The country

The Republic of Malta is part of the European Union and is located south of Sicily. Made up of eight islands (of which only four are occupied), Malta is the most densely populated country in the world, with 1,247 inhabitants per square kilometre. Formerly under the rule of the United Kingdom, which valued its strategic position, Malta declared its independence in 1964.

An onshore centre

Malta enjoys a good reputation in terms of onshore investment and has the advantage of being in the European Union and in the Eurozone. The following activities are favoured in Malta:

• the licensing of online games
• import/export corporations (optimization of margins)
• trading companies

The creation of a society in Malta is facilitated by simplified accounting, tax credits for investment and improved recruitment procedures.

Useful information

In Malta, you pay 35% tax, then 6 months later you receive a 31% rebate paid to the company shareholder, as explained in our Commercial company in Malta montage. You will, therefore, need to create a holding company in Malta and an additional offshore company. Malta has a good image but the rigour of the company management legislation does not allow you to pay yourself wages or expenses during the year; you have until the end of the year to do this. Malta is also a good jurisdiction for intellectual property.

The different types of companies

Links :
Trade Register
Companies Register

The Jurisdiction in detail

Since its independence, Malta has managed to “get by” on strong, sustainable growth until it slowed slightly at the beginning of the 21st century. The country has survived the financial crisis thanks to a reliable banking system. Maltese growth should be 2.2% in 2013.

The main asset of the country from the economic point of view is its tourist appeal, which attracts a million people each year. This part of the national economy alone accounts for 30% of GDP. Production of electronic and pharmaceutical goods is also a major sector, accounting for 20% of GDP and 75% of the country’s exports. At the same time, Malta imports a large amount of raw materials and energy to compensate for its total lack of natural resources.

The country trades mainly with the United States, the European Union and Singapore and takes advantage of its location to establish itself as a mandatory intermediary for trade between the North and South of the Mediterranean. Its trade balance has long been negative but seems, in recent years, to be tending towards equilibrium again.

The advantages in terms of investment :

• Malta is part of the European Union
• it is a good place for trade (advantageous location)
• stable political and economic system
• cheap labour
• tax advantages have been put in place for investors
• well-maintained and modern infrastructure
• foreign investment is becoming increasingly important

Disadvantages :

• the internal market is small
• inhabitants’ standard of living is quite low
• economy dependent on tourism

The various tax rates

Although, in theory, corporate tax is 35%, in Malta there are a multitude of advantages offered to foreign investors in order to create more wealth and to consolidate the country’s economy. Investors in industry are offered:

• 5% tax instead of the usual 35%
• tax credits according to investments made
• reduced tax on reinvested profits
• attractive and accessible loans
• unlimited work permits for shareholders owning over 40% of the company

All this, not to mention the country’s free trade zone, which allows companies based there to reduce their taxes. Consumer tax (VAT) is 18%, with lower rates for some sectors (hotel industry, electricity) or even 0% for medication, food, the banking and insurance. Individual income tax is progressive:

France and Malta drew up a double taxation agreement in 1977, as amended in 1994.

Links :
Malta Tax Centre
Inland Revenue Malta

Accounting essentials

In Malta, accounting is regulated by the International Accounting Standards and runs from 1 to 31 December. Accounts must be drawn up each year and include a balance sheet, a profit and loss account and an appendix. The 1995 legislation on companies requires that the information provided in these accounts is true.

Annual accounts must be confirmed by an expert external to the company.

Links :
International Accounting Standards
Malta Institute of Accountants
Accountancy Board

Access to and functioning of the market

Malta is member of the World Trade Organization and the European Union and a signatory of the Kyoto Protocol, the Washington Convention, the Basel Convention, the Montreal Protocol and the International Coffee Agreement of 2001.

Some imports are subject to European permits: foodstuffs, commercial services, food which must pass veterinary inspection and products dangerous for the ozone layer. Trade with other member countries of the European Union is not subject to customs duties. Trade with other countries is therefore taxed at a rate based on the CIF value, in accordance with the Common Customs Tariff.

Industrial products are thus taxed at approximately 4%, a rate that rises for textiles and the food industry (17.3%). The TARIC code lists all the customs duties. The import of products into Malta requires the possession of a Single Administrative Document. An Entry Summary Declaration is also mandatory in the context of the Import Control System (global import protection system).

Retail in Malta is characterized by strong competition, despite the smallness of the country, due to the many, often family-run, businesses. Stores are often relatively small and large-scale retail and supermarkets are almost non-existent. Sea and road are the most commonly used transportation methods, depending on where goods must be forwarded to.

As for the production of goods and services, the pharmaceutical sector is one of the most dynamic, together with electronics, call centres, logistics and financial services.

Employment law

The legal duration of the working week is set at 40 hours, with a minimum monthly wage of 585 EUR. Employment contracts (fixed-term, permanent, full-time or part-time) meet the standards set by the Conditions of Employment Act. Retirement age is 60 for women and 61 for men.

The employer and the employee must each pay social contributions of 10%. The Malta General Workers Union is a very powerful union.

Intellectual property

Links :
Association of General Retailers and Traders
Maltese customs
Malta transport authority
Malta transport authority
Chamber of Commerce of Malta
Conditions of Employment Act

Political data

The President (currently George Abela) is elected by the Parliament for a period of 5 years, and he appoints the Prime Minister (currently Lawrence Gonzi). The latter holds genuine executive power and runs the Government. In contrast, legislative power is held by the House of Representatives (numbering 65) elected by universal suffrage for five years.

The political landscape is made up of two parties: the Nationalist Party, a Christian democratic party, and the Labour Party, a social democratic party.