Setting Up a Sole Trader in Malta

The first step when opening a business in Malta is to select the type of business that suits you best. Some of the most employed types of structures in Malta are the sole trader, partnerships and limited liability companies. The simplest form to start a business is by setting up a sole trader or partnership in Malta.

Choosing the right type of business is very important and our lawyers in Malta can explain in detail what each type of company requires in order to be able to operate. We can also help foreign and local entrepreneurs with the procedure of registering as sole proprietors in Malta.

The Maltese sole proprietorship

The sole trader is the simplest and easiest form of doing business in Malta. The sole trader is basically a self-employed individual. He is required to obtain certain permits or licenses according to the Commercial Code, register with the Employment and Training Corporation as a self-employed and with the Inland Revenue for taxation purposes and then start operating.

The sole trader will be funded by the owner and the liability for the debts of the business will also fall on him or her. The best part when setting a sole trader in Malta is that all profits will go to the individual that established the business. It is also important to know that if a sole trader’s returns exceed 35,000 euros for goods or 24,000 euros for services, he or she must also register for VAT with the Maltese authorities.

Registration requirements for a sole trader in Malta

Compared to registering another business form in Malta, the requirements for setting up a sole trader are less stringent and require fewer documents. It is important to know that the Maltese sole trader does not need to reserve and register a trade name with the Companies Register, as the person will run the business in his or her name. In other words, the name of the self-employed person will also be the business’ name.

The establishment of a sole trader in Malta does not require a specific share capital, such is the case of the private limited liability company for example. Even so, the registrant needs to consider the proper amount of money which needs to be deposited for starting and conducting the business activities.

In respect to the documents which need to be prepared for starting a sole proprietorship in Malta, there is no need to draft any specific document, as the application forms which need to be filed are issued by the authorities.

Considering the sole trader is a good option for certain categories of professionals, it is possible for the persons seeking to register as Maltese sole traders to submit diplomas or other documents attesting to their professions or qualifications. In the case of foreign applicants, the documents need to be recognized by the Maltese authorities. The translated and certified copies of these documents will be required.

Our lawyers in Malta can explain how professionals can register as sole traders in this country. They can also advise on the documents which need to be filed.

Who can register as a sole trader in Malta?

According to the Company Law in Malta, any person can register as a sole trader in Malta. However, there are a few requirements which need to be met. The requirements are explained below:

• -          Maltese citizens are eligible to register sole proprietorships under certain conditions in this country;
• -          foreign citizens will first need to obtain residence permits in order to set up sole proprietorships in Malta;
• -          the person registering as a self-employed individual must have a social security number, no matter his or her citizenship;
• -          the identification papers submitted when registering as a sole trader need to be in their validity period.

In the case of Maltese citizens, the ID is sufficient to register as a sole trader. In the case of foreign citizens, the passport must be accompanied by the Maltese residence permit.

Our Maltese lawyers can offer more information on the requirements applicable to foreign citizens interested in registering as sole traders in this country.

It is important to know that most of the times the sole proprietorship is often used by doctors, dentists, accountants, IT professionals and lawyers in Malta. These are professions which can also be completed under the form of partnerships in Malta.

What are the taxes a sole trader must pay?

Depending on the residence of the individual, when setting up the sole trader in Malta, the individual will be subject to the income tax and capital gains tax. The income tax may reach a maximum of 35%, but the rate depends on the marital status of the individual and whether he or she has children. Foreign citizens establishing a sole trader will be applied the income tax on the profits they make in Malta and the capital gains tax.

Documents required to open a sole proprietorship in Malta

The Commercial Code does not require an individual to register with the Trade Register when doing business as a sole proprietor. Foreign individuals must obtain an employment pass and register for social security before starting operating. Then, the sole trader must also apply for a tax number and register for VAT. If the trader wants to import or export goods within the EU, they are also advised to obtain an EORI number.

Our law firm in Malta can assist sole traders in registering for taxation purposes.

Licensing requirements for sole traders in Malta

Just like any other company in Malta, the sole trader will also need to obtain specific licenses based on the activities he or she will undertake. The only exception applies to professionals who are qualified in a specific domain.

Sole traders setting up catering businesses, for example, will need to comply with all the requirements imposed by the Malta Tourism Authority and obtain a catering establishment license.

Small salespersons also need to obtain special licenses, based on the types of products for they sell. One of the most common licenses issued for such activities is the trading license which is issued to sole traders selling goods in non-fixed locations. Also, the market and street hawker licenses are available for sole traders in Malta.

Our Maltese lawyers can offer more information on the licensing requirements applicable to any business form, including sole proprietorships.

What are the advantages of setting up a sole trader in Malta?

The sole trader is the easiest way of starting a business in Malta and requires no setup or registration costs. In terms of taxation, the sole trader must submit one tax return a year. Registering as a self-employed also means less bureaucracy in Malta. The sole trader offers total control and ownership over the business.

FAQ on sole traders in Malta

1. Is it hard to register a sole trader in Malta?

No, it is not hard to register as a sole proprietorship in Malta.

2. How long does it take to set up a sole proprietorship in Malta?

The registration of a sole trader in Malta takes a few days to complete.

3. Do I need to open a bank account if I am a sole trader in Malta?

Yes, you will need to set up a bank account for your business in Malta.

4. Do I need a separate legal address for the sole proprietorship in Malta?

No, your home address can be the legal address of your business.

5. Can I change the sole proprietorship to another business form?

Yes, you can. It is advisable to change the sole trader to a limited liability company at the moment your business starts to register significant incomes.

Our attorneys in Malta will guide you through the registration process of your company and will provide you all the required information about the taxation system, so do not hesitate to contact us.