How to start your own business in Malta
by Yellow 78 Days
Many are those who aspire to set up their own business in Malta. While some simply dream about the prospect of having their own business, others take the plunge and make things happen.
For the past few years, over 11,000 new businesses have been registered annually in the Maltese islands, with the rate of closures fluctuating around the 5,000 mark, according to the National Statistics Office.
But before these businesses could start acting on their big idea, they had to take the time to fill in the paperwork and set up the necessary legal structures.
If you’re thinking of setting up your own business but feel overwhelmed by the bureaucratic process that precedes it - don’t. There’s a lot of support out there. This article, written in collaboration with Business 1st, aims to clarify the main points and help you start making sense of what you need to start cashing in on your dream.
1. Planning - Have a clear concept
Your first step is to ensure you have a clear vision in mind by creating a business plan. This is essentially a written description of what your business is all about - what you plan to do and how you’ll get there.
Your business plan will include your goals, strategy, potential problems you may face and how to address them, the organisation’s structure, people’s titles and responsibilities, and the amount of money you’ll need to finance your business. When it comes to planning the financial part, it’s important to take time to gain a clear understanding of how you’re going to cover initial expenses such as legal and consultation fees, telephone and internet bills, office rental, utility bills etc.
Your business plan will set the foundation for your brand. Having a clear picture of what your business is and why it exists will enable you to build a strong brand that will stand out from your competition.
2. Form it - Decide on the legal set-up
This is an important decision. What legal format will your business have? Here’s a basic description of the main types of business set-ups in Malta. You’ll also find links directing you to where you can find more detailed information on the subject.
Image source: National Statistics Office
As a sole trader you and your business are effectively one and the same – both from a tax and legal perspective. As a business owner you will be personally responsible for the business and any debts incurred - which is the biggest risk of operating as a sole trader. All profits also go to the owner. The main advantage is that it’s quick to set up and requires very few formalities.
Sole traders must register with Jobsplus as self-employed or by filling in this form.
A partnership is the simplest way for two or more people to run a business together. There are different types of partnerships, all of which require partners to form a Deed of Partnership through a notary, detailing the role, rights and obligations of the partners involved.
A non-registered partnership is similar to sole trader status but, instead of having one owner taking on the tax and legal responsibilities, this is shared amongst the partners who are individually registered as self-employed with Jobsplus. Similar to sole traders, non-registered partnerships can start trading as soon as all the permits and registrations are in place.
A registered partnership, on the other hand, involves the formation of a legal personality distinct from that of its members. In Malta, a registered partnership can be a general partnership or a limited partnership.
In a general partnership, partners share equal rights and responsibilities. Each partner assumes full and equal responsibility for all of the business’s debts and obligations. A limited partnership allows each partner to restrict his or her personal liability to the amount of their business investment. But there must be at least one general partner who accepts to retain unlimited liability whilst retaining the right to control the business.
Limited Liability Company
This is the most common type of business in Malta. As with registered partnerships, a limited liability company is a legal entity in its own right, separate from those who own it (shareholders). This is the major benefit of operating as a limited liability company, since the personal assets of shareholders are protected.
A limited liability company (Ltd) can be public or private. Setting it up takes time, since companies have to follow a pre-defined process of registration and set-up before they can start operating. These include having a registered office (in Malta), shareholding, directors and a company secretary, and depositing a minimum share capital that depends on the company’s size.
This type of company can be set up (according to the Companies Act) once a Memorandum of Articles and Association, and other documentation, are submitted to the Registrar of Companies, which then issues a certificate of validation.
Registration fees come into play here, depending on the type and size of the business in question. It’s also important to note that closing down a limited liability company is a lengthy process. Most start-ups initially opt to register a sole trader or partnership status to avoid the bureaucratic process it takes to set up a company.
3. Obtain the necessary licences and permits
Depending on your line of business, you will need to ensure you have all the necessary licences and permits required by law.
Since January 2017, many businesses no longer need to have a trade licence to operate - except for those operating in very specific categories. These are: street and market hawkers, auctioneers, car boot sales, door to door sales, marketing agents, commercial fairs and exhibitions, and buskers. Those businesses can apply for a trade licence by filing in the relevant online form.
Other services also require documentation. These include:
- catering establishments
- food and safety certificate
- trade operator licence
- tourist guide licence
- veterinary surgeon’s warrant
- tables and chairs permit
- public entertaining permit
- healthcare standards licence
4. Register for Income Tax and VAT
Any business that carries out an economic activity in Malta must register for a tax registration number with the Commissioner for Revenue. This is done by filling in a form through which, if you are employing people, you can also obtain an employer number (PE). Maltese self-employed need not register with the Commissioner for Revenue, as their tax registration number would be the same as their ID Card number.
If you’d like more information about tax, you can view the detailed income tax rates in Malta compiled by Finance Malta or the Commissioner for Revenue website. More information and details for foreigners can be found here.
All businesses must register with the VAT office. Once you have registered your business, you will need to request a new VAT number from the VAT Department. This procedure can be carried out online via the following link or through Business 1st.
5. Register your employees
When setting up a new business, you will need to inform Jobsplus of the change in your employment status.
If you will be employing people, you’ll need a PE number in order to retain and pay taxes related to national insurance. Maltese companies can apply for an employer number online. Once the employer number has been issued, the company must then register its employees with Jobsplus by filling in this form.
6. Other things to keep in mind
Depending on the nature of your business, there may be other boxes you’ll need to tick. Here are some of them:
If your business will be collecting the personal data of customers, you need to ensure you have the necessary structures in place to protect their personal information in line with the EU’s General Data Protection Regulation (GDPR). For more information about data protection, visit the website of the Office of the Information and Data Protection Commissioner.
As a business owner you need to safeguard yourself against the unforeseen by investing in insurance protection. While some insurances are required by law (such as employers liability insurance covering expenses in case of injury at work), others are optional (commercial property insurance, for example). Then there are other types of insurance that depend specifically on your line of work. It’s best to obtain professional advice to determine the best and safest insurance options for your line of work.
If you are renting out or buying property to use for business purposes, confirm that the premises is covered by the necessary planning permits. For more information, you can visit the Planning Authority’s website.
Are you ready to take the plunge and open your own business? If you need some additional support running or growing your business, you can reach out to one of these business consultants listed on Yellow.
And once you’re all set up, don’t forget to list your business on Yellow to be found in a matter of seconds by thousands of potential customers every day.
Whatever you decide to do, keep discovering local - yellow.com.mt.