For companies looking to leverage Malta's advantages, simply registering here isn't enough anymore. To prove "real presence" and satisfy substance requirements, your company needs to establish a tangible economic footprint on the island. There's no fixed rule for "how much is enough," as it depends entirely on your business's nature and size. However, these are the critical elements:
1. Robust Management & Control
This is the cornerstone. Your key decisions must genuinely be made and executed right here in Malta. This means:
✓ Malta-resident directors: Appoint qualified directors who live in Malta and are actively involved in your company's strategic and operational decisions.
✓ Regular board meetings in Malta: Hold frequent, physical board meetings in Malta where significant business matters are discussed, decided, and formally documented. These shouldn't be mere formalities.
✓ Documented decisions: Keep meticulous records (minutes, resolutions) that prove key decisions are made and implemented from Malta.
2. Tangible Physical Presence
Beyond just a registered address, showing you have a physical base is crucial:
✓ Dedicated office space: For substantial operations, having your own dedicated office in Malta is the strongest indicator of substance.
✓ Serviced offices/co-working spaces: These can work if they're genuinely used for active work, meetings, and demonstrate real accessibility.
✓ Proportionate space: Your office size and facilities should match your company's activities.
3. Local Personnel & Operations
Employing local talent and conducting core activities here adds significant weight:
✓ Local employees: Hire enough qualified personnel in Malta who are directly involved in your company's Core Income-Generating Activities ("CIGAs").
✓ Proportionate staffing: The number and skill sets of your employees should match your business' scale and complexity.
✓ Core activities performed locally: Critical operational tasks should ideally be performed by, or genuinely managed from Malta by, key personnel.
4. Demonstrable Operational Expenditure
Show your real economic footprint through local spending:
✓ Local expenses: Incur operational costs in Malta that are proportionate to your business activity. This includes salaries, rent, local professional fees (legal, accounting) and utilities.
5. Bank Accounts & Financial Management
Primary bank account in Malta:
✓ Operate your main corporate bank account in Malta for significant business transactions, proving local financial management.
Why This Matters Now
Global initiatives like the Organisation for Economic Co-operation and Development ("OECD")'s Base erosion and profit shifting ("BEPS") Project and the European Union ("EU")'s upcoming Unshell Directive are pushing for more transparency and targeting "shell companies" with no real economic activity. Failing to demonstrate substance can lead to serious consequences:
• Tax reclassification: You could lose tax benefits and potentially face higher taxes elsewhere.
• Denial of treaty benefits: You might be unable to use Double Taxation Agreements.
• Reputational damage: Being labelled a "letterbox company" can harm your brand.
• Penalties: You could face fines and legal repercussions.
Malta remains a fantastic jurisdiction, but genuine substance is now the foundation for sustainable and compliant international operations. It's crucial to work with local experts who can tailor a substance strategy specifically for your business model.
