Quite often most people confuse branches for subsidiaries and vice versa. 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. On the other hand, a subsidiary is an independent entity that has the right to make its own decisions.
The Maltese government offers a vast amount of incentives to foreign investors investing in Malta. Although subsidiaries and branches are closely similar business structures, they have some notable differences when it comes to the laws and regulations that govern them.
Establishing a Maltese Subsidiary
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.
Establishing a Maltese Branch
Unlike subsidiaries, for establishing a branch office in Malta there is no share capital required. Since a branch is an extension of a parent company, it is required to submit the following documents:
- a copy of the parent company’s certificate of registration issued by the Trade Register in its residential country,
- - a copy of the parent company’s Memorandum and Articles of Association,
- a copy of the parent company’s certificate of good standing;
- the Memorandum and Articles of Association of the new branch office which must be drafted and notarized;
- the document which proves that the branch representative is appointed by the parent company.
Key differences between Branches and Subsidiaries in Malta
- 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.
Which one should you choose?
There is probably no definite answer to this question, it all depends on what the purpose of the entity you are setting up is. Aside from the flexibility that subsidiary companies have, they offer a lot more independence than offered by the branch office. Thus they can benefit from numerous tax incentives compared to their branch counterparts.
Looking at it from another angle, tax liabilities for a branch office are not put on the branch itself but the parent company. This can also serve as a major advantage compared to subsidiaries who will have to bare all their liabilities by themselves.
To learn more about how you can form a branch or a subsidiary in Malta, and which one to choose, reach out to SIGTAX. Our team of accountants, lawyers, and consultants stay au courant with the latest business trends and regulations in Malta. They can also help with legal counsel on how to set up a company in Malta including giving a profound understanding of the nations’ tax system. Thus, you can be confident that you will get relevant info which guides you to do everything the right way and in your favor.
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