Table of Contents Malta Structures: Why Documentation Is Your Lifeline The Different Malta Structures and Their Special Features Tax Audit in Malta: The Documents You Need to Have Ready Compliance Requirements: The ABC of Proof Obligations International Audits: When Multiple Countries Get Involved Document Archive: How Long and How to Keep Records? The 7 Most Costly Mistakes in Malta Documentation Practical Tips: How to Survive Every Audit Stress-Free Frequently Asked Questions About Malta Documentation Malta Structures: Why Documentation Is Your Lifeline Picture this: You’re enjoying your morning coffee in Sliema, checking your emails, and suddenly there’s a friendly message from the Malta Revenue Authority. They’d like to see your documents for the past three years. Just a “routine audit.” Does that sound relaxing to you? After two years of living the Malta reality, I can say: Good documentation isn’t just a legal necessity—it’s your ticket to a restful night’s sleep. Maltese authorities take compliance very seriously—and international tax authorities are watching ever more closely. What Makes Malta Structures So Unique It’s not just the weather that makes Malta attractive. As an EU member and thanks to its strategic location, the island offers unique advantages for international business. Malta structures refer to companies or holdings established under Maltese law, and they are often part of sophisticated international tax planning. The most common Malta structures: Malta holding companies for investments Licensing companies for IP management Trading companies for international commerce Investment vehicles for real estate or financial assets Why Documentation in Malta Is Crucial for Survival Malta may be small, but its bureaucratic requirements are significant. The Malta Revenue Authority (MRA) works closely with other EU tax authorities. Since automatic exchange of information (AEI) began, data flows between countries as easily as water between communicating vessels. What does that mean for you? If your documentation has gaps, you won’t just be facing problems in Malta but potentially in your home country as well. Trust me: you don’t want to find yourself in the middle of an international tax debate. The Different Malta Structures and Their Special Documentation Features Not all Malta structures are the same. Depending on your business activity, you’ll have different documentation obligations. Here are the key types: Malta Holding Companies Holdings are the gold standard among Malta structures. They manage shareholdings in other companies and benefit from Maltese participation exemption. Sounds simple? It isn’t. Special documentation requirements: Proof of participation for all holdings Dividend agreements and evidence of distributions Substance documentation (management, control, decisions) Transfer pricing documentation for intra-group transactions Licensing Companies These entities manage intellectual property (IP)—trademarks, patents, or software. Malta offers attractive frameworks here, but documentation is demanding. Special records required: IP register, including development history License agreements and royalty arrangements Evidence of actual IP development in Malta Arm’s length pricing for royalties Trading Companies Trading companies conduct international business through Malta. Authorities look especially close to ensure real substance exists. Document Type Purpose Retention Period Sales/purchase contracts Proof of genuine business activity 7 years Invoices/receipts Verification of revenues and profits 7 years Employee records Substance evidence During employment + 6 years Office lease Physical presence For the term + 7 years Tax Audit in Malta: The Documents You Need to Have Ready A tax audit in Malta is different from what you may know from Germany. Auditors are thorough but generally pragmatic. If your records are tidy, things will remain professional. The Basic Documentation (Always Required) No matter what type of Malta structure you have, you will always need these records: Complete corporate documents Memorandum and Articles of Association Certificate of Incorporation Extracts from the company register (current & historical) Shareholder resolutions since inception Comprehensive accounting records All general ledgers Supporting documents for all transactions Bank statements for all accounts Annual financial statements and tax returns Proof of substance Lease agreement for business premises Evidence of local corporate management Board meeting minutes Decision documentation Additional Records Depending on Business Model Depending on your Malta structure, extra documentation requirements may apply. This is where things get interesting—and sometimes tricky. For international transactions (very common!): Transfer pricing documentation per OECD standards Master file and local file for groups Country-by-country reporting (if revenue exceeds €750 million) Arm’s length verification for all intra-group transactions For financial services: MFSA license and all compliance evidence Compliance officer reports AML/KYC documentation Risk management documentation Digital vs. Physical Storage Malta is surprisingly advanced when it comes to digital records. You can store nearly everything electronically, but be careful: requirements are strict. Requirements for digital archiving: Immutability of documents (timestamping) Traceable backup strategy Fast access for auditors (24–48 hours) Legibility for the entire retention period My tip from experience: a hybrid system works best. Keep essential originals physically; manage the rest digitally with a professional document management system. Compliance Requirements Malta: The ABC of Proof Obligations Compliance in Malta isn’t just “nice to have”—it’s essential for survival. Authorities in Malta have massively tightened their standards in recent years. Since the “golden passport” debate in 2020, everything is under scrutiny. Economic Substance Requirements (ESR) This is the tough one many underestimate. As an EU country, Malta must show that companies have a genuine presence—not just on paper. The Economic Substance Requirements demand actual business activity. What must you prove? Core Income Generating Activities (CIGA) in Malta Decisions are made in Malta Core activities are directed from Malta Adequate staff and premises in Malta Appropriate operating expenses Salaries to local employees Office and business equipment Locally relevant business expenses Physical presence Own or leased office space Business equipment onsite Regular meetings held in Malta Reporting Obligations and Deadlines Nothing works in Malta without proper reporting. Deadlines are tight, and delays get expensive fast. Report Deadline Penalty for Delay Annual Return By 31 January €100 + €5 per day Tax Return By 30 June €465 + interest ESR Filing By 30 June €5,000 – €50,000 Transfer Pricing On request (30 days) Assessment + penalties Anti-Tax Avoidance Directive (ATAD) The EU ramped up the standards with ATAD. Malta had to implement these rules, which are particularly important for international structures. Key ATAD Topics: General Anti-Abuse Rule (GAAR)—prevents abusive schemes Controlled Foreign Company (CFC) rules Exit taxation upon relocation Interest limitation rules (interest barrier) What does that mean for you? Your Malta structure needs a real business purpose. Pure tax optimization without substance no longer works. International Audits: When Multiple Countries Get Involved This is where things get really interesting—and sometimes complicated. Malta is an EU member and has double taxation agreements with over 70 countries. That means: information is exchanged automatically between tax authorities. Automatic Exchange of Information (AEI) Since 2017, EU countries have been automatically exchanging tax information. Malta reports certain data about your structure to your home country—and vice versa. What gets reported automatically? Bank accounts and interest income (Common Reporting Standard) Cross-border tax arrangements (DAC6) Dividends, interest, and royalties paid to foreigners Country-by-country reports for corporate groups Mutual Agreement Procedures (MAP) If two countries disagree on your taxation, Mutual Agreement Procedures can be initiated. This is a diplomatic process between tax authorities. Typical MAP cases: Transfer pricing adjustments Determination of permanent establishment Double taxation in case of emigration Different interpretations of DTA rules Simultaneous Audits This is every tax advisor’s nightmare: multiple countries auditing your international structure at the same time. Malta actively coordinates such audits with other EU member states. What does a simultaneous audit look like? Exchange of information between tax offices Coordinated audit announcement Simultaneous request for documents in all countries Coordinated audit activities Joint evaluation of results My tip: If you have an international structure, be prepared for multiple countries to ask questions at once. Consistent documentation across all jurisdictions is worth its weight in gold. Document Archive Malta: How Long and How to Keep Records? Retention periods in Malta are clearly regulated, but they vary by document type. Be aware: International obligations can mean longer retention periods. General Retention Periods Malta follows the European standard, with a few specific features: Document Type Retention Period Legal Basis Accounting records 7 years Companies Act Tax returns 7 years Income Tax Act VAT records 7 years VAT Act Corporate documents Permanent Companies Act Employment contracts Employment + 6 years Employment Relations Act Transfer pricing docs 10 years Income Tax Act International Particularities If your Malta structure is active in several countries, longer retention periods may apply. For example, Germany requires 10 years for certain documents. Key principles: Always follow the longest applicable retention period If in doubt, retain documents longer rather than shorter Ongoing audits pause the retention period Audit periods may extend obligations Practical Document Management After two years of Malta experience, I can recommend a tried and tested system: The 3-Stage Model: Current documents (0–2 years) Physical copies in the office or secure cloud Quick access for daily business Regular backup cycles Semi-active documents (2–7 years) Professional document management system Encrypted storage Retrieval within 24–48 hours Archive documents (7+ years) Long-term storage with legal compliance Fail-safe systems Retrieval within 5 working days Destruction and Data Protection Many forget: Once retention periods expire, you should properly destroy documents. Malta’s strict GDPR rules also apply to business records. Secure destruction means: Documented deletion/destruction Certified destruction companies Don’t forget backup systems Logging the destruction process The 7 Most Costly Mistakes in Malta Documentation Based on two years of Malta practice and many conversations with entrepreneurs, I’ve put together a list of the most frequent—and expensive—mistakes. These pitfalls cost not just money, but nerves as well. Mistake #1: Ignoring Substance Documentation The mistake: Many think setting up a Malta company is enough. They neglect or pay mere lip service to the Economic Substance Requirements. The consequences: Fines from €5,000 up to €50,000 plus possible loss of tax benefits. Repeat offenses can even mean company dissolution. How to avoid it: Document all local activities in detail Hold board meetings regularly in Malta Hire local employees or use qualified service providers Rent actual office space (not just a mailing address) Mistake #2: Underestimating Transfer Pricing Documentation The mistake: Intra-group transactions are carried out without proper transfer pricing documentation. I often hear, “It’s just a small amount.” The consequences: Primary adjustments (profit revision), secondary adjustments (deemed distributions), plus interest and fines. For larger amounts, costs can quickly hit six figures. How to avoid it: Prepare transfer pricing documentation for all group transactions Use comparable market prices (benchmarking) Document economic analysis in advance Update documentation annually Mistake #3: Incomplete Bookkeeping The mistake: Missing invoices, incomplete entries, or gaps in documentation. “We’ll sort that out later” is a dangerous mindset. The consequences: Tax authority estimates are rarely in your favor. Plus, fines for regulatory offenses and tougher audits. How to avoid it: Implement seamless document capturing Use professional accounting software Monthly reconciliations and checks Backup strategy for all receipts Mistake #4: Missing Reporting Deadlines The mistake: Malta deadlines are ignored or forgotten. ESR filing by June 30 in particular is often overlooked. The consequences: Automatic penalties with zero leniency. ESR violations are especially expensive (€5,000+). How to avoid it: Create a compliance calendar with all deadlines Set reminders 4–6 weeks before due dates Prepare records early Use professional compliance services Mistake #5: Ignoring International Reporting Obligations The mistake: DAC6 reporting, CRS, or country-by-country reporting are missed or underestimated. The consequences: Fines in several countries at once. Plus, possible disadvantages for future tax planning. How to avoid it: Review all international reporting requirements annually Implement cross-border monitoring Use specialized advice for complex cases Document all cross-border transactions Mistake #6: Insufficient Backup Strategy The mistake: Documents are stored in one location only, or the backup strategy is weak. “Everything’s on the cloud” is not enough. The consequences: If data is lost, retention obligations can’t be met. This leads to estimates and penalties. How to avoid it: 3-2-1 backup rule: 3 copies, 2 media, 1 offsite Regular restore tests Geographically separate backup locations Document backup processes Mistake #7: Lack of Professional Advice The mistake: “We’ll do it ourselves” or advice from unqualified providers. Malta law is complex and constantly changing. The consequences: Missed opportunities, overlooked risks, and expensive corrections. Savings on advice are often lost many times over. How to avoid it: Invest in qualified Malta consultants Use local expertise for tricky questions Conduct regular compliance reviews Keep up to date with legal changes Practical Tips: How to Survive Every Malta Audit Stress-Free Drawing from my experience with Maltese authorities and international audits, here are some golden rules. These tips come from real life—not textbooks. The 90-Day Rule for Audit Preparation Malta audits are typically announced 90 days in advance. That sounds like a lot, but it’s actually a short timeline for thorough preparation. Your 90-Day Checklist: First 30 Days – Taking Stock: Identify all requested documents Check for completeness of existing records List missing documents and plan to obtain them Assemble your audit team (internal + external) Second 30 Days – Document Preparation: Prepare or request any missing documents Update transfer pricing documentation Gather and assess substance evidence Initial consultation with tax advisor/lawyer Final 30 Days – Fine Tuning: Organize all documents in a logical order Create digital and physical copies Coordinate audit strategy with advisors Team briefing for the audit date The Perfect Audit File Malta auditors appreciate structure and completeness. A well-organized audit file can significantly reduce the audit duration. Proven structure: Executive Summary (1–2 pages) Overview of business activities Key figures from the past 3 years Special issues and items requiring explanation Corporate documents Chronologically sorted since incorporation Tabs for capital changes and shareholder shifts Organization chart for complex structures Financial documentation Annual financial statements with audit reports Tax returns and notices Monthly statements for the audit year Evidence of substance Lease contracts and office photos Employee contracts and qualification evidence Board meeting minutes Decision documentation Special topics Transfer pricing documentation Related party transactions International tax rulings Communication with Malta Auditors Malta auditors are usually professional and objective. Good communication can make all the difference: Do’s: Be proactive and transparent Explain complex matters clearly Keep promises and meet deadlines Record all conversations in writing Don’ts: Don’t withhold relevant information Don’t become defensive or confrontational Don’t try to persuade the auditor Don’t provide incomplete answers Using Technology Effectively The right tools can save you a lot of stress: Document management: SharePoint or similar systems for collaboration Version control for all key documents Search functions for quick retrieval Access controls for different user groups Compliance monitoring: Deadline management tools Automated reminders Workflow systems for recurring processes Compliance status dashboard Post-Audit: Lessons Learned After each audit, always conduct a follow-up: What went well, what can be improved? Which documents were missing or incomplete? Were there understanding issues with complex points? How can the process be optimized for next time? Feed these insights into your ongoing compliance system. Every audit will get a little easier than the one before. Frequently Asked Questions About Malta Documentation How long does a typical Malta tax audit take? A standard tax audit in Malta usually takes 2–4 weeks for simple structures and 6–12 weeks for complex international arrangements. The duration depends highly on the completeness of your documentation. Well-prepared audits are wrapped up much faster. Can I submit documents in German? In principle, yes, but all documents must be translated into English if required. Malta, as an EU member, accepts German documents but often requires certified translations for important records. My tip: Prepare key contracts in both languages from the outset. What happens if I can’t find certain documents? Missing documents are problematic but not hopeless. You can often use substitute records like bank statements, email correspondence, or witness statements. Just be sure to document your attempts to recover them. Maltese auditors show understanding for proven losses (e.g. due to IT issues). Do I need a Maltese lawyer for audits? Not necessarily, but it’s recommended for complex cases. A local lawyer knows the audit process and can mediate if conflicts arise. For routine audits, a qualified tax advisor is usually sufficient. The decisive factor is Malta expertise, not the advisor’s nationality. How often does Malta conduct tax audits? Malta audits on a risk-oriented basis. New companies are generally audited after 2–3 years, then every 5–7 years. International structures or unusual tax returns lead to more frequent audits. Are digital signatures legally valid in Malta? Yes, Malta recognizes qualified electronic signatures under the EU eIDAS standard. Simple digital signatures are sufficient for many business documents. For notarial deeds or some corporate resolutions, however, physical signatures are still required. What is the difference between Annual Return and Tax Return? The Annual Return is a company law filing to the Companies House, listing shareholders, directors, and share capital. The Tax Return is your tax filing to the Malta Revenue Authority. Both have different deadlines and contents—don’t mix them up! Can I store my documents in the cloud? Yes, but under strict conditions. The cloud must be hosted in the EU (GDPR), guarantee immutable storage, and allow fast access. Important: you’ll need a professional backup plan and must be able to document your security standards. What penalties apply for incomplete documentation? Penalties vary depending on the violation: late Annual Returns cost €100 plus €5 per day. ESR breaches start at €5,000. For serious compliance breaches, fines can reach €50,000 plus loss of tax benefits. Repeat violations can even dissolve the company. Do I have to document private expenses too? Only if they are business-related. For mixed-use expenses (e.g., car, phone), you have to distinguish between private and business use. Maltese auditors look especially closely at travel, hospitality, and representation costs. Be sure to keep detailed records showing the business purpose.
