Establishing a Branch in Malta

If you are you looking to expand your organisation abroad, you may wish to register a branch or place of business as an overseas company. Some companies receive tax breaks by continuing to be incorporated in their home country while they attempt to establish a Malta operation via a Malta Company Formation.

Malta Branch Establishment

Branch establishment refers to the process of setting up a new branch of a business or organisation in a different location from its headquarters. This can be done for a variety of reasons, such as expanding the company's reach, tapping into new markets, or improving customer service. Setting up a branch requires careful planning and consideration of factors such as location, market demand, and regulatory requirements. Once established, the branch operates under the same legal entity as the headquarters, but may have its own management team and staff. Successful branch establishment can help a business grow and thrive, but requires a well-executed strategy and ongoing attention to operational and financial management.

The establishment of a branch or place of business in Malta is regulated by Articles 385 to 389 of the Companies Act – Chapter 386 of the Laws of Malta.

Requirements to open a Branch Establishment in Malta

In summary, Oversea Companies which establish a branch or a place of business shall within one month of the establishment of the place of business, deliver to the Registrar for registration (Section 385 of the Act): 

a) An authentic copy of the charter, statutes or memorandum and articles of the oversea company or other instrument constituting or defining the constitution of the oversea company, together with a certified English language translation where applicable;

(b) A list of the directors and company secretary, if any, or of the persons vested with the administration of the oversea company, where that company does not have directors or a company secretary, and, in all cases, a list of the persons vested with the representation of the oversea company. Such list shall include the following particulars:

• in the case of an individual, his name, his usual residential address, his nationality and his business occupation; and
• in the case of a body corporate, its registered or corporate name and registered or principal office.

(c) A return containing the following particulars:

• the name under which the branch or place of business is carrying on its activities where different from the name of the oversea company;
• the address of the branch or place of business established in Malta by the oversea company, and where more than one branch or place of business has been established, there shall be indicated the address of the principal branch or place of business. The office address of CSB Group in Malta can be used for this purpose;
• the activities to be carried out by the branch or place of business established in Malta;
• the names and addresses of one or more individuals resident in Malta authorised to represent the oversea company for the activities of the branch or place of business established in Malta; and
• the extent of the authority of any individual falling within subparagraph (iv), including whether that individual is authorised to act alone or jointly with others, and in the latter case, the name of any person with whom he is authorised to act.

(d) Unless disclosed by the document specified in paragraph (a), a return containing the following particulars about the oversea company:

• the legal form of the oversea company; and the identity of the register in which the oversea company is registered and the number with which it is so registered. 

Documents required to open a Branch Establishment in Malta

When opening a Branch Establishment in Malta, certain documents are required to be submitted to the Malta Business Registry (MBR). These include;

1. A completed application form for the registration of a Branch Establishment
2. A certified copy of the parent company’s Certificate of Incorporation or Registration
3. A certified copy of the parent company’s Memorandum and Articles of Association
4. A certified copy of the parent company’s latest audited financial statements
5. A declaration from the parent company stating that it will be responsible for all liabilities and obligations of the Malta Branch
6. A certified copy of the resolution of the parent company’s board of directors approving the establishment of a branch in Malta
7. A declaration of compliance with the Anti-Money Laundering and Counter-Terrorist Financing Regulations
8. A Power of Attorney or Letter of Authorisation for a resident representative in Malta to act on behalf of the Branch Establishment
9. A lease agreement or other proof of occupancy of the premises in which the Branch Establishment will operate
10. Payment of the applicable registration fees.

It's important to note that this list is not exhaustive and additional documents may be required depending on the specific circumstances of the Branch Establishment. It's always advisable to consult with a professional service provider such as CSB Group to ensure that all necessary documentation is in order.

Accounting Requirements

To operate a branch establishment in Malta, there are certain accounting requirements which need to be fulfilled. Firstly, should the branch be generating revenue, it must register for VAT and maintain accounting records in accordance with an acceptable accounting framework (in Malta, these are namely GAPSME or IFRS) which accurately reflect its performance and financial position.

Additionally, the branch must prepare annual financial statements, audited by a Maltese registered auditor, who will then issue an audit report. The audited financial statements must be submitted to the Malta Business Registry (‘MBR’) within 12 months of the end of the financial year, together with registration fee. Upon completion of the audited financial statements, the branch is also required to submit its annual Tax Return, abiding by the same deadlines applicable to limited liability companies established in Malta which depend on the financial year end of the entity. Failure to comply with these accounting requirements may result in penalties and potential legal action.

Advantages of setting up a Branch in Malta

Malta is an attractive location for businesses looking to expand internationally. The country's strategic location at the crossroads of Europe, Africa, and the Middle East, coupled with its favourable tax regime and business-friendly environment, make it a popular destination for foreign investors.

Setting up a branch in Malta can provide numerous advantages, including access to a highly educated workforce, a stable and efficient legal system, and a modern infrastructure. Additionally, Malta offers a competitive corporate tax rate of 35%, with the possibility of further reductions based on specific circumstances. The country also has a network of double taxation treaties, providing businesses with the opportunity to reduce their tax liabilities even further.

Overall, Malta offers a unique combination of advantages that make it an attractive location for businesses seeking to expand their international presence.

The difference between a Branch and a Subsidiary Company

A branch and a subsidiary company are two different types of legal entities with distinct characteristics. A branch is an extension of a company that operates in a different location or jurisdiction, while a subsidiary is a separate company that is partially or wholly owned by another company. The primary difference between the two lies in their legal structure, management, and financial autonomy.

A branch is a part of the parent company and operates under its name, brand, and legal structure. The parent company retains full control over the branch's operations, assets, and liabilities. In other words, the branch and the parent company are considered one legal entity. The management team of the branch is accountable to the parent company's board of directors and must follow its policies and procedures. Financially, the branch's profits and losses are included in the parent company's financial statements.

On the other hand, a subsidiary company is a separate legal entity with its own management, board of directors, and shareholders. Although the subsidiary is partially or wholly owned by the parent company, it operates independently and has its own financial statements. The parent company has limited liability for the subsidiary's operations and is not responsible for its debts and liabilities. The subsidiary can enter into contracts, hire employees, and operate its business independently from the parent company.

In summary, the key difference between a branch and a subsidiary company lies in their legal structure and financial autonomy. While a branch is an extension of the parent company and operates under its legal structure, a subsidiary is a separate legal entity that operates independently and has its own financial statements.