Difference between Branch Establishment vs Company Formation in Malta

Over the years, people have come to Malta for its calm and quiet. They think it is the perfect place for a relaxed retirement. Yet, they see several opportunities in the state when they have lived there for a while. And these possibilities beg the question, “how can one set up a company in Malta?”

This is a crucial question, as there are several ways to set up a company in Malta. You must ensure that you follow the Maltese rules as you set up a company branch or start a personal holding company in Malta. 

This article exposes you to the different regulations guiding company formation in malta has in place. Hopefully, the article eases your way through the process.

There are two types of companies that you can start in malta. The first is a Maltese personal holding company, and the other is a Maltese branch of a foreign company. This article discusses the advantages and disadvantages of each option. 

What Is the Difference between Company Formation and Branch Establishment

Both personal holding companies and branches of foreign companies are acceptable in Malta. But the most popular company option is a personal holding company. This is because it is easy and fast to set up a company in malta. 

Moreover, the process only requires all the shareholders to sign the articles of association and a memorandum. There is a slight difference when it comes to branch establishment. While establishing a branch of a foreign company might seem easy, this is not the case. 

Aside from the registration with the Registry of Companies as an “overseas company,” the new company branch must submit essential documents. These documents include income tax returns, VAT returns, and audited financial statements. 

Also, both companies must pay an income tax rate of 35%, but they do not pay by the same standards. The Maltese branch of a foreign company pays based on some Maltese capital gains. But, personal holding companies in Malta pay income tax according to the world standard.

Company Formation in Malta – Very Important Points to Note

When starting a business in Malta as a foreigner, some points to note include:

1. Have a Registered Physical Office

It is crucial for every business in Malta to have a physical and registered office. The office might be at an accounting or law firm, your business area, or a managed office space,

2. Have the Required Business Capital

The minimum business capital for public liability companies is EUR 46 587. For share capital, the minimum is EUR 1,165. The share capital must be present in the business account at the time of registration. If the amount for a business exceeds the minimum, you are to pay at least 20% to the business account. 

The share capital is often divided into preference shares and ordinary shares. You should note that in Malta, you cannot have bearer shares. 

3. Company Shareholding

In a personal holding company, Malta only allows 50 shareholders. The minimum number of shareholders for such companies is 2 persons. Registering your company or business under Malta’s Companies Act is important. 

4. Office Requirements

To qualify for registration in Malta, you must have a minimum of one secretary and one director. The only exception to this is a single-member company. Here the director can also be the company’s secretary. 

Directors must ensure they teach the secretary all about the company to function in the secretarial position. Another key point to note is that the secretary does not have to be a resident of Malta.

5. Opening of An Account

A business or company in Malta should have a bank account. This account should carry the name of the proposed company. You must have Articles of Association and a Memorandum to open this bank account. You must also present other documents, such as an ID card and Residence Permits.

How to Establish a Branch in Malta – Points to Note

When you follow Maltese laws, establishing a branch of your company in Malta becomes easier. These rules include

1. Having a Structure for Your Business

The standard structure for a company branch in Malta is the limited liability company. If the Maltese authority approves all your documents, it can incorporate your company branch in the Maltese Trade Register.

2. Submit all Essential Documents

You must submit all vital documents when establishing a company branch in Malta. These include the Articles of Association, a list of administrators, and the declaration of opening a Maltese branch.

3. Register for Tax

It is crucial that the Maltese authority sees you as transparent regarding finances. So, you must register for social contributions and VAT on your services.

4. Have a Bank Account

You will need a bank account for all business transactions in your Malta company branch. A great company formation agent can handle this part of your branch establishment process.

5. Have a Solid Account System

Having a company branch in Malta will need you to have a sound auditing system. You will need to have a profit and loss account as well as a balance sheet. 

Benefits of Having a Company in Malta

Whether a foreign company branch or a personal holding company, owning a company in Malta has the following benefits:

• Malta has a great network of double tax treaties. So, it minimizes the withholding taxes on the dividends it receives
• The state has sane income taxes, and you can save money on wage costs with a lower minimum wage. This will help your business to grow and make more profit
• Malta has a low share capital requirement. This means that the cost of setting up a business in Malta is far less than in other parts of the world.
• It also has low percentages of social security. Social security is about 10% of employer and employee salary. So, it is easy to have more employees in your company.
• Malta has a few rules regarding your profits from the company. So, you can make more profits through company outsources such as business travel costs.

Conclusion

If you ever plan to shut down your Maltese company, you should open a branch of your foreign company. This is because closing a branch only requires you to notify the applicable Maltese authority. However, you must complete a liquidation process to close a Maltese company. 

In the end, this article has given a summary of all that you need to know when establishing a company in Malta. Yet, the company type that best suits you depends solely on you.