You may have heard of setting up a company in Malta, and all the tax benefits that the island offers.
Malta is a very attractive place for many people to move to and setup a business in, and not only for business reasons.
You may also personally fall in love with the place, read my view on Malta for more information about living in Malta.
I have been living here for almost 4 years now (update: I moved to Cyprus), and been through the moving process of business and legal paperwork for various of procedures required for long term settlement.
While it does take some time to setup a Malta company initially, it's well worth the low taxes once you are up and running.
Business first – I'll jump right into it and list the actual upsides of setting up a Malta Limited Company.
Benefits of a Malta Ltd company setup
There's a ton of benefits of setting up a company in Malta. Below are some of the main reasons why you should consider a Malta company.
1. Lowest effective corporate taxes in EU
The main reason to set up a Malta company is the effective corporate tax.
The corporate taxes in Malta is 35%, flat rate, which is highest in EU. However, you can reduce it down to an effective tax rate of 5-7% by distributing all the profits to the holding company.
Usually the holding company will be set up in Cyprus, Seychelles or Gibraltar.
Being a resident in Malta only makes you liable to pay taxes on income remitted to Malta. Having a Malta Company can therefore create a total tax pressure of 5% tax.
2. Sane income taxes
The income taxes are not very low (compared to EU neighbours), so taking out big salaries would result in a quite high tax pressure. If you take out a salary that's just enough, the effective tax rate will be relatively low.
The previous income stages are deducted from the tax rate, so the tax rate is only applied on the difference. For example, a salary of €14,400 (€1,200/m) would be taxed €885 per year, approximately 6-7% tax.
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Tax rates from: IRD Malta
3. Lower minimum wage
Minimum wage in Malta is €720. which gives you an idea of the salary situation. Employees can be satisfied with salaries ranging €1,000 – 2,000 for most common work which can be beneficial if you plan on running your Malta company directly from the island.
4. Share capital requirement is only €1,165
The minimum amount of share capital that is required to open up a business in Malta is €1,165, but only a 20% of this needs to be in your bank account (see best online banks) (see best online banks). In other words, less physical money required to setup a Malta Ltd. There is also an annual fee of €100.
5. Low social securities
Social security is paid to all employees and is 10% of the employees salary, plus another 10% that the company pays. So basically the effective rate is 20%, but half of it is taken from the employee's share.
6. Less restrictions on expenses
Having a Malta company let's you deduct a lot of expenses on your company.
I'm not going to get into details but generally the policies in regards to using your company's money to pay business related costs are not strict.
Traveling on behalf of business errands are not questioned on any serious degree, so for us digital nomads who like to travel and work at the same time, we can deduct a lot of costs from our business – given that it's a work related trip of course.
Other reasons you will enjoy Malta
7. Stay safe with low crime
Personally I feel really safe here, even out walking during nighttime. Throughout the years here on the island there has been very few crime related incidents happening to me.
8. Enjoy a decent climate
In Malta, the sun shines more than 300 days per year. Even though the island receives a lot of rain during winter time, most of it are falling in a concentrated period of time and usually passing by within a few hours.
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9. Less of a language barrier
English, together with Maltese, are official languages of Malta.
I would estimate that 90% of the Maltese speak fluent English, some of the older generations are not as fluent. But all papers & contracts, part of school, signs, instructions and food menus for example, are in English.
10. More like-minded entrepreneurs
Networking is a big key to become successful. In Malta, business networking is very easy.
The good business climate that Malta has to offer attracts a lot of entrepreneurs from all over the world.
Being an online entrepreneur myself, it's awesome being surrounded by people with a similar mind. There's entrepreneurs from all over the world and you'll easily make friends with people who's waking the same path.
Spending time with other successful entrepreneurs is the easiest way to become a successful entrepreneur yourself.
Setup a Malta company on your own
Personally, I don't recommend you trying to setup the Malta company on your own. It's a common mistake people make.
Even if you have plenty of experience of company formation in other countries, Malta might work different, and it's also safe to say that hiring a firm to do it for you will usually be faster, as they have established a process and might know people in the right places. In the end, it will be very time consuming.
Also, you will need to setup a bank account, which sometimes is tricky if you don't have a contact at the bank. However, you could also consider opening up an online bank account as it can take a long time to open up a local bank in Malta.
If you need any help with formation of the Malta company, I'd suggest asking people who already established Malta companies, or reach out to me.