Starting a Subsidiary in Malta in 2023
If you are thinking about investing in Malta, now is the best time to do it. Starting a business in Malta comes with greater opportunities and lots of advantages, such as tax benefits and somewhat relaxed laws on foreign investment.
This is why many foreign investors looking to enter the Maltese economy typically decide to go with the subsidiary company. A subsidiary is a commercial entity, whose rights as well as authority are in the hands of an enterprise that is held by the distinct firm.
In general, when a business acquires another business, then the firm that bought it is known as the holding firm and the business that is purchased is called the subsidiary. However, the losses of the subsidiary firm do not have to be shared with the holding company.
The subsidiary is governed by the Companies Act and it has the same procedure for incorporation as any other company operating in Malta. Even the World Bank ranked Malta 88th out of 190 countries in terms of ease of starting an enterprise in their most recent global review.
To set up a subsidiary in Malta, it is necessary to comprehend the business concept, the target market, and the available resources.
We will provide you with a detailed explanation of the process of starting a Maltese subsidiary company through this article. We’ll get straight to the point if you’re keen to learn more.
Procedure for Starting a Subsidiary in Malta
Here are the steps to set up a subsidiary in Malta:
Step 1:- Choose a unique name for your subsidiary that is not already registered with the Malta Business Registry.
Step 2:- Appoint at least one director and one shareholder for the subsidiary and they can be individuals or companies.
Step 3:- Prepare the memorandum and articles of association for the subsidiary.
Step 4:- Enroll the subsidiary with the Malta Business Registry.
Step 5:- Relying on the type of your firm, you are required to get a license and permits from the appropriate management in Malta.
Step 6:- Register the subsidiary for taxes with the Maltese tax authorities. You will require to obtain a tax identification number and register for VAT if necessary.
Step 7:- Open a bank account for the subsidiary in Malta.
Step 8:- If you plan to hire employees in Malta, you will need to comply with Maltese labour laws, including registering as an employer with the relevant authorities.
Documents Needed to Set up a Subsidiary in Malta
The exact documentation required to set up a subsidiary in Malta may vary depending on the nature of the business and the legal structure chosen.
However, here are some of the common documents that may be needed:
- Memorandum and Articles of Association
- Certificate of incorporation which shows that the subsidiary has been legally incorporated in Malta.
- Identification documents of the directors, shareholders, and company secretary, such as a passport or ID card.
- A reference letter from a bank that the directors, shareholders, and company secretary have an account with.
- A detailed business plan outlining the objectives, marketing plan, and financial projections of the subsidiary.
- The subsidiary will require to get licenses and permits from suitable administration in Malta.
Eligibility Criteria for Starting a Subsidiary in Malta
To start a subsidiary in Malta, there are no specific eligibility criteria for foreign investors.
Eventually, there are a few common requirements that must be met, such as:
- Starting a Maltese subsidiary can be established as a private limited liability company, public limited liability company, or branch office of a foreign company.
- The subsidiary should possess at minimum one director and one shareholder.
- Starting a Maltese subsidiary should possess a registered office in Malta where legal documents can be served and official correspondence can be received.
- The subsidiary should possess a memorandum and articles of association that outline the activities, rules, and regulations of the company.
- Starting a Maltese subsidiary should be registered for taxes with the Maltese tax authorities and obtain a tax identification number.
- The subsidiary should relent with all relevant laws and regulations in Malta, including those related to labour, taxes, and business operations.
- Relying on the nature of the business, the subsidiary may acquire licenses and permits from the relevant authorities in Malta.
Multiple Taxes for Starting a Subsidiary in Malta
When starting a subsidiary in Malta, there are various taxes that might be functional, such as:
- Corporate tax: The common corporate tax rate in Malta is 35%. However, there are various tax incentives available for companies that operate in certain industries, such as finance and gaming.
- Value-added tax (VAT): The general VAT rate for goods and services is 18%.
- Social security contributions: Employers and workers are needed to do social security contributions to the Maltese government. The rates differ relying on the class of income.
- Withholding tax: Particular payments made to non-resident firms might be associated with withholding tax. The rates vary differ relying on the class of income and the country of residence of the recipient.
- Capital gains tax: It may be associated with tax in Malta. Yet, there are diverse immunities and reliefs functional.
Cost of Starting a Subsidiary in Malta
The cost of starting a subsidiary in Malta can vary depending on several factors, such as the legal structure chosen, the nature of the business, and the professional fees charged.
Few of the standard expenses applied in starting a Maltese subsidiary:
Incorporation fees: The fee for incorporating a private limited liability company is €245, while the fee for incorporating a public limited liability company is €1,165.
Office rental: The subsidiary will need to have a registered office in Malta where legal documents can be served and official correspondence can be received. The cost of office rental can differ relying on the area and size of the office.
Taxes and fees: Some various taxes and fees may be applicable when starting a subsidiary in Malta, such as corporate tax, value-added tax, social security contributions, and stamp duty.
Professional fees: The professional fees charged can vary but may include fees for legal advice, company secretarial services, and other administrative services.
Why set up a subsidiary in Malta?
Setting up a subsidiary in Malta can provide several benefits, including:
Favourable tax regime
Malta has a competitive tax system with a corporate tax rate of 35% that can be reduced to as low as 5% under certain circumstances. There are also other tax incentives available for firms that function in a particular sector, such as finance and gaming.
Malta is known for its business-friendly environment, with a streamlined registration process, a flexible labour market, and a high level of English proficiency.
Favourable legal system
Malta has a standard law, which is friendly to multiple global investors. The country also has a robust regulatory framework that provides legal certainty and protection for investors.
EU and OECD compliance
Malta is fully compliant with the EU and OECD standards on anti-money laundering and countering the financing of terrorism (AML/CFT). This compliance provides an additional layer of legal protection for investors and can help to enhance the reputation of a business.
Intellectual property protection
Malta offers strong intellectual property protection, with a well-established legal framework for trademarks, patents, and copyrights. This can be particularly beneficial for companies operating in technology and innovative enterprises.
Access to the European Union
Malta is a member of the European Union, which can provide access to a large and diverse market, as well as various economic and legal benefits.
Overall, setting up a subsidiary in Malta can be a good choice for companies looking to expand their operations in Europe and take advantage of a favourable tax system, a business-friendly environment, and a strategic location. The subsidiary can be operating under an alternative name for the company and still pursue the interests of its business. However, the Maltese government offers several tax benefits, in addition, to double tax treaties signed with numerous nations.
The process of starting a subsidiary in Malta can be complex and time-consuming, so you should seek the advice of professionals like Odint Consultancy to ensure that you obey all lawful conditions.
Foreigners are allowed to establish a company in Malta. There are no limitations on the ownership of foreign companies in Malta.
A limited liability corporation may be registered with an initial share capital in the amount of EUR 1,165 and deposited into the local bank account.
While parent companies control the subsidiaries, they are legally distinct businesses that file the tax they own such as the payment of income tax on any income generated and keeping their financial records.
For the LLC to qualify as a subsidiary, the holding company must hold more than 50 per cent of the company and this is done through membership interests.
The three main ways in which the subsidiaries can generate profit for the holding firm. Selling assets and buying them, providing services and profits from dividends and stock shares.