Branch Establishment in Malta

One of the efficient business models available to a foreign company when considering the idea of expanding its operations abroad is the establishment of a Branch Office. Businesses that want to grow and consequently take advantage of new markets must carefully weigh the benefits and drawbacks of each form of corporate structure available in the country of their interest. As a result, this will help in deciding if the selected jurisdiction meets their needs and expectations. As well as identify whether to establish a branch or a subsidiary of their current business.

The establishment of a branch in Malta generates many opportunities for a foreign company to cost-effectively expand through the access of new markets granting greater international brand recognition further compounded by the numerous benefits granted by the Maltese Islands.

What Makes Malta the Ideal Location to set up a Branch?

Recognizing the value the Maltese Islands are able to offer to international companies, a sharp focus has been placed by the Registry of Companies in Malta to ensure that the formation and integration of Branches is a fluid process. The establishment of a branch in Malta yields many benefits such as:

• Fast and straightforward process of establishing a branch in Malta;
• Maltese Branch is an extension of the foreign company and not a newly incorporated entity;
• It can operate through an appointed local representative, meaning no physical presence of shareholders and directors is required;
• The branch functions under the rules of a Limited Liability Company;
• There is no minimum share capital requirements;
• The parent company maintains a significant level of control over the branch, alongside capital and assets;
• Malta offers the possibility to recruit locally, making use of a majority English-speaking population;
• Maltese Branch is eligible to Make use of over 50 signed Double tax treaties, thus exempting the parent company from additional taxes;
• Maltese Branch gets reduced tax rates on reinvested profits;
• As corporate structure in Malta, the Maltese Branch may benefit from the possibility to greatly refund taxes which start at 35% but may be reduced to 5%.

The requirements to set up a branch in Malta

The Parent Company must seek to register itself with the Maltese Registrar of Companies as an ‘Oversea Company’ within a month of its establishment. In order to be registered, the Parent Company must also appoint a Representative in Malta in order to secure their establishment locally.

When establishing a Branch in Malta, the following documents are required as articulated in The Companies Act:

• The authentic copies of the Certificate of Incorporation or equivalent formation deeds, foreign company’s Memorandum & Articles of Association or equivalent;
• Latest Good Standing certificate of the foreign entity;
• The type of company;
• A list of the persons in charge within the administration of the foreign company.

Should any of the official company’s documents be not in English language, an official certified translation shall be provided together with the documents.

In addition to the above information, it is important that the foreign Company has its accounts in order. On registration of the branch the company must present its balance sheets, profit and loss accounts along with its audited statements.

Ongoing requirements upon establishment of a Branch in Malta

The Registry of companies in Malta must be informed at all times about any changes involving the following:

• Changes to Memorandum and/or Articles of association;
• Changes in Authorized Representative;
• Any changes in function of the company must also be reported since the established Branch must perform the same duties as the Parents Company;
• All necessary Annual Financial statements in correlation with Maltese taxation principles;
• In case of company liquidation, the registrar must be informed a month prior.

Should a foreign company wish to terminate its affairs in Malta, the Maltese Branch may be dissolved and wound up. Liquidation procedure may be done voluntarily by its members or in the opposite scenario, by creditors or in any other situation by order of the court.

In case of liquidation of the Branch, the Registrar of Companies must be notified of the branch closure within one month of closure. Should it be the case that a foreign company is being wound up or dissolved, the same notification requirement applies.

Tax advantages for Established Branches in Malta

A branch of a foreign company, whose operations are managed and controlled outside of Malta, would only be subject to local taxation on income earned locally and on income earned abroad but received in Malta.

Additionally, Malta has signed more than 50 double taxation treaties with countries worldwide exempting the company from income payment if it finds itself within this list.

Subsidiary vs Branch, what’s the difference?

Depending on their business needs, foreign companies have two main corporate structures available when it comes to expanding their operations to Malta: whether establishment of a branch or a subsidiary in Malta.

Given these points, it may be noted that the tax benefits gained from double taxation treaties apply to both Branches and Subsidiaries. Further information about establishing a subsidiary in Malta may be found on the Company Formation page.

To summarise for a quick comparison, reference the chart below.

The article is intended to serve as a general guide on the subject matter. For further information and guidance on the subject we recommend seeking professional assistance.

Working with us

Our corporate team will guide you through the procedure of establishing your business in Malta and advise on the corporate structure which would be the most suitable for your business needs.

We are always available for both face-to-face or online consultations, get in touch with our team and speak with one of our experts today.