Foreign companies expanding into Malta are entering an economy ranked as one of the most dynamic in the Euro Zone, according to the International Monetary Fund. Unemployment was among the lowest in the European Union in 2021 at 3.6% and despite being the smallest economy in the EU, Malta boasts a skilled, flexible, multi-lingual, and cost-effective workforce.
However, incoming companies intending to set up a subsidiary will find these economic attractions balanced by a difficult employment market where some employee benefits are covered by laws, some by collective agreements and others a matter of individual contracts.
There are speedier and more cost-effective alternatives to launching a subsidiary, with Bradford Jacobs opening the door to a hassle-free route into Malta.
Work alongside our Professional Employer Organization (PEO) recruitment specialists, then utilize our Employer of Record (EOR) in-country experts to handle every aspect of compliance. Employers can depend on our in-depth knowledge of Malta and how to navigate its challenging legislative issues that revolve around statutes, collective agreements, and European Union directives.
Here we have set out some basic summaries of what you need to make the transition into the Maltese market, whichever sector you operate in.
Starting a Business in Malta
The World Bank estimated industry represents around 12% of GDP, and manufacturing 7%. However, Malta’s economic strength lies in the services industry, and it is now one of the largest in the Mediterranean region in this sector, representing over 80%% of GDP and employing 80% of the workforce. The financial sector managed assets equivalent to 500% of GDP according to the World Bank. Malta was the first EU state to regulate online gaming. Being part of the EU, gives tariff-free access to the world’s third largest economy with nearly 500 million consumers.
The system for opening a company in Malta is well-structured but demands a clear understanding of the requirements. The World Bank ranked Malta 88th globally for ‘ease of doing business’ out of 190 nations in its most recent global assessment. But companies looking to open a subsidiary should beware – Malta ranks 152nd out of 190 when it comes to registering a property.
Foreign companies pressing ahead with plans to open a subsidiary must follow this procedure:
- Reserve unique company name by checking availability via Registry of Companies’ website.
- Draft Memorandum and Articles of Association through a registered corporate services provider.
Further procedures to start the business in Malta are:
- Obtain Tax Identification Number (TIN) from the Companies Registry by providing confirmation of reserved company name, notarized Memorandum and Articles of Association, confirmation of deposited share capital, copies of the passports/ID of each shareholder, director, and company secretary.
- Register for Value Added Tax, obtain the employer ‘Permission to Employ’ (PE) identification number and register employees with Jobsplus.
Expanding Business into Malta
Opening a business in any overseas territory brings issues. Moving staff across the world means lengthy processes to obtain visas and work permits. When employees are in place, who will handle payroll? How will your company deal with regulations on taxation, entitlements and benefits, termination, and severance?
Drawing up an expansion blueprint is not enough. Your business plan will have to answer all these questions.
Malta welcomes foreign investment, but the employment market is complicated by its mix of laws, supplementary statutes and collective agreements affecting employee benefits and entitlements. There are other questions too: where will you find distributors, manufacturers, and offices?
There is a simple alternative. By partnering a Professional Employer Organization (PEO) and Employer of Record (EOR) such as Bradford Jacobs, companies can plot a time-efficient and cost-effective path to locating and employing staff in Malta.
Malta Business Facts
- Capital city – Valletta
- Population – 520,000 estimated by end of 2021
- Regions – Archipelago of Malta; Islands of Gozo and Comino
- Official Languages – Maltese and English
- Economy – US$16.7 billion GDP; Ranked 122 in the world by GDP
- Leading sectors by GDP 2020 – services (76%); industry (13.4%); agriculture (0.6%). Largest industries include tourism, finance, manufacturing, IT, and communications.
- Main exports – refined petroleum, electrical equipment, and machinery e.g., integrated circuits and semi-conductors, packaged medicines, toys, and books.
- Main imports – petroleum, yachts, ships and aircraft, integrated circuits including computers, chemicals.
- Main trading partners – EU, Singapore, UK, USA, S. Korea, and China.
- Government – Democratic Parliamentary Republic.
- Currency – Euro.
Advantages and Challenges of the Malta Market
Advantages of expanding into the Maltese market include:
- Workforce: Malta has a multilingual, highly skilled, educated, and adaptable workforce. Many investors praise the work ethic of the Maltese who produce high quality work at a fraction of European and North American costs
- Politics: Politically stable as a parliamentary republic, Malta has good relations with its closest neighbor nations
- Sectors: Malta has maintained traditional economic sectors such as tourism, pharmaceutics, and manufacturing, but has developed new sectors in financial services, iGaming, and digital technology, while several leading aerospace companies have established subsidiaries there
- Logistics: Malta’s location in the Mediterranean is economically beneficial for business with North Africa, the Middle East, and Southern Europe
- Global Position: Malta’s successful integration into the European Union and the Schengen area and adopting the Euro as its currency has continued to propel the island’s economic growth
- Economy: Malta is a free market economy with no restrictions on exchange controls and has few obstacles to trade and enterprise, although all dealings must be in line with EU directives
Challenges of operating in the Maltese market:
- Labor: The relatively small workforce can create skill shortages in some sectors
- Finance: The International Monetary Fund identified that anti-money laundering safeguards needed upgrading
Limited Company / Subsidiary or Branch in Malta
International companies targeting Malta for expansion will generally choose a private limited liability subsidiary. Subsidiaries can have a totally different name from the parent company, pursue different business activities and form their own contracts.
Branches, in comparison, are an extension of the parent company and are not a separate legal entity. Subsidiaries and branches have differences in how they are registered and operate. Key points are:
Main characteristics of a subsidiary:
- A subsidiary in Malta is an independent legal entity set up under Maltese Companies Law and operates under regulations imposed by Maltese authorities
- A subsidiary can embark on additional business activities to those of the parent company
- A subsidiary must register with the Maltese authorities for tax and VAT and produce its own audited accounts and financial records
- The parent company of a limited company/subsidiary will have no responsibility for debts or liabilities
Main characteristics of a branch:
- A branch is completely dependent on the parent company, operates as a foreign-based extension and must carry out the same activities
- A branch is taxed only on the profits generated in Malta
- A branch can undertake only the same business activities as the parent company
- A branch office need only obtain a VAT number to operate, but the parent company must submit audited annual accounts with the Malta Trade Register
- The parent company of a branch will be responsible for any debts or legal liabilities of the branch
In addition – a subsidiary must have minimum share capital of approximately €1,200 (US$1,374), whereas there is no such requirement for a branch. A branch is considered a permanent establishment under Malta’s double tax treaties, so the parent company could benefit from various tax deductions and exemptions. Branches and subsidiaries must both have registered offices in Malta.
Legal Structures for Malta Market Entry
Companies planning to expand into Malta with a subsidiary must comply with the Maltese Companies Act. This applies to all entities set up in the country, such as:
- A Private Limited Liability Company (with the suffix ‘Limited’ or ‘Ltd’) is the most frequent option used by investors in Malta and normally has a minimum of one shareholder and a maximum of 50, with a minimum share capital of €1,200 of which 20% is paid up upon incorporation.
- A Public Company (with the suffix ‘plc’) has a minimum of two directors and may trade in shares or bonds to the public. The share capital must be at least €46,587 (US$53,297) with at least 25% paid up upon incorporation.
- A Partnership may be between two or more members and can be either a general partnership or a limited partnership.
The legal structure for a private limited liability company:
The legal structure for a subsidiary allows it to operate independently from the parent company, under its own name and able to follow its own commercial and business activities. The subsidiary can have up to 50 shareholders who generally have no liability beyond their share contributions. The shareholders elect directors, company secretaries and managers who can then handle day-to-day operations.
The legal structure for a branch:
A branch is not a separate legal entity from the owning foreign parent company and carries on the same business under the same name as the parent company as its permanent representative in Malta. The parent company has total responsibility for any debts or liabilities of the branch.
The branch must provide Articles of Association of the parent company, and lodge the parent company’s annual accounts with the Malta Trade Registry. A designated branch manager oversees the business activity and supervises financial reporting.
Opening a Business Bank Account in Malta
All companies starting operations in Malta need a corporate bank account from the early stages, after company registration, in order to deposit share capital and to handle initial transactions. It is helpful to keep all company dealings separate from personal banking from the start, especially for tax purposes.
Maltese banks require several key documents and specific information but there are many benefits and first-rate services provided, such as tax benefits, accounts in any currency and no exchange controls. The exact procedure varies, depending on the bank.
Some required documentation may include:
- Proof of address of managers and directors, with copies of all identification documents certified and authenticated either by a major bank in home country or its local Maltese embassy or consulate.
- Some banks may also require a utility bill to confirm the company address.
- A business plan of company activities with anticipated turnover and previous profit margins; a certified copy of the Certificate of Registration and a copy of the Memorandum and Articles of Association.
- Obtain a reference from the current bank.
- The directors or management should confirm their decision to use that bank, choose a main currency and their method for tax payments.
- Complete a Know Your Customer (KYC) form.
- The directors must individually provide bank references regarding funds available and their sources, part of money laundering prevention.
- Unless this information is clearly provided and referenced, the bank’s own verification process may delay the application process.
This process can be efficiently handled by Bradford Jacob’s Maltese Employer of Record (EOR) teams who are used to dealing with the intricacies of the Maltese banking system. Do not risk missing a step and jeopardizing your business operations in Malta.
Company Formation in Malta
To incorporate a company as a limited liability subsidiary in Malta, the parent company must comply with the Maltese Companies Act. Both private and public limited liability companies must produce a Memorandum of Association and Articles of Association, including the following information:
- Company name and registered office address
- The type of company and its business activities
- Details of the shareholders
- The amount of share capital
- Numbers of shares distributed to each shareholder and shareholders’ rights
- The company directors and secretary
- Details of company’s legal representatives
- A bank account must be opened to hold the minimum share capital of around €1,200 (US$1,374), of which only 20% need be initially deposited
- The Memorandum of Association registered with the Registrar of Companies, which issues a registration certificate and number
- The subsidiary must register its employees for social security and insurance
Finding an office in Malta
Malta has a well-educated workforce and a fast-developing economy, a natural business hub in the Mediterranean owing to its location, investment incentives, modern infrastructure, and political stability. Unlike most countries, Malta lacks a central business city or district. It has a variety of business hubs in diverse locations, depending on relevant business needs, and these attract foreign companies.
Locating your office in the relevant business center/hub can provide:
- Coaching, guidance and networking opportunities, creating trust and synergy
- Ideas, knowledge, research, and development opportunities, and generating new partnerships
- Entrepreneurial activity, innovation, and opportunity for sharing knowledge
- Free support to grow on the international stage, utilizing joint potential
A robust manufacturing base and strong distribution region may also be considerations when looking to locate and establish an office for your business. Also consider:
- Are there any special economic or free-trade zones with local government funding or tax breaks?
- Are there good travel and transport links for staff and clients
- Work, communication, and storage – so is it fit for purpose?
- Is it part of a business cluster / hub?
- Is it within the budget … but still has room for expansion?
- Is the locality clean and good for mental health, provides services and accommodation to attract the top talent and keep them?
Hubs on Malta feature:
- Sliema - a commercial center of international brands and companies that enjoy the community feel
- Valletta - the capital city and hub for law firms and many long-established family businesses and a highly populated area
- Ta Xbiex – an upmarket central town, close to Valletta and Sliema, very popular with iGaming companies, attracting a large number of businesses. It provides entertainment, dining, and residential rental options for companies’ international staff
- IT ‘village’ Smart City - a self-sustainable township combining a successful business ethic and chic 21st-century lifestyle. It has an estimated 4,500 businesses in its global community
All offer a variety of office spaces for rent, to fit any budget with an assortment of top facilities to suit everyone from start-ups to very established global organizations.
Finding a Manufacturer in Malta
Maltese manufacturing industry contributes significantly to the country's GDP. Malta has no natural resources or heavy industry, so depends entirely on imports of basic and industrial products as well as consumer goods. Malta specializes in the manufacture of medium and high-tech products, semi-customized small batch products, clothing, accessories, cosmetics, and food.
Companies may need to partner manufacturers in Malta. Developing ideas into products is pointless if they cannot be produced. This presents additional problems when expanding into a foreign country but fortunately English is widely spoken in Malta, especially in business. Companies should consider these points when looking for a manufacturer.
- Do they hold relevant quality certificates?
- What experience do they have and who are current clients?
- Can they deliver direct to customers?
- Can they keep up with demand or do they outsource?
- Can they source materials?
- Are they financially sound?
- What is their minimum order quantity?
- Discuss possible penalties for poor quality or late deliveries
- Payment options
Companies may also consider:
- Market research to avoid manufacturing a product in a saturated market
- Licensing to a company that can handle manufacturing, marketing, and distribution
- Protecting your intellectual property
Explore links to manufacturers, such as:
Finding a Distributor in Malta
A successful move into Malta will prove wasted without a front-line distributor to move the products around the country, or farther afield into Europe, North Africa, or the Middle East. Finding the perfect match among the distributors is critical to accomplishing objectives. Treat distributors as long-term partners to formulate goals and business plans.
It is also interesting to note that local operators tend to work in certain niches, specializing in the distribution of products or services from certain areas. Some operators have invested in modern mass retail, working directly with European retailers, while others have partnered to represent brands in North Africa.
English is widely spoken so there should be no issue with language, especially in business.
You could try to join a trade mission from your home country who will target relevant companies, organize events and be ‘au fait’ with conferences and trade fairs and arrange one-to-one meetings. Social media such as LinkedIn is a booming source of information. Joining business-to-business organizations and accessing local directories and magazines are all good resources for contacts and to become familiar with the locale. Bradford Jacob’s as well as being global PEO and EOR specialists also have a local office – we have the know-how and the facilities!
Retail sector Organizations:
- Malta Chamber of SMEs - Association of General Retailers and Traders:
- Malta Chamber of commerce – The official Business portal
- Ministry for the Economy, Investment and Small Business – Government Economic Portal
Other useful links:
Contact Bradford Jacobs!
Bradford Jacobs opens the door for companies planning to explore exciting new markets such as Malta, ideally located for further expansion into North Africa and the Middle East. Our Professional Employer Organization (PEO) specialist teams have in-depth global knowledge of how to recruit in new territories. Our Employer of Record (EOR) services will guarantee your company complies with laws relating to employment, registration, taxation, and payroll in Malta.
Bradford Jacobs provide ongoing consultation on human resources based on our understanding of individual cultures and customs of every country being targeted for global expansion. Work with Bradford Jacobs to expand into Malta and put the brightest and most talented staff in place. Find us here. Contact us today!