The Malta Tax & Customs Administration issued, under Legal Notice 20 of 2026 on 23 January, the Tax Treatment of Highly Skilled Individuals Rules, which introduce a new 15% flat‑tax regime for qualifying employment income of eligible non-domiciled professionals until 31 December 2040.

The new rules, which apply with effect from 1 January 2026, are designed to consolidate Malta’s framework for attracting and retaining highly skilled professionals across key sectors and will supersede existing incentive programmes, such as the Highly Qualified Person Rules.

The 15% flat‑tax applies to qualifying employment income that is taxable in Malta and arises from employment activities carried out in Malta by individuals holding an eligible office. It will apply for an initial period of five years and is renewable for two further five-year periods, subject to conditions.

Eligibility is subject to a minimum annual gross basic salary threshold of €65,000, which increases by €10,000 every five years, and to an upper limit of €7 million per year. Individuals seeking to benefit under the Rules must also satisfy the following conditions:

• Hold the required professional qualifications and experience.
• Perform employment activities within an eligible office and sector in Malta.
• Declare all Malta‑taxable income related to the qualifying employment, including income from related entities.
• Have non-domiciled status in Malta.
• Not have previously benefitted under Article 6 of the Income Tax Act.
• Reside in suitable accommodation in Malta.
• Be in possession of a valid travel document.
• Hold private all risks medical insurance, for applicant and family.

Beneficiaries of the Rules are not entitled to claim any relief, deduction, reduction, credit or set-off of any kind in respect of their qualifying employment income taxed at the 15% flat‑tax rate and are not permitted to access Malta’s social security system.

The rules target senior and specialist roles that drive high‑value economic activity within targeted sectors, including financial services, gaming, aviation, maritime and shipping, offshore oil and gas services, healthcare and STEM (Science, Technology, Engineering and Mathematics).

The list of eligible offices is set out in the Schedules to the Rules, grouped by industry sector. Applications under the Rules may be made by individuals performing activities that qualify as eligible offices with employers that are regulated, licensed or recognised by any of the following competent authorities:

• The Malta Financial Services Authority (MFSA).
• The Malta Gaming Authority (MGA).
• The Authority for Transport in Malta.
• The Office of the Chief Medical Officer to Government.
• Malta Enterprise.

Eligible offices generally include executive roles, senior management positions and specialised functions that fall within the regulatory remit of the employer and are recognised as eligible by the relevant competent authority.

Applications under the Rules must be submitted to the relevant competent authorities and must specify the year of assessment from which the Rules should apply. Applications are to be processed within 90 days, although the competent authority may, at its discretion, request additional information or documentation.

Individuals who, as at 31 December 2025, qualified as beneficiaries under existing incentive programmes in Malta are permitted, subject to conditions, to apply to be beneficiaries under the new Highly Skilled Individuals Rules. These programmes include:

• Highly Qualified Persons Rules.
• Qualifying Employment in Innovation and Creativity (Personal Tax) Rules.
• Qualifying Employment in Aviation (Personal Tax) Rules.
• Qualifying Employment in Maritime Activities and the Servicing of Offshore Oil and Gas Industry Activities (Personal Tax) Rules.
• Senior Employees of Family Offices, Back Offices and Treasury Management Operations Tax Rules.

The post Malta consolidates special 15% flat‑tax regimes for Highly Skilled Individuals appeared first on The Sovereign Group.

Malta has introduced a special tax regime for senior employees of family offices, back offices and treasury management operations, which offers a reduced flat rate of income tax of 15% on employment income.

Designed to attract and retain senior and specialised professionals within Malta’s family office sector, the scheme provides for lower income thresholds and a higher income cap than Malta’s existing Highly Qualified Persons Rules.

Brought into force on 17 October by Legal Notice 250 of 2025, the Senior Employees of Family Offices, Back Offices and Treasury Management Operations Tax Rules define eligible persons, the applicable conditions and the procedure for benefitting from the reduced 15% flat rate of income tax on employment income.

Eligible roles include senior management positions such as Chief Executive Officer, General Manager, Country Head, Managing Director, Head of Back Office, Chief or Head Risk Officer, Chief or Head Compliance and Anti-Money Laundering Officer, Portfolio Manager, Chief or Head Investment Officer, Senior Trader and Senior Structuring Professional.

The eligible role must be held with a qualifying single or multi-family office that is licensed by the Malta Financial Services Authority (MFSA), as well as entities providing back office or treasury management services to them.

Under the Legal Notice, the Rules have a retrospective entry into force date of 1 January 2025 and applies from Year of Assessment 2026. The 15% tax rate applies to employment income from eligible roles up to €7 million per year. Income more than €7 million will be chargeable at the standard rate of 35%.

Qualifying beneficiaries must be employed in Malta under a contract in an eligible office and must receive annual emoluments of at least €65,000, which shall be adjusted upwards by €10,000 every five years. Qualifying income consists of emoluments under a qualifying contract of employment and excludes the annual value of any fringe benefits.

Qualifying beneficiaries are also required to possess relevant professional qualifications or a minimum of five years of comparable professional experience. Other conditions include having sufficient stable resources, living in suitable accommodation in Malta, holding valid travel documents, maintaining private medical insurance covering beneficiaries and their family, and not being domiciled in Malta.

Applications are to be submitted between 1 January 2025 and 31 December 2034 and are expected to be processed within 90 days of the submission of all the relevant documentation. Beneficiaries are eligible to benefit from the Rules for a period of five years, with the option of two further extensions of five years each, subject to conditions. The benefits under the Rules will not therefore apply beyond 31 December 2040 unless they are extended in the future.

“Having identified SFOs as a key asset in its national financial services armoury, the Malta Financial Services Authority (MFSA) has been updating its regulatory framework to facilitate the setting up of Single-Family Offices in Malta, in particular the Trustees of Family Trusts Rulebook in respect of Private Trust Companies (PTCs) to reflect modern family dynamics,” said Stephen Griffiths, Managing Director of Sovereign Trust (Malta).

The definition of ‘family member’ has been extended to ‘family clients’, which may comprise former family members, key employees of a family office, former key employees and non-profit or charitable organisations funded exclusively by one or more family member, dependant or family client.

The Investment Services Rules for Notified Professional Investor Funds were also amended to allow them to be managed by a family office vehicle that invests the private wealth of investors without raising external capital.

“Sovereign can work with family offices by setting up PTCs, or family trusts as they are generally known in Malta, as well as the underlying investment holding company. We then partner with local providers for the fund and investment management aspect,” said Griffiths.

“This new special tax regime for senior employees of family offices is therefore very timely. Malta continues to innovate in line with its strategic vision for financial services, and the family office legislation and incentives ensure that Malta remains competitive and attractive to highly qualified professionals and family offices.”

The post Malta introduces special tax regime for Senior Employees of Family Offices appeared first on The Sovereign Group.

The most significant amendment is to extend the existing beneficial ownership reporting regime for authorised and registered trustees to private trustees, which are defined as individuals who act as trustees by virtue of family ties or long personal connections with the settlor and who must meet specific criteria including non-remuneration and limits on the number of settlors they serve.

Private trustees are now required to submit a beneficial ownership declaration for each trust they administer, within 14 days of appointment. Under transitional provisions, existing private trustees are required to submit their declarations by 11 January 2026.

The declaration must contain detailed information about every beneficial owner of the trust including the names, dates of birth, nationalities, countries of residence and identification details. It must also indicate each person’s role in the trust and, for every beneficiary, the nature and extent of their interest. Trustees must further disclose whether the trust instrument suspends the duty to inform beneficiaries of their interests.

All trustees, including private and non-EU resident foreign trustees, must notify the Malta Financial Services Authority (MFSA) of any changes to beneficial ownership within 14 days and submit an annual confirmation of the accuracy of the data reported.

Regulation 8 imposes administrative penalties of up to €150,000 for non-compliance. Regulation 6 also extends access to beneficial ownership information to all national competent authorities under the Prevention of Money Laundering and Funding of Terrorism Regulations (PMLFTR), aligning Malta with the transparency requirements under Article 74 of Directive (EU) 2024/1640 (AMLD6).

Trust and Company Service Providers (TCSPs) must ensure that all trustees of trusts under their management, including private trustees, are aware of and comply with the new beneficial ownership declaration and reporting deadlines. TCSPs should also assist in setting up trustee accounts on the MFSA’s Trusts Ultimate Beneficial Ownership Register (TUBOR) portal and keep records to verify and update beneficial ownership information as required.

“The enhancement of the regulation of trustees in Malta is part of a wider project to align beneficial ownership registration across the EU for greater transparency. It also forms part of the revised rule book for trustees and fiduciaries that aligns the regulation of Trust Service Providers with that of Corporate Service Providers,” said Stephen Griffiths, Sovereign Trust Malta Managing Director.

“Overall, the 2025 beneficial ownership reporting amendments enhance Malta’s commitment to financial transparency and to combat illicit financial activities. We welcome the move because it will serve to strengthen Malta’s reputation as a highly regulated and safe jurisdiction in which to preserve assets for future generations and as a place to do business.”

The post Malta tightens compliance requirements for trustees appeared first on The Sovereign Group.

To explore these perspectives, we spoke with the Managing Directors of our three pension offices, asking them the same set of questions.

Sean Gillease (SG) Managing Director of Sovereign Pension Services (CI) Ltd	Cristina Cassar Difesa (CCD) Managing Director of Sovereign Pension Services (Malta) Ltd	Darren Whitley (DW) Managing Director of Sovereign Pension Services (Gibraltar) Ltd

Q1. What does the pensions landscape look like in your jurisdiction right now, and how is Sovereign positioned within it?

SG (Guernsey): The pension landscape in Guernsey is going through a period of rapid evolution and growth. There has always been a large number of specialist providers providing services to individual and corporate clients, based both locally and internationally. This continues but following the introduction of Secondary Pensions (auto-enrolment) in 2024 there has been a significant increase in local pension provision, which will help to ensure better outcomes for residents in the future and which has created significant demand in the local market. Sovereign is very well positioned in the Guernsey pension market, providing solutions for personal and corporate clients based in Guernsey and internationally. Sovereign was recently selected by the Government of Guernsey to manage Your Island Pension (YIP), which is a default auto-enrolment solution and was launched in January 2024. Sovereign has also seen increased interest in international retirement and savings plans for large international employers.

CCD (Malta): Until now, the pension market in Malta has primarily revolved around QROPS for UK expats. However, some very exciting things are happening locally as auto-enrolment is finally being introduced. Sovereign is exceptionally well positioned in this landscape, not just because we are one of Malta’ most established pension provider but also because our international experience enables us to partner with employers navigating this new world of auto-enrolment. Our solutions are robust, tried and tested but also tailored which is exactly what the market needs during this critical time.

DW (Gibraltar): Whilst a long standing QROPS jurisdiction Gibraltar has now introduced legislation around compulsory occupational pensions meaning the landscape mirrors that of the U.K. The Private Sector pensions act requirements commenced in 2021 and continues with a phased approach until 2027. Sovereign is now the largest provider of company pensions on the rock and is well positioned to take on all company sizes with tailored solutions to accommodate the act requirements.

Q2. What’s the biggest difference between personal and occupational pensions in your market? Which area is seeing the most growth?

SG (Guernsey): In the employer sponsored pension area (occupational pensions) the main area of focus for us has been the local auto-enrolment initiative, with YIP particularly. In this area we are dealing with business owners, HR professionals etc and their primary objective is to provide a valuable benefit to their employees. Growth in this area has been significant, driven by the compulsory secondary pensions law.

In the personal pension area, we are dealing with individual clients who want to make additional saving for their retirement, or who want to transfer an existing pension to us. This area can be complex and technical and there are arguably fewer providers able to assist in this specialist area than there would have been previously. Sovereign is well placed to assist having been providing these types of scheme for a significant number of years and with in-house technical expertise, including for pension transfer type cases.

CCD (Malta): The key difference is that to date, the majority of demand has come from QROPS and serving the retirement planning needs of UK expatriates. However, the introduction of auto-enrolment is a gamechanger and we expect this will drive significant growth in occupational pensions in the years ahead. Thanks to our international experience, Sovereign is one of the few providers with genuine occupational pension expertise, making us uniquely positioned to help employers build solid, compliant occupational schemes as this new market emerges.

DW (Gibraltar): Occupational pensions in Gibraltar are contributed to by the employer and employee whereas Personal Pensions are solely contributed by the individual. With the new act in force Occupational Pensions are growing at a rapid rate. Within two years from now every employee in Gibraltar will have had to offer one to their workforce.

Q3. What’s one misconception people often have about pensions in your jurisdiction, and how do you address it?

SG (Guernsey): There are many misconceptions. Many people believe that a pension is only worth having if you can afford to put 000’s of £ per month into it. The truth is for those with a decent amount of time to retirement even a small amount added on a consistent basis over a period of time will be worthwhile. I also think many people are nervous about pensions – there are lots of reasons why this view exists but that is one thing that we work hard to address. Trustee responsibility, member value and clear and concise communications are all ways we try to address that issue.

CCD (Malta): One common misconception in Malta is that pensions are only relevant at retirement age, or that the state pension alone will provide sufficient income. In reality, Malta’s state pension is relatively modest and may not cover the standard of living many people expect. Because the private pensions market here is still developing, part of our role is to raise awareness that additional retirement saving is not just optional, but essential for long-term financial security. By highlighting the potential tax advantages, employer benefits, and the flexibility of well-structured pension arrangements, we aim to shift the perception of pensions from a last-minute concern to an important part of future planning.

DW (Gibraltar): That they don’t need one! People often think the state pension will suffice to retire on but as with most jurisdictions across the world that is never the case. We often highlight the reality of what will be available and it works out very modest.

Q4. How does being part of a wider international group like Sovereign enhance what you’re able to offer clients locally?

SG (Guernsey): Being part of a wider group bring various benefits. In previous scenarios we’ve had clients who have relocated between jurisdictions that we have offices and this has allowed us to assist across both sites. In some cases we also have non-Guernsey resident clients who need support or assistance and given we have offices in many of the countries are clients are resident, such as the UAE, South Africa and Singapore we can arrange for them to meet with someone locally. It also ensures we are aware of ongoing developments, issues and trends across the globe as that can often have an impact on our clients and the services we provide.

CCD (Malta): Sovereign’s international footprint gives us a real competitive edge in Malta. We benefit from shared expertise and direct collaboration with colleagues in other jurisdictions. This means we can offer our clients insights and solutions informed by global best practice, not just local market experience. For a jurisdiction like Malta, where the pensions industry is still small and niche, this support makes a real difference. It helps us avoid common pitfalls and shortens the learning curve for clients and employers who are new to pensions altogether. Ultimately, the backing and experience of the wider Sovereign Group enable us to operate at a higher level of maturity and sophistication.

DW (Gibraltar): It enhances our offerings massively. We employee tax advisors, accountants and lawyers across the group so there is a depth of experience beyond that of our retirement planning field to pull on when needed. Occupational Pensions are not unique to us here in our Gibraltar office either. In Guernsey Sovereign are the provider of choice having won the contract for Guernsey Your Island Pension’s. Our experienced across both offices is often shared to good effect so that is a strength and depth that stands us apart from other providers.

Q5. If you could give one piece of pensions advice to a client starting their retirement planning today, what would it be?

SG ( Guernsey): Get started. Even if the amounts you start off with are small – time is your biggest asset and so those small amounts now can make a huge difference in the future. Also make use of any employer support you can get. If your employer offers a scheme and will contribute into it for you – do not leave the scheme – you are essentially giving away free money and you’ll kick yourself down the line.

CCD (Malta): My advice would be simple: think carefully about your future self,  the person you’re planning for deserves security, comfort, and peace of mind. Just as important as starting early is being selective about who you trust to guide you. The wrong partner could put your plans and your future at risk. The right one will help you navigate uncertainty, stay compliant, and protect what you’re building. At Sovereign, we take that responsibility seriously and are committed to supporting clients throughout their retirement journey.

DW (Gibraltar): Don’t wait! Save a little and often and you won’t regret it in retirement.

To speak to a pension expert from one of our three pension offices please use the contact details below:

Guernsey Office:
Sovereign Pension Services (CI) Ltd
T: +44 (0) 1481 811000
E: guernseypensions@sovereigngroup.com

Malta Office:
Sovereign Pension Services (Malta) Ltd
T: +356 27 888 132
E: maltapensions@SovereignGroup.com

Gibraltar Office:
Sovereign Pension Services (Gibraltar) Ltd
T: +350 200 76173
E: gibraltarpensions@SovereignGroup.com

The post Expert Views: How Pension Markets Are Evolving Across Guernsey, Malta and Gibraltar appeared first on The Sovereign Group.

Transport Malta’s Merchant Shipping Directorate issued a revised version of the Commercial Yacht Code, known as the CYC 2025, on 30 May. It replaces the previous 2020 edition and comes after extensive consultation with both internal and external stakeholders. It reflects updates aligned with current industry practices, emerging technologies and international maritime safety standards.

The CYC 2025 is set to come into force on 1 July 2025 and will apply to all commercial yachts carrying no more than 12 passengers and which are at least 24m in length, including yachts under and over 500 gross tonnage, as well as special category yachts defined under Section 18, such as high-speed yachts.

The most significant changes in the revised Code include:

• Enhanced navigation categories – the CYC 2025 clearly defines and regulates the Extended Short Range up to 150 nautical miles as its own category, separate from both the 60 nautical mile Short Range and the Unrestricted Navigation designations, providing more precise operational guidance and technical requirements for each category.
• Stricter environmental and safety standards – the code prohibits the use of asbestos in any new installations, requires lightning protection systems for yachts operating in prone regions, and mandates compliance with the International Maritime Organisation (IMO) Polar Code for vessels navigating polar regions.
• Structural and propulsion system updates – updated standards for structural integrity and stability, with refined freeboard requirements and watertight integrity to enhance resilience against flooding and damage. The code also accommodates advancements in hybrid and fully electric propulsion systems.
• Enhanced crew welfare requirements – updates to the Maritime Labour Convention (MLC) requirements emphasise improved accommodation, working conditions and onboard facilities, with detailed guidelines for non-crew personnel requiring proper safety training.
• Major refurbishment standards – yachts undergoing major refurbishments or conversions must now meet the standards applied to new yachts, ensuring the entire fleet remains modern and compliant.
• Strengthened oversight – enhanced statutory inspection audits to ensure surveys and certifications adhere strictly to the CYC 2025. Better harmonisation with the International Convention for the Safety of Life at Sea (SOLAS), the International Convention for the Prevention of Marine Pollution from Ships (MARPOL), the Standards of Training, Certification and Watchkeeping for Seafarers (STCW) and the Maritime Labour Convention (MLC).

What does this mean for yacht owners and registration?

The revised code reinforces Malta’s position as a leading maritime jurisdiction reflects Transport Malta’s commitment to maintaining a modern, competitive and safe regulatory framework for the yachting industry.

The CYC 2025 came into effect on 1 July. New registrations must immediately meet the enhanced standards. A transition period is provided for yachts that are currently certified under or undergoing survey to the 2020 Code. They will be required to transition to the updated requirements no later than their first renewal survey after 31 December 2025.

The enhanced requirements of CYC 2025 make professional guidance more valuable than ever for ensuring smooth registration and ongoing compliance with Malta’s prestigious yacht registry. Sovereign Trust (Malta) limited and Sovereign Marine can assist yacht owners in the following areas:

• Compliance assessment – conducting thorough reviews of existing yachts to identify gaps between current specifications and CYC 2025 requirements.
• Documentation management – preparing and managing the extensive documentation required for Malta yacht registration, including corporate structures, declarations and certificates.
• Regulatory liaison – acting as intermediary with Transport Malta and recognised individuals and firms for surveys, certifications and ongoing compliance monitoring.
• Corporate structuring – establishing appropriate corporate vehicles for yacht ownership, ensuring optimal structures.
• Ongoing compliance support – providing annual compliance services including renewal surveys, certification updates and regulatory change notifications.
• Project management – coordinating refurbishment or conversion projects to ensure they meet the new standards for major modifications.
• Change-of-status guidance – helping vessels shift between private and commercial use, mitigating VAT and flag implications.

For further details, please contact Sovereign Trust (Malta) Operations Director Seymour Grima by telephone on +356 21228411 or email below.

The post Transport Malta publishes fifth edition of the Commercial Yacht Code appeared first on The Sovereign Group.

Malta Finance Minister Clyde Caruana launched a public consultation on 18 June on a proposed auto-enrolment occupational pension scheme to reform Malta’s retirement savings sector.

Malta’s pension system currently operates on a pay-as-you-go state pension model, which is facing accelerating demographic pressure. The government said the old-age dependency ratio was projected to increase dramatically from 27.1% in 2022 to 65.4% in 2070.

At the same time, the public scheme benefit ratio is projected to decrease from 39% to 32%, meaning many retirees will struggle to maintain their pre-retirement standard of living. This is below OECD averages.

To address these challenges, the government has been progressively introducing tax incentives to encourage the uptake of voluntary private pension savings. Malta has operated Voluntary Second and Third Pillar Pension Schemes since 2015, but only six licence holders currently offer qualifying occupational pensions for a total of only 4,667 members – about 2% of the working population.

These participation rates remain critically low, said the government, highlighting the urgent need for structural reform to ensure long-term pension adequacy. It is therefore proposing to enhance the current occupational pensions framework through the introduction of ‘auto-enrolment’ to broaden employee access to retirement savings.

An auto-enrolment regime requires all employers to automatically enrol all eligible employees into an occupational retirement scheme, overcoming behavioural barriers. The consultation document said that research from similar schemes in other jurisdictions shows that participation rates can increase from under 30% to over 80% following the implementation of auto-enrolment.

Eligibility for occupational pension enrolment

Employees will be considered eligible if they are:

• A Maltese tax resident or habitually work in Malta.
• Between the age of 18 and less than 10 years away from retirement age.
• Working full-time or on a part-time basis where the remuneration is their primary source of income.
• Not in a probationary period.

Third-country nationals (TCNs) will also be eligible after six months of employment in Malta or at the end of the probation period, provided they hold a valid residence and work permit.

All eligible employees must be paying Social Security Contributions in Malta. Employees younger than 18 or less than 10 years away from retirement age can opt in voluntarily. Self-employed individuals can also join voluntarily.

Employer obligations under auto-enrolment

An employer in Malta will be obliged to automatically enrol employees in an occupational retirement scheme that is authorised by the Malta Financial Services Authority on the day the employee becomes eligible unless the employee specifically elects to opt out.

Employers must provide employees with key information about the scheme within four weeks of becoming eligible and explain how to opt out. If an employee opts out, the employer must offer re-enrolment every year.

Occupational pension contribution requirements

Under the proposed system, contributions can be made by the employee or jointly by the employee and the employer, with employer contributions remaining voluntary.

The proposed minimum employee contribution is being set at €50 per month. Contributions will be deducted through payroll, and the employee must confirm in writing.

Employees will benefit from the same level of tax credits applicable to individuals in the case of other pension schemes. This is in addition to any other pension-related tax benefits.

Employers can voluntarily top up employee contributions, also through payroll. Employers will also benefit from the tax credits applicable to employers under occupational pension schemes.

To establish a benchmark, the Maltese government has committed to pay an additional contribution for public sector workers, up to a maximum of €100 per month.

The scheme must permit employees to have a contribution break at any point in time to allow for instances such as statutory leave or career breaks. Employers that also contribute to a scheme will only be required to contribute where a salary for an employee is being paid.

How Sovereign supports occupational pension implementation

It is proposed that auto-enrolment in Malta will be introduced to the private sector no later than six months after its implementation in the public sector, which is planned for the end of this year.

Employee benefit packages are vital consideration attracting and retaining the best talent, as well as to maintaining a loyal and committed workforce. Occupational pensions or savings scheme are now seen by many as a key part of remuneration.

Under the current consultation, it has been proposed that only products regulated under the Retirement Pensions Act will be eligible to offer occupational pension schemes. This means that any products currently being provided as insurance products will not be suitable for employees under the new regime.

Sovereign’s occupational pension schemes are fully regulated under the Retirement Pensions Act, making them suitable for use under the proposed auto-enrolment framework.

Sovereign has extensive experience in designing and operating occupational pension and savings schemes. Our clients range from large international businesses to smaller firms just starting out. We work with employers to design benefit plans tailored to their specific needs.

In jurisdictions such as Guernsey and Gibraltar, where ‘auto enrolment’ already exists, Sovereign has implemented compliant schemes. We can assist employers in Malta to meet their new obligations. Our experienced retirement planning teams can support the entire process, from design through to implementation.

The post Malta Opens Consultation on Occupational Auto-Enrolment Pensions appeared first on The Sovereign Group.

Cyprus and Malta are both island states occupying strategic positions in the Mediterranean region. Cyprus is situated in the Eastern Mediterranean close to the Middle East, Turkey and the important maritime gateways of the Bosporus and the Suez Canal. Malta is in the middle of the Mediterranean Sea between Europe and North Africa and serves as a key stopover point on routes traversing the Mediterranean.

This legacy has ingrained a tradition of trade and commerce within the culture of both islands. Both have very open, entrepreneurial economies and offer highly attractive and flexible tax environments for businesses and individuals. Both are also former colonies of the UK, and both have mixed legal systems of civil law and English common law, subject to EU law. English is the second language of Malta and is widely spoken in Cyprus.

Cyprus and Malta joined the European Union at the same time in 2004 and are now counted amongst the smallest EU member states. Cyprus is 30 times the size of Malta. The Cypriot population now stands at above 1.27 million, almost three times the population of Malta’s at 560,000.

Given the small size of their domestic economies, both island states are heavily dependent on trade and have moved toward more service-oriented activities. In addition to thriving tourism sectors, both have developed financial services industries based on highly skilled workforces, technical infrastructure, and robust legal and regulatory frameworks, including tax efficiency.

Tax Efficiency

As full EU member states, Malta and Cyprus offer highly competitive tax systems that are fully compliant with EU and international standards. They have implemented all the relevant EU directives in respect of corporate taxation, including the EU Parent-Subsidiary Directive and the Interest and Royalties Directive.

Companies in Malta are taxed at a flat rate of 35% but its full imputation and refund system ensures relief for double taxation on the distribution of taxed profits. This leads to effective tax rates of 5% in respect of trading income and 10% in respect of passive interest and royalties. The refund is reduced to 2/3rds where the distributing company claims double taxation relief.

Malta’s participation exemption allows dividends from overseas investments to be exempt from Maltese tax if certain criteria are met, or they can be taxed at the standard rate of 35% with a 100% refund available upon distribution.

Any gains or profits derived by non-residents on a disposal of shares in a Malta-resident company are exempt from tax in Malta if the beneficial owner is not resident in Malta and the company does not, directly or indirectly, control immovable property situated in Malta. Malta does not levy any withholding taxes on outbound dividends, interest and royalties.

Malta’s extensive double taxation treaty network now extends to over 70 countries and its flat rate foreign tax credit (FRFTC) allows for a reduced tax rate of 6.25% on foreign passive income without necessitating proof of foreign tax paid. Businesses can also seek advance revenue rulings from the Inland Revenue Department for clarity on their tax obligations, which are typically valid for five years and renewable for another five.

Malta’s ‘fiscal unity’ regime allows related companies within a group to elect to be treated as a single taxpayer for income tax purposes. A parent company holding at least 95% shareholding in its subsidiaries can initiate this process, treating subsidiaries as transparent entities for tax purposes and benefitting from streamlined tax calculations and reporting.

Cyprus also offers a highly favourable tax environment, featuring a standard corporate tax rate of 12.5% together with a network of over 60 double tax treaties. It has established a strong reputation as an attractive destination for corporate relocation and headquartering.

The tax regime includes several exemptions, such as a 100% exemption on interest income not related to ordinary business activities, profits from the sale of securities, capital gains from intellectual property (IP) assets, and profits from permanent establishments abroad under specific conditions. Dividends are exempt from taxation provided they are not tax-deductible by the paying company.

Cypus’s ‘Intellectual Property Box’ offers favourable tax treatment for income derived from IP rights, patents and trademarks, allowing an 80% income tax exemption on worldwide royalty income generated by Cypriot resident companies, with only the remaining 20% being subject to the standard tax rate.

This effectively reduces the tax rate to 2.5% or lower. The 80% exemption further applies to capital gains on the disposal of IP, providing a tax-efficient exit strategy. With its extensive network of double tax treaties, Cyprus facilitates excellent profit repatriation opportunities, making it an attractive jurisdiction for IP holding and management.

Cyprus imposes no withholding taxes on dividends and interest paid to non-residents of Cyprus. There is also no withholding tax on royalties paid to non-residents of Cyprus for rights that are not used within Cyprus.

Cyprus is a modern, cosmopolitan, transparent business centre offering opportunities for investment across a wide range of sectors. Invest Cyprus maintains a dynamic portfolio of all available projects in sectors of strategic importance for the government such as hospitality and tourism, healthcare, education, renewable energy, while the country also provides incentives and policies that attract businesses and investors to choose Cyprus as their preferred place to do business.

Effective Regulation

Membership of the EU ensures that the legal and regulatory framework of both Malta and Cyprus must align with EU standards covering trade, finance and corporate governance. This alignment not only increases investor confidence but facilitates smoother access for businesses to the broader European market.

The Malta Financial Services Authority (MFSA) is the single regulator for all financial service activities in Malta and is also responsible for the companies registry. The MFSA ensures that companies adhere to best practices in governance, providing a reliable environment for investors.

In Cyprus, these roles are shared between the Central Bank of Cyprus, the Cyprus Securities and Exchange Commission (CySEC), the Cyprus Stock Exchange (CSE) and Registrar of Companies.

Innovation and Technology

Malta has recently introduced a Virtual Financial Assets (VFA) Framework to support innovation and new technologies for financial services around crypto assets, while ensuring effective investor protection, financial market integrity and financial stability.

The VFA Framework establishes three types of authorisations for: the registration of VFA Agents, the registration of ‘white papers’ and applications for VFA Services Providers. This has positioned Malta as a key hub for online gaming, blockchain, fintech and other new technologies. Malta’s communication and transport links are excellent.

Innovative research, a rapidly growing start-up ecosystem, a highly educated and experienced strong local talent pool and access to the EU and global workforce, and a range of incentives and development programs and grants render Cyprus a perfect choice to start up and scale companies.

Cyprus has been growing as a technology hub over the recent years, with an increasing number of ICT companies setting up their regional headquarters in the country or treating Cyprus as their hub for software development, systems integration, testing services, research and development and back offices.

The strong IP Box Regime and the Cyprus Startup Visa Scheme which allows talented entrepreneurs from countries outside the EU and the European Economic Area (EEA) to be granted working permission to establish start-ups in the country, attract world-class innovation-based ideas.

Good Connectivity

As islands, connectivity with other countries is very important for matters of commerce, tourism and living. Both Cyprus and Malta are easily physically accessible because they are linked via numerous direct and connecting flights with all the main European cities, Middle East, Africa and Asian countries.

The availability of modern, robust and secure connectivity infrastructure is also driving force for the digital economy and a necessary condition for a functional and innovative digital ecosystem. Cyprus and Malta have made significant investment in recent years in their digital infrastructures, which has been a decisive factor in establishing them as regional data gateways in the Mediterranean region and in attracting high-tech companies.

Taking advantage of its strategic geographical position, Cyprus has developed an extensive undersea fibre optic cable network, which connects it to the neighbouring countries of Greece, Italy, Israel, Syria, Lebanon and Egypt and with the rest of the world. More are planned.

There are now four submarine cables connecting Malta and Sicily – GO-1 Mediterranean cable system, Italy-Malta cable system, Epic Malta-Sicily Cable System (EMSCS) and Melita 1.

Trusts

As former British colonies many Common Law principles are embedded into Maltese and Cypriot law and the adoption of Common Law statutes continued after independence. Malta introduced the concept of trusts into its legal regime in 1988 and permits not merely the establishment of Malta trusts, but also accepts and recognises foreign trusts.

Malta is now a respected European hub for global trusts and the Malta trust is used extensively by HNW individuals and families for the protection and management of their global assets. Professional trustees, such as Sovereign, must be licensed by the Malta Financial Services Authority under the terms of the Trust & Trustees Act.

Cyprus International Trusts (CITs) are extremely popular with HNW individuals and professionals. Forced heirship or other laws applicable in foreign jurisdictions do not affect the validity of a CIT or the transfer of property to the trustee of a CIT. The settlor and beneficiaries must not be tax resident in Cyprus, but at least one of the trustees must be a permanent resident in Cyprus for the duration of the trust. Sovereign Trust (Cyprus) is authorised by CySEC as an Administrative Service Provider (ASP).

Investment Funds

Malta has long been an established jurisdiction for alternative investment funds and the sector has gained momentum due to increased asset management and fund servicing activity, with Malta’s flexible and pro-business attitude helping to consolidate the island’s claim for prominence as a fund jurisdiction. As well as globally recognised UCITS schemes and alternative investment funds (AIFs) under the Alternative Investment Fund Managers Directive (AIFMD), fund managers are also allowed to run funds under the island’s Professional Investor Fund (PIF) regime, which is outside the scope of the AIFMD. Alternative Investment Funds (AIFs) under the AIFMD, as well as EU-compliant and globally recognised UCITS schemes.

Cyprus was one of the first EU member states to transpose the AIFMD into national legislation and has grown into fast a leading investment fund centre in Europe for investment funds and asset management companies, offering direct access to key markets.

Cyprus funds investment funds enjoy all the tax advantages offered by the Cypriot tax legislation and AIFs have been extensively used for investment in non-traditional asset classes, such as private equity and real estate, as well as family offices.

Citizenship by Investment

Although Cyprus suspended its citizenship by investment programme in 2020, the Maltese Exceptional Investor Naturalisation (MEIN) scheme grants citizenship for ‘exceptional services’ to individuals and their families who make a direct investment in Malta that contributes to its social and economic development.

As citizens of Malta, successful non-EU national applicants gain the right to live, work or study in Malta – or any other EU/EEA member state or and Switzerland by extension. An applicant and all adult dependants must have held Maltese residency status for a minimum of 36 months (or 12 months under an ‘expedited procedure’ option).

The main applicant must make a non-refundable exceptional direct investment of €600,000, plus €50,000 for each dependant, or €750,000 under the 12-month expedited procedure. In both cases they must also buy a property in Malta with a minimum value of €700,000 or lease a property for a minimum annual rent of €16,000 and make a €10,000 donation to a qualifying NGO.

Subject to a comprehensive four-tier due diligence review, successful applicants enjoy Maltese citizenship for life, which can be passed on to future generations by descent, the option to maintain dual citizenship and the right to reside, settle and stay indefinitely in Malta. Maltese passport holders enjoy visa-free or visa-on-arrival access to 183 countries, including the US, Canada and Australia, and access to the Schengen Area.

Residency Programmes

Malta and Cyprus offer a range of residency programmes for non-EU nationals that cater for most personal requirements and budgets. Benefits include visa-free travel within the Schengen Area and tax advantages. Malta imposes no municipal tax, no estate duty, no inheritance tax and no wealth tax.

The Malta Global Residence Programme (GRP) is aimed at non-EU nationals seeking special tax status while residing in Malta. Applicants must be economically self-sufficient and make a property investment (either through purchase or long-term lease). They must establish tax residency in Malta, pay a combined minimum annual tax contribution of €15,000 and must not spend more than 183 days per year in any other country.

The Malta Start-Up Residence Programme is tailored for innovative entrepreneurs. It facilitates the establishment of start-ups in Malta in qualifying activities, while supporting the immigration process of their founders, core employees and respective immediate family members. Founders and co-founders must demonstrate a tangible business investment and are required to reside in and pay taxes in Malta.

Cyprus’s diverse residency options, combined with its favourable living conditions and attractive tax incentives, position it as an appealing destination for both expatriates and investors.

The Permanent Residency Programme (PRP), known as the Cyprus Golden Visa, offers non-EU residents both ‘Fast Track’ and ‘Slow Track’ options. The ‘Fast Track’ route allows applicants to obtain permanent residency status within approximately two months by making a minimum investment of €300,000 in qualifying assets such as real estate or local businesses. This status is valid for life and can be passed on to dependants.

The ‘Slow Track’ option is available for individuals with a secure annual income sufficient to support a good standard of living in Cyprus, allowing them to reside in the country while their application is processed over 12 to 18 months. Applicants must provide documentation showing a guaranteed annual income of at least €50,000 from abroad (an additional €15,000 for each dependent spouse and €10,000 for each minor child).

The Self-Sufficient Temporary Residence Permit is an annually renewable option that permits individuals and their qualifying dependants to live in Cyprus as visitors without employment rights. Applicants must demonstrate a minimum annual income and possess a residential property in Cyprus.

The Cyprus Tax Residency Programme offers preferential tax incentives for both EU and non-EU nationals. For an individual to be considered as a tax resident in Cyprus, they must spend more than 183 days in a year in Cyprus. Cyprus further offers a ’60-day Rule’ regime, which enables foreign nationals to enjoy Non-Domiciled Tax Residency status by spending only 60 days in Cyprus within a calendar year, instead of 183.

The tax benefits include no tax on worldwide dividend and interest income for non-domiciled individuals for 17 years, no tax on gains arising from the disposal of investments (shares, bonds, etc), no estate duty, wealth or gift taxes, and no tax on retirement gratuities and access to a special tax regime on foreign pension income.

Good Places for Retirement

Cyprus has long been regarded as a premier retirement destination, renowned for its excellent climate, appealing lifestyle, safety and low taxes on pension income. Tax residency in Cyprus has many benefits and exemptions for non-nationals, especially retirees.

One of the advantages of obtaining a Category 5 Permanent Residency Permit (PRP or Fast Track PRP) is the low tax rates on pension income that apply to individuals retiring in Cyprus.

A foreign pension received in Cyprus can be taxed either at the standard personal income tax rates in Cyprus, of which the first €19,500 of earned annual income is tax-free, or at a special 5% flat rate for any amounts exceeding €3,420 per year.

There is no withholding tax in Cyprus and non-domiciled tax residents are exempt from the Special Defence Contribution Tax. Cyprus also has double tax treaties with more than 60 countries, allowing for less taxation on types of income streams such as dividends, interest, assets and royalties for residents of Cyprus.

Finally, Cyprus imposes no inheritance tax, making it easy for those retiring in Cyprus to leave wealth for their families free of tax.

Malta also offers a special tax status for retirees under the Malta Retirement Programme (MRP). This is open to citizens of the EU, the EEA and Switzerland who are no longer employed and are in receipt of a pension as their regular source of income.

The chargeable tax rate under the MRP is a flat rate of 15% on income arising outside of Malta, subject to a minimum tax charge of €7,500 per annum, which increases by €500 per dependant. For married couples the minimum charge is therefore €8,000. Participants can hold non-executive positions on the board of a Maltese company but are not permitted to be employed by the company in any capacity.

Relocation Destinations

Cyprus and Malta are attractive destinations for expats and their families. They both offer a captivating climate and lifestyle, with year-round sunshine, unique natural landscapes, and a rich and diverse culture and history, while the cost of living remains relatively moderate compared to other Western European countries.

As of the first quarter of 2024, the average gross annual wage in Malta was around €23,000. Sectors such as financial services, technology and gaming tend to offer higher salaries, whereas hospitality and retail positions typically pay less.

In Cyprus, the average gross annual wage is around €28,000. Salaries vary significantly across industries, with finance, tourism, and IT often offering the most competitive compensation. The cost of living is generally moderate, although some popular tourist areas may be pricier.

Malta is a sought-after tourist destination renowned for its rich historical legacy, stunning architecture, and picturesque Mediterranean beaches. Key attractions include the ancient, fortified city of Mdina, the historic sites of Valletta, and the Megalithic Temples, which are among the oldest freestanding structures in the world.

Cyprus draws a significant number of tourists attracted by its diverse landscapes, archaeological sites, and beautiful beaches. Notable destinations include the coastal cities of Paphos and Limassol, the Troodos Mountains for hiking, and the historical ruins of Kourion and Salamis.

Both Malta and Cyprus enjoy a Mediterranean climate with hot, dry summers and mild, wet winters. The favourable weather, boasting around 300 sunny days per year, contributes significantly to their status as year-round tourist destinations.

High quality healthcare is provided through the respective national healthcare systems, which are highly regarded for quality and accessibility. This covers both inpatient and outpatient care and is available to all citizens and permanent residents. Private healthcare options complement public services, particularly for non-EU residents who must provide private health insurance.

Both islands also offer world-class educational and research institutions, offering a large variety of fully accredited study programmes in English. Primary and secondary schooling is mandatory in Malta and Cyprus and permanent residents and citizens can send children to free public sector schools. There are numerous private schools, and many follow the British curriculum or international baccalaureate.

Sovereign in Cyprus and Malta

Our dedicated teams in both Cyprus and Malta stand ready to support businesses and investors during the location selection process while providing facilitation and after care services when it comes to setting up your business, relocating staff or expanding your operations.

When it comes to choosing the right location to start up a business, relocate a company or expand operations in Europe, Cyprus and Malta should be prime contenders in the minds of entrepreneurs or decision makers for the following reasons:

• Positive economic outlooks
• Access to global talent
• Access to the EU market
• Excellent regulatory structures
• Strong Business support services
• Low cost of doing business
• Attractive and transparent tax regimes

The post Entrepreneurial Isles: a guide to Malta and Cyprus business frameworks appeared first on The Sovereign Group.

Malta’s Commissioner for Revenue issued Legal Notice No. 229 of 2024 on 13 September, which amends the Income Tax (Deductions) Rules with respect to deductions in respect of capital expenditure on intellectual property (IP) or intellectual property rights with effect from the year of assessment 2024.

The amendment establishes a new definition of ‘qualifying income’ for the purpose of the deduction, which means the income produced through the use or employment of the IP or IP rights chargeable to tax in accordance with the provisions of the Income Tax Acts before claiming relevant deductions.

The amendment rules also clarify how the full deduction is taken, including the part deductible under standard rules plus the remaining part that results in a full deduction. Where the deduction of the remaining part cannot be given full effect in any year because there is no or insufficient qualifying income, the excess must be carried forward for deduction in future years.

Similar rules were also introduced with respect to expenditure on IP brought forward from past years, which may be deducted in full subject to the limitation based on qualifying income.

“These new enhancements to the tax rules only serve to strengthen Malta’s competitiveness in the IP area,” said Managing Director of Sovereign Trust (Malta) Stephen Griffiths. “It will enable us to continue to attract business from corporates who consider Malta to be a jurisdiction of choice within the EU.”

The Commissioner also published a guidance note on the application of the rules under Article 14(1)(m) of the Income Tax Act, which clarifies that:

“Where a taxpayer incurs expenditure in respect of more than one IP or IP right, the election to claim a full deduction by virtue of the second proviso to Article 14(1)(m) is to be made in respect of each asset independently i.e., a different decision can be made in respect of different assets.

“Where the accelerated amortisation for any year cannot be given effect to in full because there is insufficient qualifying income, the amount of utilised accelerated amortisation is to be attributed to one or more of the IP or IP rights used or employed in the production of the qualifying income, at the discretion of the taxpayer.”

The post Malta amends income tax deduction rules for Intellectual Property expenditure appeared first on The Sovereign Group.

Malta Enterprise, the government economic development agency tasked with facilitating growth and attracting new foreign direct investment, has launched a new incentive programme specifically designed to support eligible undertakings to participate in a recognised ‘accelerator programme’ in Malta.

‘Accelerate 2024’ provides grants of up to €100,000, subject to an overall capping for de minimis assistance of €300,000 over a rolling period of three financial years for a single undertaking, to support ventures that are registered in the European Economic Area, have been operating for less than seven years, and are participating in a recognised accelerator programme in Malta.

The accelerator programme must be a fixed-term, cohort-based programme designed to accelerate the growth of its participants by providing mentorship, resources, funding and networking opportunities. Businesses that do not have a material presence in Malta may only be supported in participating in an accelerator programme being held in Malta.

Eligible applicants must have a viable business concept based on sound technical and scientific know-how and should be in the process of developing the technology into a market ready offering in one of the following areas:

• Manufacturing
• Software development
• Industrial services analogous to manufacturing
• Health, Biotechnology, Pharmaceuticals and Life Sciences
• Other economic activities that are enabled through knowledge and technology, and which have the potential to expand internationally.

Eligible applicants receive grants to cover costs related to the establishing a start-up venture in Malta, the fees charged by the accelerator programme, and other costs incurred during the acceleration period such as corporate service provider fees, rent for business premises in Malta and the rent of necessary plant, machinery and equipment.

Undertakings intending to carry out activities related to construction and real estate, or gaming are excluded. Applications under this scheme must be submitted by 31 October 2030.

Malta Enterprise has been focusing on attracting valuable accelerator programmes in strategic areas, following the success of its first accelerator programmes with Plug and Play and SuperCharger Ventures.

These programmes are designed to accelerate the growth of start-ups already established in Malta, as well as attracting new ones. They also provide participants with access to a global network of mentors and investors, an aspect that is critical given the small size of Malta’s local ecosystem.

Malta Enterprise also sponsored the EU-Startups Summit, which was held in Malta for the first time in May, bringing together European entrepreneurs and investors under one roof. Prime Minister Robert Abela said: “While foreign direct investment is and remains important, this does not diminish the importance of local entrepreneurs and professionals.”

He referred to the ongoing work to establish a Start-up Framework to pave the way for the country to be the most start-up friendly European country. He said that Malta was changing and improving laws to address the vulnerabilities of start-ups, improve fiscal measures and reduce bureaucratic processes for start-ups operating in Malta. It was no coincidence, he said, that the Europe Start-up Nations Alliance (ESNA) ranked Malta in fourth place among European countries with innovative start-ups.

New businesses that wish to set up in Malta or existing businesses that wish to expand can benefit from a raft of incentive schemes that are intended for every type and size of business:

• Business Development Scheme – to facilitate value-added projects, including new business initiatives, start-up, expansions and transformation activities that contribute to the regional development of Malta.
• Business Start – to provide early seed funding for small start-ups that have an economically feasible business concept to further develop their business proposal prior to seeking further funding or third-party equity.
• EUREKA Instruments – to support the development of rapidly marketable innovative products, processes and services that help improve the daily life of everyday people. Participation in Network projects, European Partnership on Innovative SMEs / Eurostars and Innowwide, Clusters amongst other EUREKA instruments raises participants’ international profiles through EUREKA label award, facilitates access to finance for companies involved, offers high degree of flexibility and bottom-up approach to project generation with greater chance of project proposal success.
• Exploring Research Grant – to support businesses in planning R&D initiatives by encouraging businesses to think strategically, consider the market disruptions resulting from the research and looking beyond the organisation for strategic collaborations.
• Family Business Grant – The Family Business Act provides a framework to support family businesses in planning for succession and an effective transfer of ownership. The Family Business Grant provides part financing of advisory and mediation services.
• Innovate – Innovation Aid for SMEs – to facilitate access to expertise and new knowledge towards accelerating innovation, enhancing business performance and driving competitive advantage through engagement of highly qualified personnel, and access to innovation advisory and support services.
• INVEST – Support for Initial Investment Projects – to sustain the regional industrial and economic development of Malta by facilitating initial investments resulting in the setting up of new establishments, the extension of the capacity of existing establishments, diversification of existing businesses, or a fundamental change in an overall process, amongst other activities.
• Micro Invest 2024 – to encourage undertakings, including start-ups, family businesses and self-employed, to invest in their business, to innovate, expand and develop their operations. Undertakings benefitting from this measure will be supported through a tax credit calculated as a percentage of eligible expenditure, which also covers increased in wage costs.
• Patent Box Deduction – the Patent Box Deduction Rules 2019 established a fiscal regime for income arising from patents, similar intellectual property (IP) rights and copyrighted software. The rules additionally provide that small companies may utilise the patent box rules on income from any intellectual property based on an invention that could be patented.
• Qualifying Employment in Innovation and Creativity (Personal Tax) – to facilitate employment of non-residents in roles that are currently not addressed by the local labour market by temporarily easing the tax expenses incurred by such individuals through a fiscal incentive.
• Rent Subsidy – to support businesses engaged in industrial activities that require industrial space for starting a new business, expanding or diversifying existing operations or optimising supply chains. The support subsidises rental of private industrial premises required for long term development strategies and short-term rentals to address specific requirements.
• Repatriation of Persons Established in a Field of Excellence Rules – these guidelines provide a framework for individuals seeking a determination of eligibility for the option provided by S.L Repatriation of Persons Established in a Field of Excellence Rules, as Subsidiary Legislation to the Income Tax Act (CAP. 123) of the Laws of Malta.
• Research & Development – to support industry in undertaking industrial research and experimental development activities that address scientific or technological uncertainties. The knowledge acquired through the research is expected to lead towards the development of innovative products and solutions.
• Skills Development – to support business undertakings to provide training with the scope of developing and updating the skills and knowledge of their workforce thus aiding them to perform more effectively.
• Skills Pass Support – to support licensed operators in the Tourism and Hospitality sector by ensuring that their staff have the necessary basic requirements to retain their employment and continue working in the sector.
• Smart & Sustainable Investment Grant – to provide business funding to support investments that lead to more sustainable processes. These investments are expected to enhance the competitiveness of the enterprises through the optimisation of the use of resources in their activities.
• Start-up Finance – to support small start-up undertakings that demonstrate a viable business concept and show commitment to expand and further develop their economic activity.

By providing vital support to businesses at every stage of their journey, these incentives and grant programmes demonstrate Malta’s commitment to economic growth, innovation and entrepreneurship.

The post Malta Enterprise launches new ‘Accelerate 2024’ incentive programme appeared first on The Sovereign Group.

Officials from Malta and Romania signed, on 4 July, an amending protocol to the existing 1995 double tax agreement (DTA) between the two countries.

The Protocol updates the 1995 DTA in line with the OECD Model Tax Convention, equipping the two governments with rules and instruments to ensure that profits are taxed where economic activities generating them take place and protections against tax avoidance.

Companies operating in both countries will benefit from a more predictable and stable tax regime, helping to expand their business activities and attract new investments.

“We have encouraged trade relations in several sectors, including Maltese exports of pharmaceutical and electrical products to Romania and the exports of cereals, machinery, aluminium, pharmaceuticals and plastics flowing in the other direction,” said Maltese Minister for Trade Ian Borg.

“Some 265 Romanian companies are based in Malta. And with four flights a week between the two countries, there is potential for stronger links in tourism,” he added.

The protocol is the first to amend the treaty and will enter into force after the ratification instruments are exchanged. Further details of the protocol will be published once available.

“The strengthening of this tax treaty between the two countries is a welcome development and as a licensed Company Service Provider Sovereign is well placed to assist businesses from Romania to expand and set up their enterprises in Malta,” said Sovereign Trust (Malta) Managing Director Stephen Griffiths.

“With Malta having more than 80 tax treaties in place worldwide, together with its EU membership and central Mediterranean location it is an ideal jurisdiction from which to conduct business.”

The post Malta signs tax treaty amending Protocol with Romania appeared first on The Sovereign Group.

Malta has become a jurisdiction of choice for multinational companies or start-ups looking for a competitive base to maximise business and investment opportunities inside the European Union. As a full EU member state, Malta offers effective regulation, full EU ‘passporting rights’, a robust legal framework and strong investor safeguards.

When combined with Malta’s advantageous tax system and its extensive double tax treaty network, it means that, with proper planning and structuring, investors can achieve considerable fiscal efficiency using Malta as a base. This guide aims to clarify the process of registering a company in Malta, outlining the key steps and considerations for prospective business owners.

Maltese entities can be used for all types of commercial and personal structures including holding companies, trading companies, family offices, investment funds, local and international property holding, estate and succession planning, and insurance.

Companies or partnerships are formed by agreement between the shareholders or members and must be registered at the Malta Business Registry. The following types of entity are permitted: sole proprietorship, limited liability company or, with at least one other person, a general or limited partnership.

An important advantage of a Malta limited liability company (LLC) is that the liability of the shareholders is limited to the amount which remains unpaid on their shares. A company is a legal person distinct from its shareholders and the assets and liabilities of the company are separate from those of its shareholders.

LLCs can be either public or private, with the latter being the most common choice for small to medium-sized enterprises due to their operational flexibility, more limited regulations and minimum share capital requirement.

Malta Company Registration Process: Step-by-Step

1. Choosing a Company Name

   The initial step involves selecting a unique name for your company. The Malta Business Registry (MBR) requires that the name is not already in use or reserved and is not offensive or misleading.

2. Drafting the Memorandum and Articles of Association

   The Memorandum of Association sets out details about the company’s status and objectives, its registered office address, details, its shareholders and directors, its share capital and the rights attaching to each class of share. The Articles of Association governs the internal workings of the company.

3. Share Capital Requirements

   The minimum share capital for a private company is €1,165, of which at least 20% must be paid up at the time of registration. For public companies, this requirement increases to €46,588, of which at least 25% must be paid up.

4. Appointment of Company Officials

   A private LLC must have at least one director (two are required for a public LLC) and a company secretary. Their role is to ensure the company’s compliance with Maltese law and manage day-to-day operations.

5. Beneficial Ownership

   Every company is required to submit a signed declaration containing information on the beneficial owners of the company. A beneficial owner is any natural person or persons who either ultimately own or control, direct or indirectly, more than 25% of the shares or voting rights in the company, or otherwise exercise control over the management of the company.

6. Registered Office in Malta

   All companies must have a registered address in Malta. This can be provided by a local firm of lawyers, accountants or corporate service providers.

7. Registration with the MBR

   All the information and documentation set out above must be submitted to the MBR. Upon approval, the MBR will issue a certificate of registration and a company number, marking the official existence of the company.

Post-Registration Requirements

After registration, companies can enter into contracts, own property and open bank accounts. They also have to remain in compliance with Malta’s ongoing legal and fiscal requirements.

Registered companies in Malta are obliged to:

• Maintain accurate records by filing the appropriate documentation if there is a change in the directors, shareholders, company secretary, Memorandum or Articles of Association.
• File an annual return, accompanied by the relevant fee.
• File the company accounts once a year, within 10 months and 42 days from the end of the financial year.
• Hold an Annual General Meeting once a year and retain the minutes at the company’s registered office.
• Directors’ meetings must also be recorded and retained at the company’s registered office.

Generally, once a company is registered with the Registrar of Companies in Malta, it will be registered with the Commissioner for Revenue and an income tax number will automatically be generated. Where Maltese source income is earned without a permanent establishment in Malta, an application can be sent to the International & Corporate Tax Unit to clarify the companies tax status.

All companies registered in Malta must also register for VAT. Depending on a company’s activities, VAT requirements include several compliance and payment obligations.

Advantages of setting up a company in Malta

Registering a company in Malta offers a number of benefits:

• Favourable tax system – Malta’s full imputation tax system, tax refunds and participation exemption regime and tax treaty network provide highly effective tax structuring opportunities.
• Strategic location – Malta is within the EU and serves as a gateway between Europe and North Africa.
• Skilled workforce – Malta has a multilingual, highly educated workforce.
• Robust legal framework – Malta offers a stable legal environment, influenced by EU directives and standards.

Registering a company in Malta is a straightforward process if approached methodically. From selecting a company name to understanding the legal and taxation obligations, each step requires careful consideration. With its beneficial business environment and strategic location, Malta continues to be an appealing EU destination for businesses worldwide.

The post A Comprehensive Guide to Registering a Company in Malta appeared first on The Sovereign Group.