i) History ii) Geography iii) Population iv) Government and Legal System v) Malta Financial Services Centre vi) Enhanced Profitability vii) Legislation viii) Human Resources ix) Education x) Infrastructure xi) Living in Malta
i) HISTORY OF THE MALTESE ISLANDS
Malta boasts one of the oldest Mediterranean civilisations with its neolithic temples dating back some 5000 years.
Various cultures especially the heritage bequeathed by the Knights of St. John left their indelible mark on Malta's history and architecture. A voluntary part of the British Empire in 1801, Malta achieved full independence in 1964, becoming a member of the British Commonwealth, the Council of Europe and the United Nations. In 1970, the Island signed an Association Agreement with the European Union and in 1990, it applied for full membership. In 1974, Malta declared itself a Republic.
ii) GEOGRAPHY OF THE MALTESE ISLANDS
The topography of Malta is characterised by a series of low hills and slopes towards the North East and low-lying land to the South East.
The Maltese archipelago consists of three islands: Malta, Gozo and Comino. They are situated in the middle of the Mediterranean Sea about 100 km south of Italy. The total area of the islands is 316 sq. km. Malta, the main island is 27 km long and 14 km at its widest point and occupies a total area of 246 sq. km.
Valletta, the Capital city, lies on a promontory between two main harbours. It is the seat of Government. Malta has a healthy, typically Mediterranean climate, offering warm dry summers and mild winters. The Island enjoys over 300 days of sunshine each year. The average annual rainfall is 590 mm. Temperatures range between 12 degrees Celsius in the winter to around 30 degrees Celsius during the summer.
iii) POPULATION OF THE MALTESE ISLANDS
The population of the Islands is approximately 360,000. Maltese society is homogeneous having its own identity and language. The natural population growth has in recent years been supplemented by a net inflow of Maltese who had previously emigrated to America, Canada, Australia and the United Kingdom. Malta's official languages are Maltese and English; the latter is spoken fluently by all Maltese citizens. Business correspondence is mainly in English. Most of the population is also fluent in Italian.
iv) GOVERNMENT AND LEGAL SYSTEM
Malta is a parliamentary democracy. Although Malta did not become a sovereign independent nation until 1964, it had a self-governing constitution in 1921. The President represents the unity of the nation, while executive power resents with the Prime Minister and the Cabinet. Parliament is composed of 65 representatives elected every five years. The Judiciary enjoys complete independence.
v) THE MALTA FINANCIAL SERVICES CENTRE
Through the coordination of promotion, service and regulation of financial services in one centralised, specialised organisation, Malta has developed an efficient and effective mechanism for international operations and investment.
The Malta Financial Services Centre (MFSC) evolves from the Malta International Business Authority (MIBA) which had been set up to supervise offshore activities. It continues in MIBA's tradition of adopting a professional and pragmatic regulatory approach. This ensures the orderly functioning of the financial system, while at the same time gives financial services operators the necessary flexibility demanded by the market. The Regulatory Unit of the MFSC which is central to the whole set-up, supervises activities in the investment services, insurance and banking sectors. A director heads a specialised unit dealing with each sector. Expert resources providing legal, corporate, trusts and investigative services support the unit's activities. The Regulatory Unit also issues licences, directives and guidelines as provided for by law.
The International Tax Unit (ITU) draws its staff from the Inland Revenue Department but forms an integral part of the MFSC's overall structure and is housed within its premises. This ensures that all tax related matters with respect to international operations are dealt with speedily and effectively. The ITU is also responsible for the issuing of Advance Revenue Rulings which provide certainty on the tax treatment of any international undertaking.
In addition the MFSC houses the Registrar of Companies, ensuring that the international business community finds all necessary company incorporation services under one roof. All the forms and returns required by the relevant legislation are deposited with the Registrar of Companies.
As a key element of its client-service orientation, the MFSC will assist new entrants in setting up their operations in Malta and is committed to provide such companies with services of the highest standard.
vi) ENHANCED PROFITABILITY
In addition to the basic advantages of location, human resources, infrastructure and flexible operating cost base, excellent tax planning opportunities and incentives have been developed for key economic sectors.
From favourable double tax and flat rate foreign tax relief, through tax efficient mechanisms for international trading and holding companies, Malta has developed diverse structures to enhance operations and reduce liabilities.
Coupled with incentives for investment services companies and their expatriate employees, tax relief for collective investment schemes and special tax legislation relating to trusts, the complete picture reflects a flexible, vibrant environment with diverse opportunities for increased profits without increased operating difficulties.
Among the most significant tax planning benefits offered are:
Unilateral Relief
A company which receives income from a country not covered under a double taxation agreement can receive credit of the relevant tax against its tax liability in Malta.
Flat-Rate Foreign Tax Credit
This is available to companies where none of the other mechanisms for relief from double taxation is available. It applies to income or capital gains earned by the company from overseas. The credit is calculated at 25% of the amount of the overseas income or gain before deductions. A certificate issued by the company's auditors stating that the income arose from overseas is sufficient for this purpose.
International Trading Companies
An International Trading Company (ITC) is a company whose operations are restricted to carrying out trading activities from Malta, with individuals or companies not resident in Malta. The status of an ITC is established by the issue of an Advance Revenue Ruling given by the International Tax Unit. Malta's full imputation tax system and the repayment provisions contained in the legislation make the International Trading Company a very tax efficient vehicle for non-resident shareholders.
Collective Investment Schemes
Collective Investment Schemes are tax exempt and therefore do not qualify for relief from double taxation. However, where such schemes are not structured as a unit trust, they may opt to be taxed. In this case, tax is applied at the rate of 25% and relief from double taxation can be obtained by taking advantage of Malta's network of double taxation agreements and the relevant tax planning opportunities.
Trusts
The income earned by a trust, whether retained or distributed to its beneficiaries, attracts a total global tax of Lm200 per annum. No death or stamp duty is charged, nor is any customs duty paid on any property held under a trust when imported into Malta.
vii) THE LEGISLATION
The legal framework which regulates investment services, insurance, banking and international trading activities is modern and appropriate to the demands of today's business, drawing significantly on European Union directives. Along with Malta's tax provisions, it forms an integrated structure for international business and financial services.
Some of the key components of this framework are:
The Malta Financial Services Centre Act
This establishes the Malta Financial Services Centre (MFSC) as the single regulatory authority for financial services and outlines the operating structure.
The Investment Services Act
The necessary statutory basis for the licensing and regulating of firms providing investment services and collective investment schemes is outlined here, along with licensing procedures and indications of the broad criteria MFSC will use to consider all applications.
The Banking Act
As part of a package of regulatory concepts and supervisory practices, this establishes such criteria as the minimum paid up capital for credit institutions and adequacy of own funds in terms of a risk-weighted basis. It also sets up the Financial Services Tribunal which will consider appeals of supervisory authority decisions.
The Financial Institutions Act
The general regulatory environment for the operation of financial institutions, definition of a business carrying out the activities of a financial institution and requirements for licensing are detailed here. The Act also sets out the obligations of the licence holder and other relevant supervisory provisions.
The Companies Act
Drawing on a number of European Union Company Law Directives, this legislation makes possible the setting up of various types of companies, including companies with variable share capital (SICAV). It provides for the regulation of meetings and reporting requirements and also regulates mergers and de-mergers, winding-up and insolvency. The Act establishes group accounting provisions in line with the European Union Fourth and Seventh Directives.
The Recognition of Trusts Act
The Hague Convention for the Recognition of Trusts is now an integral part of the Maltese legal system, enabling collective investment organisations to set up unit trusts under foreign legal rules with which they are familiar.
Trusts in Malta can be governed either by Maltese rules or by foreign law with recognition by Maltese courts.
The Prevention of Money Laundering Act
This legislation clearly defines the crime of money laundering and establishes safeguards to protect the integrity of the financial system. The Act's provisions are directed towards not only the principal actors but also those who aid and abet money laundering.
The Insider Dealing Act
As a supplement to the Malta Stock Exchange Act, 1990, it makes recommending or procuring a third party to deal in relevant securities or disclosing inside information knowing that it will be acted upon by others an offence.
The Professional Secrecy Act
It clearly identifies those persons who are bound by professional secrecy and describes the circumstances, which must be strictly interpreted, giving rise to exceptions to professional secrecy.
viii) HUMAN RESOURCES
Malta's work force is highly educated and receptive to new skills and practices.
Some 300 lawyers and 600 accountants practise on the Island. Academic qualifications from the University of Malta are widely recognised while many professionals have British or other major European academic qualifications.
Around twenty percent of school leavers continue their education at the University of Malta, which is over four hundred years old. The Maltese are multi-lingual; while Maltese and English are both official languages, business is usually conducted in English. Italian is widely spoken and many Maltese are fluent in other languages.
Employer-employee relations are governed by equitable labour and social laws which relate to the rights and responsibilities of both parties. A basic feature in employer-employee relations is that discrimination is non-existent in recruitment, redundancy, pay or dismissal.
Increasing emphasis has been focused on administrative and technological skills development, along with the implementation of quality standards criteria and ongoing needs assessment and training.
A number of internationally accredited professional organisations are also active in Malta. Among those offering continuing education and qualifications training for both national and foreign professionals are the Mediterranean Insurance Training Centre (MITC), The Chartered Institute of Bankers (CIB) and The Malta Institute of Accountants.
ix) EDUCATION AND TRAINING
The University of Malta traces its origins to the late 16th Century. The University offers studies in all facilities including Arts, Science, Architecture and Civil Engineering, Economics, Management and Accountancy, Education, Laws, Banking, Theology, Medicine and Surgery, Dentistry and Mechanical and Electrical Engineering.
The Labour Market
The manpower requirements of the full range of business and service industries are adequately met by the output from Malta's educational establishments. The increased output from tertiary education establishments and the supporting activities of the Employment and Training Corporation ensure the availability of employees in all sectors of business activity.
x) INFRASTRUCTURE
Telecommunications
Malta has one of Europe's most advanced telecommunications infrastructures incorporating a fully automated digitalised transmission system and satellite facilities. This allows direct access to all countries around the world. In addition, data transmission networks, packet switching, freedom and choice in subscribers' equipment, cellular telephones and wireless communications and paging systems are available.
Malta has one of the finest natural harbours in the world - The Grand Harbour. A second harbour, Marsaxlokk, has been developed into a free port catering for inter-continental cargo and a distribution centre for the Mediterranean region. Malta's Airport has also been modernised to handle over 2.5 million passengers annually.
Air Services
The airport is directly linked with most major European business centres. Regular scheduled flights ensure quick and convenient access to cities including London, Paris, Rome, Milan, Frankfurt, Amsterdam, Zurich, Tel Aviv, Dubai and Vienna while destinations not served directly from Malta are usually accessed via London, Rome, Milan, Zurich, Frankfurt and Amsterdam.
Scheduled services are provided by Air Malta and most major international airlines such as Lufthansa, Alitalia, Swissair and Austrian Airlines.
Sea Transport
Many shipping companies provide regular sailings from Malta to major ports around the world. Frequent feeder services also link Malta with most Mediterranean ports. The Malta Freeport is equipped for the needs of transportation and transhipment of container cargo, oil bunkering and warehousing.
Office Space
There is a good supply of quality office space. The annual rent for prime area, fully furnished offices is around US$ 120 per square metre, while that for offices located outside prime areas averages around US$ 45 per square metre.
xi) LIVING
The Maltese extend a warm welcome to foreigners ensuring that they quickly integrate into Malta's social fabric.
When travelling on business to Malta, you have an excellent selection of first class hotels to choose from. A number of these are operated by world leading groups such as Hilton International, Forte, Steigenberger, Golden Tulip, Maritime and Holiday Inn.
Malta's traditional hospitality is still very much in evidence and the country continues to be one of the safest to live in.
It offers residents a high standard of living, excellent private schools teaching both European and American curricula, professional health services, including well-equipped hospitals and a number of private clinics, and a diverse range of accommodations, shopping, cultural events and leisure activities.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
For further information contact
Jack Spencer Willis Corroon Middle Sea House Floriana VLT 16 Malta Tel: +356 235860/1 Fax: +356 248774or visit the Willis Corroon web site, at Click Contact Link
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