Malta Geography
The
Maltese Islands are situated in the Mediterranean
Sea, about 100 km from Sicily and 290
km from North Africa. The inhabited islands
comprise Malta (390 sq km) Gozo (65 sq
km) and Comino (2.5 sq km). Gozo is less
industrialised and considerably greener
than Malta; it is reached by ferry from
Malta. The climate is warm with an average
of 300 days of sunshine each year. Average
temperatures range between 14°C in
winter and 32°C in summer. Rainfall
averages around 590 mm.
The
landscape is characterised by a series
of low, rocky hills and slopes towards
the northeast and low-lying land to the
southeast. The capital is Valletta where
the Grand Harbour is located; the important
Malta Freeport at Marsaxlokk Bay is not
far away. There are a number of lesser
harbours. The international airport is
at Luqa, 5 km from Valletta.
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Malta Population, Language
and Culture
The total population of the islands is estimated
to be just over 409,000 (July 2012).
The official languages are Maltese and English;
Italian is also widely spoken. The civilisation
is one of the oldest in the Mediterranean
dating back to circa 5,000 years BC. St
Paul is believed to have been shipwrecked
on Malta, whose strategic position in the
Mediterranean has made it an important cultural
and commercial centre. The crusading order
of the Knights of St John established their
base in Malta, where in the 16th century
they famously withstood a siege by 30,000
soldiers of Suleyman the Magnificent's Ottoman
Empire. The islanders' stout defence against
the Germans in the Second World War is an
equally famous chapter in history, and gained
the island a collective George Cross from
the British.
The
islands' architecture, language and culture
are an intriguing and unique blend of Mediterranean
and Arabic influences. The catholic religion
is dominant, and a plethora of churches
built from local stone, and accompanying
fiestas with loud fireworks, is a marked
feature of Maltese life.
After
almost 150 years as a British colony, the
Maltese islands declared independence in
1964. Ten years afterwards Malta became
a republic within the British Commonwealth.
The economy slumped after the withdrawal
of the British military in 1979, and for
a while local political conditions were
not propitious for business development.
Tourism however continued to thrive, and
in the last ten years Malta has made an
effort to become more business-friendly,
making use of the institutions, infrastructure
and public administration left behind by
the British.
Malta
was one of the ten countries that joined
the EU in May, 2004.
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Malta Government
Malta is a politically stable parliamentary
democracy on the Westminster model, based
on the Constitution of 1964 (modified in
1974). The President is the Head of State,
but executive power lies with the Prime
Minister and Cabinet; Ministers are appointed
from among elected MPs. Malta has declared
itself neutral territory.
There
is a single House of Representatives, with
65 members elected on a single, transferable
vote system. The pro-European Nationalist
Party was confirmed in power in elections
in April, 2003. The
PN gained a majority of over 51% from a
very high turnout of 96%, in what was seen
as the most crucial election in the country's
history. The result was interpreted as a
confirmation of a yes vote in an EU referendum
in March, bringing to an end months of emotional
and often bitter debate on the subject of
EU membership. The status quo was maintained
after the March 2008 election. The next
election is due to be held by April 2014.
Malta's
judiciary is independent. The chief justice
and seventeen judges are appointed by the
president on the advice of the prime minister
after consultation with the leader of the
opposition. The senior court is the Constitutional
Court, which has limited jurisdiction; there
is a Court of Appeal which handles most
appeals from lower courts. The legal system
is based on of civil (Roman) law, but with
a strong admixture of English law as would
be expected, particularly in commercial
and some financial law.
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Malta Economy and Currency
Malta
is less affluent than its European neighbours.
The economy is heavily dependent on tourism,
which accounts for 35% of GDP; there are
about 1.2 million visitors a year. Manufacturing
industry represents about 25% of GDP. GDP
per head is about USD25,700 (2011 est),
at the lower end of the range of EU figures,
but roughly equivalent to Cyprus, and above
those of the other new EU member states.
GDP growth in 2010 was estimated at 3.7%,
and rose by an estimated 2.5% in 2011.
Unemployment
had risen to 7% in 2009. In 2011 and 2010
the figures were 6.3% and 6.2% respectively.
Inflation in 2010 was estimated at 1.5%,
whilst in 2011 this was estimated to have
risen to 2.7%. The government deficit is
expected to be 3.5% of GDP in 2012, after
running at 3.6% in 2011 and 2010.
Exports
are rising, but with limited agricultural
land and wholly lacking in energy resources,
Malta inevitably imports a great deal.
With
GDP below 75% of the Community average,
the Commission said in 2006 that the entire
territory of Malta will continue to be eligible
for regional investment aid at a maximum
aid intensity of 30% of the eligible costs.
For the period 2007-2013, Malta expects
to receive EUR840 million regional aid to
deliver growth and jobs.
The Central Bank of Malta used to apply
exchange controls under the terms of the
Exchange Control Act 1972. Current transactions
were freed from exchange controls in 1994;
capital controls were removed in 2004 as
part of EU entry. The Maltese corporate
forms likely to be used as offshore or non-resident
entities were in any case all exempt from
exchange controls. See Offshore
Legal and Tax Regimes for further details.
In
May, 2005, Malta was accepted into the EU's
ERM (Exchange Rate Mechanism), setting the
country on a path towards full adoption
of the Euro as from January, 2008. The Council
fixed the equivalent rate for the Maltese
lira at 0.429300 for one euro.
Interest
rates used to be controlled in Malta, but
were effectively liberalised in 1995 when
the Central Bank increased the ceiling on
lending rates to 10% above the discount
rate. There remain some controls on interest
rates on loans for the purchase of residential
property.
In
a 2008 report, the IMF statement said that
the Maltese authorities must be commended
for the successful adoption of the euro
on January 1, 2008, calling it "a crucial
landmark in their growth-oriented reform
agenda".
This
agenda appropriately aims at leveraging
Malta's strengths and income-generating
potential through closer integration in
the European and global economies, the IMF
suggested.
The
Maltese economy continues to be buoyed by
significant growth in the island’s
financial services sector, which recorded
a 30% growth during 2010, despite the difficult
situation in the sector internationally;
recorded growth for 2009 was 22%.
Malta Stock Exchange
The
Malta Stock Exchange Act 1990 led to the
opening of a stock exchange towards the
end of 1992. Management of the exchange
is in the hands of a Council, headed by
the Chairman. The Council is responsible
for approval of applications for listing
and for supervising performance of the ongoing
obligations of listed companies. Prospectus
and listing requirements are in line with
EU standards.
Trading
on the Exchange, which had a rather slow
start, was on a weekly basis until 1998,
when the listing of Maltacom led to daily
trading.
In
2001 the Exchange saw the introduction of
remote trading and the relocation to new
premises. The trading floor disappeared
and stockbrokers now trade directly from
their offices, enabling them to provide
a better and more immediate service to their
clients. There was a considerable increase
in the number of primary listings of Collective
Investment Funds, while secondary listings
rose steadily throughout the year. The number
of licensed stockbrokers increased from
15 up to 20 with another four financial
intermediaries being authorised by the Council
for a total of 14 by the end of the year.
During
2001 the Exchange obtained Associate Membership
of the Federation of European Securities
Exchanges after undergoing a rigorous evaluation
process by the Federation itself covering,
in particular, regulatory and trading operations
as well as compliance with EU Directives.
The number of equity listings and corporate
bond listings on the Exchange has risen
steadily over the years and numbered nineteen
and forty-three respectively by the end
of 2009.
Despite a sharp decline in 2008, market
capitalization at the end of 2010 stood
at EUR8.4bn, up by EUR0.9bn on 2009.
The
inclusion of Malta’s equity market
within FTSE’s Global Equity Index
Series (GEIS) in 2008 was an important step
for the sector.
The
Exchange is careful to monitor activity
for possible money-laundering, and submitted
itself to inspection by the Financial Action
Task Force in 1998, with positive results.
Amendments
made to the Malta Stock Exchange Act in
2002 provided for virtually the complete
removal of the Exchanges regulatory
functions in particular those concerning
admission to listing and licensing of stockbrokers;
these functions are now the responsibility
of the Financial Services Authority.
The
investment fund sector in Malta is quite
small. However, the growing success of the
stock exchange in attracting mutual fund
listings may well lead to an increase in
the number of funds actually based in Malta.
Investment Funds in Malta are licensed by
the Malta Financial Services Centre under
the Investment Services Act 1994. Licensed
funds are exempt from taxation, although
they can choose to pay tax at 25%, in which
case generous deductions can be claimed
against income and the fund has access to
Malta's network of double taxation treaties
(see Offshore
Legal and Tax Regime and Double
Taxation Treaties.)
The
Prevention of Financial Markets Abuse Act,
2005, repealed the Insider Dealing and Market
Abuse Offences Act and updated rules regarding
inside information and disclosure.
The
new laws put in place more detailed provisions
against market manipulation, and lay down
rules concerning the dissemination of information
by journalists and researchers pertaining
to financial instruments, in addition to
stating that all interests and conflicts
of interests must be fully declared.
The
Act also covers issuers and their managers,
ordinary investors, national statistics
bodies, competent authorities in Malta and
abroad, operators of recognised investment
exchanges and other insiders.
The
new provisions legislate for administrative
sanctions by the competent authority as
well as criminal sanctions imposed by the
courts, and introduce the concept of the
freezing of funds, which may be carried
out upon the request of the Attorney General
in a written statement known as a freezing
order.
With
effect from December 29, 2005 the UK HM
Revenue and Customs designated the Exchange
as a Recognised Stock Exchange under Section
841(10(b) – Income and Corporation
Taxes Act of 1998. With effect from the
same date the Exchange was also regarded
as a recognised stock exchange for Inheritance
Tax purposes.
The
Malta Stock Exchange was accepted as a full
member of the Association of National Numbering
Agencies, or ANNA in November 2006.
The objective of ANNA is to make available
to its members and the securities industry
as a whole, a standardised and uniform structure
for use in any application for the trading
and administration of securities in the
international securities industry.
The Malta Stock Exchange’s relationship
with ANNA originally started in 1992, when
the ISO Standard for International Securities
Identification Number (ISIN) was adopted
for all securities listed and traded on
the Malta Stock Exchange.
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Malta Entry and Residence
As a member state of the European Union
from May, 2004, Malta no longer applies
restrictions to the movements of nationals
of other EU member states.
As
of December 21, 2007, Malta became part
of the Schengen area. European Commission
President José Manuel Barroso announced
ahead of the enlargement of the area that:
"As
from this week, people can travel hassle-free
between 24 countries of the Schengen area
without internal land and sea border controls-
from Portugal to Poland and from Greece
to Finland. I wish to congratulate the nine
new Schengen members, the Portuguese presidency
and all EU Member States for their efforts.
Together we have overcome border controls
as man-made obstacles to peace, freedom
and unity in Europe, while creating the
conditions for increased security".
Following
enlargement, all citizens of the enlarged
Schengen space will benefit from quicker
and easier travelling. From December 21,
2007 onwards, a citizen can travel from
the Iberian Peninsula to the Baltic States
and from Greece to Finland without border
checks
At the time of writing, eight
Visa Facilitation Agreements (VFAs) are
in force between the European Union and
certain third countries on the facilitation
of the issuance of visas. The VFA sets the
cost of a visa at EUR35 and shortens the
processing period. The current VFAs cover
Albania, Bosnia and Herzegovina, Moldova,
Montenegro, Macedonia/FYROM, Russian Federation,
Serbia and Ukraine. For other countries,
a single-entry and transit visa charge of
EUR60 applies. Visas are valid for 90 days.
Anyone
who wishes to reside permanently in Malta
must apply for a residency permit under
the 1988 Residence Scheme. An applicant
must provide evidence of a minimum annual
income equivalent to the average annual
wage in Malta of EUR14,565 plus an additional
EUR2,913 for each family member. The applicant
must show that he/she has accommodation
considered normal for Maltese families.
Furthermore, the accommodation cannot be
shared with non-family members.
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Malta Business Environment
Malta has an excellent business infrastructure
with good telecommunications; this coupled
with the widespread use of the English language
and a reasonably open and efficient public
administration makes the island a very convenient
and effective business base. Valletta,
the administrative capital, is also the
chief business centre.
The
Government, after a bad period in the 70's,
is welcoming to external investment, and
foreigners are permitted 100% ownership
of enterprises in almost all sectors. There
are extensive investment incentive schemes
(see below). More than 200 foreign companies
have set up manufacturing operations in
Malta.
There are a number of local banks, but foreign
banking activity was heavily controlled
in Malta until quite recently. Business
legislation has created special offshore
regimes for a variety of types
of business , including shipping
companies, mutual
funds and
banks. There is also legislation for
Trusts modelled on English trust law, which
was updated in 2004.
Taxation
for offshore entities is very light,
and Malta is unusual among low-tax countries
in having tax treaties with 57 other countries,
including most OECD countries.
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Malta Marsaxlokk Bay Freeport
The Malta Freeports Act 1989 offers a number
of fiscal and other incentives to companies
licensed by the Freeport Authority, guaranteed
against claw-back for 15 years. They include
exemption from customs duties, stamp duty,
withholding tax (except for distributions
to Maltese residents), exchange control
and death duties. Employees of Freeport
companies have a (small) income tax reduction,
and may import personal items duty and tax
free for the fist six months of their stay.
The
Freeport, at Marsaxlokk Bay, has extensive
storage facilities, including a container
terminal. There is a ship repair facility,
and a number of other support services are
available.
In
order to gain a Freeport license, a company
must be incorporated in Malta and must operate
under one of the following headings:
-
(i)
the labelling, packaging, sorting, warehousing,
storage, exhibition or assembly of any
goods, materials, commodities, equipment,
plant or machinery; or
-
(ii)
any activity
concerned solely with the conduct of
a Freeport including, but not limited
to stevedoring, wharfage, operation
of terminals and container handling;
or
-
(iii)
the rendering
of services analogous or complementary
to the activities mentioned in (i) above.
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Malta Investments by Foreigners
The Maltese government actively promotes
foreign investment, particularly into the
high technology sector. The Industrial Development
Act 1988 introduced incentives and benefits
for foreign investors, which were administered
by the Malta Development Corporation. Some
incentives were automatic, others were at
the discretion of the Malta Development
Corporation. Incentives included tax holidays,
exemption from withholding tax, accelerated
capital allowances, export promotion allowances,
subsidised factories, customs duty relief,
training grants, reduced tax rates, soft
loans, etc.
In
April 2001, the government amended the Industrial
Development Act to incorporate a new incentive
package to boost existing and new investment,
primarily in the manufacturing sector which
employs over 30,000 people and which, together
with tourism and the services sector, is
a key element of Malta's economy.
The
incentives on offer no longer depend on
whether a company exports or not. They are
meant to promote productivity growth regardless
of where the product is sold. The new package
contains not only new tax incentives, with
reduced rates of corporate tax which start
from 5% and move up to 15% over a 15-year
period, but also investment tax credits,
a value added incentive scheme, special
provisions for small businesses, and other
incentives related to training and job creation.
These
incentives are not only available to prospective
investors, but also to existing ones ensuring
that all companies can retain and increase
their investment in Malta.
It
is possible for foreign companies to employ
expatriates subject to approval; normally
the company would have to provide training
or an understudy situation in order to bring
Maltese nationals up to speed in the jobs
occupied.
As
part of Malta's preparations for EU entry,
the Government replaced the IDA in 2001
with a Business Promotion Act which removed
discriminatory treatment of certain types
of company, giving all companies access
to a more modest range of fiscal benefits.
These are described in detail here.
In
January, 2004, the government launched Malta
Enterprise, a new body tasked with attracting
more foreign direct investment (FDI) to
the island. The umbrella body's mission
is to sustains Malta's competitiveness and
to offer assistance to those seeking to
invest in Malta. Malta Enterprise consists
of separate units, the first of which is
responsible for business development and
includes attracting FDI, trade promotion,
marketing strategies, knowledge management,
and foreign offices. The second unit is
primarily responsible for client relationship
management, whilst the third deals with
corporate services.
Malta
Enterprise has overseas offices in Germany,
Dubai and Libya. Detailed information can
be found on their website: www.maltaenterprise.com.
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