When looking to establish a presence in Malta, foreign companies can choose between setting up a branch office in Malta or a subsidiary. Each structure offers distinct advantages and requirements, and the decision ultimately depends on the goals and operations of the business. Understanding these options in detail is essential, as Malta’s favorable tax policies and strategic location make it a prime choice for international businesses. Below, we break down the key aspects of branch offices and subsidiaries in Malta.
Overview of Branch Offices and Subsidiaries in Malta
Both branch offices and subsidiaries are recognized under Maltese Commercial Law as legitimate business vehicles for foreign companies. However, they have important structural and operational differences:
- Branch Office in Malta
- Operates as an extension of the parent company.
- No minimum share capital is required.
- Taxation is based on income earned in Malta.
- Financial obligations are tied to the parent company.
- Subsidiary
- Functions as an independent legal entity.
- Requires a minimum share capital of €1,165 (20% of this must be deposited if the total share capital exceeds the minimum).
- Taxed on global income.
- Has more flexibility and independence in operations.
Registration Process
Both business types must be registered with the Malta Business Registry (MBR). However, the required documentation and processes differ slightly:
Branch Office in Malta: Registration
To open a branch office in Malta, the following documents are required:
- A copy of the parent company’s certificate of registration from its home country.
- Copies of the parent company’s Memorandum and Articles of Association.
- A certificate of good standing for the parent company.
- Drafted and notarized Memorandum and Articles of Association for the branch.
- A document appointing a branch representative.
Additionally, the branch must have a registered office in Malta and appoint a representative and secretary.
Subsidiary Registration
Registering a subsidiary involves:
- Drafting and notarizing the Memorandum of Association (MOA) and Articles of Association (AOA).
- Appointing at least one director and one secretary.
- Establishing a registered office in Malta.
- Depositing the required share capital.
Our Maltese lawyers can assist with drafting these documents and navigating the legal procedures for both entities.
Taxation in Malta: Branch vs. Subsidiary
Malta’s attractive tax regime is a significant reason why foreign companies choose to establish offices here. The tax implications for branches and subsidiaries are notably different:
- Branch Offices
- Taxed only on income earned within Malta.
- The parent company must file annual audited financial records with the Malta Trade Register.
- Profits transferred back to the head office are not subject to withholding taxes.
- Subsidiaries
- Taxed on global income, including profits earned outside Malta.
- Applicable tax rates include:
- Corporate tax: 35%.
- Capital gains tax: 35%.
- Withholding tax: 15%.
- Value Added Tax (VAT): 18%.
While subsidiaries may face broader tax obligations, they can also access various tax incentives and deductions offered by Malta. Branches, on the other hand, can leverage Malta’s double taxation treaties to avoid being taxed twice on the same income.
Office in Malta: Operational Differences
Independence and Flexibility
- A subsidiary is fully independent, allowing it to manage its own operations, finances, and strategy separate from the parent company. This flexibility often makes subsidiaries a better choice for companies planning long-term growth in Malta.
- A branch office is entirely dependent on the parent company. It operates as an extension and lacks the autonomy of a subsidiary.
Financial Obligations
- Subsidiaries must maintain their own financial records and register for both corporate tax and VAT.
- Branches only need to register for VAT but must rely on the parent company’s financial resources and support.
Choosing the Right Option and Office in Malta
When deciding between a branch office or a subsidiary in Malta, the purpose and goals of the business should guide the decision:
- Choose a subsidiary if you require:
- Independence from the parent company.
- Greater operational flexibility.
- Access to Malta’s full range of tax incentives.
- Choose a branch office if:
- You want a simpler, cost-effective structure.
- Your primary goal is to establish a presence while maintaining strong ties to the parent company.
- Tax advantages for the parent company are a priority.
Benefits of Establishing an Office in Malta
Malta is often regarded as a gateway to Europe, offering numerous advantages for foreign businesses:
- Over 65 double-tax treaties that prevent double taxation.
- A strategic location within the EU with excellent access to global markets.
- Favorable tax policies, including opportunities for deductions and exemptions.
- A pro-business legal framework designed to encourage foreign investment.
Expert Legal Support and Office in Malta
Managing the registration and taxation obligations for branch offices and subsidiaries in Malta may be difficult. Our skilled Maltese attorneys are available to streamline the process, ensuring conformity with local regulations while maximizing your company’s tax advantages.
If you are establishing a branch office or subsidiary, our legal professionals offer customized guidance to fulfill your unique requirements. Get in touch now for a customized meeting and begin the process of setting up your office in Malta.
By understanding the differences and benefits of branches and subsidiaries, businesses can make informed decisions that align with their goals and maximize opportunities in Malta’s thriving economy.
