Malta Companies: Other Key Considerations

Considerations include:

• The establishment of a branch does not confer separate legal personality on the branch
• Registration fees depend on the share capital
• Changes after initial registration must be registered within one month from amendments
• Oversea companies are required to comply with the rules on financial statements similarly to those applicable to Maltese companies
• Once registered as an oversea company, the company must file copies of its balance sheet, a profit and loss account and the notes to the accounts within 42 days from the end of the accounting period.

Private Exempt Company

A private limited liability company may have the status of an exempt company, hence qualifying for certain benefits provided it satisfies the following conditions:

1. The number of persons holding debentures of the company is not more than 50
2. No body corporate is the holder of, or has any interest in, any shares or debentures of the company o is a director of the company, and neither the company nor any of the directors is party to an arrangement whereby the policy of the company is capable of being determined by persons other than the directors, members or debenture holders thereof.

Benefits of a Private Exempt Company include:

1. It may make a loan to any person who is its director or a director of its parent company
2. May enter into a guarantee or provide any security to a director or a director of its parent company
3. May deliver to the Registrar an abridged balance sheet, all notes to the accounts relevant for the purposes of that balance sheet and the auditor’s report, without the director’s report

Holding Company

Malta holding companies can be set up in order to hold any business assets in any form such as real estate, fixed assets, aircraft, investments, bank accounts and intellectual property as well as personal assets including any luxury items such as yachts, residential property, works of art. Although there is no specific holding company regime, the domestic tax treatment afforded to the different types of income received by such companies as well as the participation exemption introduced in 2007 and typically available in holding company regimes make the setting up of Malta holding companies a very attractive option.
Participation exemption is not only applicable to holdings in companies but is also extended to holdings in other entities such as a limited partnership (the capital of which is not divided into shares, a non-resident body of persons, or a collective investment vehicle that provides for limited liability of investment.

In the event that dividends are received from a participating holding in a body of persons which does not satisfy the above anti-abuse mechanism, the five sevenths refund would apply (yielding a net effective tax paid in Malta of 10%). The Maltese company can either opt to avail itself of the exemption or pay tax at the rate of 35%, subsequent to which the shareholders of the Maltese company would be able to claim a 100% refund of tax paid at the level of the Maltese company. The latter option is particularly useful where proof of tax paid is required in the foreign jurisdiction.
Key considerations in setting up a Holding company in Malta

• Dividends received from its participating holding is not subject to tax in Malta;
• No Capital Gains tax on its disposal of all or part of its shareholding in its participating holding;
• Partnership is considered as entity for the purposes of Participation exemption;
• No withholding tax on outbound dividends, interest and royalty payments;
• Potential exemption from preparing consolidating accounts;
• Capital Gains exemption on certain transfer of shares & immovable property

Portfolio Company

Portfolio companies can be set up in Malta to hold a portfolio of securities. This is mostly common for high net worth individuals who would prefer to hold their portfolio of securities through a limited liability company as opposed to a fund or in their own name. Holding one’s portfolio of securities through a fund is an expensive option and often yields to complicated structuring which might now always be in the best interest of the client. On the other hand, holding the investments in one’s name might not be the most tax efficient way. In both situations, one can resort to use a Malta Portfolio Company which provides the client with an option to hold the investments in a separate entity that has a separate legal personality, simple to set up and administer and more cost effective. Furthermore, the tax on the income will vary as to the nature of the assets being held. The tax rate varies from 0% up to 10%, depending on the nature and value of the assets being held by the company.

Re-domiciliation of companies

The Continuation of Companies Regulations (Subsidiary Legislation 386.05) provide for:

1. The continuation in Malta of a foreign company; and
2. The continuation outside Malta of a company incorporated in Malta.

Continuation of a Foreign Company in Malta

A company which was formed and incorporated or registered under the laws of an approved foreign country, may request to the Registrar of Companies to be registered as continued in Malta, as long as, the following eligibility criteria are met:

• The foreign company is similar in nature to the company under Maltese law
• It is permitted by the laws of the foreign country under which the company is incorporated or registered and
• The company is authorised to do so by the its constitutive documents

Required Documentation

The following documents are required to be presented:

1. The resolution or equivalent document of the foreign company authorising it to be continued in Malta and a certified translation if the document is in a foreign language
2. A copy of the revised constitutive document of the foreign company
3. Certificate of Good Standing issued by the competent authority vis-à-vis the foreign company
4. A declaration signed by at least two directors confirming the following:
   1. The name of the foreign company and the name under which it wishes to be continued
   2. he jurisdiction under which it is incorporated
   3. Date of incorporation
   4. Decision to have the foreign company registered as continuing in Malta
   5. Evidence that the foreign company has given formal notice to the competent authority of the foreign country of its intention to be continued in Malta
   6. Evidence that no proceedings for breach of laws of the country of incorporation have been commenced against the foreign company
5. Declaration signed by two directors confirming the solvency of the company
6. List of directors of the foreign company
7. Any other evidence or information which the Registrar may require
8. Relative Fees

Provisional Registration

After submitting the relevant documents, a Provisional Certificate of Continuation is issued typically within two to four working days. The company would be subject to all the obligations and capable of exercising all the powers attributed to a company registered in Malta.

Final Registration

After having received the Provisional Certificate of Continuation, the company will have a timeframe of six months during which the company must obtain documentary evidence confirming the company is no longer registered in its previous country of incorporation. This evidence is to be submitted to the Registrar of Companies, who will in return exchange the Provisional Certificate of Continuation for a Certificate of Continuation.

Applicable Fees

A registration fee of €245- €2,250 will apply depending on the company’s authorised share capital at the date of the provisional registration in Malta.

 Continuation Outside Malta of a Company Registered in Malta

A company may apply to the competent authority of the foreign country to have the company registered as continued as if it had been incorporated under the laws of such foreign country as long as the following eligibility criteria are met:

• Obtaining the consent of the Registrar of Companies
• Assuming the laws of the foreign country so permit

Required Documentation

The request for the company to be continued outside of Malta must be accompanied by the following documents:

1. Declaration by at least two directors of the company confirming
   1. The name of the foreign company and the name under which it wishes to be continued
   2. The place of the proposed registration of the company and the name and address of the competent foreign authority
   3. The date on which it is proposed to establish domicile in the foreign country.

Further Requisites

The following requirements must be fulfilled:

1. An extraordinary resolution of the shareholders of the company which is delivered to the Registrar of Companies
2. Declaration signed by two directors of the company confirming the solvency of the company
3. If the company carries on in or from Malta any licensable activity, the company must provide evidence of the consent of the competent authority in Malta for the company to continue in a foreign country
4. All fees and penalties due to the Registrar
5. The fee prescribed for continuation

Contact Rudolph Psaila to find out more.