Malta is a tiny nation in the Mediterranean Sea, strategically positioned between Europe and Africa. It is home to around 400,000 inhabitants, including a certain Fun Entrepreneur, and has over 5000 years of history and culture at its roots. Malta is also a good place for business, offering year round great weather, short commutes and a skilled and flexible workforce. Whilst the local population does not offer huge market opportunities, it is a great testing ground. Existing logistical connections to mainland Europe and North Africa mean that companies wishing to expand beyond Malta can do so with ease. For those who wish to start a business in Malta, here are 10 simple steps to follow:
1. Limited Liability or Self-Employed?
The main difference is that by having a limited liability company you give your business a more trusted face and you, as a shareholder, are better protected. There are also more bureaucratic steps in creating such a company, such as having an annual audit, so I would recommend making sure your business is viable before registering it as LTD. You also need to be at least two shareholders to register a company.
For a self-employed person to start a business in Malta, the steps are much simpler, but so is the personal risk if anything goes wrong, such as with defective products or lawsuits. If you decide to start as a self-employed, then you can go directly to Step 5.
2. Prepare Registration Documentation
If you are going to proceed with a limited liability company, then you need to draft the memorandum and articles of association. Whilst you could prepare these yourself if you have the experience, I would strongly recommend seeking the assistance of local accountants or lawyers especially if you are starting a business in Malta for the first time. These documents are not only important for registration, they also detail what the company, its shareholders and its directors can and can not do.
3. Deposit the Minimum Share Capital
The amount will be determined in your memorandum and articles of association. To start off, any company needs some capital, however small. The minimum amount allowed is €1,200 (value rounded up), but you only need to deposit 20% of this value at a bank. Therefore, this step also includes you needing to open up a bank account in the company’s name. Inform the bank teller that you are depositing your share capital.
The money will go into a holding account until the company is properly registered. You will be given a receipt. It is very important that you do not lose it as you will need it to start a business.
In this step you need to present the filled in company registration form, together with the memorandum and articles of association and the share capital deposit slip to the Malta Financial Services Authority, who oversees all locally registered companies. Registration is done within 2 to 3 days and there is a registration fee to be paid, depending on the size of the company. The MFSA offers detailed information about fees and the registration procedure.
5. Obtain Licences
All those who start a business in Malta need to obtain a trading licence. For most businesses the process is quite simple. You only need to fill in the Application form for a commercial activity, although if you are setting up a food preparation business, beautician related business or a large manufacturing business you will need to apply for further licences from various governmental departments.
The best place to get your answers to all your questions about proper licencing is the Commerce Department. You will need to pay one or more annual fees for each licence but the very basic licence will cost you €70 for a small business.
6. Get a Tax Identification Number
Whilst this step might not be the most exciting, it is a legal requirement that a business has a tax identification number. Once again the necessary form can easily be found online. There are no fees to be paid, however once a year you will need to fill in a tax return form and this varies depending on whether you are a limited liability company or a self-employed person. In this case, especially for your first year in business, I would recommend seeking the assistance of an accountant or a lawyer.
7. Inform the VAT department that you will Start A Business
Another requirement to start a business in Malta is registering with the VAT department. When doing this there are 3 important thresholds to keep in mind. If you are foreseeing a turnover of not more than €7,000 in a year period (January – December) then you are not obliged to register or charge VAT.
For businesses which expect a turnover of between €7,001 to between €14,000 and €35,000, depending on the business, registration is optional, though I would recommend it. In this case the business would not charge VAT either. For turnover values above this figure VAT would need to be charged. More information about VAT requirements can be found on the department’s website. Obtaining a VAT number is free and the process is extremely fast.
8. Obtain a PE Number
This step can be skipped if you are self-employed and do not intend to employ any employees. If, however you have a limited liability company, you are automatically working for the company, therefore you are an employee. In such a case and in cases where you intend to have employees then you need to carry out this step.
To obtain a PE number you need to fill in a form online by the Inland Revenue Department. This process normally takes around 3 days and is also free of charge.
9. Register with the ETC
The Employment and Training Centre (ETC) is responsible for all employment registration in Malta. Irrespective of whether you will start a business as a self-employed person or a limited liability company, you need to fill in a form for each employee. Forms needs to be filled in upon registration and again upon termination of each employee. The process is quick and free of charge.
10. Data Protection Registration
This step only applies for businesses that will be collecting personal details of their prospective or existing customers. In recent years Malta has caught up with the rest of Europe in providing safety to people’s information. It is important that when you start a business you create certain safety processes to ensure that customer’s details cannot be stolen by third parties. More information on Data Protection in Malta can be found on their website.
You might have other questions of uncertainties when you start a business in Malta. The government has set up a department, Business First, which can handle almost all of these steps for you. If you have any further questions you can contact them via email.
Please leave a comment below if you have found this information to start a business in Malta useful.