Table of Contents Why, after 2 years in Malta, I recommend a Malta holding to every entrepreneur What is a Malta holding company? (And why its not as complicated as you think) Tax Advantages Malta Holding: The 6% Rule and Other Surprises Legal Requirements Malta Holding: What You Really Need Malta Holding Company Costs: Realistic Numbers Instead of Marketing Hype Malta Holding vs. Netherlands, Luxembourg & Co.: The Honest Comparison Setting Up a Malta Holding: Step-by-Step Practical Guide The 5 Most Expensive Mistakes with Malta Holdings (and How to Avoid Them) FAQ: Your Most Important Questions about Malta Holdings Answered Why, after 2 Years in Malta, I Recommend a Malta Holding to Every Entrepreneur Do you know what surprised me most after two years in Malta? Not the 316 days of sunshine a year, nor the fact that the bus sometimes does arrive on time. It was the realization that Malta is one of the smartest locations in Europe for international entrepreneurs—if you know how to play your cards right. When I moved here in 2022, I thought: Malta? Isnt that just for retirees and language students? Wrong! Today I’m sitting in Valletta enjoying an espresso, and can tell you from my own experience: A Malta holding company can legally reduce your tax burden by 80% or more. Sounds too good to be true? Let me show you how it works. In this article, I’ll explain everything you need to know about holdings in Malta. Not the marketing speak of consultancy firms, but the reality. With concrete figures, real costs, and the pitfalls that no one warns you about in advance. Who Actually Benefits from a Malta Holding? Before we dive into the details: A Malta holding doesn’t make sense for everyone. You should meet at least one of these criteria: Annual revenue above €500,000: For smaller sums, the setup and running costs can eat up any tax savings International business: You sell in several EU countries or have clients outside the EU Passive income: Dividends, licenses, interest or property income Exit planning: Youre planning to sell your business in the next 3-7 years If you only work and sell within Germany, save yourself the trouble. In that case, a Malta holding is like driving a Ferrari to the corner grocery store—overkill. What is a Malta Holding Company? (And Why Its Not As Complicated As You Think) A Malta holding company is, in essence, just a standard Maltese limited liability company that owns other companies. The trick lies in Malta’s tax system—but more on that in a moment. The Basic Structure of a Malta Holding Imagine you’re building a multi-story house for your businesses: Ground floor: Your operating company (e.g., in Germany) First floor: The Malta holding company Attic: You as a private person or another structure The Malta holding collects profits from your operating companies and can pass them on to you with significant tax advantages. This is enabled by Malta’s “Full Imputation System”—a term that sounds more complicated than it is. The Full Imputation System Explained (Without Legalese) Malta has a pretty clever tax system. When your Malta holding makes profits, it pays 35% corporate tax. So far, so normal. Here’s the kicker: when the holding distributes these profits to you as dividends, you get most of the tax back. Depending on where the profits come from, you can reclaim up to 6/7 of the taxes paid. That means: An effective tax rate of just 5% on certain types of income. Practical Example: Your German GmbH makes €200,000 profit and distributes it as dividends to your Malta holding. The Malta holding pays €70,000 in taxes (35%). If it passes on the €200,000 to you, you get €60,000 of the taxes refunded. Effective tax: only €10,000 or 5%. What Legal Forms Are Available in Malta? For holdings, two legal forms are mainly relevant: Legal Form Minimum Capital Shareholders Suitable For Private Limited Company €1,164 1-50 Most holdings Public Limited Company €46,588 Unlimited Large structures, planned IPO In 95% of cases, a Private Limited Company is sufficient. It’s quick to set up, cost-effective, and more than adequate for your needs. Tax Advantages Malta Holding: The 6% Rule and Other Surprises Now it gets interesting. The tax benefits of a Malta holding are impressive—but only if you really understand how they work. Let me explain the key mechanisms. The Famous 6% Rule for Malta Holdings Youve probably heard that Malta holdings can be taxed at just 6%. That’s true—but only under certain conditions. This rate applies to so-called non-resident companies and passive income. What does “non-resident” mean? Your Malta holding is considered non-resident if it’s not managed from Malta. That means: Management and strategic decisions must be made outside of Malta. What is “passive income”? Dividends from other companies Interest and loan repayments License fees (patents, trademarks, software) Property income Capital gains from company sales The Tax Refund System in Detail Malta has different accounts for different types of income. Sounds complex, but the logic is simple: Type of Income Refund Effective Tax Example EU Dividends 6/7 of tax 5% Dividend from German GmbH Foreign Dividends 2/3 of tax 11.67% Dividend from US Corporation Foreign Income 6/7 of tax 5% License fees from Germany Maltese Income None 35% Rent in Malta Making Use of Double Taxation Agreements Malta has double taxation agreements (DTAs) with over 80 countries. This means: If your Malta holding receives dividends from Germany, it only pays 5% withholding tax there, instead of the usual 26.375%. Germany → Malta Calculation Example: German GmbH makes €100,000 profit German corporate tax: ~30% = €30,000 Distributed to Malta holding: €70,000 German withholding tax: 5% = €3,500 Received by Malta holding: €66,500 Malta corporate tax: 35% = €23,275 Refund upon distribution: 6/7 = €19,950 Effective total taxation: €33,825 or 33.8% For comparison: direct distribution to a German individual would result in over 45% tax. IP Holding Structures: The Royal Road for License Fees Intellectual property (IP) is where it really gets interesting. Malta does not levy withholding tax on outgoing license fees. What this means: Your Malta holding owns patents, trademarks or software It licenses these to your operating companies The license fees flow to Malta tax-free When passed on to you: only 5% effective tax I know software entrepreneurs who reduced their tax burden from 42% to under 15% this way. 100% legal and approved by tax advisors. Legal Requirements Malta Holding: What You Really Need Now let’s talk about the legal framework. Malta is an EU member and has strict compliance requirements accordingly. But don’t panic—if you’re running a legitimate business, everything is manageable. Substance Requirements: More Than Just a Mailbox The EU has tightened the rules in recent years. Your Malta holding must have economic substance—meaning a real economic presence on the ground. What that means in practice: Registered address in Malta: Not just a PO box, but a real business address Maltese directors: At least one director must be resident in Malta Board meetings: Board meetings must take place in Malta Accounting: Accounts must be kept in Malta Appropriate expenditures: The holding must incur genuine costs in Malta Sounds like a hassle? It is. But with the right structure and a local partner, it’s absolutely manageable. Corporate Service Provider: Your Partner on the Ground Almost every Malta holding works with a Corporate Service Provider (CSP). This is a licensed firm that handles administrative tasks: Service What Happens Annual Cost Nominee Director Maltese director for compliance €3,000–5,000 Registered Office Official business address €1,000–2,000 Accounting Bookkeeping and annual financial statements €3,000–6,000 Company Secretary Minutes, compliance tasks €2,000–3,000 My tip: Don’t cut corners here. A good CSP costs more, but will save you trouble with the authorities down the line. I recommend budgeting at least €10,000 per year for all services. Reporting and Compliance Duties Malta takes compliance seriously. These reports are mandatory: Annual Return: Annual submission by January 31 (€85 fee) Beneficial Ownership Register: Who are the real owners? Tax Returns: Tax filing by June 30 Audit: Mandatory if annual turnover exceeds €700,000 Transfer Pricing Documentation: For intra-group transactions If you miss a deadline, you can quickly rack up €2,329 in fines. Repeated violations may even result in the company being dissolved. BEPS and Anti-Avoidance Rules With the BEPS rules (Base Erosion and Profit Shifting), the OECD has tightened regulations internationally. For your Malta holding, the key points are: Principal Purpose Test: Was tax saving the main reason for the structure? Limitation of Benefits: DTA benefits only granted for real economic activity CRS (Common Reporting Standard): Automatic information sharing between tax authorities The days of pure tax optimization without genuine economic activity are over. Your Malta holding must have a real business purpose. Malta Holding Company Costs: Realistic Numbers Instead of Marketing Hype Let’s talk money. Here are the real costs of a Malta holding—without the usual from €5,000 bait-and-switch offers that end up costing twice as much. One-off Setup Costs For setting up your Malta holding, expect the following costs: Item Cost Comment Government Fees €245 Registration with Malta Business Registry Legal Fees €2,500–5,000 Lawyer for incorporation documents Due Diligence €1,500–3,000 Know-Your-Customer checks Apostille €200–500 Certification of foreign documents Bank account opening €0–2,000 Some banks charge setup fees Total €4,445–10,745 Depending on structure complexity Annual Ongoing Costs These are the actual annual costs: Service Cost/Year Necessity Corporate Service Provider €8,000–15,000 Absolutely necessary Accounting & Audit €5,000–10,000 Legally required Tax Advisory €3,000–8,000 Highly recommended Bank account €500–2,000 Account management fees Government fees €500–1,000 Annual return, etc. Total €17,000–36,000 Depends on complexity Reality check: Budget at least €20,000 per year for a functional Malta holding. Anything less is either not serious or you won’t get all needed services. Break-Even Analysis: When Does a Malta Holding Pay Off? With €20,000 in annual costs, you need to save at least €100,000 in taxes for the structure to pay off. You’ll reach that with: Dividends: From around €500,000 annually License fees: From around €300,000 annually Capital gains: Often from €200,000 (one-off) Hidden Costs That Nobody Tells You About In my experience, you should also expect these costs: Travel expenses: 2–3 trips to Malta per year for meetings (€1,500) German tax advisor: For DTA applications and German compliance (€3,000–5,000) Transfer pricing studies: For larger structures (€5,000–15,000) Legal opinions: For complex structures (€2,000–8,000) Currency exchange: FX fees on international transfers All in all, you’re realistically looking at €25,000–45,000 in annual costs. That sounds like a lot—but with the right revenues, you’ll save multiples of that in tax. Cheap Alternatives and Their Limits Some providers advertise “Malta holding from €5,000.” Here’s how that works: Shelf company: Pre-incorporated companies (cheaper, but less flexible) Managed director services: Very simple nominee structures Minimal compliance: Only legally mandatory services The problem: The first tax audit or major transaction and you’ll hit a wall. If you’re serious about international business, you need a professional structure. Malta Holding vs. Netherlands, Luxembourg & Co.: The Honest Comparison Malta is not the only option for holdings in Europe. Here’s how Malta stacks up against other popular jurisdictions. Malta vs. Netherlands: The Classic Comparison The Netherlands was long the standard for European holdings. Anti-avoidance rules have changed that: Criterion Malta Netherlands Winner Effective tax 5–11.67% 25.8% Malta Substance requirements Medium High Malta DTA network 80+ countries 95+ countries Netherlands Setup costs €5,000–10,000 €8,000–15,000 Malta Ongoing costs €20,000–35,000 €25,000–40,000 Malta Reputation Good Excellent Netherlands Conclusion: Malta wins on cost and tax, Netherlands on reputation and DTA network. For medium-sized entrepreneurs, Malta is often the better choice. Malta vs. Luxembourg: Premium vs. Pragmatic Luxembourg is the premium holding solution—but also much more expensive: Luxembourg advantages: Top reputation, excellent banks, strong DTA network Luxembourg disadvantages: High costs (€50,000+ per year), complex substance rules Malta advantages: Similar tax benefits at much lower cost Malta disadvantages: Less prestigious, smaller DTA network Luxembourg makes sense from €5M+ annual turnover. Below that, Malta is the better deal. Malta vs. Cyprus: Mediterranean Competition Cyprus is Malta’s direct Mediterranean rival: Aspect Malta Cyprus Corporate Tax 5% (effective) 12.5% Dividend tax 0% 0% IP regime Available 80% deduction EU reputation Good Problematic Banking Stable More difficult after 2013 Cyprus used to have the edge, but ever since the banking crisis and golden passport scandals, Malta is the safer choice. Malta vs. Ireland: The Green Alternative Ireland actively courts international companies: Ireland strengths: 12.5% corporate tax, large tech sector, English-speaking Ireland weaknesses: High substance requirements, expensive labor Malta alternative: Lower effective taxes, lower cost Ireland is attractive for large tech companies. For smaller holdings, Malta is more cost-efficient. New Developments: Pillar 2 and Minimum Tax The OECD minimum tax of 15% (Pillar 2) is a game changer, but: Only applies from €750 million annual turnover: Most mid-size companies are not affected Malta benefits: Other countries have to raise their taxes, Malta keeps a competitive edge Safe harbor rules: Effective rates below 15% often still possible For most entrepreneurs, Pillar 2 doesn’t change Malta’s attractiveness. Setting Up a Malta Holding: Step-by-Step Practical Guide Let’s get practical. Here’s the full founding process—including all the stumbling blocks I ran into myself. Phase 1: Planning and Preparation (4–6 weeks) Step 1: Consulting and Structure Planning Find an experienced advisor who knows both Maltese and German tax law. It costs €3,000–5,000, but will save you a lot of hassle later on. Analysis of your existing structure Designing the optimal holding structure Calculating tax implications Clarifying compliance requirements Step 2: Select Corporate Service Provider Get at least three quotes. Important questions: How long have they been established? Do they have German clients? What licenses do they hold? Can they provide references? Step 3: Prepare Documents You will need (all apostilled): Passport Proof of address (not older than 3 months) CV Bank or wealth statement Complete due diligence questionnaire Phase 2: Incorporation (2–4 weeks) Step 4: Name Reservation Reserve the company name with the Malta Business Registry (€45). Takes 1–2 days. Tips: Name should be neutral and international Avoid “Holding” in the name (raises red flags) Check trademark rights in relevant countries Step 5: Memorandum & Articles of Association Your lawyer will draw up the incorporation documents. Pay attention to: Broad object clause (for flexibility) Correct number of authorized shares Proper nominee structures Step 6: Registration Filing with Malta Business Registry. Usually takes 3–5 working days, unless everyone goes on vacation at once (happens more than you think). Phase 3: Operationalization (4–8 weeks) Step 7: Apply for Tax Number At the Malta Tax Authority (IRD). Takes 2–3 weeks. You’ll get: Tax Identification Number (TIN) VAT number (if needed) PAYE number (for payroll) Step 8: Open Bank Account This is often the trickiest part. Maltese banks have become very cautious with holdings. Recommended banks: Bank Pros Cons Minimum Deposit Bank of Valletta Largest, well digitalized Conservative with holdings €25,000 HSBC Malta International, strong IT High fees €50,000 Lombard Bank Pragmatic on holdings Smaller bank €10,000 MeDirect Online focused Limited services €1,000 Documents Required to Open an Account: Certificate of Incorporation Memorandum & Articles Board resolution to open account ID of all directors and shareholders Due diligence documents Business plan and financial projections Step 9: Tax Registrations Applications to relevant authorities: Malta Business Registry (Annual Return) Malta Financial Services Authority (if investment services) Malta Gaming Authority (if gaming) Data Protection Officer (if needed) Phase 4: German Integration (2–4 weeks) Step 10: Apply for DTA Benefits In Germany you must apply under the double taxation agreement: Obtain certificate of residence from Malta Apply at the German Federal Tax Central Office Processing time: 4–8 weeks Step 11: Check for German Permanent Establishment Important: The Malta holding must not have a permanent establishment in Germany. That means: No fixed place of business in Germany No permanent representative Management and control from Malta Typical Timeline and Pitfalls Realistic total: 3–6 months Common delays: Bank account: May take 2–3 attempts Apostille: German authorities often take 4–6 weeks Due diligence: Extra questions slow things down Holiday times: In Malta, nothing moves in August My tip: Give yourself plenty of time and avoid starting in July. The best time for incorporation is September to November. The 5 Most Expensive Mistakes with Malta Holdings (and How to Avoid Them) After two years in Malta and countless talks with other entrepreneurs, I have a clear list of the most common (and costly) mistakes. Let me show you the biggest pitfalls. Mistake #1: Choosing a Cheap Provider The mistake: Malta holding for €5,000 sounds tempting. But what you actually get is: Shelf company without customised structure Minimal service and support No proactive tax advice Problems at the first tax audit The cost: I know someone who had to spend €15,000 to bring their cheap Malta holding up to compliance—plus €8,000 in tax advice after the structure didn’t work. How to avoid it: Invest in a reputable CSP (€10,000+ per year) Get several quotes and compare Request references and talk to existing clients Check their licenses and regulation Mistake #2: Ignoring Substance Requirements The mistake: Thinking a Malta holding is just a mailbox company with no real activity. The reality: EU anti-avoidance rules demand real economic substance. Without proper substance: DTA benefits can be denied German tax authorities will not recognize the Malta holding Retrospective tax bills plus interest loom What you need: Real business activity in Malta Qualified staff on the ground Regular board meetings Proper operating expenses Ignoring the cost = €50,000+ in back taxes Mistake #3: Creating a German Permanent Establishment The mistake: The Malta holding is effectively managed from Germany. Warning signs: You make all key decisions from Germany Business contacts go through your German address Contracts negotiated and signed in Germany Management effectively takes place in Germany The consequence: Germany taxes the Malta holding as a German corporation. Effective tax rate: 30%+ instead of 5%. How to get it right: Board meetings only in Malta Key decisions documented as taken in Malta Contracts signed by Maltese director Separate email addresses and communication Mistake #4: Neglecting Transfer Pricing The mistake: Setting intra-group prices that aren’t at arm’s length. Example: Your German GmbH pays 90% of its profit as a management fee to the Malta holding. The German tax office asks: “Is that market standard?” The solution: Prepare transfer pricing documentation (€5,000–15,000) Prove market-based conditions Regularly update your transfer prices Economic analysis by experts Without correct transfer pricing documentation, expect profit adjustments and fines in Germany. Mistake #5: Forgetting an Exit Strategy The mistake: Not thinking about winding up or selling the structure. Problems without exit planning: High dissolution costs (€10,000–20,000) Tax disadvantages on liquidation 6–12 months’ time required Compliance risks until final deletion Better planning: Exit clauses in CSP contracts Annual review of structure efficiency Alternative structures in mind Liquidity planning for dissolution costs Bonus Mistake: Underestimating Banking Malta holdings without a bank account are useless. But Maltese banks have become extremely cautious with holdings. Common banking problems: Account opening takes 3–6 months High minimum deposits (€25,000+) Strict due diligence requirements Regular compliance reviews Pro tip: Start the banking process in parallel with incorporation, not after. And always have a plan B (second bank). Real talk: A Malta holding is not a set-and-forget solution. It needs ongoing care, expert support, and real business activity. If you underestimate that, you’ll pay for it in the end. But if you get it right, you’ll save tax for decades. FAQ: Your Most Important Questions about Malta Holdings Answered How long does it take to set up a Malta holding? The formation itself takes 2–4 weeks. For everything to be fully operational (including bank account and German registrations), budget 3–6 months. The main bottleneck is usually opening the bank account. Can I, as a German citizen, set up a Malta holding? Yes, absolutely. You don’t even need to live in Malta. What matters is that the company itself is resident and managed in Malta. What’s the minimum capital requirement for a Malta holding? Legally, €1,164 share capital is enough. In practice, you’ll need €10,000–50,000 minimum deposit for bank account opening, depending on the bank. Do I need to move to Malta personally? No, but you need to travel to Malta regularly for board meetings and to prove substance. Plan for 4–6 trips to Malta per year. How does it work with German taxes? You remain tax resident in Germany, but the Malta holding can, via DTA applications, reduce German withholding tax on dividends from 26.375% to 5%. That saves significant taxes. What happens if there’s a German tax audit? The German tax office mainly checks: 1) Is the Malta holding truly tax resident in Malta? 2) Is there a German permanent establishment? 3) Are transfer prices at arm’s length? With good documentation, this is no problem. Can I contribute existing companies into a Malta holding? Yes, but it’s complex tax-wise. In Germany, a contribution can be tax-neutral, but requires careful planning and professional advice. Which industries are best suited for Malta holdings? Best suited: Software/IT, e-commerce, consulting, property investment, licensing, trading. Less suited: Manufacturing with lots of staff. What does a Malta holding really cost per year? Realistic costs: €20,000–35,000 per year for all services (CSP, accounting, advice, bank account). Cheaper is possible, but usually not compliance-safe. Can the Malta holding buy property? Yes, Malta holdings can acquire EU property without issue. For property outside the EU, there may be restrictions depending on the country. What happened with Brexit and UK business? Malta has concluded a new DTA with the UK. Brexit has actually increased the appeal of Malta holdings for UK business, since the UK no longer follows EU rules. How do I sell my Malta holding? Share deal (selling the shares) is usually the most tax-efficient. Asset deal (selling the assets) can be better depending on structure. Plan 6–12 months for a clean exit.
