Every business start-up raises the question: Which legal form should the new company have? In most cases, the choice falls on a corporation, such as a GmbH. In this case, persons who pursue a common business purpose join together. These are corporations under private law.
There are also various forms of corporations abroad. These include running a limited company, which has its origin in England. It roughly corresponds to the UG (limited liability company), a sub-form of the GmbH. You can establish a limited company in England, but you must have at least one office address there.
Low taxes, low capital requirements
If you have a Limited, which has German branches, you need to register with the commercial register and trade office in Germany. If the company is located in Germany, the IHK also has access and taxes are levied. Otherwise one is taxable in England. A trade tax does not have to be paid there, but 20 percent corporation tax. That is however only one advantage of the Limited in relation to enterprise forms in Germany.
As with a German UG one does not need much capital for the establishment of a Limited – a British Pound is sufficient. To the comparison: For a GmbH at least 25,000 euro are to be made insert with establishment. Accordingly the partners of a Limited are responsible also only with one pound. Beyond that pass on the average only ten days between request and permission of a Limited, while with a GmbH gladly half a year can last. A notarial certification of the enterprise establishment is not necessary.
A Limited also has disadvantages
What, on the other hand, is needed: A partnership agreement. On the one hand, it must be written in English and in accordance with local law. This is one reason why the formation of a limited company is usually left to a local service provider. Their legal advice is quite expensive and there are not only reputable providers. Recommended are law firms under the supervision of the ACCA (Association of Chartered Certified Accountants).
In addition to legal advice, the office address in England costs as much money as the local representation. There is savings potential through a P.O. box, but that is not everyone’s cup of tea. The alternative is to use a somewhat reputable P.O. box as a company address in England. Money also swallows up the balance sheet, which must be presented in GAAP format. Those who do not work carefully here must expect fines or even harsher penalties. In addition, the balance sheet must be audited by a Maltese auditor – costs and effort are incurred.
Alternative to the English Limited: Malta
Nevertheless: Some German business start-ups rely on a Limited. This is also the case in Malta – where the weather is known to be much better than in England. In addition, Maltese limited companies are more respected because the share capital is not just one pound sterling, but just under 1,200 euros. However, only 20 percent of this has to be paid in. As the official language is English, Malta has no disadvantage compared to England in this respect.
Low tax rates are another plus. Although corporate income tax, which must be paid nine months after the end of the financial year at the latest, is 35 per cent, 80 per cent of this is paid back to foreign shareholders two weeks after payment or submission of the corporate income tax return and a refund application by the Maltese tax office. It does not take longer, because the two weeks are prescribed by law. Thus, the effective tax rate is only five percent – unrivalled in the EU.
High tax refund with restrictions
There is, however, one catch that we do not wish to conceal: Since the refund from the tax office goes to the shareholder and not to the company, he has to pay tax on his income tax at his place of residence. If the Maltese Limited is a subsidiary of a German GmbH, the GmbH has to pay 30 percent tax on the refunded amount. This tax disadvantage can be avoided, for example, with a Maltese intermediate holding company as a shareholder of the limited company.
A distinction must be made here:
Partner lives in Malta: The new holding company becomes a Scottish or English limited partnership.
Shareholder does not live in Malta: The new holding company is also established in Malta and receives the profits and tax refunds.
Apart from tax savings, a Malta Ltd. has other advantages over an English Limited. For example, the island state in the Mediterranean belongs to the Euro zone. The forthcoming Brexit in Great Britain will also unsettle many companies. The request of a value added tax ID in England lasts up to a half year and presupposes a minimum conversion of 67,000 British pounds. In Malta, this is done within two to three weeks – without any financial hurdles.
For some industries Malta offers another reason for having a company headquarters: While it is quite impossible to obtain a license for offering lotteries, games and the like in this country, it is quite uncomplicated there.
Lotteries and Gaming Authority licenses are valid for five years. The Authority also monitors providers on a regular basis. Malta is not only interesting for providers who offer their services on the Internet, but for the reasons described above for anyone who wants to start a business.