Substance mismatch: Malta incorporation with activity in Germany
A software development company is registered in Malta with a local address and nominee director. The beneficial owners live in Germany and manage all business operations — project management, client communication, and software delivery — from their home offices. The company assumes that meeting Maltese substance requirements (registered office, local filings) is enough to maintain Maltese tax residency, despite no real operations in Malta.
Input Data
- Company type: Software development company
- Country of incorporation: Malta
- Management location: Beneficial owners residing in Germany
Jurisdiction Conflict
Country of registration — The company is formally registered in Malta, with compliance including a local office and nominee director.
Country of effective activity — All business operations, including management and client interactions, are conducted from Germany by the beneficial owners.
Conflict — The discrepancy between formal registration in Malta and effective management from Germany creates a potential dual tax residence issue. The Maltese registration may not suffice if German authorities view the company as managed from Germany, potentially leading to German tax obligations.
AI Analysis
Scenario A — Maltese Compliance
- Maltese authorities may accept the company as a tax resident based on formal compliance.
- The company benefits from Maltese tax rates.
- Risk: Maltese authorities might reassess if operations are found lacking.
Scenario B — German Management
- German authorities could view the company as managed from Germany.
- This could lead to German taxation and compliance requirements.
- Risk: Dual taxation risk if not resolved under a tax treaty.
Scenario C — Dual Residence
- Both countries may claim taxing rights based on their interpretations.
- The company faces complex compliance obligations in both jurisdictions.
- Risk: Increased administrative burden and potential for double taxation.
Key risk indicators
- Operations conducted from Germany
- Lack of substantive activities in Malta
Output of Richys AI Analysis
- AI assesses exposure to dual tax residence claims.
- AI identifies the management location as a critical factor.
- AI highlights the need for expert advice on treaty application.
Expert Boundary
Involvement of a verified EU expert is required for:
- country-specific interpretation of the place of effective management
- application of the Malta–Germany tax treaty to concrete facts
- selection of a defensible filing position
- preparation for potential tax authority inquiries
Case Conclusion
Tax authorities observe operations managed from Germany. The assumption that Maltese compliance suffices is exposed as flawed. A mismatch between legal registration and factual management is identified. Risk becomes material if German authorities assert management control.
Start case analysisThis case is for illustration purposes only. Real outcomes depend on residence, income structure, documents and timing. For your specific situation, use structured case analysis with AI and verified EU experts.
Sophie Bizelle
AI assistant – Business Setup