How I Saved €200,000 in Taxes as an E-Commerce Entrepreneur: Malta Case Study

The Starting Point: How German E-Commerce Taxes Nearly Ruined My Business

My Original Tax Burden in Germany

In 2020, I had a “good” problem: My e-commerce business selling personalized products was growing too fast. €2.8 million in revenue, with a 28% net margin—sounds like every founder’s dream, right? Not quite. Here was my actual tax burden in Germany:

Nearly half my profits went straight to the government. That would’ve been manageable, except for two things: First, I planned to expand into North America, which required capital. Second, after three years of 80-hour weeks, I finally wanted to take out some personal money. With an effective overall tax rate of almost 50%, it became clear: I’d never have enough liquidity for growth or a “normal” life at this pace.

The Turning Point: My First Research on International Tax Optimization

I got the crucial tip—typical for our industry—in a Slack channel. Another e-commerce entrepreneur casually mentioned his “Maltese structure” and that he pays “far less in taxes” because of it. When I followed up, he waved me off: “Too complex to explain, go get a lawyer.” So I did—and got culture shock. The first German tax advisor told me international tax planning is “basically tax evasion” and “far too risky for small businesses”. Bullshit, as I later found out. The big corporations have been doing exactly this for decades—completely legally and actively encouraged by the EU. The only difference? They have teams of lawyers and tax advisors who know what they’re doing.

Where Other E-Commerce Entrepreneurs Go Wrong

Throughout my research, I spoke with dozens of fellow online business owners. The most common mistakes:

• Dubai Dreams: Many are drawn to the UAE, overlooking substance requirements and a very high cost of living
• Cyprus Hype: Sounds sexy, but tax rates are higher than Malta’s and the bureaucracy is even messier
• Mailbox Mentality: “I’ll just incorporate in country X”—with no clue that you actually have to live and work there
• All-or-Nothing: Either 100% Germany or a full expat exit. In reality, there are many gradations in between

What does this mean for you? If you’re considering international tax optimization, don’t buy into just any “secret tip”. Most either don’t work or are plain illegal.

Malta as a Tax Haven for E-Commerce: The Basics of the 6/7 Rule

Understanding Maltas Tax System (No Law Degree Needed)

Malta has a system anyone who’s read a till receipt can grasp. It works on a simple principle: Only profits that actually flow into Malta AND are taxed there are fully taxed. Sounds confusing? At first, yes. So here’s a simple example: Your Maltese company makes a profit of €100,000. You pay 35% corporate tax in Malta, so €35,000. Pretty standard so far. The trick: As a shareholder, you can claim a 6/7 refund (about 85.7%) of the tax paid when distributing profits. That means you get €30,000 out of the €35,000 back. Your real tax burden: €5,000 or 5%. This is the EU tax refund system, which is absolutely legal—in fact, EU approved, as Malta uses it to attract international investment.

EU Tax Refunds: How Malta Uses the 6/7 Rule

So why does Malta do this? Simple: The EU forbids member states from treating their own companies worse than foreign firms. Malta thus developed a system that works equally for everyone—but few understand how to use it. Here are the various refund rates:

For my e-commerce business, it was obvious: Almost all my revenue came from outside Malta, so the 6/7 refund applied. 5% effective corporate tax instead of 35%—the game changer.

Why Malta Beats Cyprus or Ireland

Before you ask: Yes, I looked at Cyprus and Ireland too. Here’s the honest comparison: Cyprus: – Nominal tax rate: 12.5% (sounds good) – But: No refunds, complicated IP box regime – Bureaucracy is a nightmare (personal experience at a bank) – Political instability since the banking crisis Ireland: – Famous for Apple, Google & co – But: Only suits very large companies with IP structures – Substance requirements are stricter – Dublin living costs are now skyrocketing Malta: – Clear, simple system—no ifs, no buts – EU member since 2004, politically stable – English as an official language (trust me, it matters) – Manageable living costs – Functional banking system What does this mean for you? Malta may not be the sexiest country for Instagram, but when it comes to e-commerce taxes, it’s hands down the best EU system I know.

My Maltese Corporate Structure: Step by Step Explained

Holding Structure vs. Permanent Establishment: My Approach

Now for the specifics. I had to make a fundamental choice: Move entirely to Malta or just set up a subsidiary? My German GmbH already had supplier contracts, a functioning team, and—crucially—existing customer relationships. A full relocation would have been open-heart surgery for the business. So I opted for the holding model:

• German GmbH: Remains as it is, continues all operational activity
• Maltese Ltd: New holding company, acquires shares in the German GmbH
• Malta IP Company: Holds all trademarks and licenses

The key: The German GmbH pays royalties to the Maltese IP company. That way, profits are shifted to Malta, where they’re taxed at just 5%. Sounds complicated? It is. But legally airtight if you do it right.

Setting Up My Maltese Ltd

Forming a Ltd in Malta theoretically takes five working days. In practice, it took me six weeks because: 1. Due Diligence: Malta scrutinizes every shareholder (origin of funds, past business activity, even social media profiles) 2. Bank References: Your current bank must write real reference letters (not just a statement) 3. Business Plan: A three-pager isn’t enough. Malta wants to see how you’ll create real substance (actual business activity) 4. Registered Office: You can rent, but they check you actually operate there Set-up costs: – Legal fees: €8,500 – Government fees: €1,200 – Registered office, first year: €2,400 – Auditor set-up: €3,500 Total set-up cost: €15,600

Transferring Intellectual Property to Malta

Here’s the crucial part: transferring intellectual property (IP)—your trademarks, designs, know-how, and so on—to Malta. Why? Only then can you legally justify why profits should be taxable in Malta. If your Maltese firm is just a “mailbox” without real assets, the German tax office will quickly get aggressive. My IP transfer: – Trademarks: Legal transfer from the German entity to the Maltese (lawyer & notary: €4,200) – Software and algorithms: License agreements for all proprietary e-commerce tools – Customer database: Usage rights against license fee – Know-how: Documented processes and strategies The Maltese company then licenses back this IP to the German GmbH. The royalties (about 15% of revenue) flow to Malta and are taxed there at 5%. What does this mean for you? Without genuine IP transfer, the whole setup is worthless. You must have provable assets in Malta—otherwise it’s just tax abuse.

The Real Numbers: How the €200,000 Tax Savings Add Up

Tax Burden Before vs. After (with Table)

Now for the numbers youve probably been waiting for. Here are my real figures for 2022:

Wait, isn’t that just €173,880, not €200,000? Yes. The missing €26,120 comes from further optimizations: – Elimination of German capital gains tax on internal profit shifting: €18,200 – Optimized amortization of the IP transfer: €7,920 Total savings: €200,000 per year

Hidden Costs You Need to Factor In

Before you think, “Wow, I’ll save €200k per year,” here’s reality. These are the ongoing costs you’ll have:

• Maltese auditor: €12,000/year
• German tax advisor (complex structure): +€4,000/year
• Compliance lawyer: €8,000/year
• Registered office Malta: €2,400/year
• Malta bank fees: €1,800/year
• Substance requirements (office, phone, etc.): €6,000/year

Ongoing extra costs: €34,200/year Net savings after all costs: €165,800 per year

Break-Even Point: What Revenue Level Makes Malta Worth It?

The honest answer: Not worth the effort below €500,000 annual profit. Here’s my rule of thumb:

So for you: If you make under €200k in profit, forget Malta. The complexity isn’t worth the tiny advantage. It gets interesting from €500k, and at €1 million it’s basically a no-brainer.

Practical Implementation: My First 12 Months in Malta

Choosing a Lawyer and the Incorporation Process

Finding the right lawyer was harder than I expected. Malta is small—about 500,000 residents—and most law firms specialize in gaming or blockchain, not e-commerce. After three failed attempts, I landed with Ganado Advocates, one of Malta’s “Big Four” firms. Expensive, but they really understand international structures and have done hundreds of similar set-ups. The incorporation process ran surprisingly smoothly:

1. Week 1: Reserve company name, draft articles of association
2. Weeks 2-3: Due diligence by Malta Financial Services Authority (MFSA)
3. Week 4: Open bank account (more on that in a moment)
4. Week 5: Register with the Malta Business Registry
5. Week 6: VAT registration and EU Tax ID

Tip: Malta is bureaucratic, but also very thorough. Once they give you the green light, you can be sure everything is legally rock solid.

Opening a Bank Account (and Why It Took Three Tries)

Oh boy, banking. This almost made me give up. Attempt 1 – Bank of Valletta: Appointment, all documents ready, waited two hours. Then: “Sorry, we no longer open business accounts for e-commerce.” Why? Compliance issues with anti-money laundering. Attempt 2 – HSBC Malta: Better prepared, with a thorough business plan. After three weeks: “Your business model is too complex for us.” Translation: they had no idea what e-commerce is. Attempt 3 – APS Bank (local private bank): Jackpot. Smaller bank, but they actually understood what I do. Account opened in 10 days, direct contact person who actually answers the phone. Lesson learned: Malta’s big banks are often tougher to deal with than smaller local ones. And: be ready for paperwork. The Maltese would probably need a form even for a cup of coffee.

Substance Requirements: Why I Actually Moved to Malta

Here’s the key point many underestimate: You have to prove your Maltese entity has real economic substance. That means:

• Physical presence: A real office, not just a mailing address
• Qualified personnel: At least one person making strategic decisions
• Board meetings: Regular shareholder meetings must be held in Malta
• Bank account: Main business account must be in Malta

That’s why I actually moved to Malta—at least officially. I spend around 120 days a year on the island, hold all key meetings there, and rent a real office in Sliema. Would I recommend it? Malta is… an acquired taste. The summers are brutally hot, the traffic is chaos, and sometimes I miss German efficiency. But: the sea is amazing, people are friendly, and tax-wise it’s a dream. What does this mean for you? If you only want Malta as a “mailbox”, forget it. Authorities check very carefully, and abusing the system gets expensive.

Risks and Compliance: What No One Tells You Up Front

CRS and Automatic Information Exchange

Here’s the uncomfortable truth: Everything you do in Malta is automatically reported to the German tax office. Malta participates in the Common Reporting Standard (CRS), meaning automatic information exchange among EU countries. What gets reported? – Balances on your Maltese accounts – Interest and dividend income – Capital gains from sales – Essentially, every relevant financial detail But that’s not a problem if you pay your taxes correctly. It only becomes an issue if you try to hide money—which is illegal anyway. My German tax advisor knows about every transaction in Malta. Transparency isn’t optional here—it’s mandatory.

Avoiding German CFC (“Hinzurechnungsbesteuerung”)

The biggest risk for your Malta structure is Germany’s CFC regime (“Hinzurechnungsbesteuerung”). In short: If the German tax office believes your Maltese company is just a “mailbox,” they’ll tax the profits in Germany anyway. How to avoid that?

1. Genuine business activity in Malta: Not just on paper—real operations
2. Reasonable profit allocation: Don’t shift 100% of profits to Malta
3. Documentation: Record every decision, meeting, and business purpose
4. Arm’s length principle: All contracts between German and Maltese entities must be at market rates

My lawyer keeps a “compliance logbook,” documenting every substantial decision. It’s a lot of work, but far better than a massive back-tax assessment.

EU State Aid Procedure: Is the Party Over Soon?

Here’s the issue that sometimes keeps me up at night: The EU Commission is currently examining whether Malta’s tax regime breaches state aid rules. What happened? – In 2019, the EU ruled against Ireland’s “Double Irish” structure – Similar cases are ongoing against the Netherlands and Luxembourg – Malta is on the watch list My assessment: The system likely won’t be abolished completely, but stricter rules could come. That’s why I already have a Plan B (moving to Estonia or Portugal). What does this mean for you? The next 2–3 years are probably safe, but the system could change in the long run. Plan accordingly.

Who Should Consider Malta: My Honest Assessment

Minimum Revenue and Set-Up Costs

After three years in Malta, here’s my straightforward advice on when the effort pays off: Minimum requirements: – Annual profit at least €500,000 – Stable, recurring revenue (not just a single good year) – Willingness to actually spend time in Malta – At least €50,000 for set-up and the first year Set-up cost summary:

Industries That Benefit Most

Not every business is a good fit for Malta. These sectors work best: Perfect Fit: – E-commerce with digital products – Software-as-a-Service (SaaS) – Online marketing/affiliate – IP licensing – Gaming and blockchain Partially Suitable: – E-commerce with physical products (more complex VAT structures) – Consulting services (substance is harder to prove) – Manufacturing (generally doesn’t make sense on Malta) Not Suitable: – Local services – Traditional retail – Anything requiring mandatory German presence

Why You Might Be Better Off Staying in Germany

Before you call a lawyer, here’s why Malta might not be for you:

• You make under €500k profit: The effort outweighs the gain
• Your business is very Germany-centric: Substance is hard to justify
• You just want to save taxes: Without international expansion, it’s tax abuse
• You hate bureaucracy: Malta has plenty of it—just in English
• You want business certainty: EU laws can change fast

Plus, there are good tax benefits in Germany too. R&D grants, investment allowances, reduced trade tax for certain sectors—entrepreneurs often overlook what’s already possible in Germany. Bottom line: Malta isn’t a miracle cure and is clearly not for everyone. Explore all German optimization strategies before heading abroad. My honest advice: If you’re only considering Malta for tax reasons, don’t do it. But if you’re planning international expansion anyway and Malta is strategically right—it’s gold.

Frequently Asked Questions

Is the Malta Structure Legal?

Yes, absolutely—as long as you create real economic substance in Malta. That means: a physical office, qualified staff, strategic decision-making on site. Mailbox companies are illegal and are prosecuted by German authorities.

Do I Really Have to Move to Malta?

You don’t have to move your main residence, but regular presence is a must. I spend about 120 days per year in Malta for board meetings, strategic decisions, and running the business. Anything under 90 days is risky.

What Happens in a German Tax Audit?

Auditors focus especially on substance requirements. You must be able to prove actual business activity in Malta. That’s why I keep a detailed compliance logbook and document every important decision in Malta.

Which Industries Don’t Work with Malta?

Local services, traditional retail, and anything requiring a mandatory German presence. Manufacturing also rarely makes sense—Malta is tiny and expensive.

Could the EU Abolish the Malta Regime?

Possible, but unlikely. The EU is reviewing the system, but Malta has already adjusted its rules several times to remain compliant. Tighter regulation is more likely than an outright ban.

What Does a Malta Structure Really Cost?

Set-up: around €25,000 one-off. Ongoing costs: €35,000 per year for lawyer, accountant, office, compliance. Makes sense from about €500,000 annual profit.

Are There Alternatives to Malta?

Estonia (20% retained earnings tax), Portugal (NHR program for individuals), Cyprus (12.5% but no refunds). But Malta offers the best combo of low tax rates, EU membership, and English language.

How Does Banking Work in Malta?

Harder than in Germany, but doable. I recommend APS Bank or other local Maltese banks. The big EU banks are often tricky. Important: Your main business account must be in Malta for substance requirements.

What About VAT?

You register for Maltese VAT (18%) and use the OSS system for EU-wide sales. More complex than in Germany, but manageable with a good accountant. For digital products, usually straightforward.

Can I Just Move My German GmbH to Malta?

Theoretically yes, but in practice often not advisable. I recommend the holding structure: Keep the German GmbH running, make the Maltese Ltd the parent company. That way you retain all contracts and existing relationships.