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There are a number of ways how a foreigner can establish a business presence in Malta, such as opening a limited liability company, trading company or establishing a branch in Malta. One can also opt to buy a ready-made shelf company.
Malta, a business hub in the center of the Mediterranean, attracts many foreign entrepreneurs to carry out their business activities and invest in Malta. Apart from the many incentives offered, the island also acts as a gateway to the European Union.
Existing foreign companies can choose to establish a branch in Malta. This is not considered to be as ‘re-incorporating a company’, nor as a separate legal entity, but acts as an extension of the parent (existing) company in the foreign country. It must be registered with the Maltese Registrar of Companies as an ‘oversea company’, within one month of its establishment.
In this detailed guide, we will outline the main reasons why and when you should consider establishing a branch in Malta, the complete process and documents required for the registration and tax treatment.
Why Establish a Branch in Malta?
The process of registering a regular Maltese company (LTD) and that of a branch are quite similar, both in terms of fees and duration. So why would you choose to establish a branch, not an LTD.?
A Maltese branch is generally utilised by foreign companies to have a ‘place of business’ in the Maltese Islands. Despite the set up being similar, branches do not require a liquidation process in order to terminate their operations in Malta, but just a notification to the Maltese Registrar of Companies. This makes closing down a branch a much more efficient process.
Other reasons for establishing a branch in Malta include;
- A straight forward and quick registration process
- No physical presence required in Malta for registration. With that being said, the foreign company has to have a local representative for its branch in Malta.
- The foreign company might benefit from a number of fiscal advantages when splitting up the registration of the company and domicile in two different jurisdictions
- A network of double tax treaties with over 65 countries.
- Attractive tax treatments – refunds applicable and no withholding taxes on dividends
- Gateway to European Union
- Strong infrastructure
- Only income generated in Malta is taxed
How to Establish a Branch in Malta? Procedure & Documents Required
1. Appoint a Representative in Malta
One of the first steps for foreign companies wishing to extend their business in Malta, by establishing a branch, is to appoint an authorised representative in Malta.
2. Office Facilities
When registering a branch in Malta, you are required to have a registered office in Malta. Investors have the freedom to choose between the traditional offices and virtual offices. In recent times, virtual offices gained popularity as they maintain the professional business image, while having a remote workspace for the branch where you will have a registered address, mail collection and a private telephone number. Virtual offices are usually costing a fraction of a managed office space.
3. Register with Malta Registry of Companies
The company abroad has to register the branch with the Malta Registry of Companies. This is done by delivering the statutory Form M within one month of establishing the place of business, together with the following information and documents:
- Address in which the branch will be carrying out business from
- Outline the activities of business to be conducted in Malta
- Name and address of local representative
- The extent of the representative’s authority to act on behalf of the company abroad
- Copy of the Memorandum and articles of association
- Certificate of good standing by parent company
- Branch Charter
- Statute of the company
- List of Directors and company secretary/ person in charge
Upon submitting the Form M and documents, a registry fee is required to be paid. This can be as low aw 245 Euro, but depends on the nominal value of the foreign company’s authorised share capital. All of the documents submitted above have to be original or a certified copy from a notary is also accepted.
4. Accounting Procedures
Once your branch is registered with the Malta Registry of Companies, the next step is to submit audited financial accounts, including a balance sheet, profit and loss and statements.
Additionally, just like any other company set up in Malta, branches are required to be registered for VAT, income tax and social contributions.
5. Opening a Bank Account
When establishing a branch in Malta a business bank account is required to be opened for the future financial activities to be carried. This can be done together with the registration process or separate.
Tax Treatment for a Branch of an oversea company in Malta
When it comes to the taxation of branches in Malta, the procedure is similar to a regular company. This type of business that will be operated from outside the country, would only be taxed on income generated in Malta and income generated abroad but remitted to Malta.
The branch will have a tax rate of 35% and for non resident shareholders refunds on tax might be provided. In many cases, the overall effective tax rate can be as low at 5%. Additionally, the branch’s dividends are not subject to any withholding taxes and can only be taxed as the domestic tax rate.
Branches in Malta can also benefit from the many tax treaties formed with many countries which protects the company from being taxed twice.
For more information on establishing a branch in Malta, get in touch with Welcome Center Malta for a free Consultation.
