Table of Contents Malta Company Formation Basics: What You Need to Know First The 10 Steps to Setting Up a Company in Malta in Detail Malta Company Formation Costs: What to Expect Malta Tax Advantages: Why Incorporation Pays Off Avoiding Common Mistakes When Setting Up a Company in Malta After Incorporation: Ongoing Compliance and Accounting FAQ: Frequently Asked Questions Are you dreaming of starting your own company in Malta? Let me start by delivering both the most exciting and sobering news up front: Yes, it’s possible. And no, it’s not as easy as an Instagram post might make you believe. After two years on the island and countless conversations with founders, lawyers, and desperate entrepreneurs in front of the registry office, I can assure you: With the right preparation, a Malta Limited is achievable – without it, you’re in for a marathon through the Maltese bureaucracy. Malta entices with 5% corporate tax, EU membership, and English as an official language. Tempting? It is. But between the first thought of “I’ll start a business in Malta” and your first Maltese business bank account, there are several hurdles I’d like to help you avoid. That’s why, right here, you’ll find the complete process in 10 concrete steps – including all costs, pitfalls, and insider tips I wish I’d known back then. Malta Company Formation Basics: What You Need to Know First Before we dive into the 10 steps, we need to talk basics. A Malta Limited is a private limited company – comparable to a German GmbH or Austrian GmbH. That means: limited liability, minimum capital of €1,200, and plenty of paperwork. Malta Limited vs. Other EU Corporate Forms Why not just opt for a Cyprus Limited or an Irish company? The answer is Malta’s unique tax system. The Malta Refund System enables effective tax rates of 5% on distributed profits – but only if you do everything right. A Cyprus Limited pays 12.5%, an Irish company pays 12.5% without any refund system. Country Corporate Tax Effective Rate EU Member English as Official Language Malta 35% 5% (with refund) Yes Yes Cyprus 12.5% 12.5% Yes Yes Ireland 12.5% 12.5% Yes Yes Estonia 20% 0% (if not distributed) Yes No Who Can Set Up a Malta Limited EU citizens have it easy. Non-EU residents have to overcome additional hurdles, but it’s not impossible. As an EU citizen, you need: At least one shareholder At least one director A Maltese address for the company A company secretary (can be your service provider) The upside: You don’t have to live in Malta to set up a Malta Limited. But you do have to fulfill substance requirements – more on that later. Malta Residence: Nice to Have or Must-Have? This is where things get interesting. You don’t need Maltese residence to form a company. For optimal tax benefits, though, you do. The Malta Refund System works best if you are taxable as a shareholder in Malta. Without Maltese residency, you still only pay 5% – but you must prove you’re not tax-resident in your home country. My practical tip: Form the company first, see if your business model works, and then think about residency. You can apply for Maltese residence at any time later on. The 10 Steps to Setting Up a Company in Malta in Detail Let’s get concrete. These 10 steps take you from idea to registered Malta Limited. Expect a total duration of 4-8 weeks if everything runs smoothly. Spoiler: it rarely does. Step 1: Reserve and Check Your Company Name The first step takes you to the Malta Business Registry (MBR). Your desired name must be available and comply with naming guidelines. Typical no-gos: “Malta”, “Bank”, “Insurance”, or anything sounding like a state organization. Name reservation costs €25 and is valid for 30 days. My trick: Check the Companies House Database online in advance to see if your name is available. Then reserve online via the MBR portal. Takes 2-3 business days. Important note: Your company name must include “Limited” or “Ltd.” Without this designation, your registration will be rejected. Step 2: Choose a Company Service Provider (CSP) This is where you save time or money – both is not possible. A good CSP costs €2,000–3,500 per year but handles all the paperwork for you. A cheap CSP costs €800–1,200, but you have to track everything yourself. Your CSP handles: Company secretary function (legally required) Registered office address Nominee director services (optional) Compliance and annual returns Accounting and tax returns My recommendation: Don’t just go for the cheapest option. A CSP that goes out of business after six months will cost you more nerves than you’ll save in fees. Step 3: Prepare Memorandum and Articles of Association The memorandum is your “birth certificate”, the articles your “rule book”. Both documents define: Objects clause (purpose of business) Share structure and shareholder rights Director powers and responsibilities Meeting procedures and voting rights Standard templates are free, but I recommend tailored articles. Especially when it comes to the objects clause – don’t cut corners here. It determines what your company can do later and what it can’t. Step 4: Appoint Directors and Shareholders Every Malta Limited needs at least one director and one shareholder. This can be the same person. As an EU citizen, you can assume both roles. Non-EU citizens need a Maltese or EU director. Key decisions: Number of shares: Minimum €1,200, but you can also issue 10,000 shares at €0.12 each Share classes: Ordinary shares are enough for simple structures Director structure: One director is cheaper, two directors provide more flexibility Step 5: Pay in Capital and Open a Bank Account This is where the Malta adventure really starts. You need €1,200 minimum capital, but this money is only paid in after incorporation. That is: you register with €0, and pay in afterwards. Opening a bank account in Malta is… a challenge. Expect 2-8 weeks and the following requirements: Certificate of incorporation Memorandum and articles Board resolution opening the account Due diligence documents for all directors Business plan and revenue projections Proof of source of funds Alternative: You can deposit the capital with a lawyer into a client account. It’s faster but costs extra. Step 6: Submit Documentation at Malta Business Registry Now comes the paperwork. You submit: Form A – incorporation application Memorandum and articles (notarised) Director and secretary consent forms Registered office address confirmation Name reservation certificate The registration fee is €245. Processing time: 5–10 business days if all documents are complete. Missing documents mean new waiting periods. Step 7: Receive Certificate of Incorporation The certificate of incorporation is your official birth certificate. With this document, your Malta Limited officially exists. From this moment onward, the compliance clock is ticking — you have 18 months for your first annual return. The certificate includes: Company registration number Incorporation date Authorised share capital Registered office address Step 8: Tax Registration with the Commissioner for Revenue Within 30 days of incorporation, you must register for tax purposes. This is done at the Commissioner for Revenue with Form VAT 1. You’ll receive: Tax Identification Number (TIN) VAT number (if liable for VAT) Employer registration (if you have staff) VAT liability from €35,000 turnover per year. Voluntary registration is possible and often makes sense for EU transactions. Step 9: Social Security and Employment License (if needed) If you have employees or want to employ yourself, you need: Employment license: €200 per year, mandatory for all employers Social security registration: For each employee Work permit: For non-EU employees As an EU citizen, you can employ yourself. As a non-EU director, you need a work permit — this can take 6–12 weeks. Step 10: Corporate Bank Account and Payment Processing The last step is often the longest. With your certificate of incorporation, you can activate your bank account and pay in your minimum capital. Maltese banks are… picky. Bank ranking from my own experience: APS Bank: Quick but expensive (€300 setup + €50/month) Bank of Valletta: Cheap but slow (6–12 weeks) HSBC Malta: International but very strict European and Revolut Business: Alternatives for simple needs Payment processing via Stripe, Square, or local providers is also necessary for online businesses. Malta Company Formation Costs: What to Expect Here’s the unvarnished truth about costs. The “from €1,500” ads are pure marketing nonsense. Realistically, in the first year, you’ll pay €4,000–8,000 depending on complexity and service level. One-Off Malta Limited Incorporation Costs Position Cost Required Name reservation €25 Yes Registration fee €245 Yes Notarisation €150–300 Yes CSP setup fee €500–1,500 De facto yes Legal fees (lawyer) €1,000–2,500 Recommended Bank account setup €200–500 Yes Total €2,120–5,070 Annual Ongoing Costs Here are the hidden costs nobody tells you about: Position Cost/Year Due Company secretary €800–2,000 Annual Registered office €300–600 Annual Annual return €100 Annual Accounting & tax returns €1,200–3,000 Annual Audit (from €200k turnover) €2,500–5,000 Annual Bank charges €300–1,200 Annual Total €2,700–11,800 Hidden Costs No One Mentions From my experience, these items also add up: Travel expenses: 2–3 Malta trips for bank, signatures, etc. (€500–1,500) Apostille fees: For foreign documents (€50–200 per document) Translation costs: Non-English documents (€100–300) Express fees: If you’re in a hurry (€200–500) Nominee director: If you need a local director (€1,000–2,500/year) Cost Optimization: Where You Can Save My tips to save money after two years on the island: Compare CSPs: Get at least three quotes. Price differences of 100% are normal. Timing: Don’t incorporate in December. Everyone’s on holiday, everything takes longer. Preparation: Collect all documents in advance. Every follow-up request costs time and money. Bank account alternatives: European and Revolut are cheaper than Maltese banks. DIY steps: You can do name reservation and tax registration yourself. Malta Tax Advantages: Why Incorporation Pays Off Now we get to the real reason you’re here: taxes. Malta’s tax system is complex but brilliant. With the right structure, you actually pay only 5% corporate tax. But – and it’s a big but – only if you know the rules. The Malta Refund System Explained Malta has a trick: They charge 35% corporate tax, but refund you 6/7 of that. Here’s how it works: Your Malta Limited makes €100,000 profit Corporate tax: €35,000 (35%) Distribution to shareholders: €65,000 Refund: €30,000 (6/7 of the paid tax) Effective tax burden: €5,000 = 5% The catch: You must distribute the profits to get the refund. Retained earnings are taxed at 35%. Participation Exemption: 0% on Dividends This is where it gets really interesting. If your Malta Limited holds stakes in other EU companies, dividends are 100% tax-exempt. This is called the participation exemption. Requirements: At least 10% participation or €1,164 acquisition cost Minimum holding period of 183 days No trading in the shares Practical example: You incorporate a German GmbH for operations and a Malta Limited as a holding. The German company pays dividends to Malta – tax-free. Malta pays out to you – 5% tax. Malta vs. Other EU Jurisdictions Jurisdiction Corporate Tax Dividend Tax Capital Gains Holding Benefits Malta 5% (with refund) 0% (EU dividends) 0% (if exempt) Participation exemption Luxembourg 24.94% 0% (if exempt) 0% (if exempt) Participation exemption Netherlands 25.8% 0% (if exempt) 0% (if exempt) Participation exemption Cyprus 12.5% 0% (if exempt) 0% (if exempt) Participation exemption Substance Requirements: What Malta Demands Here’s the catch. Malta requires “economic substance” for tax benefits. Meaning: Management and control: Board meetings must take place in Malta Operational activities: Business decisions made in Malta Employees: Adequate number of qualified employees in Malta Office: Adequate business premises in Malta What does this mean in practice? For a simple holding, 1–2 board meetings per year in Malta and a qualified director on location are enough. For operating companies, you need true presence. Take Advantage of Double Taxation Agreements Malta has a wide network of double taxation treaties. This means: Dividends paid to you are often taxed at lower rates. Examples: Germany: 5% withholding tax on dividends (with >10% participation) Austria: 5% withholding tax on dividends Switzerland: 5% withholding tax on dividends UAE: 0% withholding tax on dividends Combined with your personal tax situation, this can be quite attractive. Avoiding Common Mistakes When Setting Up a Company in Malta From two years’ experience in Malta and countless conversations with frustrated founders: These mistakes cost you time, money, and nerves. Learn from others’ errors. Mistake 1: Choosing the Cheapest CSP and Later Regretting It The biggest mistake: You pick the cheapest company service provider. €800 instead of €2,500 – sounds like a deal, right? It’s not. What happens: Annual returns filed too late (penalties: €233) Tax returns have errors (additional taxes + interest) CSP goes bankrupt (you look for a new CSP + paperwork transfer) No consultancy for compliance questions My tip: Invest in a reliable CSP. The €1,500 extra pays off within the first year from correct compliance. Mistake 2: Ignoring Substance Requirements Many founders think: “I set up in Malta, live in Germany, and pay 5% tax.” It doesn’t work like that. Without economic substance in Malta, you get no tax benefits. Minimum substance for tax benefits: 2 board meetings per year in Malta Business decisions are documented as made in Malta Qualified director with Maltese residency Adequate office equipment Cost for real substance: €3,000–8,000 per year. But without substance, no 5% tax rate. Mistake 3: Underestimating Bank Account Opening You think: “I’m an EU citizen, company is registered, bank account is routine.” Wrong. Maltese banks are paranoid about compliance. Typical rejection reasons: Business model not clearly explained Source of funds not sufficiently documented No physical connection to Malta evident Director does not live in Malta Online business without local clients Solution: Prepare a detailed business plan, provide proof for all money flows, and allow 8–12 weeks for account opening. Mistake 4: Missing Annual Returns and Compliance Deadlines The Malta Limited is set up, business is running – and then comes the unpleasant surprise. Annual returns not filed, tax returns too late, penalties are accumulating. Compliance deadlines for a Malta Limited: Obligation Deadline Penalty if Late Annual return 18 months after incorporation, then annually €233 Tax return 9 months after financial year end €465 + interest VAT return Quarterly €200 + 0.33% daily Social security Monthly €25 + interest A good CSP manages all of this for you. But check regularly that everything is done. Mistake 5: Forgetting Tax Residency Planning You form in Malta for 5% tax, but remain tax-resident in Germany. Result: You pay German tax on Maltese profits. The Malta refund system is no help. The most important tax residency rules: Germany: 183-day rule + no habitual residence Austria: 183-day rule + center of life interests Switzerland: Exit taxation for >20% participation Plan your tax residency before starting a Malta Limited. A tax adviser in both countries is essential. Mistake 6: Confusing Malta Residence with Incorporation Common misconception: “I need Malta residence for company formation.” Not true. As an EU citizen, you can incorporate a Malta Limited without Maltese residency. But: For optimal tax benefits, Malta residence is very helpful. The Malta residence programs: Ordinary Residence: Free, from 90 days’ stay Malta Permanent Residence Programme (MPRP): €300,000 investment Global Residence Programme: €275,000 property + €15,000 minimum tax Start with ordinary residence – sufficient for most tax benefits. After Incorporation: Ongoing Compliance and Accounting Congratulations – your Malta Limited exists! Now the real work begins. Ongoing compliance is the key to success. Ignore the rules, and Malta will become very unpleasant. Malta Limited Accounting: What You Need to Know Maltese accounting follows IFRS (International Financial Reporting Standards). This is more complex than German HGB, but internationally recognised. Minimum requirements: Proper accounting in English Profit & loss statement Balance sheet Notes to financial statements Directors’ report Audit required from: €200,000 turnover OR €175,000 balance sheet total OR 3 employees An audit costs €2,500–5,000 and takes 4–8 weeks. Factor that into your cash flow planning. Malta Tax Returns: Deadlines and Penalties Malta tax returns are more complicated than in Germany. You have several forms: Form Purpose Deadline Frequency Form C Corporate Tax Return 9 months after year end Annual Form D Dividend Distribution On distribution As needed Form R Refund Application With Form D As needed VAT 3 VAT Return 21st of following month Quarterly Delays are expensive. €465 penalty + 0.33% daily for tax returns. That adds up quickly. Director Duties: What You Need to Bear in Mind as a Director As a director of a Malta Limited, you have serious duties. Breaches can mean personal liability. Your most important director duties: Fiduciary duties: Act in the company’s best interest Duty of care: Make informed business decisions Compliance duties: Comply with all laws Record keeping: Maintain proper books Filing obligations: Submit all returns on time Board meetings must be properly documented. You need board resolutions for: Opening a bank account Dividend distributions Major business decisions Appointment of new directors Share transfers Economic Substance Compliance Since 2019, stricter economic substance rules apply. Your Malta Limited must demonstrate genuine economic activity in Malta. Substance test for various activities: Business Activity Minimum Substance Monitoring Holding company Adequate directors, meetings in Malta Annual IP business Staff, premises, core IP activities Quarterly Trading Core staff, decision making Quarterly Service business Skilled staff, adequate premises Quarterly Penalties for non-compliance: €50,000 + possible deregistration. Economic substance is no joke. Banking Compliance: KYC and Monitoring Your Maltese bank account is continuously monitored. Unusual activity leads to account reviews or account closure. Red flags for Maltese banks: Large cash deposits without business justification Transfers to high-risk countries Inconsistent activity vs. declared business purpose No local Malta transactions My tip: Keep a transaction log with business purpose for every major transaction. Makes KYC reviews much easier. Exit Planning: What Happens If You Leave Malta Nobody talks about exit planning, but it’s important. When your Malta time comes to an end: Strike-off application: Costs €240, takes 3 months Final tax return: Settle all outstanding items Asset distribution: Remaining assets to shareholders Employment terminations: Observe notice periods Dormant companies still cost €1,500–3,000 per year for compliance. Strike-off is often cheaper than dormancy. Conclusion: Malta Company Formation – Is It Worth It? After 4,000+ words and all the details you’re probably asking yourself: Is a Malta Limited really worth it? The honest answer: It depends. Malta Limited is worth it if: You make at least €200,000 profit per year You’re willing to spend €5,000–10,000 per year on compliance You can meet economic substance rules You plan for the long term (5+ years) You operate an international business Malta Limited is NOT worth it if: You make less than €100,000 profit You only have local clients in Germany/Austria You don’t have time for compliance management You remain tax-resident in your home country You believe the social media hype My personal conclusion after two years in Malta: The 5% tax is real, but it doesn’t come for free. You swap German bureaucracy for Maltese bureaucracy plus international compliance. For the right businesses, Malta is brilliant. For everyone else, it’s expensive overhead. If you do decide on a Malta Limited: Invest in good advice from the very start. The €2,000 for a reputable lawyer will save you many times that in avoided mistakes. Malta is not the Caribbean offshore dream from Instagram. It’s a serious EU jurisdiction with real tax advantages for real businesses. But only if you do your homework. FAQ: Frequently Asked Questions about Malta Company Formation Do I need Maltese residence for a Malta Limited? No, you don’t need Maltese residence to incorporate. As an EU citizen, you can set up a Malta Limited without living in Malta. For optimal tax benefits, though, Maltese residence is very helpful. How long does company formation in Malta take? With all documents ready, 4–8 weeks. Incorporation itself takes 5–10 business days, but opening a bank account and tax registration greatly extend the process. How much does a Malta Limited cost in its first year? Realistically €4,000–8,000 including all incorporation fees, CSP costs, legal fees, and first-year compliance. “From €1,500” offers are marketing fluff and don’t cover all essential expenses. Can I manage the Malta Limited from Germany? Theoretically yes, but in practice it’s problematic. Without economic substance in Malta, you lose tax advantages. At least 2 board meetings per year in Malta are needed, plus a qualified director on site. Which bank is best for a Malta Limited? APS Bank for fast account opening (expensive), Bank of Valletta for low fees (slow), European/Revolut Business for simple online businesses. It depends on your needs. Am I required to have an audit? Audit is required from €200,000 turnover, €175,000 balance sheet, or 3 employees. Smaller companies can apply for “audit exemption” and save €2,500–5,000 per year. Does the 5% tax system really work? Yes, but only with the correct structure. You pay 35% corporate tax, but get a 6/7 refund when you distribute profits. Without distributions, it remains 35%. What if my CSP goes bankrupt? You must find a new company secretary and registered office. The transfer costs time and money. That’s why you should choose an established CSP with a solid track record. Can I use a Malta Limited for crypto business? Malta has special DLT/crypto regulations. For crypto trading, you need a VFA license, usually not for simple holding. Compliance is complex – definitely seek specialised advice. How complicated is Maltese tax residency? Ordinary residence from 90 days’ stay is easy. Global Residence Programme requires €275,000 in property. Malta Permanent Residence requires €300,000 investment. For EU citizens, ordinary residence is usually enough.
