Malta

Business Environment

As Malta is one of the leading countries vying to become a member of the European Union, government is in the process of adapting legislation and the tax system to comply with EU directives. The Malta Financial Services Centre (MFSC) is the sole regulator of the financial sector. The MFSC is currently being reorganised and renamed as the Malta Financial Services Authority.

Companies are considered resident in Malta if incorporated in Malta or if control and management are exercised in Malta. Malta's Companies Act, 1996 allows limited liability companies, general partnerships, and limited partnerships. A general partnership is called a 'partnership en nom collectif' and a limited partnership is called a 'partnership en commandite'. For tax purposes companies may be classified as international trading companies or holding companies. International trading companies are restricted to trading overseas. Companies providing back office management services to non-resident companies may operate as international trading companies. Holding companies are Maltese registered companies that hold assets, shares or investments.

Investment services and mutual funds are regulated by the Investment Services Act, 1994. The act provides for two types of licenses: an investment services license, and a collective investment scheme license. Collective investment schemes can be formed as open ended investment companies (Sicavs), close ended investment companies (Invcos), mutual funds, investment partnerships or unit trusts. Sicavs can be public or private companies. Invcos can only be public companies. Unit trusts are defined as those created under the legislation of another country recognised in Malta.

The Insurance Business Act, 1998, and the Insurance Brokers and Other Intermediaries Act, 1998 regulate the insurance sector. The Banking Act, 1994 and the Financial Institutions Act, 1994 regulate the provision of banking and financial services. A foreign trust formed under the Trusts Act 1988 is one in which the settlor and beneficiaries are not resident in Malta and in which the assets do not include immovable property situated in Malta. The trust must be registered with the MFSC to qualify for tax incentives. For shipping companies the Malta Freeport facility provides a trans-shipment centre for the Mediterranean.

Under the Prevention of Money Laundering Act, Malta established a financial intelligence analysis unit (FIAU), which reports to the ministry of finance. Malta is gradually abolishing bearer accounts.

Stock Exchange
Borza ta' Malta (Malta Stock Exchange)
27, Pietro Floriani Street
Floriana VLT 14
Malta
Tel: (356) 244051/5
Fax: (356) 244071
E-mail: borza@borzamalta.com.mt

Malta Lotteries and Gaming Authority

Business Guides

Comparative Study: Investment Services in Malta, Luxembourg and Ireland
The Malta Financial Services Centre, PDF, May 2001

Brochures (PDFs) from Malta Financial Services Centre

A Framework for Financial Services
A Guide to Investment Services
A Guide to the Establishment of Collective Investment Schemes
A Guide to Providing Investment Services in Relation to Linked Long Term Contracts of Insurance
A Guide to the Establishment of Professional Investor Funds
A Guide to the Enrolment of Companies in the Brokers List and Registration of Persons in the Brokers Register
A Guide to the Business of Insurance and Reinsurance
A Guide to the Formation of Trading and Holding Companies
A Guide to Taxation
A Guide to Back Office Administration for the Financial Services Sector

Deloitte & Touche: Malta International Tax & Business Guide (PDF)
Ernst & Young: Doing Business in Malta (PDF)
Price WaterhouseCoopers: Malta Guide (PDF)

Taxation

The corporate tax rate is 35%. Malta has double tax treaties with 35 other jurisdictions. International trading companies are taxed at the normal company rate of tax but gain tax advantages for non-resident shareholder amounting to an effective tax rate on distributed profits of 4.2%. Holding companies are taxed at the corporate tax rate but gain tax advantages for non-resident shareholders. Under the Business Promotion Act businesses set up to manufacture in Malta are eligible for a number of incentives, including a ten year tax holiday, reduced rates of tax, investment allowances, accelerated depreciation, and tax free dividends. Companies with a license from the Malta Freeport can get exemptions from custom duties, from income tax, and from duty on documents.

Collective Investment Schemes are exempt from tax but are excluded from double taxation treaty benefits. A collective investment scheme that is not a unit trust may waive its right to the exemption from tax on its income and is taxed at 25%. Schemes opting to be taxed are entitled to benefits under double tax treaties. Capital gains realised by a scheme listed on the Malta Stock Exchange are exempt from capital gains tax.

Non-resident persons (including companies) are exempt from tax in respect of interest, royalties and gains or profits made on a disposal of any units in a collective investment scheme and of any shares or securities in a company. Individuals ordinarily resident or domiciled in Malta are taxed on income arising in Malta and on foreign sourced income received in Malta. Tax paid by a company is imputed to the shareholder in the event of a dividend distribution. All income and capital gains derived from overseas assets and profits derived from an overseas branch, agency or permanent establishment are eligible for relief of double taxation. Personal tax rates are progressive up to a maximum of 35% on any amount of income, including capital gains. Overseas online betting operators are taxed at an effective rate of 4.2% plus pay the Malta government 0.5% on the value of all bets. Links: Double tax agreements (from International Beneficiary Services Ltd.).

Business Contacts
Malta Financial Services Center
Notabile Road
Attard BKR14
Malta
Tel: (+356) 441155
Fax: (+356) 441188
E-mail: communications@mfsc.com.mt

The Registry of Companies
(Provides services online)
Malta Financial Services Center
Notabile Road,
Attard BKR14, Malta
Tel: (+356) 441155
Fax: (+356) 441195
E-mail: registry@mfsc.com.mt

Central Bank of Malta
Castille Place,
Valletta, CMR 01, Malta
Email: info@centralbankmalta.com
Tel: (00356) 21 247 480
Fax: (00356) 21 243 051

The Malta Development Corporation
Postal Address
P.O. Box 141 GPO 01,
Marsa, Malta
Tel: (00356) 441888
Fax: (00356) 441887
E-mail: zerafa@mdc.com.mt

Malta Maritime Authority
Maritime House
Lascaris Wharf
Valletta VLT 01
Malta
Tel: (+356) 250360
Fax: (+356) 250365
E-mail: mership.malta@mma.gov.mt

Country Description

Republic of Malta. The Maltese archipelago consists of three small islands, Malta, Gozo and Comino, and two uninhabited ones. The French took Malta over in 1798. In 1814 Malta became a British colony. Malta gained independence on 21 September 1964. Link: Country Profiler: History.

Population (2001)
394,000

Capital
Valletta

Languages
Maltese (official), English (official)

Currency
Maltese lira. US$1 = 0.46 lira (January 2002)

Legal system
Based on English common law and Roman civil law. Judges and magistrates are appointed by the president, acting on the advice of the prime minister. The judicial system is made up of inferior courts, civil and criminal courts of appeal, and a Constitutional Court. The Constitutional Court deals in cases involving violations of human rights, the interpretation of the constitution and invalidity of laws. The court has jurisdiction to decide questions as to membership of the House of Representatives and any reference made to it relating to voting for election of members of the House of Representatives. The Court of Appeal is composed of three judges and hears appeals from the Civil Court. The same court composed of one judge hears appeals from the Court of Magistrates in its civil jurisdiction. The court also hears appeals from decisions of a number of special tribunals. The Criminal Court sits with a judge and a jury of nine persons to try, on indictment, offences exceeding the competence of the Court of Magistrates. The court may in certain cases sit without a jury. The Court of Criminal Appeal, made up of three judges, hears appeals from persons convicted before the Criminal Court. The court, when formed by one judge, hears appeals from judgments delivered by the Court of Magistrates. The Civil Court hears civil and a commercial cases exceeding the jurisdiction of the Court of Magistrates. The Court of Magistrates sits with a single magistrate, who exercises both civil and criminal jurisdiction.

Government
Malta is a parliamentary democracy with a president and prime minister. The president is elected by the unicameral parliament for a term of five years. The president is the nominal head of state, with moral rather than executive powers. The president assents to bills, he prorogues and dissolves parliament, and except in rare constitutional matters he must act on the advice of the prime minister and ministers. Executive power lies with the prime minister and cabinet based on the Westminster model. Parliament is made up of the House of Representatives, which has a minimum of 65 members elected by popular vote on the basis of proportional representation to serve five-year terms. Additional seats are given to the party with the largest popular vote to ensure a legislative majority. The speaker may be appointed from within or from outside the House of Representatives. Current parliament: 65 seats and a speaker of the house. The government is formed by the Nationalist Party (PN), which holds 35 seats. The opposition Labour Party holds 30 seats. Links: Official History. Members of Parliament; House of Representatives.

Executive
President: Guido de Marco (1999) PN
Prime minister: Eddie Fenech Adami (1998) PN

Cabinet
Deputy prime minister, social policy: Lawrence Gonzi
Education: Louis Galea
Finance and economic affairs: John Dalli
Environment: Francis Zammit Dimech
Tourism: Michael Refalo
Transport and communications: Censu Galea
Economic services: Josef Bonnici
Justice and home affairs: Tonio Borg
Resources and infrastructure: Ninu Zammit
Minister for Gozo: Giovanna Debono
Health: Louis Deguara
Information technology and investment:: Austin Gatt
Foreign affairs: Joe Borg
Rural affairs and the environment: George Pullicino
Youth and the arts: Jesmond Mugliett

Political parties
Alleanza Gustizzja Socijali-Alternativa Demokratika/Social Justice Alliance-Democratic Alternative (AD): leader Harry Vassalo. Partit Laburista/Malta Labour Party (MLP): leader Alfred Sant; Partit Nazzjonalista/Nationalist Party (PN): leader Edward Fenech Adami.

Elections
Held 12 April 2003. PN received 51.79% (34 seats), MLP 47.5% (31 seats), AD 0.68%. Registered voters: 282,213. Percentage: 98.6%. The next election is due to be held by September 2003. Link: Election Results.

Economic overview
The economy is dependent on foreign trade (including trans-shipment through the port), manufacturing (electronics and textiles), and tourism. Manufacturing contributed 22.85% of gross domestic product, public administration 16.47%, private services 11.49%, insurance, wholesale and retail trade 11.07%, property income 10.77%, insurance, banking and real estate 9.18%, transport and communication 6.7%, government enterprises 6.09%, construction and quarrying 2.96%, agriculture and fishing 2.41%. Malta is an European Union accession candidate. Malta signed an advance commitment letter agreeing to comply with the OECD's 'harmful tax competition' requirements.

Gross Domestic Product (2003 Central Bank of Malta estimate)
1% to 1.3% real growth.

Employment (April 2003)
Labour supply: 145,181. Unemployment rate 5.2% (April 2003)

Trade (January to June 2003)
Balance of payments current account: Lm75.4 million debit. Goods balance: Lm138.4 million debit. Services balance: Lm58.8 million credit.

Inflation rate (CPI) (June 2003)
Annual rate: 1.8%

Government accounts (2002)
Budget forecast: A 9% increase in revenues to Lm735 million (US$1,606 million), and a 6% increase in total expenditures to Lm812.8 million (US$1,776 million). The financial year is the calendar year.

Public holidays (2004)
1 January (New Year's); 10 February (Feast of St Paul's Shipwreck); 19 March (Feast of St Joseph); 31 March (Freedom Day); 9 April (Good Friday); 1 May (Worker's Day); 7 June (Sette Giugno: commemoration of the uprising of 7 June 1919); 29 June (Feast of St. Peter and St. Paul also known as Mnarja or Harvest festival); 15 August (Feast of the Assumption); 8 September (Feast of Our Lady of Victories); 21 September (Independence Day); 8 December (Feast of the Immaculate Conception); 13 December (Republic Day); 25 December (Christmas Day).

Time
GMT plus one hour. The clock goes forward one hour on the last Sunday in March and back to normal time on the last Sunday in October.

Sources/Links
Government of Malta
National Statistics Office
Central Bank of Malta
Malta Financial Services Center
Malta Freeport
International Monetary Fund
Elections Around the World
CIA Fact Book
Holidays (Government of Malta)
Country Profiler: Malta