• Why Malta?

    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:

    • Income Tax Act - A single rate of taxation of 35% for limited liability companies in Malta.
    • Business Promotion Act - authorizes the government to assign fiscal and other incentives to businesses engaged in manufacturing, repair or maintenance activities.
    • Companies Act - Controls the creation of limited liability companies. It provides for the creation of investment companies with variable share capital (SICAVS) and businesses with share capital denominated in a foreign currency.
    • Malta Financial Services Authority (MFSA) Act - Created the MFSA, which is the agency responsible for the management of investment services in Malta. The Investment Services Act of 1994 contains a package regulating investment services, including banking and insurance.

    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:

    • Information and Communications Technology, including electronic components
    • Health, Medical Equipment and Pharmaceuticals
    • Back Office and support operations including call centres
    • Knowledge-based services, including aviation repair, education and training; and research and development
    • Logistics-based services, including maritime, warehousing, and oil and gas services
    • Film Industry
    • Education and Training

    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.

    Conversion and Transfer Policies

    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. 

    Dispute Settlement

    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.

    Performance Requirements and Incentives

    The government offers numerous significant fiscal and other incentives for investment in industrial projects. These include:

    • Investment Tax credits are offered to eligible companies, which include those companies involved in pharmaceuticals, plastics, biotechnology, and electronic and electrical activities. Investment Tax credits are calculated as a percentage of either the amount invested; or of the first 2 years wage costs of new jobs created. For Small Enterprises, the relative percentage is 50%, 40% for Medium Enterprises, and 30% for Large Enterprises.
    • An Investment Allowance of 50% on plant and machinery and 20% on industrial buildings and structures, on top of the normal tax depreciation.
    • Tax on Reinvested Profits is reduced from 35% to 19.25%.
    • Encouragement for job creation: The creation of new jobs for specific persons (e.g., persons unemployed for more than two years or disabled persons) would entitle a company to an additional tax deduction based on the wage costs of such persons.
    • Factory Buildings are made available at competitive prices.
    • Soft Loans: Promoters of industrial projects may search for soft loans from Malta Enterprise covering up to 75% of the projected capital outlay. On the other hand, companies may profit from low interest rates to be paid on loans taken up from licensed financial institutions to acquire additional assets. Loan guarantees are also available.
    • Other Incentives include training and management service grants. Based on whether the company is categorized as a large enterprise or a small or medium enterprise, support may vary from 35% to 80% of costs incurred on training.
    • Work Permits: Unspecified work permits are given to shareholders (or their nominees) if they hold 40% or more of the equity. Definite work permits for specialists are granted according to company requirements.
    • The government gives generous incentives to trading and financial businesses registered with the Malta Financial Services Authority (MFSA). Changes to laws in 1994 removed the division between offshore and onshore companies with the result that all companies in Malta are subject to a 35% tax rate on profits. However, a system of refunds due to non-resident shareholders substantially minimises the effective tax rate for international investors.

    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.