Malta: Types of Company

Maltese company law derives chiefly from civil or 'Roman' law, rather than common law. A new Companies Act 1995 replaced the old Commercial Partnerships Ordinance, and set up a new regime for commercial entities under the Registrar of Companies. Companies set up under the old regime had until 1st January 1998 to convert themselves into the new formats, except that 'Offshore Companies', which can now no longer be formed, had 10 years to adapt. Shipping companies, and, while they survived, offshore companies, continued to be subject to the old Commercial Partnerships Ordinance.

In March, 2006, the European Commission formally requested Malta under EC Treaty state aid rules to abolish the tax regime for Maltese Companies with Foreign Income (CFI), and the International Trading Companies' (ITC) regime by the end of 2010 at the latest.

Competition Commissioner Neelie Kroes observed that: "The schemes provide sizable aid to companies that are owned by non-Maltese and produce revenues outside of Malta, and are therefore highly distortive without promoting growth of the Maltese economy."

In May, the Maltese government formally decided to gradually abolish the existing aid schemes.

Competition Commissioner Neelie Kroes announced: "I welcome the abolition of Malta's preferential regimes as a further important step towards eliminating selective tax incentives that significantly distort the location of business activities in the Single Market."

Malta's acceptance of the EC recommendation meant that:

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Malta Private Limited Company

The private limited company, (or 'partnership anonyme' in civil code terms), has the suffix 'Limited' or 'Ltd'. The company is formed by submission of the Memorandum and Articles to the Registrar (in English), together with the appropriate fee. Once all documents and information have been submitted to the registrar, incorporation may take as little as 24 hours.

The following are the chief characteristics of a private limited company:

Registration and annual return fees for paper documents are as follows:

The fees for online registration and submission of returns are slightly less. Full details can be found at: www.mfsa.com.mt.

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Malta International Holding Company

The International Holding Company (IHC) is similar to the old International Trading Company except that as its name implies it holds participations in foreign companies. Its effective tax rate is 11.67% or less; if dividends emanate from a 'participating holding', ie one of more than 10% in the paying company, then the effective rate of tax is nil. See Offshore Legal and Tax Regimes for further details.

The IHC can make use of Malta's Double Taxation Treaties.

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Malta General Partnership

General Partnerships are formed under the Companies Act 1995 as a partnership 'en nom collectif' which has a partnership name. There is a Deed of Partnership giving the names of the partners, the address of the registered office, the objects of the partnership, its duration, and the amount of capital contributed by each partner. The Deed is registered by the Registrar of Companies.

The partners are liable jointly and severally for the full debts of the partnership.

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Malta Limited Partnership

Limited partnerships in Malta have general partners, who are responsible for management, and have unlimited liability, and limited partners, who are liable only to the extent of their capital contributions to the partnership. A limited partnership is formed under the Companies Act 1995 as a Societe en Commandite Simple and is subject to the same rules as a general partnership. The SICAV (Societe d'Investissement a Capital Variable) is also formed under the Act, but as a partnership limited by shares (Societe en Commandite Limitee par Actions), and is used by mutual funds.

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Malta Branch of Overseas Company

Branches of foreign companies are permitted but are taxed at the same rate of income tax as domestic companies. No additional taxes are withheld on profits transferred back to head office.

Malta Trusts

The Offshore Trusts Act 1988 was amended by The Trusts and Trustees Act 2004, which became effective in January 2005, and allows Maltese residents and firms to use local trusts, while also furthering Malta's international obligations on non-discrimination, transparency and the prevention of money laundering.

The government believes that the legislation, which creates a more streamlined and simplified trust regime, will make Malta much more attractive to both international and domestic clients, by offering greater flexibility and certainty. The new Act eliminates the nominee company regime, and introduces a licensing regime for professional trustees.

Until 2005, trusts in Malta were based on the Offshore Trusts Act 1988, which was largely based on Jermal trust law, itself a common law implant stemming from English trust law. Trusts under this Act must have non-resident settlor and beneficiaries, and trust assets must not include Maltese real estate (permitted under the new Act).

The Recognition of Trusts Act 1994 gave effect to the Hague Convention, and results in a division of trusts into:

All trusts, including foreign ones, must register with the Maltese Financial Services Centre (MFSC), which costs EUR250 for application and processing and EUR100 upon approval. A further EUR2,500 is payable upon the issuance of approval and annually thereafter. Foreign trusts which do not register with the MFSC will not benefit from the tax advantages of registered foreign trusts (they are tax-exempt). Under the 2004 Act, transfers of assets into a trust or a change of beneficiaries may give rise to a charge to tax.

Under the 2004 Act, a registered trust must have a Maltese Professional Trustee as one of its trustees, which files an annual declaration of conformity with the law.

It is likely that a Malta-registered trust will often be a more effective holding vehicle than the International Holding Company (see above, and see Offshore Legal and Tax Regimes). Trusts are able to use the extensive network of Maltese Double Taxation Treaties.

Unit Trusts

There are no special provision in Maltese law covering Unit Trusts, which are therefore treated in the same way as ordinary Maltese trusts, and have the same tax regime.

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