The Maltese legal system is a best described as a hybrid legal system, comprising a unique mix of both civil and common law traditions that has become increasingly shaped by the influence of European Union law.

Malta’s private law regime is primarily based on the continental European civil law tradition and is particularly influenced by the Napoleonic model and Italian civil doctrine. Among other things, Maltese contract law, property law, family law, and inheritance law are broadly codified and clearly structured.

Malta’s public and commercial legal spheres are more heavily influenced by the English common law system; particularly areas such as tax law, company law, criminal procedure, and administrative law practices. Unlike pure common law systems, Malta does not follow the doctrine of binding precedent, albeit certain decisions and the judicial reasoning applied therein, particularly those of higher courts, tend to be persuasive.

Malta entered the European Union in 2004, leading to supervening Union law dominating and reshaping regulation in several areas, and contributing further to the jurisdiction’s distinctively hybrid legal system.

Generally, under Maltese law, business is most commonly conducted through limited liability companies regulated by the Companies Act, Chapter 386 of the laws of Malta (hereinafter, the ‘Companies Act’). The private limited liability company (demarcated with the suffix ‘Limited’ or ‘Ltd.’) is the legal form most routinely used for doing business locally, where liability is limited to unpaid share capital and share transfers are restricted. Public limited companies (demarcated with the suffix ‘p.l.c.’) may offer shares to the public and are typically used for larger or listed enterprises.

The Companies Act also provides for partnerships en nom collectif (general partnerships) and partnerships en commandite (limited partnerships); both of which have a legal personality that is separate and distinct from that of its partners. Foreign entities may also establish a branch in Malta. Sole traders may operate without incorporation, though they do not benefit from limited liability.

Beyond these traditional structures, the Maltese legislative framework also accommodates sophisticated vehicles tailored to specific sectors, with some examples including co-operative societies, and SICAVs (Société d’Investissement à Capital Variable), amongst others. Furthermore, the legislative framework also provides for cell legislation, offering Protected Cell Companies (PCCs) and Incorporated Cell Companies (ICCs) that provide robust mechanisms for asset segregation and liability ring-fencing, particularly within the insurance and securitisation industries.

Under the general principle of European freedom of movement, it is generally the case that businesses established within the European Union may provide services in Malta without the specific requirement to register a branch in Malta; subject to certain exceptions, such as the requirements of industry or service-specific regulation or when a branch or place of business is established in Malta. More generally, non-domestic foreign entities can operate in Malta through a registered branch or place of business rather than by incorporating a company or other entity in Malta.

Where a branch or place of business is registered in Malta, the foreign company (referred to within the Companies Act as an ‘oversea company’) must file core constitutional documents (and translations where needed), provide details of its directors/administrators and persons authorised to represent it, state the Malta address and intended activities, and keep the registry updated when those particulars change. A local resident authorised representative for the Malta operations is required.

The minimum authorised share capital allowable by the Companies Act is EUR 46,587.47 for a public company and EUR 1,164.69 for a private company. If the authorised share capital is set at the minimum threshold, it must be fully subscribed; if higher, at least the minimum must be subscribed.

On incorporation, at least 25% (public) or 20% (private) of the nominal value of each share taken up must be paid up on signing the memorandum of association. Shares may be issued for cash or for assets capable of economic assessment, but not for future services/undertakings to perform work. Where shares are issued for non-cash consideration, an independent valuation/report is generally required, subject to a limited-value threshold where a directors’ declaration can suffice. Partnerships are not subject to the same statutory minimum share capital requirements as companies, and contributions/capital are generally governed by the partnership deed (subject to the liability split between general and limited partners and any sector-specific rules).

A Maltese company is established by incorporating and registering it with the Malta Business Registry through filing a memorandum and articles of association and providing the required corporate details.

A foreign company can register a branch or place of business in Malta as an overseas company with the Malta Business Registry through filing an authentic copy of its constitutive documents, a list of its directors or persons otherwise vested with the administration thereof, and a return containing information including inter alia the name under which the branch is carrying on its activities in Malta, the address of the branch or place of business, the activities to be carried out by the branch or place of business in Malta, and the name of at least one individual, being resident in Malta, who is authorised to act as the local representative of the oversea company in Malta.

The primary decision-making organ of the Maltese company is its board of directors, which is generally responsible for day-to-day and strategic decision-making, subject to applicable law and variable constraints that may be specified within the company’s constitutional documents.

Shareholders exercise influence primarily by decisions taken in general meetings (or other permitted decision mechanisms), typically being required to approve alterations to the company’s memorandum and articles of association, and capital-related matters. Shareholders may have varying degrees of influence over the company’s day-to-day and strategic decision-making, subject to the specification of issues within the memorandum and articles of association that expressly require shareholder approval – normally referred to as ‘reserved matters’.

Companies also have a company secretary role with statutory and administrative functions.

The applicable requirements depend on the vehicle chosen and the company’s constitutional documents, but Maltese company law sets baseline requirements for corporate organs and filings. Public companies generally have more stringent governance requirements than private companies. Shareholders may generally be Maltese or non-Maltese, and restrictions are more likely to arise by means of industry or service-specific regulation, rather than under general company law. In the case of a branch of a foreign company, the overseas entity must appoint a local authorised representative resident in Malta to represent it in relation to the Malta establishment and to receive notices and communications.

Apart from incorporating a company or registering a branch in Malta, foreign businesses may expand through contractual arrangements such as commercial agency, distribution, reseller, franchise or licensing agreements without establishing a local legal presence.

Commercial agents benefit from mandatory statutory protections, including rights to commission, minimum notice periods and, in certain circumstances, termination compensation. Distribution and reseller arrangements are generally contractually regulated, subject to compliance with applicable competition law principles.

Malta does not have a standalone corporate governance code specifically applicable to privately owned, non-regulated companies.

Corporate governance codes issued by the Malta Financial Services Authority (hereinafter, the ‘MFSA’) primarily target listed entities and unlisted entities authorised to provide financial services in or from within Malta. In particular, the MFSA’s 2022 Corporate Governance Code applies cross-sectoral rules applicable to regulated authorised financial services entities and is structured around four main pillars: (i) an effective and properly constituted board (including, where practicable, independent non-executive directors and periodic board evaluations); (ii) robust internal controls and risk oversight; (iii) stakeholder engagement; and (iv) corporate culture, CSR and ESG. The MFSA’s Corporate Governance Code is applied on a proportional, best-efforts basis, although its high-level principles (such as integrity, compliance, and proper management of conflicts of interest) are expected to be observed in all cases. Mandatory sector-specific rules (e.g. banking, insurance and investment services frameworks) prevail in the event of conflict.

Privately owned companies which are not subject to sectoral regulation are principally governed by the Companies Act and its subsidiary legislation, as well as their own constitutional documents (and, where applicable, shareholders’ agreements). There is no equivalent soft-law governance code specifically addressed to such entities.

Working capital can typically be provided through either equity funding (for example, subscribing for new shares as a capital injection and/or making additional shareholder contributions) or debt funding (for example, advancing shareholder loans and/or obtaining third‑party borrowing).

Equity funding typically involves corporate formalities in order to inform the Malta Business Registry and, depending on how it is structured, may affect ownership percentages, while debt funding generally requires appropriate documentation and commercial terms and should be considered in light of the entity’s ability to service and repay the funding. The available options are commonly assessed by reference to the entity’s solvency position, projected cash flows, any banking or covenant requirements, and broader group tax and treasury considerations.

Proceeds are typically returned through dividend distributions, repayment of shareholder or third-party loans, or capital transactions such as share buybacks or capital reductions.

Dividends require that the company has sufficient distributable profits and that the distribution is properly approved through the required corporate process. Loan repayments follow the contractual loan terms and are treated differently from profit distributions. Returns of capital and buybacks involve more statutory formalities, requiring specific legal procedures and safeguards designed to protect creditors and maintain the integrity of the company’s capital.

Shareholder decisions are generally taken either by ordinary resolution (a simple majority of votes cast by shareholders authorized to vote) or by extraordinary resolution (not less than 75% in nominal value of the shares represented and entitled to vote at the meeting and at least 51%, or such other higher percentage as the memorandum or articles may prescribe, in nominal value of all the shares entitled to vote at the meeting). Ordinary resolutions typically apply to routine matters such as approval of financial statements, appointment or removal of directors, and appointment of auditors. Extraordinary resolutions are required for fundamental changes, including amendments to the memorandum and articles of association, alterations of share capital, mergers, and voluntary winding up.

In addition, a company’s articles of association may impose higher majority or unanimity requirements for reserved matters, particularly in private companies.

Under Maltese law, shareholders of a limited liability company are generally not authorised to issue binding day-to-day instructions to the board or management. The Companies Act adopts a board-centric governance model under which the business and administration of the company are vested in the directors, subject to the Act, the memorandum and articles of association, and any regulations lawfully adopted in general meetings. While shareholders may reserve specific matters to themselves through the constitutional documents or pass resolutions within their statutory competence, they cannot retrospectively invalidate properly exercised director powers nor interfere with management functions outside their remit.

The position is not identical across all Maltese entity types: limited liability companies follow this board‑led structure, whereas partnerships and other forms depend more heavily on their constitutive deed and the specific statutory regime applicable to that entity. Consequently, attempts by shareholders to instruct management outside their proper remit will typically be non-binding and may create governance disputes.

Shareholders’ lawful mechanisms of influence lie in exercising voting rights, amending the articles (subject to the required majority), and appointing or removing those entrusted with management in accordance with the Act and the entity’s constitutional framework.

The core employment law protections under Maltese law are primarily set out in the Employment and Industrial Relations Act, Chapter 452 of the laws of Malta (hereinafter, the ‘EIRA’) and its subsidiary legislation. Maltese law prohibits discrimination from the recruitment stage through to termination and requires equal treatment in relation to employment conditions, promotions, dismissals, and other aspects of employment. It also prohibits harassment, including sexual harassment, and victimisation. Protected characteristics include sex, pregnancy or potential pregnancy, marital status, disability, religion, political opinion, colour, and trade union membership. Employees are entitled to equal pay for work of equal value, subject to limited lawful exceptions.

Mandatory minimum working conditions are established through National Standard Orders, including minimum wages, while sectoral regulations lay down minimum standards applicable within specific industries. Employment terms cannot be less favourable than the minimum standards prescribed by law. In terms of pay protection, wages must be paid directly to the employee in legal tender in Malta, unless otherwise permitted by applicable law. Employers may not restrict how or where wages are spent. Wages are generally not assignable and may only be attached in accordance with limited, court-regulated rules. Deductions from wages are prohibited unless authorised by law, court order, collective agreement, or requested by the employee in specific cases such as thrift or superannuation schemes. Employees are also entitled to statutory bonuses and income supplements established by legal notice or government estimates. Part-time employees and employees engaged on a ‘whole-time with reduced hours’ basis are entitled to pro-rata benefits and must not be treated less favourably without objective justification.

With regard to working time and leave, the standard working week for a full-time employee is 40 hours, although employees may work an average of up to 48 hours per week over a reference period determined by law, depending on the industry. Employees are entitled to a minimum of 192 hours (24 days) of paid annual leave based on a 40-hour working week, with additional leave granted where a public or national holiday falls on a Saturday, Sunday, or the employee’s weekly day of rest. For every six hours worked in a day, employees are entitled to at least 15 minutes of rest. They are also entitled to a minimum of 11 consecutive hours of daily rest and a weekly rest period of at least 24 consecutive hours, or 48 hours over a 14-day period.

The standard employment probationary period is 6 months, which may be shortened by agreement and, in certain cases, extended to up to 12 months. In relation to termination, notice periods vary according to length of service unless otherwise agreed between the parties. Where the employee does not work through their notice period, compensation in lieu may be payable. During the probationary period, employment may be terminated without providing a reason, although a one-week notice period applies once the employee has worked for more than one month. For indefinite contracts, termination by the employer after the probationary period is only permissible in cases of redundancy or where the employer can demonstrate a good and sufficient cause.

Health and safety protections apply to all employees. Employers are required to safeguard both the physical and psychological wellbeing of employees by preventing risks, evaluating hazards, controlling unavoidable risks, and minimising dangers as far as possible. Employers must also prepare and communicate a health and safety policy and ensure compliance, and health and safety representatives must be appointed. Employees have corresponding duties to protect their own and others’ health and safety by following training and instructions and reporting risks. Additional safeguards apply to pregnant employees and young persons.

Employers are required to provide employees with written information on key employment terms within the deadlines prescribed by law. The Industrial Tribunal is the competent authority in Malta to hear claims relating to breaches of these provisions. Certain exceptions may apply, particularly where collective agreements are in force, and not all rules applicable to private sector organisations necessarily apply to public sector entities.

Under Maltese law, an employment contract may be lawfully terminated during the probationary period or after the probationary period in accordance with statutory requirements. During the probationary period, either party may terminate the employment relationship without giving a reason. Following the probationary period, an employee may terminate the contract at any time, subject to the applicable notice requirements. However, an employer may only terminate an indefinite contract on the grounds of redundancy or where there is a ‘good and sufficient cause’.

In the case of redundancy affecting an individual employee, the employer must apply the ‘Last-In-First-Out’ principle within the relevant class of employees, meaning that the last employee engaged should be dismissed first, subject to limited exceptions in specific circumstances. The employer is required to provide statutory notice based on the employee’s length of service and must pay any outstanding wages as well as accrued and unused vacation leave by the next pay day. A redundant employee is also entitled to re-employment if the same post becomes available within one year, on terms not less favourable than those previously enjoyed, and such re-employment is deemed to constitute continued employment.

Where termination is based on a good and sufficient cause, Maltese law does not prescribe a specific statutory procedure. Nevertheless, employers are generally expected to follow a fair disciplinary process, including conducting a proper investigation and gathering evidence, to mitigate the risk of a finding of unfair dismissal. Certain grounds may never constitute good and sufficient cause, such as trade union membership, marriage, pregnancy or maternity leave, whistleblowing, filing complaints or seeking recourse before authorities, or a transfer of business unless objectively justified. Additional statutory protections may also restrict dismissal in particular circumstances, including the prohibition on dismissing employees while on maternity leave.

In terms of costs and notice obligations, when an employer gives notice to an employee on an indefinite contract, the employee may either continue working during the notice period or opt to receive payment equivalent to half the wages due for the unexpired portion of the notice period. Conversely, when an employee gives notice, the employer may either require the employee to work through the notice period or pay wages corresponding to the remaining notice period. If an employee fails to give the required notice, they are liable to pay the employer half the wages applicable to the notice period, whereas if the employer fails to give the required notice, full wages for the notice period must be paid to the employee. Premature termination of a fixed-term contract or a contract for a defined task or project generally results in the defaulting party being liable to pay a penalty to the other party. In cases of unfair dismissal, the Industrial Tribunal may award compensation or order reinstatement, and any complaint must be filed by the employee within four months of the alleged breach.

Collective dismissals are specifically regulated by the Collective Redundancies (Protection of Employment) Regulations, Subsidiary Legislation 452.80 of the laws of Malta. A collective redundancy occurs where an employer terminates employment on grounds of redundancy over a period of thirty days involving at least 10 employees in establishments normally employing 20 to 99 employees, at least 10% of employees in establishments employing between 100 and 299 employees, or at least 30 employees in establishments employing 300 or more employees. In such cases, the employer must notify the employees’ representatives in writing and commence consultations within seven working days from the date of notification. The same documentation must also be submitted to the Director of the Department of Industrial and Employment Relations. Redundancies generally take effect only after 30 days from notification to the Director, although this period may be shortened or extended. A breach of the regulations may result in a fine of not less than €1,164.69 per redundant employee.

The Employee (Information and Consultations) Regulations, Subsidiary Legislation 452.96 of the laws of Malta, establish a framework for the right of employee representation. These regulations apply to both public and private undertakings in Malta. All individuals have a right to join a trade union; however, this is not mandatory under Maltese law, and employee representatives for information and consultation are generally only legally required in undertakings employing 50+ employees.

Information and consultation must be with:

• Recognized trade union representatives (where unions cover all categories).
• Both union and elected representatives (where unions do not cover all categories).
• Elected representatives (where there is no recognised union).

Employers must provide the employees’ representatives with information pertaining to, inter alia, recent and probable developments concerning the undertaking’s activities and economic situation, matters of employment situation, structure, and anticipated changes, and decisions likely to lead to substantial changes in work organisation or contractual relations.

Furthermore, consultation must be timely and adequate, allowing representatives to study and respond to information and to seek agreement on major decisions.

Employers who fail to comply with the provisions of the Regulations are subject to fines, with amounts depending on the nature of the offence and the number of employees affected. These fines may range from €23.29 to €11,646.87.

There are specific circumstances under Maltese law which, notwithstanding the exception for the requirement of having an employee representative in a general capacity, would require the appointment of a representative. These situations are clearly depicted within different subsidiary legislation falling under the EIRA and relate to extraordinary circumstances which would include collective redundancies or the transfer of an undertaking.

Malta does have a legal anti‑bribery and anti‑corruption framework that is primarily regulated by the Maltese Criminal Code, Chapter 9 of the laws of Malta (hereinafter, the ‘Criminal Code’); which includes detailed provisions concerning bribery and corruption, both in the public and private spheres. This baseline of criminal law is supported by institutional and governance measures such as the Permanent Commission Against Corruption, public‑sector internal audit/financial investigation and reporting mechanisms, the National Anti‑Fraud and Corruption Strategy, and whistleblower protections.

The aforementioned regime can extend beyond purely domestic scenarios: depending on the fact-pattern, such as the nationality and residence of the perpetrator, and the jurisdiction where the conduct and/or its effects have occurred, and whether Maltese public functions or entities are implicated, the Maltese courts may assert extraterritorial jurisdiction.

The Criminal Code criminalises various offences pertaining to economic crime, including inter alia fraud, misappropriation or embezzlement, corruption-related offences and money laundering; the latter of which is subject to an additional body of law, being heavily structured by reference to European Union legislation, falling within the ambit of the Prevention of Money Laundering Act, Chapter 373 of the laws of Malta (hereinafter, the ‘PMLA’).

Reporting obligations vis-à-vis economic crime arise most clearly under the provisions of the PMLA, as well as the subsidiary legislation thereof and binding implementing procedures issued by the Maltese Financial Intelligence Analysis Unit (hereinafter, the ‘FIAU’).

In essence, entities that are characterised as subject persons through the performance of ‘relevant activity’ or ‘relevant financial business’, are obliged to file suspicious transaction reports with the FIAU when they know, suspect or have reasonable grounds to suspect money laundering or terrorist financing activities. Outside the AML/regulated-entity context, there is not generally a universal obligation on persons to report economic crimes, although specific duties may apply in certain scenarios.

Malta also has a robust framework regulating the implementation of international and domestic sanctions, by virtue of the National Interest (Enabling Powers) Act, Chapter 365 of the laws of Malta, which also imposes certain obligations – particularly on subject persons as defined by the PMLA – to remain vigilant to the possibility of interaction with sanctions persons or moneys, and to cooperate in facilitating the implementation of sanctions through, inter alia, asset freezes, restrictions on the provision of financial services, exports controls, or other restrictive measures.

In Malta, money laundering and terrorist financing are regulated under a combination of domestic criminal law and EU frameworks. While the offences of money laundering and terrorist financing are directly criminalised and regulated by the Criminal Code, the most detailed source of local anti-money laundering (‘AML’) and counter-terrorist financing (‘CFT’) is the Prevention of Money Laundering and Funding of Terrorism Regulation, Subsidiary Legislation 373.01 of the laws of Malta (hereinafter, the ‘PMLFTR’).

The PMLFTR, and its accompanying implementing procedures issued by the Maltese Financial Intelligence Analysis Unit (‘FIAU’), broadly implement the European AML/CFT infrastructure, and require financial institutions, auditors, lawyers, and other obliged entities to conduct customer due diligence (‘CDD’), monitor transactions, report suspicious activity, and maintain records.

The FIAU is the central authority responsible for receiving reports, analysing them, and coordinating investigations with law enforcement and foreign financial intelligence units.

At the time of writing, Malta does not have specific regulation on supply‑chain due diligence that is comparable to the examples outlined in this question.

That said, supply chain misconduct can still result in criminal exposure through pertinent criminalised offences in Malta, such as human trafficking and exploitation, corruption, bribery involving intermediaries or suppliers, fraud and falsification of invoices or certifications, money laundering where criminal proceeds are handled through the business, and (where applicable) breaches of sanctions or trade restrictions.

Maltese companies can be affected by EU‑level corporate sustainability and human‑rights/environmental due diligence requirements, particularly the Corporate Sustainability Due Diligence Directive (CSDDD) as well as related EU reporting obligations. In addition, Maltese businesses that are part of international groups, or that contract with in‑scope EU customers, may face contractual compliance requirements even where Maltese law does not impose an equivalent standalone regime.

Pursuant to the Companies Act, every company must prepare annual financial statements in respect of each financial year, comprising at least a balance sheet, profit and loss account, notes to the financial statements and, where applicable, a directors’ report. The accounts must give a true and fair view and be prepared in accordance with applicable accounting standards (typically IFRS as adopted by the EU or GAPSME, depending on the company’s size and eligibility).

The directors are responsible for ensuring that the annual financial statements are drawn up and laid before the general meeting within the statutory timeframes (generally within 10 months from the end of the financial year for private companies and 7 months for public companies). As a rule, financial statements must be audited by a warranted auditor, although certain small private companies may qualify for audit exemption if they meet the statutory size thresholds.

Once approved by the directors, a copy of the annual financial statements, together with the auditors’ report (where applicable) and directors’ report, must be filed with the Malta Business Registry (hereinafter, the ‘MBR’) within 42 days of approval. Failure to comply with preparation, audit, approval or filing obligations may result in administrative penalties and potential liability for directors.

Companies are required to file an annual return with the MBR upon the anniversary of their registration, confirming updated details relating to share capital, shareholders, directors, company secretary and registered office, together with payment of the applicable annual registration fee. In addition, companies must submit the annual beneficial ownership (BO) confirmation form, confirming whether the registered beneficial ownership information remains accurate or notifying any changes, in line with Malta’s beneficial ownership regulations.

Ongoing obligations also include the filing approved annual financial statements within 42 days of shareholder approval, maintaining statutory registers (including the register of members, directors and beneficial owners), and notifying the MBR within the applicable timeframes of any changes to corporate particulars. Non-compliance may give rise to administrative penalties and potential liability for officers in default.

Every company is required to hold an annual general meeting (hereinafter ‘AGM’). Not more than 15 months may elapse between the date of one AGM and the next, although a newly incorporated company may hold its first AGM within 18 months of registration without being required to hold one in the year of registration or the following year.

The primary business of the AGM is to lay and approve the annual financial statements, together with the directors’ report and auditors’ report (where applicable). The meeting also typically addresses the appointment or re-appointment of directors and auditors, the fixing of auditors’ remuneration, and the declaration of dividends that may have been recommended by the board.

There is no general statutory requirement to hold annual meetings of other stakeholders (such as employees or creditors), unless the company operates in a regulated sector where specific governance or reporting obligations may apply.

Malta has a statutory beneficial ownership regime under the Companies Act and other beneficial ownership regulations, which require companies and certain other regulated entities to identify and register their ultimate beneficial owners.

A beneficial owner is generally any natural person who ultimately owns or controls, directly or indirectly, more than 25% of the shares or voting rights, or who otherwise exercises control over the entity. Companies must obtain and hold accurate and up-to-date information on their beneficial owners in an internal register and submit the relevant particulars to the MBR upon incorporation and within prescribed timeframes following any changes thereto. In the absence of any beneficial owner that has a qualifying percentage of ultimate ownership and/or control, the company will be required to disclose its senior managing officials; generally characterised as those persons being responsible for taking strategic decisions that fundamentally affect the business operations or general direction of the entity, and who exercise executive control over the daily or regular affairs of the entity through a senior management official.

In addition, companies are required to file an annual beneficial ownership confirmation form with the MBR confirming that the registered information remains accurate or notifying any updates. Failure to comply typically results in significant administrative penalties imposed on the company and its officers.

Corporate taxation

A company incorporated in Malta is considered both resident and domiciled in Malta. A company not incorporated in Malta is considered resident in Malta if the management and control of its business is exercised in Malta.

Companies which are resident and domiciled in Malta are subject to income tax on their worldwide income and chargeable gains. Companies that are ordinarily resident but not domiciled in Malta are taxable in Malta on a source and remittance basis, i.e., on income and chargeable gains arising in Malta and on income arising outside Malta that is received in Malta (such companies are not taxable in Malta on income arising outside Malta that is not received in Malta or on capital gains arising outside Malta, regardless of whether received in Malta). Companies that are neither incorporated nor resident in Malta are chargeable to tax in Malta only in respect of Malta-source income and chargeable gains, such as the income of a Malta permanent establishment (PE). The standard corporate income tax rate is 35% which may however be reduced through the application of a full imputation system and a tax payment and refund system.

From 2 September 2025, companies have the option to apply a tax rate of 15% on chargeable income, with any tax liability being deemed ‘final’ through the final income tax without imputation system (FITWI).

Taxable income

Taxable income inter alia includes gains or profits derived from a trade or business; dividends, premiums, interest, or discounts; rents, royalties, and other profits arising from property; any charge, annuity, or annual payment; and certain chargeable capital gains.

Capital gains inter alia arise upon a transfer of: (i) immovable property; (ii) securities, business goodwill, business permits, copyrights, patents, trademarks, trade names, and any other intellectual property; (iii) interests in a partnership; and (iv) beneficial interests in trusts that hold property.

Furthermore, certain categories of investment income are taxed at 10% or 15% while certain categories of rental income are taxed at 15%.

Branches are taxed at the same rates as domestic companies, that is, at the standard corporate income tax rate of 35%.

Full imputation and refund system

Relief for economic double taxation upon the distribution of taxed profits by companies is ensured by the application of the full imputation system of taxation and the tax payment and refund system.

The full imputation system of taxation ensures that the Malta tax liability suffered by a Malta registered company is credited in full to its shareholder/s in the form of a refundable tax credit upon the distribution of a dividend by that company of the profits on which the Malta tax was chargeable. By virtue of the full imputation system, no further tax is levied on dividends distributed out of the taxed profits of the distributing company.

In addition, any shareholder in whose favour a dividend has been declared by a company registered in Malta is, to the extent that it is registered for such purposes, entitled to claim a refund of all or part of the Malta tax paid by the company on the profits out of which the dividend is distributed. The refund to which the shareholder is eligible varies according to the type of income being distributed, with the most commonly applied refund being of 6/7ths of the underlying Malta tax paid by the distributing company.

Value Added Tax (VAT)

A taxable person established in Malta is required to register for VAT in Malta if, in the course of a trade or profession, they make supplies of goods or services in Malta that are VAT taxable or exempt with credit, or provide services to customers established in other EU member states for which VAT is payable solely by those customers under the reverse charge mechanism. A taxable person that is not established in Malta and is not registered for VAT in Malta is required to register when they become liable for the payment of Malta VAT on a supply (including VAT taxable ICAs and VAT taxable importations).

Taxable transactions

VAT is imposed on the supply of goods and services in Malta, the intra-Community acquisition (ICA) of goods in Malta, and the import of goods into Malta from outside the EU.

Rates

The standard VAT rate is 18%. Reduced rates of 0%, 5%, 7% and 12% apply in certain cases. Some transactions are exempt (e.g., banking and insurance services, the sale and leasing of immovable property).

Tax deductions

Expenses are typically deductible to the extent that they are wholly and exclusively incurred in the production of taxable income during the year preceding the year of assessment. However, in general, no deduction is allowed for any expenditure incurred for a capital purpose or of a capital nature.

Trade losses may be set off against income or capital gains of the relevant year and carried forward indefinitely to set off against income from subsequent years. Losses arising as a result of depreciation may be carried forward indefinitely and set off against the profits of the same and continuing activities. The carryback of losses is not permitted. Capital losses may be set off against capital gains of the current and subsequent years.

Any expenditure of a capital nature on intellectual property (IP) or any IP rights is deductible if proven to have been incurred in the production of income, and such deduction may either:

• be spread equally over a minimum of three consecutive years, the first year being that in which the said expenditure has been incurred or the year in which the IP/ IP rights are first used or employed in producing the income; or
• at the option of the claimant, be deducted in full in the year in which the said expenditure was incurred or in the year in which the IP or IP rights are first used or employed in producing the income, in so far as it is claimed against income produced through the use or employment of said IP/ IP rights.

Qualifying undertakings established in Malta are entitled to a notional interest deduction on their qualifying capital (e.g., share capital, share premium, interest-free debt, and positive retained earnings), which is capped at 90% of taxable income, with any excess able to be carried forward to be deducted against taxable income derived in future years.

Participation exemption

A Malta registered company in receipt of dividends or gains from an overseas investment which qualifies as a participating holding (usually an equity shareholding of at least 5%, although a number of alternative tests may apply) for Malta tax purposes would, subject to satisfying certain anti-abuse criteria, be entitled to apply the participation exemption in which case such income/gains would be exempt from tax in Malta.

Foreign tax relief

An ordinary tax credit with per-jurisdiction and per-source limitations may apply, or a (notional) flat rate foreign tax credit of 25% may apply to companies that receive, and are specifically empowered to receive, foreign-source income.

Incentives

Tax credits and other incentives are granted for activities such as manufacturing, information technology, research and development and innovative activities, environmental solutions, life sciences, pharmaceuticals, audiovisual productions, education and tuition, logistics, human inpatient and day care services, and hotel and guest house accommodation.

Incentives include the following:

(i) investment aid for initial investment projects, which comprises investment tax credits, cash grants, loan interest subsidies, and loan guarantees;

(ii) aid for micro-businesses and startups;

(iii) aid for value-added projects, including new business initiatives, startups, and expansion and transformation activities;

(iv) aid for research and development activities to resolve scientific or technological uncertainties;

(v) aid for workforce skills development;

(vi) aid for smart and sustainable investments and the optimization of resources;

(vii) allocation of industrial land and support for rental or acquisition of industrial space;

(viii) aid for digitalization of business processes; and

(ix) aid to support advisory and mediation services required by family businesses.

Employee schemes

Highly skilled individuals occupying defined ‘eligible offices’ (including senior roles within financial services, gaming, aviation, maritime and offshore oil and gas servicing, assisted reproductive technology, family offices, and STEM industries) are in principle eligible for a flat 15% income tax rate on qualifying employment income from the eligible office, subject to application and satisfaction of specific eligibility conditions, income thresholds and time limits.

Withholding tax

Malta does not generally levy any withholding taxes on outbound payments of dividends, interest or royalties, however, payments made by a Malta tax resident to a non-resident liable to tax in Malta shall be liable to a withholding tax of 35%. In addition, a withholding tax of 15% may apply on the distribution of certain profits to a Malta tax resident individual.

Property taxes

Transfers of immovable property are generally subject to an 8% final withholding tax, to be levied on the transfer value, subject to the following exceptions:

• transfers of immovable property acquired prior to 2004 are subject to a 10% final withholding tax; and
• transfers of immovable property, made within 5 years from the date of acquisition of such property, where the immovable property does not form part of a project, are subject to a 5% final withholding tax.

Stamp duty

Stamp duty generally is imposed on documents evidencing transfers of immovable property at a rate of 5% of the higher of the consideration or the real value.

It also applies on a transfer of marketable securities and/or an interest in a partnership at a rate of 2% of the higher of the consideration or the real value; however, a 5% rate applies to transfers of marketable securities in a company and/or an interest in a partnership where 75% or more of the company’s and/or the partnership’s assets consist of immovable property.

However, a company is eligible to obtain a stamp duty determination, whereby any transfers or disposals of marketable securities in, to or by the company would be exempt from Malta stamp duty. An application for such stamp duty determination would be made on the basis that the company satisfies one of the criteria contemplated in the domestic legislation.

Malta has a statutory public takeover regime that applies where the target company’s securities are admitted to trading on a regulated market in Malta. The regime is set out in Chapter 11 of the Capital Markets Rules (Takeover Bids) as published and supervised by the MFSA.

Chapter 11 regulates both voluntary and mandatory bids. A mandatory takeover bid is triggered where a person acquires a controlling interest (generally more than 50% of the voting rights), requiring an offer to all remaining shareholders at an equitable price. The rules also provide for squeeze-out and sell-out rights once high acceptance thresholds (typically 90%) are reached. The regime does not generally apply to private companies or unlisted targets.

Yes. Malta operates a mandatory merger control regime under the Control of Concentrations Regulations, Subsidiary Legislation 379.08 of the laws of Malta, enforced by the Malta Competition and Consumer Affairs Authority (hereinafter, the ‘MCCAA’).

A concentration shall be notified prior to implementation where the relevant turnover thresholds are met (based on turnover generated in Malta). Notifiable transactions are subject to a standstill obligation, meaning they cannot be completed until clearance is obtained. The MCCAA conducts a Phase I review (generally within six weeks) and may clear the transaction, clear it subject to conditions, or open a more detailed investigation if competition concerns arise.

Maltese law does not impose a specific obligation to negotiate M&A transactions in good faith or to conclude a transaction once negotiations have started. Parties are generally free to negotiate and withdraw, subject to contractual arrangements.

However, Maltese courts recognize the doctrine of culpa in contrahendo (pre-contractual liability), under which a party may be liable if it conducts negotiations in bad faith, for example by misleading the counterparty or breaking off advanced negotiations without justification. In practice, parties manage this risk through carefully drafted letters of intent and term sheets, clearly identifying which provisions (if any) are legally binding.

Employee protections primarily arise under the EIRA and Transfer of Business (Protection of Employment) Regulations, Subsidiary Legislation 452.85 of the laws of Malta. Where a transaction involves the transfer of an undertaking or business that retains its identity, employees assigned to that business automatically transfer to the buyer on their existing terms, and continuity of employment is preserved. The transfer itself cannot justify dismissals.

In such transfers, both the transferor and transferee shall inform and, where applicable, consult employee representatives in advance regarding the transfer, its reasons, and its legal, economic and social implications. These obligations typically arise in asset deals. In a share deal, the employing entity usually remains unchanged, so transfer-of-business rules do not normally apply, although separate consultation obligations may arise later if restructuring or collective redundancies are proposed.

Malta operates a foreign direct investment screening mechanism regime which applies to investments made by non EU investors aiming to establish or maintain lasting and direct links in order to carry on economic activity in Malta, including investments which enable effective participation in the management and control of a company carrying out an economic activity.

A mandatory prior notification is required where the investment may affect security or public order, particularly where the target operates in sensitive sectors such as critical infrastructure (including energy, transport, water, health, communications and data processing), critical technologies and dual-use items, supply of critical inputs, access to sensitive information or personal data, and media. The notification obligation applies not only to planned in-scope investments, but also before implementing certain post-investment changes, including changes to the business activity into a sensitive area, ownership changes resulting in at least 10% foreign ownership, or a change in direct or indirect control passing to a foreign investor; the notification must also include core ownership/UBO, value, activities, jurisdictions, funding and timing information.

Following notification, the competent authority may clear the transaction (with or without conditions) or prohibit/unwind it where it affects security or public order.

Malta does not operate exchange control restrictions. As an EU Member State and part of the Eurozone, there are no limitations on the movement of capital into or out of Malta, and dividends, interest, loan repayments and capital may be freely repatriated, subject only to compliance with applicable anti-money laundering and tax reporting obligations.

The most common ways to wind up, liquidate, or dissolve an entity in Malta depend mainly on whether the company is solvent, qualifies for a simplified strike-off procedure, or requires court involvement.

Members’ voluntary winding up

A members’ voluntary winding up is available only if the directors issue a declaration of solvency confirming, after full inquiry, that the company can pay all its debts in full within a stated period not exceeding twelve months from dissolution. The declaration must be made shortly before the dissolution resolution, filed with the dissolution notice, and supported by a recent statement of assets and liabilities. Directors face criminal liability if the declaration is made without reasonable grounds, and a failure to settle debts within the stated period creates a presumption that the grounds were not reasonable. After dissolution, the company files the resolution, ceases trading except for winding-up purposes, appoints a liquidator to realise assets and settle liabilities, and the liquidator files periodic progress statements if the process runs beyond twelve months.

Malta has also introduced a new, simplified voluntary dissolution and striking-off procedure available to eligible companies registered for at least six months, excluding regulated entities and public limited companies. This procedure is only available if, in the preceding six months, the company has not changed its name, traded, employed non-officer employees, pledged shares, or had outstanding Registrar filings or penalties. It requires submission of a prescribed application that includes directors’ declarations confirming (among other points) no pending proceedings, liabilities settled or written off, no assets exceeding €5,000, nothing due to the Government of Malta, and all bank accounts closed. If the Registrar is satisfied, a notice is published and the company is struck off after three months, with possible court restoration thereafter and continuing potential liability of officers and members despite the strike-off.

Creditors’ voluntary winding up

If no declaration of solvency is made and delivered, the voluntary winding up is a creditors’ voluntary winding up. In addition, even where a members’ voluntary winding up starts with a declaration of solvency, if the liquidator later forms the opinion that the company will not be able to pay its debts within the period stated in that declaration, the liquidator must immediately summon a meeting of creditors and lay before it a statement of the company’s assets and liabilities, and the provisions applicable to the creditors’ process then apply.

Court-ordered winding up

Court-ordered winding up in Malta is a formal process initiated when a company meets specific statutory grounds, such as prolonged business suspension, insolvency, or a reduction in members or directors below the legal minimum. An application may be made to the court by the company, its directors, creditors, contributories, or the Registrar, and after considering submissions from relevant parties, the court may issue a winding up order and appoint a liquidator to manage the process. Once the order is made, the company is deemed dissolved, its business ceases except for winding up purposes, and the liquidator is responsible for settling liabilities and distributing any remaining assets.

Defunct company procedure

The Registrar may strike a company off the register where there is reasonable cause to believe it is not carrying on business or is not in operation, typically after an inquiry letter and a published notice giving a three-month period to show cause (with assets devolving to the Government of Malta). A similar notice-and-strike-off process can apply in certain voluntary winding up cases where no liquidator appears to be acting (or the winding up appears complete) and the required liquidator filings are significantly overdue. An aggrieved interested person may seek restoration by court application within five years, and liability of directors, officers, and members may continue notwithstanding the strike-off.