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Doing Business in Malta: Start-ups – Paul Baldacchino

2 Aug 2019 12:00 | Anonymous
The Accountant – Sustainability. Summer 2019 (MIA Publication)
Malta has a vibrant economy, fuelled by a steady stream of start-ups attracted by a good investment climate. Doing business in Malta is duly regulated by clear legislation implemented by agencies that strive to improve the general business climate and continuously working to facilitate processes.

Information released by the National Statistics Office on 9th May 2019 reveals that business demographics in Malta enjoy a healthy birth rate:

A start up needs to follow a set of procedures and observe applicable legislation in order to be registered. While most business activities do not require a trading licence, there are a few specified activities that do require licensing, such as those related to: 
  • Street and Market Hawkers
  • Auctioneers
  • Car Boot Sales
  • Door to Door sales
  • Marketing agents
  • Commercial fairs and exhibitions.
In addition, some specific activities may require an operating licence from the relevant regulatory authorities. For example, catering and hospitality establishments, tourist guides and travel operators require permits from the Malta Tourism Authority. Similarly, setting up an employment agency requires a licence by DIER (Department for Industrial and Employment Relations). 
Permits are also required to set up a recreational diving centre, a private school, childcare centre and operating a motoring school. If your start up handles food, imports or sells food items or performs health-related activities, such as in the case of beauticians, clearances are required from the Environmental Health Directorate located in Santa Venera or at Business 1st.  The local regulating authorities should also be consulted for other specialised activities operating in the gaming, pharmaceutical, finance and transport sectors. 
A new business may be established under various forms but the two most common types in Malta are self-employed ‘Sole Trader’ or registered as a ‘Limited Liability Company’ under the provisions of the Companies Act and the subsidiary legislation. Other options include Partnerships or Cooperatives but usually these forms fit rather specific circumstances. 
The eventual choice of the form of business entity is mainly based on the nature of the business characteristics. The ‘Self Employed’ Sole Trader is typically the form of choice for start-ups that entail a low capital outlay, a minimal reliance on creditors and generally deemed as a low risk operation. This business is not incorporated under the Companies Act. Unincorporated businesses can be owned by one individual or more, if they agree to trade under a partnership agreement. The partnership should be governed by an agreement between the partners and the agreements should be formalised through a Notary Public. 
The sole trader will need to register for VAT and is assigned a unique VAT number (unless activity is specifically exonerated under the VAT Act). The business owner will be personally responsible for the risks of the business while also carrying tax and legal responsibilities. Self-employed entrepreneurs can seek the assistance of Business 1st:a One-Stop-Shop agency, based in Mrieħel operating under the model of the ‘servizz. gov’ setup.  Business 1st assists start-ups with their registration process which is done online using an e-form accessed from the agency’s website. Sole Traders can apply for and register their new business by submitting a single form. Apart from obtaining a VAT number, the entrepreneur will be assigned a registration number with Jobsplus and notify the National Statistics office of the start-up. The e-form also links the start-up to the Income Tax regime and to be assigned a PE number. The single e-form will, therefore, notify the relevant authorities and all registration numbers and VAT number will be assigned via e-mail.
At the registration stage, the entrepreneur will be required to provide an estimate of the forecasted turnover to determine the VAT classification of the business and the frequency of the VAT returns. 
Sole traders can facilitate the entire process using their national electronic identification registration. The e-ID, or electronic identity, is a trusted authentication mechanism for citizens and businesses to identify themselves in order to electronically access services from across government.
All self-employed sole traders are required to submit an annual tax return and the profits from the business activities will be subject to the tax rates applicable to individuals. The tax position should be reviewed with a warranted professional.
The Companies Act provides three models of commercial entities but the most common among them remains the Limited Liability Company. This company can be registered as a public or a private company depending mainly on the number of shareholders or whether the company intends to issue a public offer for shares or bonds. In any case, if the shareholders exceed 50, the company needs to be registered as a public limited liability company (PLC). 
In specific cases, the promoters may opt to register the enterprise as a commercial partnership which can take two forms: the Partnership en nom Collectif or Partnership en Commandite. The element of liability varies under both models and therefore professional advice should be sought when considering any of these two options. 
The registration process of all companies is handled by the Registrar of Companies under the newly formed Agency which, as from the 27th June 2019, became officially known as the Malta Business Registry using the online portal address https:// registry.mbr.mt/ROC/. 
A limited liability company is registered online on the portal of the Malta Business Registryand a registered Service Provider should be engaged to assist in this process. There are some basic steps that need to be followed before proceeding with the online submission:
  • Assign a corporate name which must not create any confusion with existing registered names nor be deemed as inappropriate
  • Determine the initial paid up share capital and structure and deposit the paid-up capital in a bank account
  • Establish the registered address of the entity
  • Assign a company secretary and the company directors
  • Set out a memorandum and articles governing the structure of the company and specify the objects of the company
  • Determine and declare the ultimate owners/beneficiaries of the entity. 
It is always advisable to seek professional advice for guidance on tax implications, adapting the memorandum and articles of the company to the requirements of the new entity, and to determine whether you should form a commercial partnership or a limited liability company. 
Furthermore, start-ups are encouraged to visit the Business 1st offices to find information about any applicable incentives. The MicroInvest incentive scheme, for example, awards tax credits to small enterprises that invest in capital expenditure, refurbishing or job creation. 
'A new business may be established under various forms but the two most common types in Malta are self-employed ‘Sole Trader’ or registered as a ‘Limited Liability Company’ under the provisions of the Companies Act and the subsidiary legislation. Other options include Partnerships or Cooperatives but usually these forms fit rather specific circumstances. '
Paul Baldacchino is the Chief Officer at Business 1st. Business 1st is a one-stop-shop for entrepreneurs in Malta and is based in Mrieħel. Visit our portal www.businessfirst.com.mt

Suite 4, Level 1, Tower Business Centre, Tower Street, Swatar, BKR 4013, Malta 

E-mail: info@miamalta.org

Tel. +356 2258 1900