For any investors contemplating expanding into a new market, the pros and cons of establishing a branch or foreign subsidiary will depend on the business benefits as well as the economical and regulatory environment of that particular country. Opening a subsidiary in a foreign land can bring substantial results, such as the expansion of your brand recognition, opening access to new markets and utilizing efficient production processes to manage expenses.
Opening a subsidiary in Malta comes with a lot of tangible business benefits and the incorporation procedure is quite a straight forward process. Subsidiaries in Malta can benefit from Malta’s large network of double tax agreements and most importantly the EU Parent-Subsidiary Directive. The later allows special provisions between the two related companies—such as the decrease or cancellation of withholding tax on interests, dividends or royalties payable to EU countries or DTA nations.
Requisites for Maltese Subsidiaries
As mentioned earlier, a subsidiary in Malta is considered a separate legal entity. Therefore it should be registered, either as a private or public limited company with the Maltese company registrar. Whichever legal structure you choose, you will have to follow the legal requirements of that company structure, as stated by the Maltese companies act.
As a general rule, the newly formed subsidiary should comprise of the following in its articles of association:
- the name and registered office’s address;
- the type of company;
- details regarding the shareholders;
- information regarding the amount of capital;
- An outline of the activities performed by the company;
- total number of shares distributed to each shareholder and their rights;
- details regarding the company directors and secretary;
- period of availability (if any);
- the name and details of the company’s legal representative.
Subsidiary companies in Malta should have a minimum of two shareholders and at least one director and one secretary. They should also have at least 1165 euros as share capital. In the case that the respective business entity’s share capital is above the minimum requirements, only 20% of it should be deposited. As a general rule, the subsidiary should have a registered office in the Maltese territory.
What is the difference between a Branch and a Subsidiaries in Malta?
Quite often most people confuse subsidiaries for branches and vice versa. A subsidiary is an independent entity that has the right to make its own decisions. On the other hand, a branch office in Malta is simply an extension of the parent company—therefore each and every part of its activity is governed by the parent company.
Below are a few key differences between the two:
- A subsidiary is an independent company whereas a branch is simply an extension of the parent company.
- A subsidiary is considered as an exclusive local company but a branch is just a local structure
- Thus branches are partially independent and subsidiaries are more flexible and exclusively independent.
Malta embraces investments from all over the world and offers one of the best business environments. The incorporation process might be daunting but it’s worth it. For further help and assistance with registration, you can contact SIGTAX experts. Our team of accountants, consultants and lawyers is ready to help you in any way possible and help you dodge the common pitfalls in the company formation process