Updated: August 27, 2021 | 11 minute read

    Introduction

    As an EU Member State, Malta is recognized internationally as a safe and secure place, with high economic and political stability. An attractive cost and tax-efficient base for financial services’ operators looking for an EU-compliant but yet flexible domicile, enhances the country’s attractiveness as a centre for international business in the Euro-Mediterranean region.

    Where is Malta?

    Situated just 95 km South of Sicily and 290 km from the North African coast, Malta is right at the crossroads of Europe, North Africa and the Middle East.
     
    Malta’s coastline is picturesque with many harbours, bays, creeks, sandy beaches and rocky covers. It takes about 2 to 3 hours to get to Malta by air from most European cities.
     
    There are frequent and direct flights to Malta from London, Rome, Paris, Frankfurt, Brussels, Geneva, Athens, Amsterdam, Madrid, Munich and Vienna, amongst others. Other frequent flights are also operated from North African and Middle East destinations.
     
    As a European Union country, Malta’s requirements on visas fall in line with the EU policy. Malta also forms part of the Schengen area. Daily high-speed catamaran services for passengers, cars and heavy vehicles connect Valletta and Sicily. Other ferry services connect Valletta with Italy and North Africa.
     
    You might also be interested in reading:

    Language in Malta

    The official languages of Malta are Maltese and English.
     
    Maltese, the national language, is of Semitic origin written in Latin script that, over the centuries, has incorporated many words derived from English, Italian and French.
     
    For official purposes, both Maltese and English are recognized and given equal status and use in Government.
    Likewise, most business correspondence is normally in English.
     
    Other languages, particularly Italian and French, are also spoken by the population.
     
    Language in Malta

    Weather in Malta

    Malta’s climate is strongly influenced by the sea and is typical of the Mediterranean.
     
    The Islands have a very sunny climate with a daily average of five to six hours sunshine in mid-winter to around 12 hours in summer.
     
    Winters are mild, and summers are hot, dry and very sunny. Annual rainfall is low, averaging 600mm a year, and the length of the dry season in summer is longer than in neighbouring Italy.
     
    Sunbathing is quite possible well into the ‘winter’ months, and the peak beach season can last until late October.

    Education & Career Prospects in Malta

    Malta operates a system of free education with school attendance being compulsory until the age of 16.
     
    Each year, Malta has a steady influx of undergraduates and new students entering further and higher education while many are also obtaining internationally recognized diplomas from the vocational college - the Malta College of Arts, Science & Technology (MCAST).
     
    Besides public schools, one also finds numerous private and international schools.
     
    Related:
     
    Malta’s comparatively low ancillary labour costs, an excellent work ethic and a highly-motivated workforce make it a very cost-effective location to set up one’s business.
     
    There is a large pool of professionals, with law, management, communications and medicine being the dominant courses read at university.
     
    Learn more:
     
    education in malta
     

    Religion in Malta

    The majority of the Maltese are Roman Catholic, but other religious groups are also represented.
     
    There are small Anglican, Church of Scotland, Greek Orthodox, Jewish, Methodists and Muslim communities.
     
    Most services are available all day on Sundays; some churches offer services Saturday evenings, and a couple of them provide services during the week first thing in the morning or in the evening.

    History of Malta

    Malta has a rich history spanning over 7,000 years. Mainly due to the crucial role it often played due to its strategic location in the centre of the Mediterranean.
     
    Phoenicians, Carthaginians, Romans, Byzantines, Arabs and Spanish all ruled the islands for varying lengths of time.
     
    Traces of the cultures that passed through Malta are still evident on the island.
     
    The main great influences in Malta have been predominantly the following:
     
    • The Arabic period proved the basis of the Maltese language;

    • The period of the Knights of St John shaped the islands culturally, socially, commercially and artistically;

    • Whereas the British period introduced British justice, a unified modern code of laws.

    Government of Malta

    Malta is an independent parliamentary republic with a parliament-elected president as head of state, and a prime minister leading an elected government for five-year terms.
     
    The country has a long-established and strong democratic tradition with high levels of voter participation.
     
    It is a member of the EU, the Council of Europe, the United Nations and the Commonwealth. The rule of law is respected in civil society, and the power is smoothly transferred following, regular, fair and open elections.
     
    No one group or class dominates the society or the economy.

    Investing in Malta

    The government has a tradition of encouraging foreign investors to establish operations in Malta and has always adopted policies that favour an open economy and direct investment.

    To that effect, Malta Enterprise, as the agency responsible for the promotion of foreign investment and industrial development in Malta provides for several fiscal and non-fiscal incentives to attract foreign direct investors and local enterprises with high value-added or high employment potential.

    These fall under the following headings:

    • Investment Aid;

    • SME Development;

    • Enterprise Support;

    • Access to Finance;

    • Employment and Training; and

    • Research & Development.

    In terms of the Investment Aid Regulations 2008, Investment Tax Credits are available in respect of qualifying expenditure incurred on, or after, 1st January 2008 by qualifying companies, i.e. businesses which carry on a trade or business which consists solely of one or more qualifying activities.

    Qualifying companies include companies engaged in all types of manufacturing activities (with the exception of the production of certain commodities such as motor vehicles and synthetic fibres), information and communication technology; research, development and innovation; logistics operations and activities carried out by a company licensed under the Malta Free-ports Act.

    Following an amendment to the regulations, companies engaged in the management and operation of hotels are also eligible for the Investment Tax Credits as expenditure incurred as from 1st January 2012.

    Eligible enterprises can benefit from tax credits (ranging from 15% to 35% depending on their sizes) calculated as a percentage of the value of capital investment or the value of wages. Any tax credits not utilized during a particular year may be carried forward to subsequent years.

    Enterprises engaged in the management and operation of hotels are eligible for a tax credit rate of 15%, irrespective of their size. Tax credits calculated as a percentage of qualifying research and development (R&D) expenditure are available as a deduction from the tax liability.

    In addition to direct R&D expenditure, costs incurred for R&D-related training of personnel and hiring of new personnel may qualify.

    The credit is granted in addition to the normal deduction of the expenditure from taxable income.

    The applicable percentage varies from 10.5% to 35%, depending on the type of the R&D initiative and expenditure incurred, whether the taxpayer is a small or medium-sized enterprise and whether the project is EU funded.

    Research and development activities are increasingly being considered as an essential sector of Malta’s economy. In this regard, various incentives, including tax credits to stimulate enterprises to engage in R&D, are offered under guidelines issued in terms of the Malta Enterprise Act.

    Other forms of assistance include soft loans and loan interest rates subsidies which aim at supporting enterprise engaged in manufacturing through loans at low-interest rates for part financing investments in qualifying expenditure.

    Soft loans are available to manufacturing enterprises, and only after Malta Enterprise completes a due diligence exercise on the applicant and the proposed project.

    Soft Loans granted by Malta Enterprise usually cover 33% of an approved project but, in any case, may not exceed 75% of the cost of plant, machinery and equipment.

    Learn more: Why are billionaires flocking to Malta?

    Investing in Malta

    Economy of Malta

    With a population of around 450,000, Malta has a Gross Domestic Product (GDP) of €12.32 billion (as published by the National Statistics Office of 2018), generated by the following economic activities:
     
    • Agriculture and Fishing;

    • Manufacturing;

    • Wholesale and Retail Trade;

    • Transportation and Storage;

    • Accommodation and Food Service;

    • Information and Communication;

    • Real Estate;

    • Professional, Scientific and Technical;

    • Public Administration;

    • Education; Human Health and Social Work; and

    • Arts, Entertainment and Recreation.

    Sustained by continued rapid growth, the Maltese economy retains a relatively low rate of unemployment. The economy is dependent on foreign trade, manufacturing (especially electronics and pharmaceuticals), and tourism. The economic recovery of the European economy has lifted exports, tourism, and overall growth. Major markets of Malta are Eurozone, USA and Singapore.

    Film production in Malta is another growing industry, despite stiff competition from other film locations in Eastern Europe and North Africa, with the Malta Film Commission providing support services to foreign film companies for the production of feature cinema (Gladiator, Troy, Munich and Count of Monte Cristo, World War Z, amongst others, were shot in Malta over the last few years), commercials and television series.

    A relatively new sector in Malta is the aviation industry which has been prompted, amongst others, through the facelift of the aircraft legislation in Malta in 2010 relating to aircraft registration (the ‘Aircraft Registration Act’) and the implementation of the Cape Town Convention on International Interests in Mobile Equipment and its Aircraft Protocol (the ‘Cape Town Convention’), ratified in February 2011.

    A number of airlines, aircraft/aircraft engine owners and other aircraft operators are organizing their aviation activities in Malta including, but not limited to, aircraft financing, leasing and management of aircraft, insurance, brokerage, aircraft maintenance, classification and surveying (e.g. Lufthansa Technik).

     

    Banking & Financial institutions Malta

    The two largest commercial banks are Bank of Valletta (BOV) and HSBC Bank, Malta.
     
    However, Malta is also home to an international financial centre with several foreign offshore banks.
     
    Malta’s banking system is well regulated by the Malta Financial Services Authority (MFSA).
     
    On 1st May 2004, the Central Bank of Malta joined the European System of Central Banks (ESCB), and on 1st January 2008, it adopted the euro as the country’s currency.
     
    The Central Bank of Malta has two key areas of responsibility: the formulation and implementation of monetary policies; and the promotion of a sound and efficient financial system.

    Malta Tax Structure

    Tax in Malta is levied on the basis of residence and is charged on all income and certain capital gains.
     
    The combination of Malta’s tax system and its extensive double tax treaty network (over 70) means that, with proper planning and structuring, investors can achieve considerable fiscal efficiency using Malta as a base.
     
    Businesses set up in Malta benefit from the application of the full imputation system and the refundable tax credit scheme on profits distributed to shareholders.
     
    Malta also offers an ideal tax residency status for individuals through a number of schemes to benefit non-residents to base their tax status locally.