1. Name and Language
Languages: Maltese is the national language, but Maltese and English are the official languages of the island. However, most of the population is proficient in Italian and a good percentage of the Maltese also have a working knowledge in French or German.
2. Political Structure
The Republic of Malta is an archipelago which consists in three main islands (Malta, Gozo and Comino), covering just over 300km in land area with a population of around 400,000 inhabitants, and thus making the island one of the smallest and most densely populated states in Europe. The Parliamentary system is based on the Westminster model, and the unicameral House of Representatives is elected by universal suffrage every five years. Broad consensus across the political spectrum (dominated by two political parties) has been reached over Malta’s membership of the European Union and the Eurozone and, generally, over the promotion of liberal economic policies and the benefits of an open economy and competitive business environment that is attractive to inward investment.
3. Currency
The currency of Malta is the Euro.
4. Business Structures and Regulators in Malta
Throughout the recent past, Malta has earned a strong reputation as an ideal regional centre for financial services and expansion-oriented business. Malta, a member of the European Union with a proud history and culture has:
- A highly educated and skilled labour force – fluent in several languages;
- A hard working professional culture and tradition;
- Comparatively low operating costs and wages;
- A stable political situation;
- A modern legal and tax framework;
- An accessible and professional financial services regulator;
- A large and expanding international tax treaty network and other locally/unilaterally available double taxation relief mechanisms;
- A proud industrial tradition;
- A convenient European time zone;
- An idyllic location in the centre of the Mediterranean;
- Excellent flight connections;
- A mild climate.
The Financial Services industry in Malta is regulated by a single-regulator (the Malta Financial Services Authority – MFSA) that in turn takes care to monitor the three main areas of the industry and thus the Securities, Banking and insurance sectors. Its main objectives are to regulate, monitor and issue guidelines to institutions and entities in the financial field. It also houses the Registry of Companies, which in turn caters for registering, compliance and investigation of companies in Malta. The blooming Maltese corporate sector is reflected by the constant increase in the number of companies which are registered in Malta.
The Maltese business setup ranges from the concept of sole trader to that of associations, specifically one of the three commercial partnerships regulated by the Companies Act, and thus, the partnerships en nom collectif, partnership
5. A modern legal and tax framework
en commandite and limited liability companies. The process involved to set up a local company is rather straightforward, and comparatively-speaking, Malta offers one of the most attractive packages to do so, be it procedure or tax-wise. The duration of company formation can take place in a mere two-day period. Malta is proud of the growing international recognition received in respect of its serious, sophisticated and consistent, yet accessible and flexible regulatory framework which is, of course, fully compliant with all EU requirements.
Malta’s strength as a financial services centre is founded on innovation and a strong desire to provide an optimal operating environment. The promulgation of a positive legislative framework that seeks strict compliance (particularly against money laundering and the funding of terrorism) but also offers room for a non-standardized approach to dealing with its users, has been vital in allowing Malta to develop into a meaningful and reputable financial services centre, competing successfully with the most established financial services locations. In addition, Malta has a competitive tax regime comprising attractive features such as a full imputation system, a refundable tax credit system and a large and expanding international tax treaty network.
In fact, Malta has become a reliable international business, financial and maritime centre world-wide. The World Economic Forum’s Competitiveness Index 2008-2009 has ranked Malta 34.
6. Malta Tax
Malta has a banking system that is the 10th soundest in the world, while the Global Financial Services Index, published by the City of London in March 2008 ranks Malta 4th place as the centre most likely to increase importance in the next few years, and in the 5th place as the centre where most organizations where most likely to begin new operations in the next two to three years.
Malta has a progressive taxation system, wherein individuals are taxed between 15 to 35 per cent of their income. Permanent residents benefit at the reduced rate of 15 per cent of any income which is remitted into Malta subject to a minimum of €4,193 annually. No tax is charged on foreign source that is not received in Malta whilst foreign residents who work in Malta only pay tax on the income they earn in Malta.
A company incorporated in Malta would be ordinarily resident and domiciled in Malta for domestic tax purposes and, as a result, would be chargeable to tax in Malta on a worldwide basis.
A company incorporated outside Malta cannot be ordinarily resident and domiciled in Malta but may be resident in Malta should its business be controlled and managed in or from Malta. Any such company would, accordingly, be liable to tax in Malta on:
- chargeable income derived from Malta;
- chargeable income arising outside Malta to the extent that such income is received in or remitted to Malta;
- chargeable gains realised in Malta; 6/7 of the Malta tax suffered at the level of the Malta company on its said profits.
The Maltese Government is also eager to attract foreigners to settle in Malta, provided they meet certain financial criteria. To further contemplate this, Malta has also operated expatriate immigration schemes for a good number of years and thus, people who settle in Malta under such schemes are allowed to remain on the islands indefinitely, benefitting from a range of fiscal advantages.
8. Aviation
Malta strives to promote a successful Aviation Register directed to attract international airlines and other companies in this industry (primarily private and corporate jets) and to serve as an important milestone in building a high value added aviation service cluster in Malta. Although it is already possible to register an aircraft in Malta, recent legislation has been enacted to consolidate regulations to provide a holistic legal system to regulate the registration of aircrafts and aircraft mortgages in Malta.
9. Investment Funds in Malta
Malta’s investment fund industry has enjoyed steady growth in recent years. In fact, the aggregate value of assets under management in funds domiciled in Malta was estimated to stand at €.8 billion at the end of 2009 – up from €00 million in 2001 and € billion in 2004. Such growth is projected to increase over the course of this year and going forward as Malta seeks to position itself amongst the foremost and principal investment fund jurisdictions.
Malta’s increasing success in attracting investment fund business may be attributable to a number of key factors including: the Regulatory Regime, which is fully compliant with EU requirements and international standards. As such, Malta’s legislation comprises a broad framework regulating the formation, licensing and operations of all types of collective investment schemes and providers of investment services and the marketing of investment products.
Applicants for an investment fund license are actively encouraged to approach the MFSA at an early stage of the application process with a view to procuring guidance as regards the most appropriate structure and an early indication of acceptability and applicable license conditions. The MFSA is nevertheless appropriately rigorous in its consideration of any license application.
Membership of the EU and adoption of the added credence to the jurisdiction and its laws and gives investors further security and peace of mind. As a result of Malta’s membership of the EU, Malta domiciled funds may also be entitled to access the EU investment market without any further licensing requirements in any host Member State. In turn, Malta’s adoption of the Euro eliminates currency risk at the level of Euro Zone investors and at the fund level when investments are denominated in Euro.
Malta remains a cost effective EU domicile for investment funds insofar as management, administration and custodial fees are generally highly cost competitive. In addition, whilst Malta’s professionals have gained a reputation for thoroughness and high professional standards, fees have remained comparatively low.