The long-awaited mobility directive will come into effect on January 31, 2023 and it will be finally possible for both public and private companies incorporated in one EU Member State to move to any other EU Member State. In other words, upon such corporate migration, the company (which remains in existence without being liquidated) will no longer be governed by the laws of its state of incorporation but by those of the state of destination. This new possibility promotes the freedom of establishment and mobility within the EU Member States. 

There could be various reasons why such a corporate migration would be beneficial. Examples include where the shareholder physically moves to another EU state and as a result would also wish to migrate his or her business to the new EU country so as to manage all affairs in one state. Also, an acquisition of a group of entities whose holding is in another EU Member State could trigger a need for a reorganisation of the new combined group and this new migration possibility may facilitate the reorganisation. Such corporate migrations could also prove useful in the case of simplification of international group structures.

Today, Malta’s corporate rules already provide more flexibility than the above Directive.  For the past 20 years, Malta has allowed the movement of limited companies in and out of Malta to any other jurisdiction, not just within the EU but also with other non-EU jurisdictions provided the other state has reciprocal legislation in force.

It is important to understand the tax aspects of such corporate migrations. Potential exit taxation in terms of the EU wide ATAD rules might arise. However, in terms of Maltese tax law, it is possible to benefit from a step up of assets from their original tax cost to their market value upon moving to Malta. 

Paul Pace Ross, Director, International Tax Advisory and Dr Antoine Demicoli, Associate Director, Corporate Services, KPMG in Malta.