Four arguments against establishing a Malta Limited in Malta

At Dr Wern­er & Part­ner, we look after clients from all over the world who are seek­ing tax advice in Mal­ta or are con­sid­er­ing estab­lish­ing a com­pa­ny here. In a grow­ing num­ber of cas­es, how­ev­er, we do not advise estab­lish­ing a com­pa­ny, or at least rec­om­mend a dif­fer­ent set-up from what was orig­i­nal­ly envis­aged. The rea­sons for this include the fol­low­ing:

Estab­lish­ment in Mal­ta is dif­fi­cult for investors from coun­tries with CFC rules

CFC rules: the investor comes from and is res­i­dent in a coun­try in which CFC rules (Con­trolled For­eign Com­pa­ny or Cor­po­ra­tion) apply. Gen­er­al­ly speak­ing, these are rules from which it emerges how a com­pa­ny can and may be estab­lished and oper­at­ed abroad. Once these or sim­i­lar rules are applied, the out­lay for the sub­stance to be cre­at­ed in Mal­ta may in some cir­cum­stances be too great.

Income is too low for estab­lish­ment in Mal­ta

Antic­i­pat­ed turnovers and prof­its are too low. There are many providers who offer to help estab­lish a com­pa­ny in Mal­ta at more or less com­pet­i­tive prices, com­plete­ly inde­pen­dent­ly of the annu­al prof­its to be expect­ed by the com­pa­ny. In our opin­ion, it is only worth estab­lish­ing a com­pa­ny in Mal­ta and cre­at­ing the asso­ci­at­ed struc­tures start­ing from a prospec­tive annu­al com­pa­ny prof­it of approx. €250,000 upwards. On the one hand, estab­lish­ing and oper­at­ing a com­pa­ny in Mal­ta costs mon­ey and time (espe­cial­ly if some sub­stance has to be cre­at­ed as not­ed under point 1). On the oth­er hand, it should be tak­en into con­sid­er­a­tion that, even dis­re­gard­ing all the finan­cial aspects, the men­tal effort of estab­lish­ing and oper­at­ing two cor­po­ra­tions as a for­eign­er in a strange coun­try with dif­fer­ent laws should not be under­es­ti­mat­ed. Even if we relieve our clients of much of the work, the invest­ing client must still invest men­tal effort. Thus the client should weigh up whether the effort of estab­lish­ing a struc­ture is real­ly worth­while to make minor sav­ings of €10,000 to €50,000. Please note: if you are con­sid­er­ing mov­ing to Mal­ta, this lim­it does NOT apply because you would make con­sid­er­able sav­ings when cre­at­ing sub­stance.

After estab­lish­ment in Mal­ta tax­es have to be paid on div­i­dends

A clas­sic mis­cal­cu­la­tion: many clients who remain res­i­dent abroad for­get or dis­re­gard the fact that, in addi­tion to Mal­tese tax­es (which can be very attrac­tive), tax also has to be paid on div­i­dends from Mal­ta in the coun­try of res­i­dence. In EU mem­ber coun­tries this gen­er­al­ly amounts to between 15 and 30% and must of course be includ­ed in any cal­cu­la­tions. So beware! Think­ing that you can receive div­i­dends in an account in Mal­ta or in cash or oth­er­wise WITHOUT the tax author­i­ties in your home coun­try real­is­ing it is a) naive (see CRS (Com­mon Report­ing Stan­dard, applic­a­ble as of 01/01/2016, and b) could make you liable to pros­e­cu­tion or con­sti­tute an offence in almost all coun­tries.

Estab­lish­ing a com­pa­ny in Mal­ta pure­ly for tax rea­sons does not make sense

A favourable tax bur­den as the only rea­son for estab­lish­ing a com­pa­ny in Mal­ta: any inter­est­ed par­ty who does not live in Mal­ta and does not wish to move to Mal­ta in the fore­see­able future should give suf­fi­cient thought to the ques­tion of why estab­lish­ing a com­pa­ny in Mal­ta appears to make sense WITHOUT THE TAXATION ASPECTS. The advan­tages of estab­lish­ing a com­pa­ny in Mal­ta sole­ly for tax rea­sons will be brought down soon­er or lat­er under the scruti­ny of a for­eign tax office. There are, how­ev­er, ade­quate valid rea­sons to estab­lish a com­pa­ny in Mal­ta. These include, for exam­ple: Malta’s strate­gic geo­graph­i­cal posi­tion, the prac­ti­cal reg­u­la­tion of the finance and gam­bling sec­tors, the attrac­tive options for ship reg­is­tra­tion, the more favourable costs of fringe benefits/social secu­ri­ty con­tri­bu­tions, the large num­ber of spe­cialised IT per­son­nel, the mod­ern research, busi­ness and com­mer­cial cen­tres, the secure IT con­nec­tion, etc.

Please note that in the event of relo­ca­tion to Mal­ta any fur­ther require­ment for dec­la­ra­tion of income to for­eign tax author­i­ties is in any case inap­plic­a­ble, as you would then be liv­ing in the coun­try in which you are estab­lish­ing the com­pa­ny. Fur­ther­more, relo­ca­tion to Mal­ta offers con­sid­er­able per­son­al ben­e­fits which we would be hap­py to explain in a per­son­al con­ver­sa­tion.


About Philipp Sauerborn

In 2005, Philipp Sauer­born joined the firm of St. Matthew in Lon­don, one of the lead­ing Ger­man account­ing firms in Eng­land renowned for its exper­tise in cor­po­rate, com­mer­cial and tax law, as a depart­ment head. After three years, he was a part­ner and man­ag­ing direc­tor.
Towards the end of 2011, he decid­ed to move to Mal­ta, where he first worked at inter­na­tion­al law firms and con­sul­tan­cies in an employed and con­sult­ing capac­i­ty. Since the begin­ning of 2013, he has been a senior employ­ee at Dr. Wern­er & Part­ner. Mr. Sauer­born is cur­rent­ly com­plet­ing his ADIT ‑Advanced Diplo­ma in Inter­na­tion­al Tax.

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