In an era of increased regulatory scrutiny and transparency, substance has become a critical factor in corporate structuring and tax planning. Both the EU and local tax authorities have taken significant steps to prevent tax avoidance and ensure that companies have real economic presence in their jurisdiction of incorporation.
One of the most notable recent developments is the EU’s Unshell Directive, which aims to tackle the misuse of shell companies for tax purposes. The directive establishes minimum substance requirements for companies operating within the EU, emphasizing the need for real economic activity in the country of incorporation. This has direct implications for companies incorporated in Malta, a popular jurisdiction for business structuring due to its attractive corporate framework.
Minimum Substance Requirements for a Malta Company
To ensure compliance with regulatory requirements and avoid potential challenges from tax authorities, companies incorporated in Malta must demonstrate adequate substance. This means:
Having a real economic presence: Companies should have physical office space and, where possible, local employees actively carrying out business operations.
Appointing qualified directors: Directors should be knowledgeable about the company’s operations and capable of making independent decisions.
Holding board meetings in Malta: Regular board meetings should take place in Malta, and minutes should be properly documented.
Maintaining local business operations: Where applicable, the company should have contracts, transactions, and operational activities taking place within Malta.
Failure to meet these minimum substance requirements could result in adverse tax implications, including the risk of being classified as a ‘shell entity’ under the Unshell Directive, potentially leading to tax reclassifications or denials of treaty benefits.
How Quazar Can Assist
At Quazar, we understand the evolving regulatory landscape and the importance of ensuring that your Malta company meets substance requirements. We provide tailored solutions to support businesses in achieving and maintaining compliance, including:
Directorship Services: We offer professional directorship services, ensuring that your company has qualified and knowledgeable directors who understand your business operations and regulatory obligations.
Company Secretary Services: Our team ensures that all corporate governance and compliance requirements are met, including filing obligations and maintaining statutory records.
Registered Office Services: We provide a registered office address in Malta, fulfilling legal requirements and offering additional substance to your corporate structure.
Tips from Quazar to Strengthen Your Company’s Substance
To avoid complications and ensure compliance, we recommend the following best practices:
Obtain a Tax Opinion Before Setting Up: Seeking a qualified tax opinion before establishing your Malta company helps create an airtight corporate structure and prevents potential tax challenges in the future.
Appoint Qualified Directors: Having experienced and knowledgeable directors who understand your business activities is essential for effective governance and substance requirements.
Set Up an Office in Your Jurisdiction of Operations: Depending on the scale of operations, a fully functioning office with active employees or, at minimum, a registered office is necessary to demonstrate real presence.
Hold Regular Board Meetings in Malta: Regular meetings—ideally on a quarterly basis—should take place in Malta, with proper documentation and records maintained.
Contact Our Specialist Corporate Team
Ensuring that your company meets the required level of substance is crucial for compliance and long-term success. With increasing regulatory oversight and evolving tax laws, businesses must take proactive steps to secure their standing and avoid potential legal and financial repercussions.
At Quazar, we provide comprehensive corporate services to help businesses navigate these requirements effectively. Whether you need support with directorship, company secretarial services, or establishing a registered office, our team is here to assist.
Contact us today to discuss your corporate needs and ensure your Malta company is fully compliant.
Get in Touch:
Matthew Aquilina
maquilina@quazar.mt / +356 2388 4600
