Welcome to my article on Malta Limited Incorporation.
Because there are enough “charlatans” and salespeople, I want to clarify first what you will sooner or later read between the lines anyway.
I am reporting the unvarnished truth here. No tax consultant doom-mongering, but also no euphoric praise for Malta.
See it as a practical gauge you can use for yourself.
How do you set up a company in Malta? What are the taxes like? Where is the catch? What does the German tax office say? I want to answer these questions.
Ready? Then let’s go.
Yours, Philipp M. Sauerborn
Malta Company Formation - How It All Begins.
When I moved from the financial metropolis of London to Malta in 2011, there was great amazement.
“Really? What do you want there? Where is Malta anyway?”
What many didn’t know: I had been dealing with Malta for a while and knew the advantages.
And now it comes:
It was exactly the right decision. Malta is flourishing and thriving. In my role as an employee at Dr. Werner & Partner, the conditions couldn’t have been better..
Der Grund ist die folgenden Vorteile, die Malta für Unternehmer und Unternehmen bietet:
Malta’s low taxes as an incentive: The government promotes cross-border operating companies
You have to imagine:
Malta is a small island, lots of sandstone, very rocky farmland. Agriculture was therefore never profitable. Meanwhile, shipping has kept the country afloat for a long time. Fishing still plays a major role in Malta’s economy today, although it is no longer the mainstay, as tourism is now the mainstay.
But it wasn’t and isn’t the best.
Malta wanted to be a major player, wanted to be modern and an attractive location for companies. All wheels were set in motion, Malta opened up and has been a proud EU member since 2005 (the relevant advantages of which I will explain further down).
The focus of the government in Malta has always been on promoting companies in Malta, especially those run by foreign investors.
When Joseph Muscat became Prime Minister of Malta in 2013, this course was further strengthened. The government in Malta continues to create new incentives for entrepreneurs to set up a company in Malta or relocate their business there.
Although Muskat has now been replaced by Robert Abela, the course of the party colleagues remains the same:
to convince entrepreneurs of Malta.
This is not only reflected in tax policy, which I will discuss shortly, but also in the promotion of infrastructure development or the gaming sector.
Speaking of which:
Malta was one of the first countries to issue a genuine, robust, and sustainable regulation of the online gambling sector. This regulation is now the most important and well-known of its kind. At least 20 years before Germany succeeded.
In Malta:
The biggest and most well-known players are based in Malta, including Tipico, Bet365, Pokerstars, Betsson, and many more. Although many other countries, presumably as free-riders due to Malta’s success, now have their own regulations.
But:
Malta, and at the forefront, the MGA, the Malta Gambling Authority, are still the pace-setters and one step ahead of the “competition”.
Avoid Mistakes When Setting Up a Malta Limited.
In Malta the sun shines – keyword: quality of life
You might smile that I bring up this point. But I know it was also significant for many founders in Malta:
In Malta there is plenty of sunshine.
In summer it practically never rains, so a family trip to the sea is definitely worth it. For me, that’s a good piece of quality of life.
Or take winter. At the beginning of December, I was still with my 7-year-old daughter at our favorite beach in Malta in the sun. .
In December!
At the same time, I have to add:
If sunshine isn’t for you, then Malta might not be the best place for you to start a company.
Official Language English – Company Formation in Malta Made Easy
What many do not know: The official language in Malta is English.
You read that right!.
Not Maltese (or Malti, as the language is called here), but English governs communication in Malta. This is a huge advantage for foreign company founders.
But why?
Quite simply: Living in a country whose language you do not speak is one thing. Doing bureaucratic work there? Impossible. You do not have this problem in Malta.
Although the locals speak the national language Malti (an interesting mix of Italian and Arabic) among themselves, most can also speak English, especially in all public institutions.
That English is spoken here is a leftover from the colonization by Great Britain, which lasted until the 1960s.
Other remnants: left-hand traffic, red telephone booths, and, very importantly, football madness.
FAQ
Yes, Malta has been a member of the EU since 2008 and also uses the euro. Malta is one of the smallest countries in Europe and the EU.
In Malta, there are two official languages, both are official languages. Namely Maltese and English.
Yes, Malta was a British colony until 1964 and is still a member of the Commonwealth. The British influence is still noticeable today, including the language and left-hand traffic.
Yes. Malta has made progress in many areas. For one, there is a lot of development in terms ofmodernizing technology and roads. But also culturally and socially. Malta is the most LGBT-friendly country in the world. The greatest progress is noticeable in the financial sector.
Yes. Malta is conservative in all areas be it banking or law enforcement. Reputation is one of the most important “export goods”.
- 1. Tax 5% 2. Entrepreneur-friendly 3. Robust and modern infrastructure. 4. Great sunny climate. 5. Stable politics 6. EU membership
- English-speaking 8. International 9. Innovative 10. Small and agile
No. Malta was never on a black list. Malta was briefly on a gray list but was removed in record time through sustainable cooperation with the nations. Now Malta is again, like likeGermany, the USA, or France, on the white list.
Yes, for those who want to take advantage of all the benefits of Malta, Malta is worth it. From a purely tax perspective, it is not worth it for profits under 250k EUR per year. For those who move to Malta, a setup is worthwhile for much less! I am a digital nomad – How does Malta compare to, for example, Cyprus?
Better. Because in Malta you not only pay less tax, but also significantly less social security. I recently wrote an article about this. Malta is better than Cyprus. You can find my reasons here.
Expect initial advisor costs in Malta to be at least 10k EUR. This usually includes the setup, account, and certain services for a year. Also, expect at least 10k EUR per year for typical services such as accounting, company maintenance, communication with authorities, auditing, representation, registered address, and company secretary.
Legal Tax Advantages through the Establishment of a Malta Limited
Here comes the information you have surely been waiting for. Taxes in Malta.
Malta’s Tax Advantages.
I consciously do not always mention taxes in Malta first because I believe that one should be convinced of Malta for other reasons as well. The tax advantages in Malta should then do the rest.
Most people probably know by now that you only pay 5% taxes in Malta. But how this is achieved and was achieved, I need to explain in more detail in 2024. Indeed, there has been an important development here.
Back in the days: The Tax Refund, the 6/7 Reimbursement
Malta has one of the highest corporate tax rates in the world on paper, namely 35%. But as a “foreigner” who is a shareholder in such a Malta company, you are entitled to a reimbursement of 6/7 of the taxes.
It’s a simple calculation:
35 divided by 7 is 5. One seventh tax, six sevenths no tax (refund) makes exactly 5%.
I can tell you upfront:
Today you pay 5%. Basta.
No refund. No cash flow problem, but you need the right setup – which I will explain further below. But first, how it all fits together and comes about.
Malta before Legal Notice 110 in 2019
Before the issuance of this Legal Notice, companies actually had to pay 35% and the SHAREHOLDER received the aforementioned 30% back upon request. And since Malta had relatively much success with its model, the administration and processing became a very long and bureaucratic process.
Malta became a victim of its own success.
For the applicants, this often meant long waiting times, sometimes over 2 years.
Problem for the Cash Flow
The Malta model seemed attractive, but leaving your money to the tax office for 2 years of bureaucracy seemed uncertain and unattractive. The great advantage found its nemesis: Malta’s refund application.
But the real danger came from elsewhere – from Brussels
Because:
The tax refund due to the back and forth payments (from the taxpayer to the tax office and back) also became a tool for money launderers.
Today, and even earlier, the transfer of large amounts was an effort. Banks want documents and proof of the source of funds. Good for honest citizens like us, but a horror for criminals with black money.
Only one bank did not ask questions: The Central Bank of Malta
Aber nun stellen Sie sich vor, rein hypothetisch, dass Sie ein Geldwäscher wären. Und Sie jeden beliebigen Betrag an ein EU-Finanzamt bezahlen können. Nämlich die Steuerschulden der Malta LTD an das Zentralbankkonto des Finanzamtes auf Malta. Und Sie wissen, dass die Zentralbank keine Fragen stellt, egal von welchem Konto Sie die Steuern bezahlen.
And you pay from your Panama black money account.
And not only are zero questions asked.
You provide your official white money account in Germany to receive the refund. And your bank in Germany only sees that an EU tax office is transferring money to you. So it lets it through without many questions as well.
What is that?
Money Laundering deluxe
That is exactly what happened when criminals discovered this money laundering method of the Malta refund for themselves. Without the knowledge of the tax office in Malta.
In short:
The Malta refund was suddenly not only unattractive, but it had also become a tool for criminals.
And the EU put considerable pressure.
A solution was needed. A holistic solution.
And the Parliament of Malta eventually passed the aforementioned LN110, which both deterred the criminals from the Malta refund and restored Malta’s groundbreaking attractiveness.
LN110.2019
I don’t want to get too technical now. But with this legal notice, the refund was practically abolished. It still technically and legally happens, but:
Anyone who for some reason has a claim to such a refund can immediately offset it with the tax to be paid.
5% directly. No more refund application. No more 2-year wait
As I mentioned above, this solved the cash flow problem for “normal” taxpayers. And also the problem with money launderers. Count on 5%. In cash flow and overall. I also mentioned the “right structure” above.
Now I will get to that:
Avoid Mistakes When Setting Up a Malta Limited.
FAQ
Yes. There is basically freedom of establishment within the EU. But: Due to the tax competition between EU countries, there are several pitfalls. Therefore: Good advice is essential.
Yes, in Malta indeed. But look beyond the horizon zon.
Die Malta Limited mag zwar nur 5% bezahlen, wenn alles richtig gemacht wird.
Aber Sie Gesellschafter bezahlen natürlich auch etwas auf die Dividenden aus Malta am Wohnort.
Wer in Malta wohnt übrigens zahlt nichts weiter als 5%
No. Nowadays there is no Tax Refund with the right Malta company structure. And therefore no waiting times.
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Both complement each other wonderfully. Thus you have all the advantages of Malta and Portugal, the best of both worlds. Contact me if you want to know how it works best.
For shareholders who live in Malta or not.
Whenever you deal more closely with the topic of setting up an LTD in Malta, you will come to the point of the holding company.
The Malta Holding Model.
Those who set up a company in Malta must also set up at least one holding.
But why is this recommended at all?
Is it just so that the lawyer or consultant you are dealing with can sell you two companies?
The answer is: No.
The Malta Holding Model has an effective tax background, which I would like to explain below.
A chapter above, I explained the technical background of the tax refund, which is due to the SHAREHOLDER and not the tax-paying company.
The Malta Holding Model protects you from 2 things in terms of tax law
- The immediate taxation of dividends – see below “The matter with the dividends“
- The complete taxation of the refund – see below “The matter with the refund”
Rightly, one might ask: Why? Nothing flows.
And that is exactly what it does in terms of tax law.
Malta Company Formation: The Matter with the Dividend
The entitlement to a tax refund is only for the shareholder who actually takes their dividend.
But you do not always want to do that to protect the company’s cash flow.
Therefore, there is a more or less virtual dividend payment, with immediate repayment.
So purely in the books. In Malta, it officially takes place and in the published financial statements with an auditor’s certificate.
By definition, a dividend flows – which usually triggers taxation for the recipient. In Germany, capital gains tax would be due in this case.
But to prevent exactly that from happening, you use the holding – similar to how it is possible in Germany.
The difference in Malta: While in Germany 5% of the income is also taxed in the holding, the dividend in a Maltese holding is tax-free.
Why?
Because the money has already been taxed. You remember?
The books show a 35% tax burden on the profit.
And how should the refund be taxed?
Now it comes to that.
Ltd Formation in Malta: The Matter with the Refund
Per se, the refund is also subject to taxes. In Malta, even at the personal income tax rate if you do not have a holding.
So up to 50%!
This is because the refund is not classified as capital income, but as a hybrid.
And this refund is therefore not taxed at the lower rate for capital income, but fully at income tax, 50%.
But now the twist:
For corporations, the refund is also tax-free.
Which explains why the Maltese holding is interposed.
Malta Holding: Receives Dividend and Refund on Your Behalf
So the holding receives the dividend AND the holding the tax refund.
What happens then.
From the Malta holding, you then distribute a dividend at a time of your choosing.
Namely consisting of the dividend from the operating company and the refund. And thus you have a dividend taxed at 5%.
And then?
You then tax the difference with the tax rate on dividend income in the country of residence.
So if you live in Germany as a shareholder of the Malta holding:
- Capital gains tax 25% plus solidarity surcharge or
- Income tax under the partial-income method: tax rate on 60% of income.
Incidentally, full tax would also apply again in Malta if you only set up two Maltese companies.
Those who live in Malta do it differently (and better).
Option 2: Establish a Malta Limited with Two Holdings
It is different if you also live in Malta as a shareholder.
Moving to Malta and then establishing the Malta company there is the royal road from a tax perspective, and the same goes for many hundreds of clients.
Why this is so, there are many more articles here in my blog.
In this case, the Malta holding model looks a little different, extended by another holding company.
You read that right.
Another holding is set up on the holding, thus a double holding.
The difference:
Here no Maltese company is used, but a company outside of Malta.
The idea behind it:
The distribution of the dividend and the refund is tax-free if it flows to a foreign shareholder.
With a foreign company, you use exactly this vehicle – a foreign shareholder.
There are not so many options for establishing this holding company outside of Malta as you might think.
Malta Formation: Classic Offshore Companies, a no-go for Banks
Because what would work in terms of tax law, such as the establishment of a Panama or BVI holding, makes little sense for bank compliance reasons.
Banks have become too cautious, and your plan fails before you have earned a cent.
Where then?
I recommend a special company form in Scotland (an LP), which is registered in Malta in a certain way and with which one can work wonderfully.
This 3-tier structure or the third tier is only needed if you live in Malta.
The mechanics of the tax refund claim and dividends are just like the 2-tier model.
Well, with one difference:
Those who live in Malta pay no taxes at all except 5% with this structure.
5% in total.
Practical, right?
Summary
- Malta’s government is committed to entrepreneurship in Malta
- Malta is a place to feel good: The sun shines all year round, and winters are mild
- The official language in Malta is English – bureaucratic matters and everyday things are easy to handle
- Malta offers legal tax advantages, but they are tied to meeting important requirements
- By establishing two holdings, the tax burden can be further reduced
FAQ
This has real and genuine tax reasons. Mainly to receive and manage dividends and Tax refunds as efficiently and cheaply as possible.
No. If you use the Malta holding only for the purposes mentioned above, the effort is not significantly higher, certainly not twice as high.
Yes. You should ideally do that. The holding in Malta is a normal corporation, and shares can be held worldwide with it.
Yes. You can even contribute the shares tax-free into the Malta holding bring in neutral share swap. Dividends from Germany can be transferred tax-free to Malta, but only through an exemption application. However, be careful with an existing GmbH: There can be implications with the German disconnection, i.e., the Exit Tax for companies. But more importantly: If you also move to Malta, you must definitely look at the Exit Tax for yourself personally.
Legally and theoretically yes, but I advise against it. The Tax Refund must then be taxed normally in the GmbH. Sometimes it makes sense to use the GmbH as the holding of the Malta holding.
Avoid Mistakes When Setting Up a Malta Limited.
This is why a company in Malta is a legal solution for tax optimization
Clearly tax evasion!
That’s what many think of a Malta Limited.
That is factually wrong.
I explain why a Malta Limited is also recognized in Germany and that it has NOTHING to do with tax evasion.
The accusation of tax evasion comes quickly.
I think I also know the reason.
Cayman Island – small country, big companies, tax evasion.
Panama – small country, big companies, tax evasion.
Barbados – small country, big companies, tax evasion.
Malta – small country, big companies… Well?
Tax evasion?
One might think so. But it is not.
In Malta, the situation is different.
Malta’s tax advantages are desired
The many small tax havens all had in common that a big secret was made of who owned a company there.
It was obscured as much as possible.
Many companies were happy:
Company constructs were built, tax loopholes were exploited, and in the end, the minimal tax burden remained.
Especially tricking the tax offices by exploiting tax loopholes was always a dark gray and black zone.
Now comes the big difference in Malta:
No tax loopholes, no secrets, and everything in accordance with the law.
The reason? The Maltese state, as already explained, specifically provides for tax relief and has firmly anchored it in its laws.
And as is well known, every state in the world has the sovereignty to define its own tax legislation.
The question now is, of course, what distinguishes Malta from other states that also pursue a special tax policy with sovereignty.
The crucial point to this comes now.
Company in Malta thanks to the free internal market and freedom of establishment – Malta rocks the EU
As mentioned earlier, Malta has been an EU member since 2005. This brings certain advantages.
The two most important in the context of company formation in Malta:
- Freedom of establishment
- Free internal market
Freedom of establishment in the EU ensures that every entrepreneur can settle relatively unbureaucratically anywhere in the EU and pursue their business activities there. Here is the wording:
Self-employed persons and service providers or legal persons within the meaning of Article 54 TFEU who can lawfully carry out an activity in a Member State may i) carry out their economic activity in another Member State on a continuous and permanent basis (freedom of establishment: Article 49 TFEU) or ii) temporarily offer and provide their services in other Member States but remain established in the country of origin (freedom to provide services: Article 56 TFEU).Furthermore, the EU has established the free internal market.
Access to the free internal market enables Member States to trade directly with other EU Member States – without cumbersome bureaucracy.Also in the wording:
With the Single European Act of 1986, the goal of the internal market was incorporated into the EEC Treaty, which was defined as a “space without internal borders […], in which the free movement of goods, persons and services as well as capital is ensured.”
The combination of both makes the establishment of a Malta Limited possible.
Because:
Financial agreements such as CRS confirm Malta’s course
Als die für Transparenz sorgenden When the financial agreements ensuring transparency “Common Reporting Standard” (CRS) or “Base Erosion & Profit Shifting” (BEPS) were launched, there was a lot going on in my industry.
But while some were horrified, I was quite relaxed, because one thing is clear:
Transparency in tax matters only harms those who take an unclean path.
Because despite Malta’s participation in both BEPS and CRS, this ultimately has no negative consequences for clients I support.
Because if there is one thing that has always been observed at the law firm DW&P Dr. Werner & Partners, it is that the establishment of a company in Malta is always carried out cleanly.
And that is paying off now.
Summary
Those who take advantage of tax benefits in Malta do nothing they need to hide Freedom of establishment and the free internal market enable cross-border business Financial agreements do not harm Malta; they are even positive: This drives away black sheep.
FAQ
Malta offers a significantly lower tax rate than all EU countries..
Das gesamte Steuerrecht versucht zu verhindern, dass Sie nur aus einem Grund in Malta gründen: Wegen genau dieser niedrigen Steuer. Because tax cannot be the only reason, but it can be one of many.
Yes, it is legal. The location of the company’s shell, in our case Malta, does not matter in the assessment. The tax office examines where the business takes place and where the shareholders and directors live. A shell company from Malta with American directors and shareholders does not bother the German tax office in any way, for example.
Yes. Both the commercial register and the financial statements, which list directors and shareholders, are public. Much more importantly: Every bank will automatically report you as an authorized signatory director, and shareholder to the home tax office. Once a year.director, and shareholder to the home tax office. Once a year.
Yes. You are obliged to report the establishment in Malta if you, for example, have a residence in Germany. Do I have to report withdrawals or dividends from my company in Malta to my home tax office?
In case of doubt, yes, especially if you live in Germany. But also if you have just moved and still have income in Germany.
Tax Pitfalls & Audit Efforts when Establishing a Company in Malta
It’s about the money and the taxes that every country wants to earn and keep, understandably. And many, if not all, means are allowed.
And it should be as difficult as possible, and it feels like the “other” tax administration makes it as difficult as possible to use the benefits in Malta.
See it as a sport.
You also use all the means at your disposal to save taxes. So don’t be surprised if the “other” tax administration does the same.
What you need to prepare for are protective mechanisms of national and international tax legislation. And these have become more and more over the years.
Also with establishment in Malta, tax audits
For example, those who live in Germany and work legally with the Malta LTD will certainly often be audited by the home tax office. Probably even more often than a German GmbH. On the one hand, this is certainly done because the tax office still finds something in many audits of a Malta company without much effort.
Because bad setups are still being sold and a lot of nonsense is being set up: The tax officials just have to grab it.
But assuming everything was perfectly structured
Even then, the tax office would audit more intensively and at a higher frequency because it is still about the money. And you can certainly expect a certain pedantry that is applied in the context of a Malta LTD.
Malta Taxes vs. Trade Tax: German Tax Optimization
How much it really is about money, I can explain using the example of the German trade tax. You may know that each municipality can set the rate of the German trade tax itself.
And hello dear double standards:
In Germany, too, there is a downward tax competition. In Germany, too, municipalities try to establish themselves precisely through this rate of the German trade tax.
What do you read about this in the press?
Probably not much. But that’s not the point here.
What I want to say:
For example, if you establish your GmbH in a “cheap” location in Germany, where a low trade tax rate is used as a lure, then your “home municipality” will also audit you more and more often.
A high frequency of tax audits and a certain pedantry during these audits is one of the administrative protective mechanisms.
By the way, those who move to Malta can literally enjoy the good weather.
Because then such audits are a thing of the past. I have lived in Malta for a long time, and should I tell you how often I have been audited.
Attention tax secret: Zero times.
This is, of course, because an annual audit is mandatory, and this takes a lot of work off the tax office.
FAQ
Yes. You can expect increased audit efforts.
Of course, there are. The obligation of an annual audit by an external and independent auditor takes the job off the tax office.
Yes. It is true of course also possible without, but I always recommend involving your colleague outside Malta.
Both the local tax office at the place of residence and an international, central department can conduct the audit.
That is hard to say. However, don’t be surprised if no audits are conducted for the first few years. The tax office can review up to 10 years and more in the past, so it is crucial to do everything correctly from the start.
Requirements for Establishing a Malta LTD
What are the requirements for a meaningful company formation in Malta?
What are the requirements for a meaningful company formation in Malta?
I present: 5 or 1
FIVE
- Real Business
- Risk
- Value Creation
- Permanent Establishment
- Substance
Or
ONE
- Move to Malta
As you can see, I mention 6 points, the first 5 of which apply if the shareholder does not reside in Malta.
I need to refine this:
Because you can be involved in a company in Malta at any time without considering the following points, provided there is no CONTROLLING INFLUENCE. That means, for example, if you do not own more than 49% of the Malta company, directly or indirectly through a holding company.
However, most of my readers and clients will have a controlling influence because they own 100% of the Malta company. Therefore, the following points are also very important.
I would like to say upfront that in addition to these Malta requirements, there are also protective mechanisms under non-Malta law. I will discuss this later in the article.
So, let’s start:
Malta Company with Residence in Germany – Requirement Number 1: “REAL BUSINESS”
That sounds relatively simple at first. Of course, you are running a real business, but is it really so? This question is not about how the setup in Malta looks, but why it is set up there in the first place.
Let’s not kid ourselves
For the German tax office, the only reason why anyone sets up a company in Malta is the favorable tax rate. Taxation can be a reason, but not the only one. It’s not just about being able to name other reasons for setting up in Malta besides tax. The reasons must also align with economic reality.
And therefore:
Therefore, it is not enough to claim that Malta is, for example, English-speaking, and that’s why you establish a company there. If your organic business case does not support this, e.g., because your website is not in English or you only have customers in Germany.
That doesn’t really make business sense and can be questioned.
Somewhere it says
“The soul’s home is the meaning”
And in our case, it is the tax soul, and Malta must make sense for your business case.
Company Formation in Malta when Living in Germany – Requirement Number 2: “RISK”
My favorite requirement. Many entrepreneurs don’t even know that this requirement exists. It is somewhat connected to Requirement Number 1. But I consider it important, so I made it a separate requirement.
One thing is part of being an entrepreneur: Risk.
Not knowing what is coming.
Investment, costs, and work, without knowing the economic future.
What also sounds simple is not so easy to artificially create, even if you want to.
Let me put it very simply. You have a big contract in prospect, a real deal. And maybe even in the medium term, not just “right before the end of the year.”
After LTD Formation: Quickly send the contract to Malta
Now you consider how you can handle this contract in a tax-efficient manner. It seems justified to consider Malta. You establish the company in Malta, even rent a real physical office, and hire a local full-time director.
And:
You tell your customer that the contract will be signed in Malta, and it will be.
Did you do everything right? By no means.
Because in reality, the Malta company had no real entrepreneurial risk. You were the oracle for your company, the grey eminence in the background who handed the contract to the company.
And that’s not good!
The Malta Limited simply got the contract and thus the customer without being genuinely involved in the economic risk. The director did not have sleepless nights wondering if his job depended on securing this contract.
Of course, there are ways and advice on how to build this legally and sustainably, but it certainly isn’t achieved by just having substance in Malta.
Therefore:
If it is obvious that there is or was no real risk for the new Malta LTD, then this is an indication that Malta was chosen solely for tax reasons as a location. And this will be challenged accordingly.
Requirement Number 3 when Establishing an LTD in Malta but Residing in Germany – “Value Creation in Malta is of Fundamental Importance”
The value creation of a tax-privileged Malta Limited must take place in Malta.. Das heißt:
In Malta, the services that lead to income are provided.
In the case of trading physical goods, these are shipped from Malta.
Those who live in Germany and establish in Malta – Requirement Number 4: “Permanent Establishment must be in Malta”
Closely linked to the first requirement is the point about the permanent establishment. To benefit from a Malta Limited, you must move permanent establishment to Maltato Malta.
That means: your office, your employees –everything in Malta.
And be careful:
Be careful to avoid creating a permanent establishment abroad through maintained outposts. After all, every tax office rightly wants what is due to it.
And if parts of your company are located in Germany, for example, then it is the logical consequence that a tax liability arises there.
A small practical example of what can already trigger a permanent establishment:
A software developer, who is now our client, came to us because the tax office had assumed he had a permanent establishment in Germany.
The reasons:
At one of his major clients, he could more or less come and go as he pleased.
So, without prior notice.
The conclusion:
House right, therefore permanent establishment.
If he had asked for permission or an appointment each time, he would not have formally had house right and would not have triggered a permanent establishment.
Requirement Number 5 for a Company in Malta with Residence Outside of Malta: “The Company Must Prove Substance in Malta”
You as a shareholder must always be able to prove that you have real substance in Malta, at least if you are actively working on the success of your company.
And of course, it is not uncommon for shareholders to want to be fully involved and to be active as a director, i.e., managing director.
However, this assigns you a special role:
You strongly tie the value creation to yourself.
This is not bad per se, but it also means that you cannot continue your activities in, for example, Germany while the company is registered in Malta.
Because, as mentioned in Point 3, the value creation must be in Malta.
So, if you want to be active as a shareholder and also as a managing director, I can only recommend:
Or
The Royal Road to Establishing a Company in Malta – Moving to Malta – Requirement Number 6
The five requirements above seem a bit cumbersome.
But if you conduct real business from and in Malta, it becomes easy to handle. Or easier. The easiest way, from the perspective of the requirements, is to move to Malta.
Then you meet all the requirements organically.
But more importantly, the foreign tax office has nothing to say, and therefore, the questions do not arise as often. And that you only pay a total of 5% in taxes, both business and private, that could be the deciding factor.
I can demonstrate meeting the requirements below
Real Business: You establish a company where you live and work almost exclusively from Malta.
Risk: You as an entrepreneur have moved. That is already a big risk. But with you, the entire entrepreneurial activity has moved, including all risks. You will certainly sweat in Malta. Not just because of the weather. But also, whether the next contract with your customer will materialize.
Value Creation: You live and work in Malta. Values are created here and nowhere else.
Permanent Establishment: Yes, you need to be a bit careful here. I wrote about the software developer who had house right at the client. The issue of permanent establishment can also become a problem with a move. But if you are only in Malta or mainly: No problem.
Substance: Whether you work in your Malta office, in the business centre, hub working or from home. You will not have to worry about building substance in Malta if you live in Malta.
Building Substance for Malta Limited in 2024: Easier Than Before
In 2024, the issue of substance does not look fundamentally different, but you can be sure:
It has not become more difficult either.
In my opinion, moving to Malta is still the best option, but you no longer have to rent a huge office.but you no longer need to.Too much has happened in the world of work to justify having your own office.
So, can you build sufficient substance exclusively with a home office?
That may be a somewhat too relaxed interpretation of the changes. More flexible solutions like serviced desks and co-working spaces are definitely an option.
The advantage:
You save money, still have a decent office, and simultaneously build substance for your company in Malta.
Summary
The most important requirement to benefit from Malta: The value creation of your company must necessarily take place in Malta.
Therefore, it is essential that the permanent establishment, i.e., the place of business operations, is in Malta.
As a shareholder, you should prove substance in Malta. The only sensible way to do this is to move to Malta.
FAQ
The tax office does not have to prove anything; you do. The burden of proof is reversed.
The tax office can, for example, act as if the Malta LTD does not exist at all and look “through the company in Malta” to the shareholder/you as an individual. This makes the entire business yours personally as a sole proprietorship, and you must pay taxes on the profits in Malta like a “normal” business operator.
I barely understand it, but the officer at my local tax office certainly understands it less.
It may be true that a local tax office does not have much international experience. But the case can be referred to a professional department of the tax office for international law, and there are specialists who know exactly what to ask.
No. If the managing director in Malta is only an agent, then you are probably the de facto managing director.
Right, but you shouldn’t actually ask this question. Because you shouldn’t establish in Malta solely for tax reasons. Plan Malta commercially first, and then tax-wise.
Avoid Mistakes When Setting Up a Malta Limited.
Malta LTD and the Bureaucracy
Sometimes I am asked about the bureaucracy in Malta when establishing a company in Malta. Unfortunately, I have to sigh then.
Because the bureaucratic effort is enormous. There is no other way to put it. The authorities are mainly to blame. Those in Malta and the EU. Maybe even authorities worldwide. But one thing at a time.
Founding Malta: Why it’s bureaucratic – Reason 1: Malta and its service providers like us
Yes, I must admit:
Consultants like me and service providers like DW&P Dr. Werner & Partners benefit from the quasi-legally mandated bureaucracy.
Because alone, honestly, you are lost.
In my opinion, the legislator has set certain requirements so that as a “foreigner” you have to hire a service provider who is usually or ideally local and therefore pays Maltese taxes and has Maltese employees. Because this is how the legislator earns taxes, income tax, social security, taxes on the rent of the office, and VAT. And with penalties for non-submission, late submission, incorrect submission of documents, or interest for not paying taxes or fees.
Therefore, hiring a good service provider with whom you can communicate and interact effectively and sustainably is essential.
Because it doesn’t end with the establishment.
Read below what obligations you will face during and after the establishment of the Maltese company.
Company formation Malta: Why it’s bureaucratic – Reason 2: The EU and anti-money laundering directives
In one chapter, I candidly describe that many countries, especially those with higher taxes, do not like it when a company is established in Malta.
As mentioned, it is not personal; it is about business, about taxes.
And if some entrepreneurs establish in Malta, it should be done with as much effort as possible so that you have no fun from the beginning.
From the very beginning, that fits quite well.
Because at the beginning there is the big workload “ANTI-MONEY LAUNDERING COMPLIANCE” – an effort that was quasi-dictated to Malta, and which every client of mine must endure before they can or may become a client.
Not because I want to, but because I have to. Because the Maltese state imposed it on me, just as it was imposed on it by all other states – led by Germany.
Our “Onboarding Officer” will take an appointment with you and scrutinize the business case from front to back.
He will ask questions, some of which are admittedly quite personal.
For example, how you earn and have earned your money. He wants to see contracts and identification documents, documents like bank statements. He wants references. All in all, it can feel as if you are not really being welcomed.
See? The big picture emerges?
That is exactly what the EU wants to achieve. To make the start as unpleasant as possible.
But rest assured, you are welcome, and the bureaucratic effort of onboarding is a necessary evil that you and we will handle sportily, but above all professionally and discreetly.
So that you can quickly enjoy the benefits of Malta.
Take that, EU!
Compliance – A Must for Every Company Formation in Malta
But how did it come to this?
In 2017, the EU established new guidelines on money laundering. The law with the cumbersome name was enacted:
“Act to Implement the Fourth EU Money Laundering Directive, to Implement the EU Funds Transfer Regulation, and to Reorganize the Central Office for Financial Transaction Investigations”
was enacted.
The law affects banks inin particularas they are the ones that carry out the transactions that are to be better controlled.
Therefore, every account opening, especially for internationally operating companies, requires a great deal of effort, otherwise, the banks could be held accountable. You surely know this from your own bank account opening.
The purpose of the4. anti-money laundering directivereads as follows:
With the Fourth Money Laundering Directive and the new Funds Transfer Regulation, the EU is tightening the reins on money laundering. Comprehensive risk analyses and additional requirements for obligated parties mean additional effort for them as well as for the state authorities involved. Also, tightening of the sanction regime demonstrates the determination of the European legislator to intensify the fight against money laundering and terrorist financing.
The focus of the Fourth Anti-Money Laundering Directive was on the following topics:
In plain terms:
If you want to open an account for your company in Malta, you must convince the banks! The financial institutions take their obligation very seriously.
As astudy by LexisNexis Risk Solutions revealedthe cost of anti-money laundering compliance in Germany alone amounts to 46 billion euros.
And even with the successor to the 4th Anti-Money Laundering Directive, the 5th Anti-Money Laundering Directive, the regulations were further tightened, although the focus was more on refining the regulations.
My advice here is also:
Full transparency and correctness help everyone!
FAQ
You can expect with a respectable effortespecially for satisfying the anti-money laundering requirements.
No. Although the check before the establishment is particularly thorough, there is ongoing monitoring. This means that your business operations will be continuously checked internally by the firm in the context of anti-money laundering requirements.
In the worst case, we are obliged to report you. In the best case, you will have to provide additional information. The provided information will be continuously cross-checked with the real data during monitoring. real data cross-checked.
The confidentiality obligation is legally suspended in matters of anti-money laundering. By the way: Tax evasion is an offense that falls under money laundering. an offense which falls under money laundering.
Bank Account for a Company in Malta
We know it from some movies or series: The paradox of time travel. The protagonist tries to change something in the past through a time travel and then becomes the reason why it happens in the first place. the reason, why it occurs in the first place.
In Malta, there is the paradox of account opening.
In a country that lives by making it as easy as possible for entrepreneurs because these entrepreneurs mean survival for the country.
And it seems to be paradoxically difficult to obtain a business account, especially in Malta
Difficult. And bureaucratic. And expensive. And time-consuming.
But as always, I have a way out for you.
Let’s start from the beginning.
Why is it so difficult at all?
When I came to Malta 15 years ago, you could walk into almost any bank branch, without an appointment, and have the account after 30 minutes. The present reality could not be further from that.
That’s why:
This has, once again, mainly to do with the regulations of the banks. Especially with the now extreme penalties for violations of these regulations (as explained above).
And it also has to do with the fact that banks in Malta are rather traditional, not to say old-fashioned.
I reported above that the anti-money laundering requirements for service providers like law firms have already been greatly increased.
Not mainly from Maltese initiative, but especially due to international pressure, from the EU.
Firms like ours spend about 50% of their internal costs solely on anti-money laundering. Imagine that! Banks probably even more.
Today it is as follows:
Nowadays, you can’t even get an appointment at a bank in Malta without having an “introducer,” i.e., a law firm or a consultant like DW&P Dr. Werner & Partners, by your side.
That’s why an introducer:
The banks require this so that the mountain of documents and information, the process the bank imposes on each applicant, is properly followed. The banks thereby at least administratively shift the responsibility.
Nevertheless, you will have to pay both the bank for processing the application (without a guarantee of success) and the service provider a fee to ensure the account application is properly prepared and submitted.
And above all, for communication and interaction with the bank.
Business Model after LTD Formation: Malta Banks vs Neobanks
When it comes to account opening, I am not always a local patriot. I always recommend my clients to proceed in two steps or stages.
Namely:
- After the formation, first open a business account with one of the neo or internet banks: Revolut, Wise, Bunq, Monzo, Monese, and the like.
- With some time and experience under your belt, then open an account in Malta (which certainly has its advantages).
But:
At this point, I appeal to your sense of responsibility, your entrepreneurial initiative, and above all, your foresight.
Be attentive whenever you encounter a new bank, read about it, or otherwise get wind of the possibility that you can open an account at a bank that your advisors or your firm do not yet know.
Because banks block and close accounts.
If a bank finds something not clean, and that doesn’t mean it isn’t clean, a transaction may be quickly blocked, the account frozen, or even completely closed.
Please understand that even internally for existing customers, rules can sometimes completely change or be amended.
That means:
Better to have one account too many than too few.
Because the most important thing is and will be that you can continue to work. Continue to pay invoices and continue to receive funds. The process of opening a bank account will never leave you, together with the constant bureaucratic interaction with the banks.
Be prepared that this will not get better but worse.
But:
Also rest assured that the setups can be constructed in such a way that the circus with the banks can bewas a bit of a headache and will cost something. But that in the end they will always have a healthy and sustainable multi-track account structure.
And with that, your business will work sensibly and successfully.
FAQ
Expect 1 to 3 months from the date of establishment in Malta.
Yes. Expect bank fees and a fee for the “bank introducer,” your consultant. a fee for the “Bank introducer“, their advisor.
The best-known banks in Malta are HSBC, BOV, BNF, APS and Lombard Bank
Yes. A company in Malta can legally open an account anywhere in the world.
Yes. Usually, banks charge a monthly fee and also a fee for transactions.
Note: Tax Protection Mechanisms When Establishing in Malta
Warning: There is an abundance of literature on this topic. Books, professional journals, and dissertations have been published, and there are not fewer but more. This article and this chapter are not intended to replace any of them because this topic definitely cannot be treated as a quick shot. should none of them replace, because this topic definitely cannot be treated as a quick fix.
My approach:
I can generally outline the topic and introduce the most important mechanisms. But the devil is more than in the details here.
The devil is the detail, and I can only recommend a thorough consultation to everyone.
Gladly through my colleagues and myself, as far as we can, or through partner law firms.
So to the point:
By a protection mechanism, I mean a law that makes the way to Malta more difficult, delays, makes it more expensive, or prevents it.
And again my same refrain:
Do not take it personally.
You are a paying customer in a country (i.e., the taxpayer), and no one likes to let a paying customer go to the competition. Neither does a country.
Let’s just work through the following points
Exit Tax for Companies – Protection Mechanism 1 When Establishing in Malta
I mentioned the risk above. If you simply hand a contract to the Malta company, this contract has a value, and in a normal context, the Malta company would have paid for it.
And whether it is paid or not, the transferring company, for example, a German GmbH, must book revenue in the amount of the value and pay taxes on it in Germany.
This is made more difficult in that it is not only about the transfer of such a value.
They are relatively easy to quantify.
But don’t get excited too soon:
It can also be about non-material values, such as a profit opportunity, or the use of the CRM or other systems of the foreign company, the involvement of personnel, the use of know-how, networks, and resources.
I’ll get straight to the point:
Everything that makes it easier for the company in Malta and is provided or received by your company or a related company abroad must be invoiced at market prices. As if the foreign company were completely independent and you would give up the opportunities.
Malta Company Formation Protection Mechanism 2: Exit Tax for Natural Persons
The exit tax or departure tax for individuals who move out of Germany works differently than the exit tax for companies. The value of your holdings worldwide is considered.
And your holdings are fictitiously sold at the date of departure, exactly at this value.
In other words, the tax office goes and acts as if you have sold all your shares at once.
And your holdings are fictitiously sold at the date of departure, exactly at this value.
Also:
60% of the amount is taxed at your personal income tax rate, usually 42-45%.
And immediately.
There is no longer a deferral, only the option of installment payments against security. I wrote a long article with all the details and facts about the German exit tax.
Update on Exit Taxation 2024
Our efforts to overturn this rule were successful. Even though it wasn’t our case that triggered the decision of the Federal Fiscal Court, but:
The exit tax in its current form is not legal.
Because as I have said since the adoption of the “new” rule: Never and never is this compliant with the rules of the EU.
Because it is clear:
In the EU, one must be able to move freely. And if, as a shareholder of a GmbH, I suddenly have to pay hundreds of thousands or even millions of euros in tax without having earned a cent, it is practically impossible to move away.
Don’t get me wrong:
I don’t think the mechanism is great, especially how corporate values are calculated, but per se the interest is justified. But having to pay before an exit event, i.e., the sale of the company, is just nonsense – and a real obstacle.
Therefore:
I strongly assume that the indefinite deferral will make a comeback. Finally!
Protection Mechanism 4 with New LTD Establishment in Malta: Withholding Tax in the EU
The EU mandates:
Dividends from a company in EU country A to EU country B must not be subject to withholding tax in country A upon distribution.
In Germany, this withholding tax is 26.75%, Malta does not charge withholding tax.
Without an application, without paperwork, it simply does not exist. If, for example, you pay a dividend from a German GmbH to Malta, the paying GmbH must withhold and pay the withholding tax on it.
Wait: There is a complex application that can exempt you from this. But even that has become increasingly complicated over time.
Not fair, I think, but that’s how it is regulated in the double tax agreement with Malta.
Protection Mechanism 5 when Moving with GmbH: Function Relocation
If you do exactly what some laws require of you, namely create a real function in Malta, have real value creation in Malta, a real office, etc.:
Be careful not to relocate any function to Malta, because then you have to also tax this relocation in the country from which this function originally comes.
Complicated? Slightly paradoxical? Yep, 100%.
Better is:
Duplicate the function. That means:
Let the German company remain as it is, perhaps with a different managing director.
Then build an additional entity abroad, with additional employees.
Is that expensive? Yes.
Does it avoid taxation due to a function relocation? Also yes.
You’d rather invest the money in your own company than pay it as tax.
Protection Mechanism 6 for Company Formation in Malta: Permanent Establishment Outside Malta
A fictional conversation between German-speaking tax officials
“Helmut, Mr. Maier’s company in Malta is real. I checked it thoroughly, it’s legitimately based there.”
“Wait a minute, if we can’t tax everything from this Malta LTD here, let’s at least try to tax part of the profit here.”
“Part of it?”
“Yes! Let’s check if they don’t have a permanent establishment here.”
“How, they don’t have business premises or even a warehouse here.”
“Doesn’t matter. Maybe a senior employee, a manager lives in our country. It could even be just the IT manager or the head of accounting.”
“No, that’s all in Malta. Only the managing director comes here occasionally. But he doesn’t live here.”
“Occasionally?”
“Yes. But not more than 183 days or even close to 183 days.”
“How many days is it per year?”
“It’s just over 3 months per year.”
“That works out well. Because with that, this Malta Limited has a permanent establishment with us, and we get a part of the profit. At least the part that we can attribute to this ‘representative permanent establishment’.”
“Great, thanks for the info, Helmut.”
All facts, dear reader, all facts.
But even in this case, there is advice so that Helmut gets nothing.
What the conversation is supposed to show:
Even if everything is set up cleanly in Malta, it must be ensured that too frequent visits to Germany by the managing director do not trigger a permanent establishment.
Otherwise, it leads to the described case, and the representative permanent establishment in Germany results in a tax liability in Germany.
Therefore, in this context, the often-cited 183-day rule does not apply if you are the managing director yourself! I have to correct this very, very often.
183-day rule: Applies to you personally and your private income.
60-day rule: Applies to you in your role as managing director and your company’s income.
And if you suddenly feel caught: It may not be too late to straighten out the problem. But: Now it means making no more mistakes and taking the right steps!
Therefore: If you do not want to become taxable in Germany, pay attention to your stays on site.
FAQ
It’s about money,about taxes. Even in the EU, where there should actually be no hurdles high-tax countries want to protect themselves from low-tax countries.
A good question. It is advisable to have an experienced international advisor “on hand” all the time.
Probably not.
All current and future rules will apply to you.
Yes and no. The hurdles are the same for every entrepreneur, but you can assume that more scrutiny will be applied the more profit/revenue you make.
Malta Limited – Authorities and Obligations
In the chapter about good old theory, I already touched on it. The Maltese authorities also demand the successful ride of the paper tiger from you. But which authorities are they and what do they require from you?
Establishing a Limited in Malta: Only with MBR – The Malta Business Registry
The Maltese commercial register is now its own authority and no longer under the MFSA, the financial supervisory authority (the equivalent of the German BAFIN).
What does the MBR do in Malta?
The MBR registers and administers newly established Maltese companies. Here, the register of directors, the company secretary, and the shareholders are kept.
In addition, the MBR also maintains and manages the important transparency register if a company is not held by a natural person, but for example by a holding company, a trust, a trustee, or a foundation.
Fully transparent
The commercial register is public, and any changes within an LTD in Malta are recorded here. For example, changes to the company name, address changes, or changes in the managing director.
Once a year, an LTD in Malta must submit the “Annual Return.” This is a report or rather a confirmation of the address and the company’s organs. In addition, the MBR requires the company’s annual financial statements once a year.
Any change within the LTD must be registered within 14 days, otherwise, a penalty is due per day. A penalty is also due if you fail
- To submit the annual financial statements
- To submit the Annual Return
- To submit the entry for the transparency register. This one is particularly harsh. Actually, there is a penalty for everything that is not done properly.
These are the requirements of the MBR for a formation
Not only administrative tasks are to be done. Some basic requirements must also be met for the formation of a company.
And in Malta, they are thorough:
These 8 requirements must be met.
The Maltese financial supervisory authority, or simply the Maltese tax office, expects a lot from companies to maintain the title of Malta Limited.
Because:
The list of requirements that a company in Malta must always fulfill includes seven points.
Therefore, now it is:
Read carefully!
1. Must have office space
Every company in Malta must have office space. It is not enough to provide your own private address in Malta or that of an acquaintance. Instead, a proper office should be rented sooner or later. For pure mail traffic, the address of the local tax advisor can usually be chosen, although this should be changed at the latest 6 months after formation.
Moreover, the rules have become somewhat more relaxed, especially since the Corona pandemic. It is simply no longer contemporary to expect every entrepreneur to have their own office. Serviced desks and co-working spaces are therefore an ideal alternative in my opinion.
2. Define the objectives of the company
You must specify what objectives you are pursuing with the company to be formed. The activity must be described as concisely as possible. It is advisable to call a spade a spade here – evasive information is recognized and the formation is then rejected.
3. Minimum Capital for Malta Limited Formation
Similar to a GmbH in Germany, founding capital is also required for a Malta Limited. In Malta, however, this is significantly lower: €1164 in equity is required for the formation, with slightly more than €200 in share capital to be paid in at formation.
4. At least two shareholders, maximum 50
For a Malta Limited, the rule is: It must have at least two shareholders, but no more than 50 (although I have never seen this myself). The possibility of having only one shareholder does exist, but this must be clearly stated in the Memorandum of Association and justified how this will affect the business intentions of the company – but it is possible.
5. Director and Company Secretary
A company must appoint at least one director and one company secretary for its formation. The role of the director is equivalent to that of a managing director. The company secretary, on the other hand, is not to be understood as a classic secretary but rather as an additional control and information body within the company, ensuring that everyone is informed about formal processes.
6. Company Meeting or Shareholder Meeting
Every company must hold at least one meeting each year in which fundamental issues are discussed. Minutes must be kept.
7. Tax Return
Of course, like any other legal form, a Malta Limited is also required to submit a tax return annually.
8. Annual Audit
The annual audit.
In Malta, the guild of auditors is significantly larger than in Germany, for example, because:
Every Limited (including holdings) in Malta must undergo the procedure. It is carefully examined what was booked and whether the information in the tax return is correct.
My guess:
The requirements are also so high here because Malta no longer wants to tolerate funds being transferred through the island that actually have no business being here.
The audit usually costs some nerves and time, but whoever has found a good auditor who follows their processes in an orderly manner saves a lot of work.
First Registration after Formation in Malta: Inland Revenue / Tax Office
The Maltese tax office assigns the Maltese tax number for “income tax” at the beginning of a company’s life in Malta.
Not to be confused with the VAT number or the MBR number.
Important:
Dem Finanzamt müssen Sie im Falle Rede und Antwort stehen, aber eigentlich haben Sie nicht viel mit dem Finanzamt zu tun. Das liegt nicht daran, dass es nichts zu tun gibt. Sondern daran, dass das Finanzamt in der Regel nur mit Repräsentanten, z.B. dem Anwalt, Auditor, Corporate Service Provider oder dem Accountant kommuniziert. Das liegt nicht daran, dass es nichts zu tun gibt. Sondern daran, dass das Finanzamt in der Regel nur mit Repräsentanten, z.B. dem Anwalt, Auditor, Corporate Service Provider oder dem Accountant kommuniziert.
Once a year, you have to submit the balance sheet certified by a local auditor and also the tax return of the Malta LTD to the tax office.
Of course, the tax office in Malta also imposes penalties for non-submission, or interest is charged for unpaid taxes.
Important Number 2:
The tax office is ultimately responsible for the tax refund and thus for achieving the 5% tax. This means: Everything must be done properly and on time here.
Second Registration after Formation of the Company in Malta: Jobs Plus / Employment Office
JobsPlus is the employment office.
But also the authority where every employment relationship is registered. Or every change or termination of an employment relationship. If you want to employ someone in Malta, even if it’s just yourself, you will need to get a JobsPlus number.
Third Registration after Formation of the Company in Malta: VAT Department / VAT Authority
The VAT authority, in my opinion, the strictest authority in Malta. Every Malta LTD must or wants to apply for a VAT number, i.e., the VAT ID. This number is essential for cross-border transactions, which are almost all transactions with a Malta LTD.
So:
With the registrations under Article 10 of the “VAT ACTS,” i.e., the Malta VAT law, there is a quarterly obligation to submit a VAT return.
This is called a VAT return in Malta.
There is also an obligation to submit so-called “recap statements” to the authority. A recap statement captures the EU internal market traffic. This means you declare which other EU VAT number you have interacted with commercially.
In addition to interest and late fees, the VAT authority often issues “assessments” if VAT returns are not submitted.
The assessment is an estimate of the VAT owed, and this estimate is usually much higher than the actual VAT amount owed. But the estimate is valid until the VAT return is submitted. And interest is also charged on the estimate.
FAQ
1 Malta Business Registry MBR, the Commercial Register, 2 Inland Revenue, the tax office in Malta, 3 VAT Departmentthe value added tax authority 4 JobsPlus the employment office
Quarterly VAT return and annual return (report to the MBR, commercial register), balance sheet to the MBR and Inland Revenue (tax office), tax return to the tax office. If you are an employee have, the FS4 at the beginning of the employment relationship, the FS3 at the end of the employment relationship and FS7 annually.
Yes, every submission is subject to a penalty fee for late submission.
Yes. In Malta, about 1% interest is charged per month.
Everyday Life with Operating a Malta Company
A lot of theory doesn’t help if there is no practical relevance.
Therefore: Some practical experiences from everyday life with a Malta Limited. Unvarnished and direct.
As I know most entrepreneurs, the anticipation is great at first:
When can I finally start making money with my Malta Limited?
That is a very frequently asked question.
And I understand the question – I am no different.
Depending on whether you seek advice, the company in Malta is usually founded after 10 days. With a holding, it takes correspondingly longer, as the parent holding must first be founded before the subsidiary companies can be established.
What can take time:
What usually takes a bit more time is the VAT number. And yes, it is unfortunately very important.
After all, as an entrepreneur from Malta, you also want to do business outside of Malta.
And bam: The VAT number is missing for invoicing. Some of my clients solve the problem with pro-forma invoices, which is certainly valid.
The fact is:
You cannot issue a formally correct invoice within the EU if you do not have an EU VAT number.
The second point that might take a bit longer (but it depends on the bank; usually, the banks we work with at DW&P are a bit faster): opening a bank account. I have already described that.
The process takes a long time, mainly because the banks scrutinize you so thoroughly. It doesn’t matter if it’s a challenger bank or a traditional bank.
Managing Director’s Salary and Social Security with Malta Limited
Another question I hear frequently: If I am the director, i.e., managing director of my Malta Limited, do I get a salary?
However you wish, I always say. But the following practice is advisable:
To be fully socially insured – including health insurance – you must earn the minimum wage in Malta. I always recommend fully utilizing the tax-free allowances. These are around €1000 per month in Malta.
That means:
You receive just under €1000 in salary as a managing director in Malta, fully tax-free, and pay about €180-200 in social security contributions.
This way, you are fully insured and taken care of in case of an emergency.
You pay yourself the salary monthly, just like that.
Fun fact: In Malta, you can pay all dues with credit cards, whether VAT or social contributions.
I have heard from some clients that they can earn a lot of miles this way – provided they have the right credit card.
Invoicing with Malta Limited – Serious?
Many clients are concerned whether a billing address in Malta would deter potential business partners.
And I understand the concern! And it may well be that it causes some raised eyebrows in certain industries. I think it all depends on your offer.
Clearly:
Invoicing must be done by the new Limited, otherwise, it creates other problems.
And honestly:
Don’t try to hide it, but go on the offensive.
Company in Malta? Sure! I live here too.
More and more entrepreneurs of the new era are moving to Malta, Dubai, or Cyprus. Internationalization is now simply part of it, and in a few years, even more so.
So this is not a topic I would seriously worry about.
FAQ
Yes. You must pay yourself at least €1000 for a full-time position based on the minimum wage. full-time position based on the minimum wage.
I always recommend a settlement. Employees can go to the labor court (tribunal) for free in Malta and usually win.
835 EUR per month
The employer’s share is 10% of the gross salary, but there is a legally prescribed maximum.
It is best to look at the website of the Maltese Bar Association, where you can find lawyers sorted by specialization. https://www.avukati.org/find-a-lawyer/
Company Formation in Malta – A Future Outlook
I have experienced many doomsdays.
So, Judgment Day.
The end of the world.
There was the abolition of Swiss banking secrecy. BEPS. CRS. The Panama Papers. Just to name a few.
The developments and consequences from these, or should I say the assumed consequences in direct reaction were always:
THIS IS THE END OF LOW TAX.
But of course, it never was. If you had tried to sell a Malta holding structure to someone before the abolition of banking secrecy, they would have laughed at you and simply asked:
“Why Malta? I’m going to Switzerland!”
The fact is:
Anyone looking to optimize taxes will always choose the best or optimal solution currently available.
And Malta will always be one of the optimal countries.
And even after the abolition of banking secrecy, Switzerland still works optimally.
Therefore, it is not of particular importance whether, for example, there will be a minimum tax worldwide.
The responsible people in Malta know exactly what they are doing in this regard and will always be able to offer you top legislation.
You can also deduce this from the fact that there has been a lot of political turbulence in Malta during my time. Even a change of government. But the issues that concern you have not been and will not be addressed, at least not fundamentally.
What this does not mean:
That you do not have to adjust to any changes. Because as written above, other countries will try to make Malta increasingly unattractive. For example, through stricter compliance requirements, i.e., paperwork.
What it does mean:
In my opinion, more and more clients will choose to move to Malta when looking for a truly optimal solution. And fewer and fewer clients will, for example, operate a setup from Germany.
FAQ
This question can only be answered from Malta. Because developments against tax advantages are now implemented “in block” and it always affects all countries. One thing is certain: Malta will always be competitive and able to offer the best possible advantages. competitive and offer the best possible benefits.
No, there are currently no indications of this.
Best by moving to Malta. Because then you are under Maltese administration and thus have the most planning security.
My personal opinion: More and more people will move to Malta and fewer and fewer will establish a Malta company from, for example, Germany.
Theoretically, everything can change. But realistically I believe that the paperwork and compliance requirements will continue to increase, but also the path to Malta will be made increasingly difficult by foreign tax authorities.
Conclusion
So much for theory…
…the practice is often complicated!
Through my work at the firm Dr. Werner & Partner, I repeatedly experience astonishing things.
Therefore:Let me leave you with a few final words.
I am pleased that you are interested in Malta. And with this, you have already reached a level that is essential: elementaryis:
Sufficient information gathering in advance.
Everyone has heard the saying before:Ignorance is no defense against punishment.And unknowingly committing tax evasion due to the improper establishment of a company abroad is a fate not to be trifled with.
And:Establishing a company abroad is in itself a great challenge, especially if it involves moving abroad (which I, as you know, recommend). Therefore, in my opinion, it does not happen overnight and not without sufficient legal protection. not without sufficient legal protection.
Perhaps you have noticed that one point is particularly important to me:
Do not make any efforts to use Malta for illegal tax avoidance. This is no longer possible!
For those who do not intend to do so: Much success with your business in Malta!
Here are some important articles for further reading if you want to seriously engage with Malta.
