The Republic of Malta is a small island consisting of an archipelago in the middle of the Mediterranean Sea of which only the three largest islands Malta (Malta), Gozo (Ghawdex) and Comino (Kemmuna) are inhabited. The strategically located islands constituting the Maltese nation have been ruled by various powers and fought over for centuries, and they have a deeply rooted history dating back to neolithic times.
Malta ’s strategic geographical location played a decisive role in its history and continues to play a very important part in its economical, political and cultural development and prosperity today. Having implemented a sound legislative framework over the past decade, Malta’s accession as a member of the European Union has stimulated significant developments in the islands’ economy, brought about principally by a boost of inward direct investment into the country. With its highly educated workforce and the comparatively lower cost of professional services when compared with other EU centres, Malta has become firmly established as a reputable business and financial centre offering attractive business solutions for individuals and international corporations alike.
The population of the Islands is approximately 410,000 (this figure includes foreign nationals residing in Malta). Maltese society is homogeneous having its own identity and language (English and Maltese are both national languages). The natural population growth has in recent years been supplemented by a net inflow of returning migrants who had previously emigrated to America, Canada, Australia and the United Kingdom.
Malta boasts a rich history of tradition and culture lavishly woven by the many civilisations that have swept the Mediterranean leaving their imprints on those small islands. The first evidence of life dates back as far back as the Neolithic age, when early settlers some 6000 years ago left evidence of their magnificent temples of worship and burial grounds. After these, new faces belonging to new civilisations appeared, all leaving their indelible traits: Phoenicians; Carthaginians; Romans; Arabs; Aragonese; the Knights of St. John; the French under Napoleon Bonaparte and finally the British. The British stayed for more than a century and a half and during this time set up a prominent naval and military base for their Mediterranean fleet and their influence, particularly on the infrastructure of the country, its legal system and its civil service, remains.
Malta obtained its independence in 1964 but retained a NATO military base, which turned out to constitute the Island's main source of revenue. Ten years later it became a Republic and in 1979 it closed the military base.
Malta is a sovereign independent state enjoying traditional political, economic and social stability. It enjoys a parliamentary democracy based on the Westminster model. It joined the EU in May 2004 and forms an integral part of Western Europe both politically and culturally. Malta is a member of the United Nations, of the Council of Europe and of the Commonwealth. Malta maintains friendly relations with all countries through its policy of neutrality and non-alignment.
The President is the titular head of the state, while executive powers rest with the Prime Minister and the Cabinet. Parliament is composed of 65 representatives elected every five years. Based on the English juridical system, the judiciary has a tradition of independence that dates back hundreds of years. The supreme law of the country is its written constitution, which expressly incorporates the fundamental principles of Balance of Powers, the Rule of Law, the Independence of the Judiciary and the Human Rights.
With the closure of the military base in 1979, it became imperative for the country to launch a series of development programmes to re-orientate the Islands’ economy.
A strong infrastructure and promotional drive basing itself on price competition and on high standards of tourism facilities turned tourism into Malta's primary source of foreign exchange, with more than a million tourists visiting Malta each year. Malta's natural harbours host one of the most renowned dry-docks in the Mediterranean and a shipbuilding yard.
The geography of the Island has always provided natural attractive safe marinas for yachts coming from all over the world. Manpower is the most precious resource in Malta. Human resources development is fundamental to the Island's economic progress, which is why great stress is placed on an enlightened education system and the training and preparation of the labour force to levels required by modern industry and sophisticated technology.
Following an overhaul of Malta’s financial legislation in the early 1990s, Malta has obtained international recognition as a stable financial services centre of repute. Today, Malta’s regulatory framework for financial services is fully consolidated and aligned to internationally recognized standards. Its onshore regime provides a seamless framework that supports both domestic and international economic activity. The Malta Financial Services Authority (MFSA) is Malta’s single regulator for banking, investment services, insurance and other financial services activity. The regulator’s accessibility and its pro-active approach to addressing market developments have proved to be a highly successful formula.
The Maltese financial services industry has witnessed a rapid growth over the last decade, with over 7,000 people currently employed in the financial services sector (excluding law firms and accountancy firms), contributing a significant 12% to the country’s GDP. The Maltese Government continues to evaluate and update relevant legislation and regulations, keeping it abreast of developments in the industry with a view to maintaining Malta’s competitiveness in this sector.
Malta joined the 2004 EU enlargement along with nine other countries. Several state-controlled corporations have been sold and markets were liberalised in anticipation of Malta’s EU membership, whilst the Government’s remaining participations in the private sector continue to be privatised.
Reserves for foreign currency per head are amongst the highest in the world. With more than 100 years experience behind them, Malta's banks are continually expanding and improving their services. Financial institutions have been streamlined to keep abreast of transformations that are taking place in what has become a global marketplace. Exchange controls have also been removed to facilitate the free movement of capital across Malta’s national borders, in line with EU legislation.
The Maltese government entered the ERM framework II in May 2005, and adopted the Euro as the country's currency on 1st January 2008. Malta also adopted regulations implementing the provisions of the Schengen Treaty in December 2007
There are several daily flights to Malta from all major European cities.
The Republic's official languages are Maltese and English; all Maltese citizens speak the latter fluently. Business correspondence is mainly in English. Most of the population is also fluent in Italian.
Exchange controls have been abolished since 19 April 2004, save for certain restrictions for transactions involving non-residents from non-EU/non-EEA countries.
Malta is a Civil Law jurisdiction, however, all modern legislation including company, tax and maritime laws are modelled on their UK counterparts.
Companies Act, 1995; Trusts and Trustees Act, 1988; Malta Financial Services Authority Act, 1994; Investment Services Act, 1994; Banking Act, 1994; Financial Institutions Act, 1994; Financial Markets Act, 2002 and the Business Promotion Act, 1988.
This entails the deposit of the paid-up issued share capital into a bank account and the filing of the Memorandum and Articles of Association with the Registrar of Companies. Non-EU/ non-EEA resident shareholders are also required to submit a bank reference besides an identification document for the immediate shareholder (e.g. passport copy or certificate of incorporation).
There are no specific restrictions on trading imposed on Maltese Companies. However, companies involved in particular spheres of economic activity may require a licence before commencing their activities. Such activities would include investment services, insurance business, other financial services and also gaming activities, to mention a few.
A Maltese company may exercise all those powers outlined in the Memorandum and Articles of Association of the Company.
Must be maintained in Malta.
Two to Three working days.
Anything identical or similar to the name of a company already incorporated or reserved; anything that in the opinion of the Registrar of Companies is offensive or otherwise undesirable.
Names can be expressed in any language using the Latin alphabet.
The name of the company must end with the word "Limited" or "Ltd" in the case of private limited companies and “p.l.c.” in the case of a public limited company.
The identity of the beneficial owners of a Maltese company may remain confidential if a trustee company authorised by the Malta Financial Services Authority is engaged to act as shareholder on behalf of the underlying beneficial shareholders. This confidentiality is maintained as long as the company and its beneficial owners are not involved in any money laundering activity.
The minimum authorised share capital of a private limited liability company is of €1,165. The minimum issued share capital of a private limited liability company is €1,165, 20% paid up. The share capital may be denominated in any convertible currency.
A company may have different classes of shares.
A minimum of one who need not be a Maltese resident. Corporate directors are also allowed.
The secretary is to be an individual and may be a non-resident of Malta.
The minimum number of shareholders is normally two; however a "single member company" may also be registered, subject to the satisfaction of certain requirements.
Malta operates the 'full imputation' system of taxation so that any tax paid by the company is imputed to the shareholder in the event of a dividend distribution. The tax withheld by the company from the dividend it ditributes is, therefore, no more than a payment on account of the shareholder's own liability.
Income Tax is the only tax imposed on the profits of companies. The standard rate of income tax is 35% of taxable income, which is the net profit (accounting profits) as reported in the companies' audited financial statements, subject to certain adjustments. All expenses incurred wholly and exclusively in the production of the income are considered deductible.
Allocation of a company's profits to the individual Tax Accounts.
The distributable profits of a company registered in Malta (which includes Maltese branches of foreign companies) are required by tax law to be allocated to five different accounts, or reserves, namely:
Malta generally operates an ordinary credit system for relieving double taxation. There are four different types of double taxation relief, namey:
The following example illustrates this method:
|Income net of foreign tax||800|
|Grossing up for Flat rate of foreign tax credit||200|
|Tax @ 35%||350|
|Flat rate foreign tax credit||(200)|
The payment of a dividend by a Maltese registered company to a shareholder entitles such shareholder to a full or partial refund of the tax paid by the Maltese company on the profits out of which the dividend was distributed.
A tax refund arises from the full imputation system of taxation referred to above. In addition, another entitlement to a tax refund arises on certain distributions made by Maltese companies, in certain circumstances as explained below:
A company registered in Malta would have a 'participating holding' in a subsidiary company where the following conditions are satisfied:
The shares held by the Malta company in the subsidiary company qualify as ‘equity shares’ i.e. shares in a company which does not own immovable property situated in Malta (or rights over such property) and does not hold, directly or indirectly, shares or interests in a body of persons which owns immovable property situated in Malta (or rights over such property) and which entitle the shareholder to at least two of the following rights: (i) a right to votes; and/or (ii) a right to profits available for distribution; and/or (iii) a right to assets available for distribution in the event of a winding up; and
At least one of the 6 additional qualifying criteria are met:
The Participation exemption would always be available in respect of capital gains derived from a 'participating holding' - even upon a disposal of a participating holding (in whole or in part) in a Malta resident company.
On the other hand, the participating exemption would only be available in respect of dividends derived from a participating holding in a non-resident subsidiary and if any one of the following additional conditions is satisfied:
Where none of the above three conditions are satisfied, then both of the following two conditions must be met to avail of the participation exemption:
Tax is payable by a Maltese company on profits allocated to the foreign income account and Maltese taxed account by not later than sixty days from the end of the month in which a dividend is paid. If no dividend is paid, tax is payable on profits allocated to the Foreign Income Account within eighteen months from the end of the accounting period.
A tax refund due from the Maltese revenue authorities is payable to the shareholders within 14 days from the end of the month in which a valid refund claim is submitted, provided the company has paid the tax on the distributed profits.
No tax is withheld on the payment of dividends by a Maltese registered company to its shareholders, whether such shareholders are resident or non-resident in Malta.
Non-resident persons are exempt from tax on interest or royalties accruing or derived from Malta except where such interest or royalties are derived from a permanent establishment that the non-resident has in Malta. As a result no withholding tax is levied on the payment of interest or royalties to non-residents.
Maltese companies trading from Malta may be registered for VAT purposes and the VAT prefix will be 'MT'.
Malta's has a large and expanding network of double tax agreements comprising 62 treaties in force to date. Malta’s double tax treaty network as well as other domestic methods for relieving double taxation on cross border transactions, and Malta’s full imputation system and its refundable tax credit system provide an excellent base for establishing tax efficient structures.