A company subsidiary is a legal entity that many foreign investors chose when they open a company in Malta. The company in Malta is separate from the abroad parent company, however the parent company can still control the Maltese subsidiary through the owned stock.
Maltese subsidiaries benefit from a wide range of double tax treaties signed with other countries. The EU Parent – Subsidiary Directive also applies to Maltese subsidiaries and it allows for special provisions between the two related companies. These treaties regulate the minimization or cancellation of withholding taxes on dividends, interests or royalties paid to EU members or treaty countries by the Maltese subsidiary. Taxes on profits are also subject of these treaties and they may be refunded or completely abolished in Malta, based on their regulation.
Advantages and requirements for a subsidiary in Malta
The subsidiary is incorporated as a separate legal entity in Malta. This can be done in the form of a limited liability company, be it public or private. The foreign parent company owns totally or partially the capital of the subsidiary.
If the subsidiary is incorporated in the form of a private limited liability company, it must have at least one founder and no more than fifty shareholders. The minimum share capital must consist of at least 1,200 euros, from which 20% must be paid up upon registration. The management must consist of at least one director and one company secretary. Shareholders may be residents or foreigners.
If the subsidiary is incorporated in the form of a public limited liability company, it must be formed by at least two founders and it can have more than fifty shareholders. The required minimum share capital is 46, 600 euros, from which at least 25% must be paid up upon registration. At least two directors must assure the management. This type of company is best suited for large businesses or for corporations and it can be listed on the Stock Exchange, in order to offer shares to the public.
The main difference between a subsidiary and a company branch in Malta is that the foreign company is not liable for the debts and obligations of the Maltese subsidiary.
How to incorporate a subsidiary in Malta
In order to incorporate a subsidiary in Malta, the investor or the investors must consult the provisions of the Maltese Companies Act. Both types of limited liability companies are based on a Memorandum of Association that includes the following information:
- The name and the address of the registered office in Malta;
- The type of subsidiary;
- The activities performed by the subsidiary;
- Information on the shareholders;
- Information on the amount of share capital;
- The number of shares distributed to each shareholder and their rights in the company;
- Information on the company director and secretary;
- The period of availability, if necessary;
- The name and information regarding the company’s legal representative.
In order to deposit the required minimum share capital, a bank account must be opened with a Maltese bank. The desired name for the company must be verified online and then reserved. The Memorandum of Association and the decision to open a subsidiary in Malta must be submitted to the Registry of Companies, which will issue a certificate of registration and a registration number.
Before starting any type of commercial activities, it is necessary to register for social security and insurance for the company’s employees.
Other requirements for subsidiaries in Malta
Subsidiaries must observe the same principles for annual accounting and audit as any other company incorporated in Malta. The documents that reflect the financial situation of the company include a balance sheet, profits and loss account, a director’s report and an auditor’s report. All these documents must be provided to the respective legal authorities, if required.