In terms of the Maltese Companies Act, a foreign or “oversea company” which is a body corporate which is constituted or incorporated outside Malta, can set up branches in Malta in order to provide goods and services in Malta. The Oversea companies are required to register with the Maltese Registrar of Companies within one month from establishing a branch or a place of business in Malta.
Why a Branch in Malta?
Malta is ideally placed for the establishment of company’s branches for several reasons:
- the process of establishing a branch is relatively straightforward;
- there is no requirement to establish a physical presence in Malta, although the foreign corporation must appoint a local representative for its branch;
- the establishment of a branch and the registration of a corporation as an oversea company may (coupled with other steps) provide solutions in fiscal migration or redomiciliation exercises whose underlying rationale is to achieve certain fiscal advantages by splitting ‘registration’ and ‘domicile’ across two separate jurisdictions;
- Malta has developed an extensive double tax treaty network spanning over 65 countries;
- it is a politically stable and business-friendly member of the EU having a robust legal system and an attractive onshore tax regime that underlies the country’s success in the financial services sector;
Establishing a Branch in Malta and the documents required
The Maltese Companies Act regulates the establishment of branches or places of business in Malta. Any corporation, wherever incorporated and whatever its legal form, may establish a branch in Malta, but establishment does not confer separate legal personality on the branch. The principal requirements for branch establishment are set out below.
a) Authorised Representative
An authorised representative in Malta must be appointed by Corporations who intending to establish a branch or place of business in Malta.
b) Statutory Form
A body corporate constituted or incorporated in a country outside Malta (a “corporation” or “oversea company”) must deliver a statutory From to the Malta Registry of Companies (“Registry”), within one (1) month from the establishment of the branch or place of business, containing all relevant information, such as the name and address by and at which the branch or place of business carries on its activities in Malta; the activities to be carried out by it; the name and address of the person resident in Malta authorised to represent the corporation for the activities of the branch; and the extent of his authority to act in that capacity.
A number of documents must also be annexed to the Form, notably, an authentic copy of the memorandum and articles of association, charter, statute or other instrument that constitutes the oversea company itself and a list (and details) of the directors and company secretary or (where there are none) of the persons vested with the administration of the oversea company.
c) Registry Fees
Registry fees are payable on submission of MFSA Form. The sum due depends on the nominal value of the authorised share capital of the oversea company, with the lowest being €245.
The documents required to be annexed to the statutory Form must either be submitted as originals legalised by apostille or copies certified by a notary and legalised by apostille.
Statutory obligations and on going requirements
Once a branch is established in Malta, the corporation is required within 42 days from the end of the period allowed for the accounts to be laid for approval by the company in general meeting to deliver to the Registry a balance sheet, a profit and loss account and notes to the accounts in a form and containing particulars and including documents as are required of companies organised in accordance with the requirements of the Companies Act.
The Registrar has a discretion to accept accounts (including the balance sheet, profit and loss account and notes to the accounts) prepared in the form required under the law of the place of the corporations’ constitution or incorporation. He will exercise that discretion favourably if the accounts give substantially the same or more information than that required to be given under the Companies Act. If the accounting requirements under the law of the corporation vary substantially from those of a Malta company, the Registrar may accept the corporation’s accounts as long as full details are given as regards the branch operations in Malta and special rules apply here.
Where a branch carries on business or has business interests of more than 90% outside Malta, the director of the corporation or the authorised representative of the branch in Malta may apply to extend the deadline for approval of the accounts by the corporation to 18 months if a statutory Form U(1) is delivered to the Registrar of Companies.
A branch of an oversea company (the business of which is managed and controlled outside Malta) would be taxable in Malta only on income arising in Malta and on income arising outside Malta but received in Malta.
Same corporate tax system as Maltese Companies: The income of the branch would be taxed at the same rate as that of a Maltese company (currently 35%), and the computation of the income would follow that adopted by a domestic company. Non-resident shareholders of overseas companies may qualify for refunds of tax, provided that the relevant conditions are satisfied.
No withholding taxes: Branch office profits are not subject to any withholding taxes at the time of transfer or later. A branch’s profits are only subject to the corporate tax charge at the domestic rate.
Double tax treaties: Subject to any particular conditions in a particular double tax treaty, branches of foreign companies may use the provisions of a relevant Malta double tax treaty with another jurisdiction.