Malta has been an EU member state since 2004 and a Eurozone member since 2008. It seeks foreign direct investment to boost the rate of economic development. The island offers incentives to draw in investments in various sectors, including manufacturing, shipping and servicing division, especially generic pharmaceuticals manufacturing, information and computer technology and financial services.
As a country, Malta is politically secure with regards to its position as a parliamentary republic and boasts free press and active political parties. Malta is known for being a safe and secure country in which to do business. In fact, Moody’s scored Malta an A3 government bond rating, with a stable outlook.
The Maltese government created The Malta Enterprise to encourage overseas direct investment in Malta. The Malta Enterprise gives information to potential investors, processes submissions for government investment incentives and communicates between investors and other government parties.
Below are some important laws that influence foreign investment in Malta:
Nearly all the manufacturing divisions are accepting of investors as long as they plan to export their products from Malta (as most manufacturers do). There are no legal constraints for investments geared toward sales in the small local domestic market, but the government cautiously screens such submissions from foreign businesses.
Some sectors controlled by the state, such as the production of electrical energy and circulation of fuels, are being liberalized in reaction to European Union regulations. Energy distribution remains in the hands of Enemalta.
In an attempt to attract investors, the government gives precedence to businesses operating in the following sectors:
Private foreign investors are free to make equity adjustments as they please, from dual ventures to full equity control.
The Maltese government has privatized an amount of state-controlled firms, counting its shares in the country's biggest bank, and postal service and its remaining 60% of the share in a wireless telecommunications services company.
The government gladly accepts private investors, both Maltese and non-Maltese, to partake in privatization projects. It affords overseas investors equal treatment as that given to domestic investors. It also sets a small number of limitations on their operations. At the moment there are no performance requirements other than those linked to the goals stated by the investors at the time of application for assistance. Foreign investors have the right to repatriate or reinvest profits with no constraints and can take disputes before the International Centre for Investment Disputes.
The government regularly accepts repatriation of profits, dividends, and assets. There are no limits on the inflow or outflow of resources for remittances of profits, debt service, capital, capital gains, returns on intellectual property or imported raw materials as long as investors provide the appropriate documents to the Central Bank of Malta. No significant delays exist in converting investment returns after presentation of the necessary documents. Maltese laws and practices affecting remittances of investment capital and earnings have been improved as many international exchange controls were relaxed to conform to EU orders.
There have been no sizeable investment disputes over the past few years involving American or other overseas investors or contractors in Malta. The Maltese Parliament is the highest law-making organization. Every five years its 65 members are elected by proportional representation.
The Government functions through a cabinet of ministers, headed by a Prime Minister. The judiciary is independent and courts are divided into Superior Courts, presided by judges, and Inferior Courts presided by magistrates. The jurisdiction of the Inferior Courts is controlled to minor offences of a criminal nature and to small civil matters. Conventionally, the judiciary functions through the Criminal, Civil and Constitutional courts. The First Hall of the Civil Court arbitrates cases of a commercial nature. There is one Court of Appeal for all jurisdictions. The Constitutional Court has authority to hear and decide questions and appeals on constitutional issues.
There are a number of administrative tribunals, such as the Industrial Tribunal, the Rent Regulation Board and the Board of Special Commissioners for income tax purposes.
In 1987, Malta adopted the European Convention of Human Rights as part of Malta's domestic law.
The Maltese law courts have a long tradition of independence. Once elected to the bench, judges and magistrates have fixed salaries, which do not need annual consent, and they cannot be dismissed except for a proven inability to exercise their function properly or proven misbehaviour, following a two-thirds vote in the House of Representatives. The Constitution ensures the separation of powers amongst the executive and the judiciary. Fair trial is also recognized as a constitutional human right under the Maltese Constitution.
Malta has a unique Commercial Code. Commercial activities are controlled by the Commercial Code and related legislation, such as the Banking Act, the Central Bank of Malta Act, amongst others. Bankruptcy is covered in the Commercial Code. The court assigns a curator to liquidate the assets of the bankrupt company, organization or individual and distributes the proceeds between the creditors.
Malta signed the Convention on the Settlement of Investment Disputes in 2002. It is also a member of the New York Convention of 1958 on the recognition and enforcement of foreign arbitration awards. Means of settlement of disputes are also given in bilateral investment guarantee agreements, which Malta has with several countries.
The government offers numerous significant fiscal and other incentives for investment in industrial projects. These include:
Businesses running within the Malta Freeport, which is a customs-free region, will profit from two main incentives: in particular, decreased rates of taxation and investment tax credits. In effect, tax credits may offset the tax payable for a number of years or decrease it substantially.
All investment incentives are specified by law and made unavailable in an ad hoc manner. Handling of local and foreign investors is the same. Non-Maltese investors do not receive favoured treatment.
Presently there are no performance prerequisites other than those concurrent to the goals stated by the investor at the time of application for assistance to Malta Enterprise. There are no stated conditions that a overseas investor should minimise his shareholding interest over a period of time, transfer his technology, or employ Maltese nationals. Although, these factors might have an effect on Malta Enterprise's decision regarding a firm's application for assistance.
Malta Enterprise monitors compliance with any conditions set by the government as a condition of government assistance. Investors are not forced to disclose proprietary information.