Key Legal Points

• Incorporation and governance governed by the Companies Act (Cap. 386) and the MFSA Registry of Companies framework.
• Trading income taxable at 35%, subject to the full imputation system and potential 6/7ths shareholder refund under the Income Tax Act (Cap. 123).
• VAT implications depend on the EU place-of-supply rules contained in the Value Added Tax Act (Cap. 406).
• Cross-border trading structures must meet economic substance expectations through real value creation in Malta.
• Ongoing obligations include annual returns, financial statements, tax filings, VAT reporting, and UBO declarations.

Executive Summary

Malta trading companies are widely used by international entrepreneurs, owner-managed businesses, family-owned groups and multinational operators seeking a stable, EU-based corporate platform for commercial activity. Malta’s corporate framework is grounded in established legal principles, supported by an efficient regulatory environment, and complemented by a corporate tax system designed around the full imputation method, ensuring that profits are not taxed twice.

A Malta trading company may operate in import–export, distribution, procurement, digital commerce, wholesale supply, or regional commercial coordination. While the corporate tax rate is 35%, Malta’s refund system for shareholders may reduce the effective tax leakage for non-resident shareholders upon distribution of taxed profits. With a 6/7ths refund for eligible shareholders, the use of a Malta company for trading operations proves to be very attractive.

This publication provides a detailed overview of the legal, tax and operational framework relevant to trading companies in Malta, with emphasis on practical application, regulatory expectations and forward-looking compliance considerations.

Understanding Malta Trading Companies

A Malta trading company is a limited liability entity established to carry out commercial activities involving the sale of goods or services. The concept is intentionally broad, allowing businesses to structure a wide range of activities within a single company, including:

• import–export of goods
• wholesale and distribution
• commodity trading
• software and digital product sales
• e-commerce operations
• group procurement or logistics functions
• mixed models involving both goods and services

Malta’s corporate legislation is designed to provide flexibility while maintaining proper governance. Trading companies may be incorporated as:

• private limited companies (Ltd) – the common structure for trading
• single-member companies – suitable for entrepreneurs and owner-managed structures
• public limited companies (plc) – where listing or wide shareholding is contemplated

A trading company may combine operating and holding functions, provided internal arrangements are clear and compliance obligations are properly managed.

The distinction between Malta-based trading operations and cross-border trading arrangements is important. Both are legitimate, but cross-border models must be supported by meaningful decision-making, governance and commercial justification.

Transfer pricing

Malta has adopted a transfer pricing regime consistent with OECD guidelines. In practice, trading companies must ensure that intra-group pricing:

• is commercially defensible
• reflects the real value created in each jurisdiction
• aligns with the functions, assets and risks allocated to Malta

Documentation is increasingly important, particularly where the company forms part of a wider international group.

Practical Structuring Options

A Malta trading company may serve various roles within an international business model:

• principal trading entity leading regional or global trade
• procurement or sourcing hub consolidating group purchasing
• distribution centre managing supply and regional logistics
• merchant-of-record for e-commerce operations
• supporting trading entity within a broader group supply chain

The choice depends on commercial substance, operational capacity, and strategic function.

In all scenarios, the model must be grounded in commercial logic, supported by governance structures and decision-making in Malta.

Why Malta for Trading Activity

A dependable EU commercial jurisdiction

Malta is a fully-fledged EU Member State with a commercial, legal and tax system that is widely understood and respected. Businesses benefit from a stable environment, predictable policymaking and clear ties to EU law and regulatory frameworks. For international entrepreneurs, this provides reassurance and continuity.

Access to EU markets and regulatory alignment

Operating through a Maltese entity grants access to the EU internal market, simplifying movement of goods, services and capital. EU regulatory alignment ensures that commercial operations are governed by familiar principles, increasing certainty when dealing with EU counterparties.

Well-established corporate and tax system

Malta’s corporate tax framework is grounded in long-standing statutory provisions and administrative practice. The full imputation system prevents double taxation and forms the basis of Malta’s approach to corporate taxation, offering clarity to both shareholders and businesses.

Strategic location for regional operations

Malta sits at the intersection of European, North African and Middle Eastern markets, making it a suitable base for companies coordinating regional supply chains or dealing with multiple jurisdictions.

English-speaking professional ecosystem

The professional, legal and regulatory environment operates in English, supported by accountants, auditors and tax specialists experienced in cross-border structures.

Corporate Tax Treatment

Statutory corporate tax: 35%

Profits of a Malta trading company are subject to a tax rate of 35%. This tax is paid at the company level.

Full Imputation System

When dividends are distributed, shareholders receive a credit for the tax already paid by the company. This prevents double taxation of the same profits and forms the basis of Malta’s long-established corporate tax policy.

Shareholder Tax Refunds

Where the shareholder is not resident in Malta, refunds are available once a dividend is distributed out of taxed profits. The most relevant to trading companies is:

• the 6/7ths refund, typically applicable to active trading income

Other refund mechanisms may apply in specific circumstances (e.g., 5/7ths for passive interest and royalties, 2/3rds where double taxation relief is claimed).

Deductible expenses

A Maltese company may deduct all expenses incurred wholly and exclusively in the production of its income. These include:

• cost of goods sold
• transport and logistics
• staff costs
• marketing expenditure
• administrative costs
• outsourced operational support

Provided the expenditure is properly documented and commercially justified, it is normally taxable on a net-profit basis.

No withholding tax on outbound payments

Malta does not impose withholding tax on dividends paid to non-resident shareholders, and in most cases does not impose withholding tax on interest or royalties paid to non-residents.

VAT Considerations

VAT treatment depends on the type of supply and the relevant place-of-supply rules under EU and Maltese legislation.

Import–export operations

The importation of goods may give rise to import VAT, often reclaimable. Exported goods are generally zero-rated, provided evidence of export is retained.

Intra-EU trading

Intra-Community supplies to VAT-registered counterparties are exempt with credit, while intra-Community acquisitions may be taxable but deductible, depending on the VAT registration category.

Digital and distance-selling models

Digital products and online services follow customer location rules, and distance-sales thresholds may trigger VAT obligations in other EU Member States.

VAT registration in Malta may be required under:

• Article 10 (standard taxable person)
• Article 11 (small undertaking exemption, not typically suitable for trading businesses)
• Article 12 (VAT on acquisitions only)

Correct categorisation is important to ensure proper VAT treatment.

Legal Framework for Malta Trading Companies

Trading companies in Malta are regulated primarily by:

• the Companies Act (Cap. 386), which governs incorporation, governance and reporting
• the Income Tax Act (Cap. 123) and related rules governing corporate taxation
• the Value Added Tax Act (Cap. 406) governing VAT treatment
• sector-specific legislation, where relevant (e.g., product regulation, logistics, import controls)

Under the Companies Act, directors must ensure proper management, maintain accurate records, convene annual general meetings, and prepare annual financial statements in accordance with accounting standards. The company must file:

• an annual return
• audited financial statements (unless exempt as a small company)
• tax returns
• VAT returns, where applicable

The Registry of Companies enforces these obligations to maintain transparency, corporate integrity and shareholder protection.

Operational & Governance Considerations

Banking and payment infrastructure

Banking arrangements depend on the nature of the trade and the jurisdictions involved. Options include Maltese banks, other EU banks, and reputable electronic money institutions. AML/KYC processes must be factored into operational planning.

Corporate governance

Directors must exercise independent judgement, ensure compliance, and maintain proper records. Board meetings should be held in Malta, with minutes capturing substantive decision-making. Oversight of trading activity must be demonstrably rooted in Malta.

Accounting, audit and reporting

All Malta trading companies must keep proper accounting records. Most companies are subject to audit, unless exempt as small companies under defined thresholds. Tax returns, VAT returns, annual returns and financial statements must be filed within statutory deadlines.

Commercial contracts

Contracts should reflect the company’s role in the supply chain. This includes clear terms for procurement, distribution, warehousing, logistics, licensing and risk allocation.

Licensing and regulatory compliance

Some activities (e.g., pharmaceuticals, regulated commodities, food products, aviation-related goods) require specific permits. Companies must ensure compliance before commencing such activities.

Cross-Border Trading and Substance Requirements

Cross-border trading structures require careful analysis to ensure alignment with international tax standards and domestic regulatory expectations. Across the EU and OECD, the economic substance of a company is increasingly scrutinised.

Substance through real value creation in Malta

Substance for a Malta trading company involves demonstrating that genuine commercial activity and decision-making take place in Malta. While operational models differ, the following elements are particularly relevant:

• board-level decision-making carried out in Malta, supported by local directors who meaningfully participate in decisions
• commercial functions located in Malta, such as procurement, contract negotiation, order management, or financial control, depending on the business model
• relevant human capital in Malta, whether through directly employed staff or specialised outsourced functions that bring meaningful expertise to the structure
• premises appropriate to the scale of activity, such as office space used for management, administrative or commercial functions
• risk management and oversight embedded in Malta, demonstrating that key risks associated with trading operations are controlled locally
• documented rationale for why Malta is the commercial centre for the activity, consistent with transfer pricing principles

The emphasis is on real economic relevance, not formality. Companies must be structured so that Malta is the natural locus for the trading function.

What This Means for You

A Malta trading company offers a reliable and legally robust platform for businesses seeking an EU-based trading presence. With proper planning, meaningful substance, and sound commercial implementation, Malta can serve as a strategic base for cross-border operations, supported by a stable tax system and an experienced professional ecosystem.

How Our Malta Corporate Lawyers Can Help You

Our Corporate, Commercial and Tax lawyers assist with the establishment, structuring and day-to-day support of Malta trading companies. We provide guidance on incorporation, governance, tax and VAT treatment, cross-border structuring, substance planning and long-term operational compliance.