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Malta continues to strengthen its position among Europe’s leading jurisdictions, thanks to its stable economy, EU membership, competitive tax regime, and strategic location between Europe and North Africa. For entrepreneurs and corporations, opening a company in Malta offers a wealth of opportunities – but choosing the right legal structure is essential.
In this article, we examine and compare the main business structures available in Malta:
- Limited Liability Company (LTD)
- Limited Partnership (LP)
- Permanent Establishment (PE)
- Branch
- Fiscal Unit
We outline their key features, advantages, and strategic differences, with particular focus on the comparison between Maltese subsidiaries (LTD) and branches.
1 Maltese Limited Liability Company (LTD)
The LTD is the most common and versatile corporate form in Malta. It is established under the Companies Act (Chapter 386) and operates as a separate legal entity, distinct from its shareholders.
Key Features:
- Separate Legal Personality: The company can own assets, enter into contracts, and assume obligations in its own name.
- Share Capital: Minimum €1,165, with 20% paid up on incorporation.
- Shareholders: May be individuals or legal entities.
- Management: At least one director and one company secretary are required.
- Taxation:
- Standard corporate tax rate: 35%.
- Thanks to Malta’s full imputation system and shareholder refund mechanism, the effective tax rate for non-resident shareholders can be reduced to 5%.
Best For:
Businesses seeking limited liability, tax efficiency, and operational independence in Malta. Commonly used for trading, holding, and intellectual property structures.
2 Maltese Limited Partnership (LP)
The Limited Partnership (LP) is also regulated under the Companies Act but differs in its structure and tax treatment. It is a flexible partnership model, suitable for small enterprises, joint ventures, and investment funds.
Key Features:
- Partners: At least one general partner (with unlimited liability) and one limited partner (liable only up to their contribution).
- Taxation:
- Typically transparent for tax purposes – income is allocated and taxed at the partner level.
- Legal Status: May have separate legal personality but is not always treated as a separate taxpayer.
- Flexibility: Frequently used for investment management, asset holding, and fund structures.
Best For:
Investors and fund managers seeking a flexible structure with pass-through taxation, such as private equity vehicles or family offices.
3 Permanent Establishment (PE) in Malta
A Permanent Establishment (PE) is a fixed place of business through which a foreign company carries out its activities in Malta, without forming a separate legal entity.
Key Features:
- Definition: May include an office, branch, workshop, or any other fixed place of business.
- Taxation: Only profits attributable to Maltese operations are taxable in Malta.
- Legal Status: The PE is not a separate legal entity – the parent company bears full liability.
Best For:
Foreign companies wishing to test the Maltese market or conduct temporary operations without full incorporation.
4 Branch
A Branch is a specific type of Permanent Establishment officially registered under Maltese law. It enables a foreign company to operate locally while maintaining its foreign legal identity.
Comparison: Subsidiary vs. Branch
| Aspect | Subsidiary (LTD) | Branch |
|---|---|---|
| Legal Status | Separate legal entity under Maltese law | Extension of the foreign company |
| Taxation | Taxed on worldwide income (with refunds and exemptions available) | Taxed only on profits arising in Malta |
| Autonomy | Independent structure | Controlled by the parent company |
| Business Activity | May engage in any business activities | Must reflect the parent company’s activity |
| Liability | Limited to the Maltese entity’s assets | Parent company bears full liability |
| Purpose & Strategy | Suitable for long-term presence | Ideal for rapid market entry |
Summary:
- A subsidiary provides legal protection and independence, ideal for long-term strategic development.
- A branch offers simplicity and lower setup costs, but exposes the parent company to direct liability.
5 Fiscal Unit
Introduced in 2019, the Fiscal Unit regime allows a group of Maltese companies to be treated as a single taxpayer for income tax purposes.
Key Features:
- Conditions: The parent company must hold at least 95% of the subsidiary’s equity, voting rights, and profit entitlement.
- Tax Filing: A single consolidated tax return is filed by the principal taxpayer on behalf of the group.
- Advantages: Enables intragroup loss and profit offsetting, simplified compliance, and cash flow optimization.
Best For:
Corporate groups with multiple Maltese entities seeking tax consolidation and administrative efficiency.
Summary Table: Main Business Forms in Malta
| Structure | Legal Personality | Taxation | Liability | Best For |
|---|---|---|---|---|
| LTD | Separate legal entity | Effective rate ~5% | Limited | Trading / Holding / IP |
| LP | Separate entity | Transparent | Mixed | Investment / Partnerships |
| PE | No | Maltese-source income only | Parent liable | Temporary presence |
| Branch | No | Maltese-source income only | Parent liable | Fast market entry |
| Fiscal Unit | Group as one taxpayer | Consolidated taxation (~5%) | Within the group | Large corporate groups |
Malta’s legal and tax framework offers businesses flexibility, efficiency, and EU-level credibility.
The optimal choice between an LTD, Branch, LP, or Fiscal Unit depends on the scale of operations, desired autonomy, and long-term strategic objectives.
Frequently Asked Questions (FAQ)
Is Malta an offshore jurisdiction?
- No. Malta is an onshore, EU-compliant jurisdiction with high regulatory and banking standards – a major advantage in building credibility with investors and financial institutions.
Can non-residents be directors or shareholders?
- Yes. Non-residents can serve as directors or shareholders of Maltese companies, provided proper substance and governance are maintained.
What is the effective tax position?
- While the nominal corporate rate is 35%, the effective rate may be significantly lower due to Malta’s participation exemption and shareholder refund mechanisms. A professional tax model should always be prepared to assess eligibility.
Is an audit required?
- Yes. Most Malta Ltd companies must undergo an annual statutory audit, regardless of size.
How long does company formation take?
- Once documentation is ready, incorporation is typically fast. However, bank onboarding, EMI setup, or sector-specific licensing may require additional time.
When is a branch preferable to a subsidiary?
- A branch is ideal for rapid market entry under an existing legal entity. Once the operation expands, converting to a Malta Ltd is advisable to benefit from limited liability and stronger investor appeal.
What is a Fiscal Unit, and do I need one?
- The Fiscal Unit regime consolidates multiple Maltese entities into one tax group. If you manage several Maltese companies, this system can streamline reporting and optimize intra-group cash flow – subject to eligibility criteria.
Action Plan (Download Free Checklist)
If your goal is to establish a company in Malta, position the structure as a credible EU onshore entity from day one:
- Build real economic substance
- Maintain strong corporate governance
- Ensure ongoing compliance and transparency
By doing so, Malta’s regime will work for you – helping to strengthen banking relationships, partner confidence, and long-term scalability within the EU market.
Contact us today to get started!
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