Attitude toward Foreign Direct Investment
Malta actively seeks foreign direct investment (FDI), providing financial, tax, and other investment incentives to attract investment in high-tech manufacturing (especially health technologies such as pharmaceuticals, manufacturing, and life sciences), information and communications technology (ICT), R&D, aerospace & defense/ aviation maintenance, registration of ships and aircrafts, electronics, transshipment and related service industries, finance services, and digital gaming. Foreign investment plays an integral part in the Government of Malta's policies to reduce the role of the state in the economy and increase private sector activity.
Malta's comparative advantages include membership in the EU, the Eurozone, and the Schengen Zone; competitive wage rates (even though the standard of living is high, labor costs are relatively low compared with other EU countries); a highly skilled, English-speaking labor force; proximity to both European and North African markets; a fair and transparent business environment; and excellent telecommunications and transport connections.
Other Investment Policy Reviews
Malta Enterprise, a government organization established to promote FDI, provides information to prospective investors, processes applications for government investment incentives, and serves as a liaison between investors and other government entities. Malta Enterprise offers an attractive investment package for American and other investors (see section 5, “Performance Requirements and Investment Incentives”).
Laws/Regulations on Foreign Direct Investment
The following are the most important laws that govern foreign investment in Malta:
The Income Tax Act of 1948 (as amended) establishes a single rate of taxation of 35 percent on income for limited liability companies in Malta. In certain qualifying cases, this rate is effectively reduced to 5 percent through a system of tax refunds on dividends paid.
The Business Promotion Act authorizes the government of Malta to allocate fiscal and other incentives to companies engaged in manufacturing (including software development), repair, or maintenance activities.
The Malta Enterprise Act of 2003 enables Malta Enterprise to develop and administer incentives and other forms of support to liberalize and update legislation relevant to FDI.
The Companies Act of 1995 regulates the creation of limited liability companies. The Companies Act provides for the establishment of investment companies with variable share capital (SICAVS) and companies with share capital denominated in a foreign currency.
The Malta Financial Services Authority Act of 1989 established the Malta Financial Services Authority (MFSA), responsible for the regulation of banking and investment services in Malta.
The Investment Services Act of 1994 contains a package regulating investment services in the banking and insurance sectors.
The Maltese Commercial Code provides for the establishment of several types of business entities according to the needs of an individual investor when setting up a company in Malta. The following are the different available structures:
When setting up a Maltese private company, the minimum share capital amount accepted is €1,165 ($1,300), while the minimum for a public company is approximately €46,600 ($51,670) of which 25 percent must be deposited prior to registration. In the case of private companies with an authorized share capital exceeding the minimum requirements, only 20 percent of the amount must be deposited.
The maximum amount of shareholders is 50 and minimum number is 2 (although a single member company may also be registered under the Companies Act).
The following are the main steps required to set up a company in Malta:
Reserve a company name with the Maltese Commercial Register;
Draft the company’s memorandum and articles of association;
Deposit the minimum share capital; and
File the application with the Malta Registrar of Companies.
The documents to be filed with the Malta Registrar of Companies are:
The memorandum and articles of association;
A confirmation of the company name reservation;
The bank receipt confirming the share capital deposit; and
Passport copies of the shareholders, directors and company secretary.
The Memorandum must be presented to the Registrar of Companies accompanied by a check to the MFSA covering the registration fees, as well as the bank receipt as proof of payment of the initial share capital. The MFSA may also request that due diligence on the directors, shareholders and/or beneficial owners be provided before proceeding with the incorporation. Upon incorporation, a registration fee is payable to the MFSA that is established according to the amount of share capital held by the company.
Given that all the above requirements are satisfied, incorporation of a company can normally be carried out within 2-3 working days. Once incorporation is complete, the MFSA will publish a Certificate of Incorporation which will also display the company registration number.
MFSA website: http://mfsa.com.mt/.
Virtually all manufacturing sectors are open to FDI. There are no legal prohibitions against FDI oriented toward sales in Malta's domestic market. The Government of Malta seeks as a top priority companies operating in the following fields:
Information & communications technology, including electronic components and digital gaming;
Health technologies, medical equipment, pharmaceuticals and life sciences;
“Back office” and regional support operations including call centers;
Knowledge-based services, including aerospace & defense (aviation maintenance), education and training, and research and development;
Logistics-based services, including marine technology, warehousing, and oil/gas services;
Film Industry (Malta has one of the few sets in the world for water/boating scenes).
Limits on Foreign Control and Right to Private Ownership and Establishment
Private foreign investors are free to make equity arrangements as they wish, from joint ventures to full equity ownership.
The Government of Malta recognizes the right to private ownership in theory and in practice. Private entities are free to establish, acquire, and dispose of interests in business enterprises and engage in all forms of remunerative activity. Many U.S. firms sell their products or services in Malta through licensing, franchise, or similar arrangements. The Government of Malta normally allows foreign companies to operate in merchandising areas, especially if they operate a licensing, franchising, or similar agreement through a local representative.
It is the government's stated policy not to allow public enterprises to operate at the expense of private entities. Some sectors, such as electricity generation, are now also open to private sector participation. The government provides private enterprises with the same opportunities as public enterprises for access to markets and other business operations.
In recent years, the Maltese government has privatized a number of state-controlled firms, including the country's largest bank, the postal service, shipyards, energy generation, and the wireless telecommunications industry. Although full privatization of Air Malta, the national airline, has been excluded, the Government of Malta is currently considering options for a strategic minority partner.
The government welcomes private investors, Maltese and non-Maltese, in privatization projects. It affords foreign investors equal treatment to that given to domestic investors and sets few limitations on their operations. Foreign investors have the right to repatriate or reinvest profits without restriction and can take disputes before the International Center for the Settlement of Investment Disputes (ICSID).
Screening of FDI
Malta is a free trade, open economy country. The government does not approve or restrict any foreign direct investment, as long as it complies with EU and national regulations. Malta Enterprise reviews FDI before granting any incentives requested by the private entity/business. A due diligence process is carried out prior to approving greenfield investments. Company formation can be completed within ten days.
The MFSA undertakes the filings and regulatory screenings on financial investments. For other types of investment see “Screening of FDI” section above.