Building Substance in Malta

Economic substance means that a company actually operates and is managed where it is based. Tax authorities typically look at where the key management decisions are made, who makes them, where contracts are signed, whether the company has its own office and qualified staff, and whether it banks in the country where it is based. What counts is the overall picture, not any single factor.

No. Every Maltese company must have a registered address; that is a company law requirement. But the address alone carries little weight when it comes to where the company is managed. If the company is in fact run from the UK, HMRC may treat it as resident in the UK, for instance when the director takes the decisions from a home office in the UK.

Not as a matter of company law. For tax purposes, what matters is where the company's key decisions are actually taken. If you continue to run the company from the UK, its central management and control is likely to remain in the UK. There are usually two routes: you move your home to Malta, or a qualified management team in Malta genuinely takes the decisions itself. A move has its own UK tax consequences. The UK currently has no general exit tax for individuals, but under the temporary non-residence rules (TCGA 1992, s. 10A) certain gains can become chargeable if you resume UK residence within five years of leaving. We work out which route suits you in the initial consultation.

A Maltese private limited company needs at least one director, and a public company at least two. The law does not require directors to live in Malta. For substance purposes, a director based in Malta with real decision-making authority can still make sense. A director who simply signs what has been decided elsewhere does nothing for the company's substance.

There is no fixed threshold. The set-up has to match what the company actually does: a consultancy with one managing director needs something different from a trading business with a warehouse and a sales team. One point matters in every case: the company has to carry out its core activity with its own people. If that activity is largely outsourced, it becomes much harder to show that it genuinely takes place in Malta. That is why every engagement starts with an analysis.

Yes. We compare how your company actually operates with what can be evidenced, and show you where the gaps are. We then close those gaps with the services your company needs.

If HMRC concludes that the company is managed from the UK, it is treated as resident in the UK and liable to Corporation Tax on its worldwide profits. If HMRC accepts that the company is managed in Malta, the controlled foreign company rules can still apply where the company is controlled from the UK, its profits are taxed at a low rate in Malta and a UK-resident company holds an interest of at least 25% in it. UK-resident individuals who have transferred assets abroad may also be taxed on the company's income under the transfer of assets abroad rules, unless an exemption applies. Assessments can go back several years.

Most tax systems ask the same basic question: where is the company actually managed? The tests and exemptions differ from country to country, so we go through the rules of your country of residence with you in the initial consultation.