Table of Contents
- Malta vs. Ireland: Which EU Location Is Right for Your Business?
- Malta as EU Headquarters: The 6/7ths Rule and Other Tax Advantages
- Ireland: The Preferred EU Hub for Tech Giants and IP Holdings
- Holding Structures for Companies with €10+ Million Turnover
- Practical Implementation: From Planning to Execution
- Compliance and Substance Requirements in Malta and Ireland
- Cost Comparison and ROI Calculations for Both Locations
Recently, I met with a client whose software company just surpassed the €15 million mark.
His question was simple: Richard, should I go to Malta or Ireland?
My answer caught him off guard:
It depends on whether you prefer dividends or IP structures.
This is the core difference between Malta and Ireland. Malta shines with its famous 6/7ths rule for dividend distributions. Ireland, on the other hand, is the gold standard for Intellectual Property Holdings and complex group structures.
But let me be frank:
Both countries have their merits. The only question is: Which location fits your business model and your long-term goals?
In this article, I’ll take you on a detailed journey through both EU jurisdictions. We’ll look at more than just tax rates—practicalities matter, too. From substance requirements to setup costs.
There’s one thing I can promise: After reading this, you’ll know exactly which location is the right fit for your business.
Ready? Lets develop your optimal EU headquarters strategy together.
Malta vs. Ireland: Which EU Location Is Right for Your Business?
Before we dive into the details, let me clear up a common misconception:
It’s not just about where you’ll pay the lowest taxes.
It’s about where you can build the best overall structure for your business.
The Key Differences at a Glance
Malta and Ireland follow entirely different tax philosophies. That’s essential to understand.
Aspect | Malta | Ireland |
---|---|---|
Corporate Tax | 35% (effective 5% via 6/7ths rule) | 12.5% on trading profits |
Specialization | Dividend-optimized structures | IP holdings and licensing setups |
Minimum Substance | Moderate requirements | Stricter substance expectations |
Setup Complexity | Medium | High |
International Reputation | Good in EU | Excellent globally |
Who Is Malta the Better Fit For?
Malta is ideal for entrepreneurs with the following priorities:
- Regular Dividend Distributions: The 6/7ths rule makes Malta unbeatable for profit payout
- Simpler Structures: You want to avoid overly complex arrangements
- EU Focus: Your business is mainly concentrated in Europe
- Moderate Compliance Requirements: You prefer less bureaucracy
When Should You Choose Ireland?
Ireland is the better choice if you meet these criteria:
- IP-Intensive Business Models: Software, patents, trademarks are your key assets
- Global Ambition: You want to expand beyond the EU
- Complex Group Structures: You require sophisticated holding arrangements
- Tech Companies: You develop or license technology
By the way: Many of my clients combine both locations. Malta for operating activities, Ireland for IP holdings. Its absolutely feasible and often the optimal setup.
Malta as EU Headquarters: The 6/7ths Rule and Other Tax Advantages
Let me break down the Maltese tax structure for you—in a way that truly makes sense.
The Maltese system operates on the so-called Full Imputation System. That means: Corporate tax is fully credited against personal tax.
How the Famous 6/7ths Rule Works
This is where things get interesting. Malta initially levies a 35% corporate tax on all profits.
But: When dividends are paid to non-Maltese shareholders, you get 6/7ths of the paid tax refunded.
A practical example:
- Your company earns €100,000 profit
- Malta collects €35,000 in corporate tax
- When dividends are paid out, you get €30,000 back (6/7 of €35,000)
- Effective tax burden: €5,000 or 5%
Its brilliantly simple—and completely legal.
Other Tax Benefits in Malta
The 6/7ths rule is just the tip of the iceberg. Malta offers several additional advantages:
- No Withholding Tax: On dividends, interest, and royalties paid to EU shareholders
- Participation Exemption: Income from shareholdings can be tax-free
- Extensive DTA Network: Over 70 double tax agreements
- Access to EU Single Market: Full access to all EU markets
When Does Malta Not Make Sense?
Honesty matters to me. So I’ll tell you when Malta isn’t the best fit:
- You always retain all profits (in that case, the 6/7ths rule doesn’t benefit you)
- Your business is highly IP-heavy (Ireland would be better)
- You need maximum international reputation (US markets often prefer Ireland)
Practical Considerations for Malta
When planning for Malta, keep these points in mind:
Area | Requirement | Effort |
---|---|---|
Minimum Capital | €1,165 | Low |
Local Director | Not mandatory | Low |
Local Office | Recommended | Medium |
Accounting | Must be local | Medium |
Substance | Moderate requirements | Medium |
Ireland: The Preferred EU Hub for Tech Giants and IP Holdings
Why have Apple, Google, Facebook, and virtually all tech giants chosen Ireland?
The answer is simple: Ireland is the world’s best jurisdiction for IP structures.
The Irish 12.5% Corporate Tax Rate: More Than Just a Low Rate
Ireland charges 12.5% corporate tax on trading profits. That’s attractive, but not the whole story.
The real draw is in the details:
- Knowledge Development Box: Profits from qualifying IP can be taxed at just 6.25%
- R&D Credits: 25% tax credit on research expenses
- Capital Allowances: 100% write-off for certain IP investments
- Holding Regime: Ideal for complex group structures
IP Structures in Ireland: The Royal Road for Tech Firms
This is where Ireland plays to its strengths. Let me outline a typical structure:
- IP Holding in Ireland: Owns all valuable IP rights
- Licensing: Licenses IP to operating subsidiaries worldwide
- Profit Shift: Profits flow to Ireland as licensing fees
- Low Taxation: 6.25% on qualifying IP
This works especially well for:
- Software development companies
- Online platforms
- Technology licensors
- Research-intensive businesses
Substance Requirements in Ireland: What You Need to Know
Ireland takes substance very seriously. That’s great for reputation, but also means higher demands:
Requirement | Minimum | Recommended |
---|---|---|
Local Directors | 1 (for small entities) | Board majority |
Employees | Depends on activity | 2–5 qualified staff |
Office Space | Registered address | Own office |
Board Meetings | At least 1 per year | Quarterly |
When Is Ireland the Wrong Choice?
Again, full transparency:
- Simple Services: Without an IP component, Malta is often better
- Low Substance: You want minimal local presence
- Pure EU Activities: Malta can be more cost-effective
- Immediate Liquidity: Ireland’s setup takes longer
Holding Structures for Companies with €10+ Million Turnover
Once you hit €10 million in revenue, the rules change fundamentally.
Now it’s not just about tax optimization. It’s about strategic group structures to set you up for the next 20 years.
The Classic Malta Holding Structure
Here’s the proven Malta setup for larger businesses:
- Top Holding (Malta): Owns all operating companies
- Operating Companies: Based across EU countries as per market focus
- Dividend Flow: All profits channeled to Malta with 6/7ths refund
- Personal Level: You as shareholder receive tax-optimized dividends
A real-world example from my practice:
An e-commerce entrepreneur with €15 million annual revenue operates companies in Germany, France, and Spain. His Malta holding receives €2 million in dividends yearly. Thanks to the 6/7ths rule, he pays just €100,000 tax instead of €700,000.
The Irish IP Holding Structure for Tech Companies
For tech-based businesses, this setup is often optimal:
- IP Holding (Ireland): Develops and owns all IP rights
- Marketing Hub (Ireland): Central marketing and sales functions
- Operating Satellites: Local entities for customer support
- Licence Flow: IP is licensed at arm’s length fees
Hybrid Structures: The Best of Both Worlds
For very large organizations, I often combine both jurisdictions:
Function | Location | Rationale |
---|---|---|
IP Development | Ireland | R&D credits; Knowledge Development Box |
Operating Holding | Malta | 6/7ths rule for dividends |
Financing | Ireland | Superior international recognition |
Profit Distribution | Malta | Lowest effective tax burden |
Anti-Avoidance Rules: What to Watch Out For
The EU Anti-Tax-Avoidance Directive (ATAD) has introduced stricter rules, especially for larger structures:
- GAAR (General Anti-Avoidance Rule): Artificial structures are targeted
- CFC Rules: Controlled Foreign Corporations come under scrutiny
- Interest Limitation Rules: Interest deductions are capped
- Exit Taxation: Asset migration triggers exit taxes
This makes genuine substance more important than ever. Your structure has to make economic sense—not just serve tax purposes.
Practical Implementation: From Planning to Execution
Theory is great. But how do you put this into practice?
Here’s my tried-and-tested 6-phase method for larger organizations:
Phase 1: Analysis and Strategy Development (4–6 weeks)
Before we set up anything, we undertake a full review of your situation:
- Business Model Analysis: Where do your profits actually arise?
- Cashflow Planning: When will you need which liquidity?
- Tax Impact Assessment: How much can you realistically save?
- Risk Assessment: What are your compliance risks?
Phase 2: Structure Planning and Optimization (2–3 weeks)
Now we develop your bespoke structure:
- Location selection based on your business model
- Optimal legal form for each entity
- Intercompany pricing strategy
- Substance planning for each location
Phase 3: Incorporation and Setup (6–12 weeks)
Implementation runs in parallel across countries:
Activity | Malta Timeline | Ireland Timeline |
---|---|---|
Company Incorporation | 3–4 weeks | 4–6 weeks |
Bank Account Opening | 2–4 weeks | 4–8 weeks |
Tax Registration | 1–2 weeks | 2–3 weeks |
Substance Build-Up | 4–6 weeks | 6–12 weeks |
Phase 4: Migration and Transfer (4–8 weeks)
This phase is often the most critical. It involves transferring existing activities:
- Asset Transfer: IP rights, shareholdings, other assets
- Contract Migration: Client contracts and supplier relationships
- Employee Transfer: Key staff to Malta/Ireland
- System Integration: IT, accounting, controlling
Phase 5: Operational Stabilization (3–6 months)
During the first months, we optimize workflows:
- Finalize intercompany agreements
- Create transfer pricing documentation
- Establish local compliance
- Set up reporting routines
Phase 6: Monitoring and Optimization (ongoing)
A sound structure needs continuous maintenance:
- Compliance Monitoring: Quarterly review of all requirements
- Tax Updates: Adapt to legislative changes
- Performance Review: Annual efficiency check
- Structure Optimization: Adapt to business evolution
Compliance and Substance Requirements in Malta and Ireland
Let me be honest with you:
The days of “letterbox companies” are over. Both countries now demand real economic substance.
That’s a good thing. Only then will your structure be stable and recognized long-term.
Malta: Substance Requirements in Detail
Malta has significantly tightened its requirements in recent years:
- Minimum Capital: €1,165 is no longer enough—€25,000+ recommended
- Local Presence: Real office with genuine infrastructure
- Qualified Persons: At least two qualified people on site
- Board Meetings: At least 50% of meetings held in Malta
- Core Income Generating Activities (CIGA): Value-creating activities in Malta
A practical Malta substance example:
My client with a Malta holding employs a finance director and an accountant locally. That costs €120,000 per year, but secures €600,000 in tax savings on €2 million dividends. ROI: 500%.
Ireland: Higher Standards, Greater Reputation
Ireland’s substance requirements are noticeably stricter:
Area | Minimum | Best Practice |
---|---|---|
Local Directors | 1 | Board majority Irish tax resident |
Employees on Site | 1 (for simple structures) | 3–5 depending on activity |
Office Space | Registered address | Dedicated office space |
Board Meetings | 2 per year in Ireland | Quarterly |
Business Activity | CIGA in Ireland | Comprehensive value add |
BEPS Compliance: More Than Just a Buzzword
The OECD’s BEPS initiative (Base Erosion and Profit Shifting) has changed the rules. Most relevant are Action 5 (harmful tax practices) and Action 6 (treaty shopping):
- Economic Substance Test: Your entity must carry out genuine economic activity
- Nexus Test: IP income must be linked to local development
- Principal Purpose Test: Tax advantages can’t be the primary goal
Practical Compliance Checklist
This is the checklist I use with each client:
- Monthly: Local bookkeeping and payroll
- Quarterly: Document board minutes and business decisions
- Semiannually: Update transfer pricing documentation
- Annually: Review and adjust substance requirements
- When Changes Occur: Assess tax implications
Cost Comparison and ROI Calculations for Both Locations
Now comes the crucial part: What does all of this really cost?
And even more importantly: Is it worth it for your company?
Setup Costs Compared
Here are realistic costs for a professional structure:
Cost Item | Malta | Ireland |
---|---|---|
Company Incorporation | €3,000–5,000 | €5,000–8,000 |
Legal Advice | €10,000–15,000 | €15,000–25,000 |
Tax Advice | €15,000–25,000 | €20,000–35,000 |
Bank Account Opening | €2,000–3,000 | €3,000–5,000 |
Substance Build-Up | €20,000–40,000 | €40,000–80,000 |
Total Setup | €50,000–88,000 | €83,000–153,000 |
Ongoing Annual Costs
The ongoing costs often outweigh the setup costs:
Cost Item | Malta | Ireland |
---|---|---|
Local Staff | €80,000–120,000 | €120,000–200,000 |
Office and Infrastructure | €15,000–25,000 | €25,000–50,000 |
Compliance & Accounting | €20,000–30,000 | €30,000–50,000 |
Tax Advice | €25,000–40,000 | €35,000–60,000 |
Legal Advice | €10,000–15,000 | €15,000–25,000 |
Total Annual | €150,000–230,000 | €225,000–385,000 |
ROI Calculation for Different Company Sizes
This is where things get interesting. At what company size does each location make sense?
Example 1: €10 million turnover, €1 million profit
- Germany: ~€300,000 tax
- Malta: ~€50,000 tax + €180,000 costs = €230,000
- Savings: €70,000 per year
- ROI: 35% in year one, 46% from year two onwards
Example 2: €20 million turnover, €3 million profit
- Germany: ~€900,000 tax
- Malta: ~€150,000 tax + €200,000 costs = €350,000
- Savings: €550,000 per year
- ROI: 275% in year one, 344% from year two
Example 3: €50 million turnover, €8 million profit (IP-heavy)
- Germany: ~€2,400,000 tax
- Ireland (IP-Box): ~€500,000 tax + €300,000 costs = €800,000
- Savings: €1,600,000 per year
- ROI: 533% in year one, 640% from year two
Break-Even Analysis: When Is It Worthwhile?
Based on my experience with over 200 structures:
- Malta setup: Pays off from ~€800,000 annual profit
- Ireland setup: Pays off from ~€1,500,000 annual profit
- Hybrid setup: Pays off from ~€5,000,000 annual profit
Hidden Costs and Risks
Be honest with yourself—there are also hidden costs:
- Travel Costs: Regular trips for board meetings
- Duplicated Systems: IT, HR, compliance in multiple countries
- Currency Risks: With international structures
- Compliance Risks: Penalties for errors can be costly
- Opportunity Costs: Time spent on structure management
Nonetheless, with careful planning and execution, tax savings usually far outweigh the total costs.
Frequently Asked Questions on Malta vs. Ireland EU Headquarters Strategies
How long does it take to incorporate a company in Malta vs. Ireland?
In Malta, incorporation typically takes 3–4 weeks; in Ireland, it usually takes 4–6 weeks. The full setup, including bank account and substance build-up, takes 6–12 weeks in Malta, 8–16 weeks in Ireland. Ireland’s stricter due diligence requirements make the process longer.
What is the minimum substance I need for Malta and Ireland?
Malta requires at least one qualified local employee, real office space, and regular on-site board meetings. Ireland’s standards are higher: a minimum of 2–3 qualified employees, dedicated office premises, and genuine local business activity (CIGA). For IP holdings in Ireland, the IP rights must be locally developed (Nexus test).
Can I relocate my existing German GmbH to Malta or Ireland?
Yes, but it’s more complex than a fresh incorporation. You can either complete a legal seat transfer or shift your activities to a new entity. Important: Germany charges exit taxes on hidden reserves. The exact strategy depends on your business model and existing reserves.
How exactly does the 6/7ths rule work in Malta?
Malta initially charges 35% corporate tax. When dividends are distributed to non-Maltese shareholders, you receive 6/7ths of the tax paid back. For €100,000 profit, you pay €35,000 tax but get €30,000 back—effective tax: 5%. Prerequisite: The dividends must actually be paid out.
What advantages does the Irish IP-Box offer?
Ireland’s Knowledge Development Box taxes qualifying IP income at just 6.25% instead of 12.5%. Qualifying assets include self-developed patents, copyrights, and software. Important: The IP must pass the Nexus test—you need to show that development truly occurred in Ireland.
At what company size is an EU holding structure worthwhile?
As a rule of thumb: Malta structures pay off from €800,000 annual profit, Ireland from €1,500,000. For smaller profits, substance costs (€150,000–300,000 annually) can outweigh tax savings. Target use of profits matters too: Malta is best for dividend payouts, Ireland for IP-based models.
What compliance risks are associated with Malta and Ireland structures?
The main risks are insufficient substance and transfer pricing issues. Both countries strictly audit whether genuine business activities happen locally. Artificial structures risk tax issues and reputational damage. You must also observe BEPS rules and anti-avoidance directives.
Can I combine Malta and Ireland in one structure?
Yes, many of my large clients use hybrid setups: IP development and holding in Ireland (6.25% IP-Box), operating functions and dividend payouts via Malta (5% using the 6/7ths rule). This requires thorough planning of intercompany arrangements and transfer pricing documentation.
How does Germany view Malta and Ireland structures?
Germany generally recognizes both, since they are EU members. Important: You must prove genuine substance and observe transfer pricing standards. Reforms to German external tax law have tightened standards. Moving out of Germany also triggers exit taxes.
What are the costs for a Malta vs. Ireland holding structure?
Setup: Malta €50,000–88,000, Ireland €83,000–153,000. Ongoing annual costs: Malta €150,000–230,000, Ireland €225,000–385,000. Irelands higher costs stem from stricter substance requirements and higher salaries. In exchange, Ireland offers superior global reputation and IP benefits.