companies registered in Malta:

• A closed company with limited liability: the entire capital of the business is distributed in shares, which are owned by all members of the company.

• Partnership with unlimited liability: all partners are equally liable for their debts and liabilities.

• Limited liability partnership: each partner’s liabilities are limited by their share in the company’s capital.

To start a business in Malta, you must register the articles of association with the Malta Financial Services Authority and pay a registration fee. The registration fee when forming a company is calculated on a progressive scale, depending on the declared share capital. When forming a company with the minimum share capital, the fee is 7,5% of this amount, and with a higher share capital, the fee can drop to just 1%. A registration certificate is issued after payment of the fee.

To qualify for financial assistance from the Government of Malta, you need to register your company with the Department of Social Security.

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 legal entity can act as a director, but the company secretary has to be an individual who can be a Maltese or foreign citizen.

Additional fees for opening a company in Malta:

• €8 — booking a company name;

• €23 — registration with the data protection commissioner’s office;

• From €100 to €1900 — company registration with the Registrar of Companies. The fee depends on the type of company;

• €1,000 — obtaining a trading license for the calendar year.

The company must have at least two shareholders, either individuals or legal entities, by law. Only shareholders not resident in Malta are eligible to receive tax deductions. A trustee may be a shareholder.

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.

Since 2020, Maltese legislation has allowed wealthy people to obtain citizenship for exceptional services by direct investment. An investor applies for a residence permit and applies for citizenship after 12 or 36 months. In just 14 months, they can become an EU citizen. The application for a Maltese residence permit or citizenship by direct investment includes undergoing a strict Due Diligence check.

We discuss the conditions under which investors receive Maltese citizenship for exceptional services by direct investment.

Malta attracts entrepreneurs from all over the world through the appeal of its attractive taxation system and the prospect of doing business globally. Individual entrepreneurs are eligible to receive several benefits. Operating businesses are rarely offered for sale in Malta. Investors usually start their own companies.