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Malta in Europe

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Malta Overview

Contributed by Camilleri Preziosi

Malta has over the last twenty years established itself as a competitive platform for international business and foreign direct investment. The World Economic Forum’s Global Competitiveness Report for 2017–2018 ranks Malta in 37th position out of 137 countries, in terms of its overall index.

A variety of attributes have helped to launch and maintain Malta’s position as a top-ranked financial and professional services jurisdiction. These include direct access to the EU’s Eurozone (since 2008) and single market of more than 500 million people in 28 EU Member States (since 2004); low operational overheads; a convenient time zone, being just one hour ahead of GMT; and a proactive business culture, with a skilled English-speaking labour force. English is, in fact, one of Malta’s two official languages, the other being Maltese. Additionally, top foreign direct investment pulling factors are competitive personal and corporate tax regimes, as are a stable social climate and political, legal and regulatory environment. In fact, Malta boasts an extensive double tax treaty network, with over 70 treaties concluded to date.

Economic performance continued to strengthen during 2017, with Malta achieving a real economic growth of 7.2% in comparison to the preceding year where the real economic growth was 6.4%, placing it amongst the frontrunners in terms of economic performance in the EU. Malta has continued to consolidate progress in labour market performance with an employment growth rate of 3.7% (up from 2.4% in 2016), and the unemployment rate decreased from 5.7% in 2015 to 4% in 2017. Real GDP is forecast to grow by 5.6% in 2018 and the Government of Malta is aiming for a surplus target of 0.5% of GDP by 2018. Another achievement is that Standard and Poor’s maintained the sovereign credit rating of Malta at A-; this was raised from BBB+ to A- in 2017.

Notwithstanding such strengths and growth, a number of areas have been identified as possible focus points for improvement from the point of view of foreign direct investment. At the forefront of the agenda is enhancing the creation of business, the incentivisation of the markets and the further attraction of foreign direct investment. The Budget for 2018 announced that the Government of Malta would again focus on developing Malta’s domestic or regional market; R&D and innovation environment; and the country’s transport and logistics infrastructure. Particular reference was also made to boosting the pharmaceutical industry.

Measures have also been put forward in order to further develop and upgrade Malta’s infrastructure and the education system. Measures also include implementing ‘making work pay initiatives’, reducing the risk of poverty and ensuring that economic growth is enjoyed by all. Provision of healthcare is also to improve, with investment in new hospitals and the refurbishment and conversion of already existent ones in the process, already underway.

Malta benefits from a hybrid legal system. A strong civil law legacy coupled with a corporate law structure modelled on the English law counterpart facilitates flexible and diverse solutions. This is evidenced in the significant number of companies opting to shift their jurisdiction of domicile to Malta and the multitude of legal entities being registered in Malta. Malta offers a fiscally efficient platform for financial services companies and this, combined with a number of other incentives, such as an accessible Regulator and secure regulation, make doing business in Malta an attractive proposition. A number of income tax incentives for highly qualified professionals and high net worth individuals make Malta just as attractive for individuals engaged in the industry.

Yacht and ship registration are also buoyant markets in Malta, an island state conveniently and strategically located in the heart of the Mediterranean basin. Malta has the second largest ship register in Europe and the eighth largest in the world. These are rankings which have been achieved through a well-developed legal structure offering security to financiers, attractive incentives, including fiscal incentives to both owners and operators, and a long-standing maritime tradition. In keeping with such success, aircraft registration and finance has similarly been an area which the legislature has focused on in recent years.

The legal market in Malta is also thriving as a result of the growth sustained in international business, and it is projected to continue on a growth path in line with growth projection in the rest of the industry. iGaming has been identified as a leading business sector over the coming years, with ICT and telecoms and a variety of financial services offerings following suit. In relation to iGaming, Malta has been at the forefront of this industry since 2004, when it was the first EU Member State to regulate the remote gaming market. This has seen Malta attract some of the largest and most successful iGaming companies to its shores. In order to ensure the stability of this market, Malta intends to extend the ‘VAT Grouping’ concept to such, wherein legally independent, permanently established entities in Malta having financial, economic and organisational ties may be registered as one taxable person. Another avenue for potential growth which is currently being developed is Islamic banking and the set-up of Shariah-compliant funds, such as sukuk funds, in Malta.

The profile of capital markets in Malta, promoted principally by the Malta Stock Exchange (Borża ta’ Malta), has also been bolstered with the introduction of a multilateral trading platform, ‘Prospects’, which is fully owned by the Malta Stock Exchange and is tailored to the financing needs of small and medium-sized companies on a pan-European level. Additionally, it is anticipated that in the near future, blockchain will also establish itself as a favoured trading and clearing platform on the local and global stock markets. A new blockchain lab will be opened at Malta Information Technology Agency and a government web portal will be launched to focus on this technology as well as on cryptocurrencies. These strides forward can be seen alongside a number of other domestic initiatives targeted towards ensuring the vitality, growth and competitiveness of Malta’s capital markets. These include strengthening the legal infrastructure in the areas of securitisation, insurance and collective investment schemes, as well as amendments to domestic income tax legislation in order to incentivise equity listings on the Malta Stock Exchange.

Looking towards the near future, it is expected that the upward trend in economic growth will continue in 2018 due to Malta’s strong reputation and stable political, economic, social and legal bases, as well as the collective drive from all stakeholders in the industry.