Entering the Malta Market

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Entering the Malta Market
 

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 2019 and despite being the smallest economy in the EU, Malta boasts a skilled, flexible, multi-lingual and cost-effective workforce.

The World Bank estimated industry employs over 19% of Malta’s workforce, representing 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 84% of GDP in 2018 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.

These statistics highlight the potential of the Maltese market … and Bradford Jacobs’ expertise as a Professional Employer Organisation (PEO) will source top-level staff to fit any role. This is backed up by Employer of Record (EOR) outsourcing services which handle all aspects of staff administration and compliance with Malta’s employment, tax and registration laws. We provide the solutions to foreign expansion without companies risking the expense and uncertainty of establishing a subsidiary.

Starting a Business in Malta

The system for opening a company in Malta is well-structured but demands a clear understanding of the requirements. The World Bank ranks Malta 88th globally for ‘ease of doing business’ out of 190 nations. 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

Opening a company bank account for the subsidiary also has a precise procedure, which begins with the bank receiving references from the signatories’ existing banks. The Maltese bank will then require:

  • A completed Know Your Client (KYC) form
  • The ‘request to open an account’ form, specifying type of account, currency and preferred method of tax payment
  • Copy of the Memorandum and Articles of Association and certified copy of the Certificate of Registration. The bank may also require information on company activities and anticipated turnover
  • Confirmation of permanent address of directors and parent company certified by their prime bank or Maltese Embassy in country of residence; authenticated identification documents for directors, signatories, owners and company secretaries
  • Signed confirmation the directors are appointing the bankers

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, notarised 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 Jobs Plus

The Registrar of Companies also provides an alternative service for the registration of companies. Registration may now be carried out online through the Registry’s portal. Prior to registration, an applicant must register for an account and obtain a personal Digital Certificate by registering for an e-ID. The Registrar would then vet the application within five working days.

https://www.doingbusiness.org/en/data/exploreeconomies/malta

Expanding Business into Malta

Foreign companies expanding into Malta are tapping into a compact economy on a small island, but one that has been identified by the International Monetary Fund as among the most vibrant in the Euro Zone. Its location in the Mediterranean Sea, makes Malta a well-placed springboard to North Africa, the Middle East and western Asia.

Malta has a skilled, multi-lingual, flexible and cost-effective workforce as a further attraction for companies looking to establish a presence in the country, which had one of the European Union’s lowest unemployment rates in 2019.

There are a variety of sectors offering potential. Malta has become a major player in the services sector in the region, representing 84% of GDP in 2018 and employing a large majority of the workforce. Pharmaceutics, aerospace and microchips are among the leading areas of manufacturing, while industry as a whole employs close to 20% of the workforce and accounts for 12% of GDP. Malta was the first country to legalise online gaming.

Maltese Business Facts

  • Capital City – Valetta
  • Population – 442,000
  • Regions – Archipelago of Malta, Gozo and Comino
  • Official Language – Maltese and English
  • Economy – €11 billion GDP
  • Leading sectors – Finance, services, manufacturing
  • Main exports –Refined petroleum, integrated circuits, packaged medicines, toys, protection equipment, fish
  • Main imports – Petroleum, yachts, ships and aircraft, integrated circuits including computers, books
  • Main trading partners – Germany, France, Italy, Singapore, USA
  • Government – Democratic Parliamentary Republic
  • Currency – Euro

https://www.worldometers.info/demographics/malta-demographics/#pop

https://import-export.societegenerale.fr/en/country/malta/market-sectors

Advantages and Disadvantages of the Maltese Market

Advantages and attractions of operating in Malta include:

  • Malta’s successful integration into the European Union and Schengen area and adoption of the Euro as its currency has continued to propel the island’s economic success
  • Politically stable as a parliamentary republic, Malta has good relations with surrounding nations and its location in the Mediterranean is economically-convenient for business with North Africa, the Middle East and southern Europe
  • 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
  • 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
  • Malta’s workforce is multilingual, highly skilled, educated and, perhaps most importantly, flexible. Many investors praise the work ethic of the Maltese who produce high quality work at a fraction of European and North American costs
  • In terms of productivity, profitability, quality and response time, locally-based foreign companies consistently achieve better-than-predicted results

The challenges foreign companies face when expanding into Malta hardly rate as disadvantages, but the complexities of sourcing staff then running payroll and complying with Maltese laws and European Union directives point towards obtaining expert advice. The 100 per cent solution is to consider the alternative to setting up a subsidiary by working with Bradford Jacobs. Our Professional Employer Organisation (PEO) international recruitment specialists will find the perfect fit for the roles you need to fill. Then our Employer of Record (EOR) in-country consultants will handle all the complications of Malta’s employment and registration laws, tax regulations and payroll, ensuring your Maltese expansion plans move smoothly into gear.

Why Companies like doing Business in Malta

The Business Promotion Act encourages foreign companies to operate in Malta by offering flexibility and incentives, particularly for those demonstrating growth and employment potential.

The Maltese Tax System is designed to attract foreign investors. Although the corporate tax rate is 35%, refunds on dividends brings it down to 5% or lower. Malta’s banking system is ranked 14th soundest globally by the World Economic Forum.

The range of attractions that draw companies to operate in Malta include:

  • Member of the European Union
  • Highest percentage share of hi-tech imports and exports in the EU
  • Established trade and logistics links through air and sea with Europe, North Africa and the Middle East
  • International airport has direct flights to 37 major cities
  • Malta Freeport links with 115 ports worldwide
  • Flexible, multi-lingual and well-educated workforce
  • High-quality educational and training facilities set up to respond to the demands of industry
  • Highly-developed communications networks

Establishing a Limited Company, Subsidiary or Branch in Malta

Foreign companies deciding between opening a subsidiary/limited company or a branch in Malta must be aware of important differences.

  • A branch is completely dependent on the parent company, operates as a foreign-based extension and must carry out the same activities
  • A subsidiary in Malta is an independent legal entity set up under Maltese Companies Law and operates under regulations imposed by Maltese authorities
  • A branch is taxed only on the profits generated in Malta
  • A subsidiary is taxed on its worldwide income
  • A branch can undertake only the same business activities as the parent company
  • A subsidiary can embark on additional business activities to those of 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
  • 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 branch will be responsible for any debts or legal liabilities of the branch
  • The parent company of a limited company/subsidiary will have no responsibility for debts or liabilities

In addition – a subsidiary must have minimum share capital of approximately €1,200, 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 Maltese Market Entry

  • A Private Limited Company (with the suffix ‘Limited’ or ‘Ltd’) is the most frequent option used by investors in Malta and normally has a minimum of two shareholders, with a minimum share capital of €1,200 of which 20% is paid up
  • A Private 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 with at least 25% paid up
  • A Partnership may be between two or more members and can be either a general partnership or a limited partnership
  • Small or Medium Enterprises (SMEs) can take advantage of business opportunities via a European Economic Interest Grouping (EEIG), granting easier access to the European single market. SME’s can pool resources, knowledge and capital through an EEIG to approach more customers and diversify risk

Maltese Business and Corporate Tax

Maltese companies are subject to corporate tax at the rate of 35% on their worldwide income and capital gains. Foreign companies, incorporated outside Malta carrying out business activities in Malta are liable to tax on income arising in Malta.

When companies are taxed at the standard rate of 35%, following the distribution of dividends, shareholders are entitled to a refund of part or of all the tax paid by the company. This can reduce the effective rate to 5% or less.

https://cfr.gov.mt/en/Corporate/Pages/Corporate-Tax.aspx

https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-maltahighlights-2020.pdf

Opening a Business Account in Malta

All companies starting operations in Malta need a corporate bank account from the early stages in order to deposit share capital and to handle initial transactions. Maltese banks require several key documents and specific information. The exact procedure varies depending on the bank.

Requirements include:

  • Proof of address of managers and directors, with copies of all identification documents certified and authenticated either by a major bank or the local Maltese embassy or consulate. Some banks may also require a utility bill to confirm the company address
  • A business plan describing 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 present 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. 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 our Maltese Employer of Record (EOR) teams who are used to dealing with the intricacies of the Maltese banking system. Don’t risk missing a step and jeopardising your business operations in Malta.

https://www.welcome-center-malta.com/business-bank-account-in-malta-how-to-apply/https://www.gbofintech.com/opening-a-business-bank-account-in-malta/

Register a Company in Malta

A limited liability subsidiary is the most popular form of company for businesses establishing a presence in Malta. The registration process to become a legal entity in Malta is well-defined, but protracted.

To incorporate a subsidiary in Malta, the parent company must comply with the Maltese Companies Act. Both private and public limited liability companies must produce the Memorandum and Articles of Association, including the following registration information:

  • Company name and registered office address
  • The type of company and its business activities
  • Details of the shareholders
  • The amount of capital
  • Numbers of shares distributed to each shareholder and shareholders’ rights
  • The company directors and secretary
  • Details of company’s legal representatives
  • Obtaining tax registration number from the Inland Revenue Department
  • Providing office address of company keeping accounting records
  • Value Added Tax registration is mandatory; returns can be made on a quarterly basis
  • The balance sheet, profits and loss accounts, director’s and auditor’s reports must reflect the true financial position of the company

A bank account must be opened to hold the minimum share capital. The Memorandum of Association must be delivered to the Registrar of Companies, which issues a registration certificate and number. The subsidiary must register its employees for social security and insurance.

https://www.companyincorporationmalta.com/establish-subsidiary-malta

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. Malta 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 centre/hub can provide:

  • Coaching, guidance and networking opportunities, creating trust and synergy
  • Ideas, knowledge, research and development opportunities, generating new partnerships
  • Entrepreneurial activity, innovation and opportunity for knowledge sharing
  • Free support to grow on the international stage, utilising joint potential

Hubs on Malta feature:

  • Sliema – a commercial centre 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 and with an assortment of top facilities to suit everyone from start-ups to very established global organisations.

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 specialises in the manufacture of medium and high-tech products, semi-customised 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?
  • How will local customs impact production?
  • 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:

  • Zoom info – https://www.zoominfo.com/companies-search/location-malta-industry-manufacturing
  • World of Manufacturers – http://worldofmanufacturers.com/category/default/country/122
  • Malta Business Book – https://www.maltabusinessbook.com/en/directory/maincategories/bycategory/4/name/asc/999/1/manufacturing.htm
  • Trade Malta – https://www.trademalta.org/exporters-directory/
  • Eco Build – https://ecobuild.gov.mt/en/catalogue/Pages/Company-List.aspx

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. Some local 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.

Retail sector Organisations

  • Malta Chamber of SMEs – Association of General Retailers and Traders: https://www.smechamber.mt/
  • Malta Chamber of commerce – The official Business portal: https://www.maltachamber.org.mt/
  • Ministry for the Economy, Investment and Small Business – Govt. economic portal:

Other links:

  • For logistics and distribution – https://millermalta.com/corporate
  • For distribution and sales – https://www.privacyshield.gov/article?id=Malta-Distribution-and-Sales-Channels
  • For trade search – https://www.globaltrade.net/m/c/agent-distributors/Malta.html
  • For technical distribution – https://distribution.logicom.net/2021/countries/malta/

Enter new Markets with Bradford Jacobs

Bradford Jacobs open 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 Organisation (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, and find us here