3 Common Hurdles When Setting Up a Malta Limited

Are you looking to optimize your corporate tax burden by setting up a company abroad? Malta is a prime location within the EU for this purpose, offering the legal certainty of an EU member state alongside a positive economic outlook. At DW&P Dr. Werner & Partners, based in Malta, we specialize in guiding international entrepreneurs through the company formation process. Over the years, we have noticed that clients often face the same specific challenges. Here are three common hurdles you need to know about as you plan your business setup.

The Incorporation Process – Flawless Documentation

While you do not need to be physically present in Malta to register a Malta Limited, the administrative requirements are strict. Unlike the instant online formation processes you might be used to in jurisdictions like the UK, forming a company in Malta requires specific, signed documentation that must be absolutely flawless. This typically includes certified copies of your identification and bank references (which are essential for opening a corporate bank account). All documents must be officially certified and up to date to be accepted by the registrar.

Establishing Economic Substance

To ensure your company is tax-resident in Malta and recognized by tax authorities in your home country, establishing a "permanent establishment"—or economic substance—is essential. You cannot simply operate a letterbox company. Within a reasonable timeframe, you must set up physical office space and employ staff locally to demonstrate that the company is genuinely managed and operated from Malta. The good news is that due to Malta's competitive labor costs and office rents, this hurdle is relatively easy to clear compared to other financial hubs, but it is a critical detail that is often overlooked.

Managing the Tax Refund Flow

Malta’s tax system operates on a refund basis: companies initially pay the standard 35% corporate tax, and foreign shareholders can subsequently apply for a 6/7ths refund. However, there is a catch. If this refund is paid directly to you as a private individual resident in another country (such as the UK or Germany), that amount is usually subject to personal income tax in your home jurisdiction.

To avoid this tax leakage, it often makes sense to implement a holding structure. In this scenario, the refund flows to the holding company rather than to you personally, which can be far more tax-efficient depending on the specific double tax treaties in place.

Depending on the nature and scope of your business activities, further applications may be necessary—for example, if your business requires specific licensing, such as in the iGaming sector. Please feel free to contact us to discuss the specific requirements for your business model.