Company Formation in Malta or Cyprus: A Direct Comparison

Reasons for Relocating Your Residence and/or Company to Malta & Cyprus

Who hasn't dreamt of living on a beautiful Mediterranean island? Imagine great weather almost all year round, crystal-clear waters, Mediterranean cuisine, and a relaxed Southern European lifestyle. While popular destinations often include Italy, Portugal, Spain, or Croatia, many also choose the stunning islands of Malta or Cyprus. These islands aren't just tourist magnets; they're increasingly becoming preferred locations for both living and doing business. Below, you'll learn about common reasons for changing location, why the EU is a sensible choice for emigration, and what you should consider when forming a company.

The Most Common Reasons for Company Formation Abroad

• Location for Location-Independent Businesses Your business is already location-independent, and you're looking for the best overall package for your company's base.
• Seizing Growth Opportunities Your company wants to expand and chooses a new location. Access to new markets can also provide a competitive advantage over rivals.
• More Favourable Licences Abroad Licence fees vary by country, leading some entrepreneurs to change their business location due to these costs.
• Improved Quality of Life For entrepreneurs, aspects like sun, sea, beaches, and a Mediterranean lifestyle play a crucial role when relocating their residence.
• Business-Related Relocation Your company needs to establish another branch or even move its entire operations abroad.
• Lower Taxes The tax burden in your home country makes it difficult for your company to grow, and you want to optimise your taxes.

Which Countries Are Often Chosen?

Why the EU Makes Sense for Company Formation

When an entrepreneur considers relocating their company's headquarters, they typically choose a country that meets their requirements for both residence and business, while also offering low taxes. Such countries include the Bahamas, British Channel Islands, Cayman Islands, Liechtenstein, Isle of Man, Monaco, Netherlands Antilles, Panama, Switzerland, Cyprus, and Malta. Differences between these countries include, of course, their continents and associated lifestyles, as well as applicable laws, such as tax regulations. Many entrepreneurs wisely opt against countries on the so-called blacklists (like Barbados, Bahamas, Tunisia, etc.) or grey lists (like Dubai, Panama, Mongolia).

Another important factor is the geographical location of the low-tax country, which determines flight connections and can simplify cross-border trade. In short: the most frequently chosen emigration destinations are countries within the EU. There's a good reason for this: the European Union has created economic frameworks that greatly simplify trade within the EU, for example, through duty-free movement of goods. Furthermore, the EU has a strong reputation, which helps companies build networks even overseas.

The Choice Often Comes Down to Cyprus or Malta for Company Formation and Emigration

The advantages of a company in Malta or Cyprus speak for themselves:

• Country within the EU
• Tax-free dividends regardless of the company's seat
• Lower cost of living
• Excellent flight connections
• Mediterranean lifestyle

• 300 sunny days

• Diverse landscapes
• Foreign income is tax-free
• Freedom of establishment
• Free internal market

So, which country should you choose? Fundamentally, the two countries differ relatively little in terms of taxation. The main difference lies in Malta having English as an official language, which is advantageous for companies looking to expand or hire new employees in the country. Malta also scores another point when comparing the countries' economies. Cyprus is closely intertwined with Greece, meaning its economy is still recovering from the global economic crisis.

This factor is also reflected in the banking sector. Malta's banks are very stable, unlike those in Cyprus. Moreover, the Maltese government is very keen to support foreign entrepreneurs. Malta's healthcare system is also very similar to that of the UK. We've summarised a comparison of key figures for you below (Source: https://www.laenderdaten.info/laendervergleich.php).

Top 5 Expat Countries by Internationals (based on happiness and well-being)

1. Ecuador
2. Mexico
3. Malta
4. Singapore
5. Luxembourg

Source: https://www.internations.org/expat-insider/2015/

For Individuals and Businesses - What to Expect When Relocating

Changing Legislation, New Measures & Harmonisation of States Require Extensive Knowledge

If you've decided to continue your business outside your home country, you'll quickly realise that numerous regulations and laws can complicate a company relocation. Relocating your centre of vital interests and/or company abroad always means a loss of tax revenue for the country you're leaving, which in turn means that country won't make it easy for you.

Additionally, the constantly changing and emerging legislative drafts at national and international levels, particularly from the G20, OECD, and EU, as well as tax authorities, are actively combating structures aimed at tax evasion and avoidance. For you as an entrepreneur, this means: if you're considering a change of location purely for tax motives, abandon your plan - such setups rarely succeed in the long term.

As you can imagine, a company relocation initially involves significant bureaucratic effort and requires knowledge of applicable laws. However, the sheer volume of laws is no reason to panic. There are also several options that can simplify the relocation of your company's headquarters. Guidelines and laws within the EU that work in your favour include, for example, Double Tax Treaties (DTT), the EU Parent-Subsidiary Directive, freedom of establishment, or Non-Dom Residence.

In short: yes, establishing a company abroad for long-term success is complex. Therefore, our advice to you is: leave nothing to chance and seek advice from experts who are familiar with applicable law and can help you. But beware: many measures that worked 10 years ago no longer do today. This means that poor advice can cost you not only time but also, potentially, parts of your profits later on.

What You Need to Consider. Do You Want to Form a Company?

In addition to the aspects mentioned above, there are many other regulations that should be considered when forming a company abroad. For example, you must not have a primary residence in your country of origin. If you do, and the tax authorities become aware of it, you could quickly be accused of tax evasion. In such a case, the burden of proof shifts, and you must be able to demonstrate to the tax authorities, with data, that your centre of vital interests is Malta. In Malta itself, or any other emigration destination, the issue of substance and value creation is crucial.

Tax evasion is now also considered a money laundering offence. Therefore, any advisor who is a regulated subject person under anti-money laundering directives must report a Suspicious Transaction Report (STR) to the Financial Intelligence Unit if they have suspicions. Simply put - advisors must report you as soon as they suspect a money laundering offence.

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