The Government of Malta offers several investment incentives to attract FDI. All investment incentives are specified by law and cannot be made available in an ad hoc manner. However, the way in which incentives are designed allows the opportunity to offer relatively tailor-made solutions, even though treatment of domestic and non-Maltese investors is identical. There are no stated requirements that a foreign investor should transfer technology, employ Maltese nationals, or reduce his shareholding interest over time. These factors might, however, influence 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 required to disclose proprietary information.
Investment Tax Credits
Companies in a targeted sector are entitled to a tax credit calculated as follows:
- As a percentage of qualifying capital expenditure (currently granting 15 percent for a large enterprise, 25 percent for a medium enterprise, and 35 percent for a small to micro enterprise. As of January 2018 the applicable percentages will drop to 10, 20, and 30 percent, respectively); or
- As a percentage of the wage cost for the first 24 months of a newly created job (currently, 15 percent for a large enterprise; 25 percent for a medium enterprise, and 35 percent for a small and micro enterprise).
Access to Finance:
Soft Loans: Malta Enterprise supports enterprise though loans at low interest rates for partial financing of investments in qualifying expenditure.
Loan Guarantees: Malta Enterprise may guarantee bank loans taken by a company to finance acquisition of additional assets to be employed in the company’s business.
Loan Interest Subsidies: Malta Enterprise may subsidize the rate of interest payable on bank loans. Loan interest subsidies are not in addition to loan guarantees and applicable to loans provided by banks or other financial institutions.
Micro Guarantee Scheme: Malta Enterprise aims to accelerate the growth of enterprises by facilitating access to debt finance for smaller business undertakings.
Employment and Training: Malta’s employment corporation JobsPlus, formerly known as ETC, supports enterprises in recruiting new employees and training their staff.
SME Development: Incentives to assist SMEs in investing, innovating and expanding or developing their operations through the Micro Invest Scheme. The Ministry for the Economy, Investment and Small Business can also facilitate access to newly-developed crowd-funding platforms.
Enterprise Support: Malta Enterprise provides assistance to businesses to support development of international competitiveness, improve processes, and network with other businesses. Support for trade promotion activities is offered through Trade Malta, Malta’s export and trade promotion agency.
Research and Development: Malta Enterprise offers incentives to support and encourage businesses to engage in industrial research and experimental development, including exploitation of intellectual property through licensing of patented knowledge.
More information on incentives offered by Malta Enterprise can be found at: https://www.maltaenterprise.com/support
Other Tax Benefits
The Government of Malta offers generous incentives to trading and financial companies registered with the Malta Financial Services Authority. Legislative changes in 1994 removed the distinction between offshore and onshore companies, so that all companies in Malta are subject to a 35 percent tax rate on profits. However, the fact that the Maltese tax system is the only remaining full imputation system in the EU means that a tax paid by a company will essentially remain a prepaid tax on behalf of the tax liability of the shareholders. Shareholders then are entitled to claim a tax refund which may be equivalent to roughly 85 percent (in the case of trading income) of the tax paid at the corporate level.
Companies operating within the Malta Freeport, a customs-free zone, may also benefit from reduced rates of taxation and investment tax credits.
Research and Development
The Government of Malta offers specific incentives for companies to engage in industrial research and development (see “Investment Incentives” section above). The government does not differentiate between U.S. or foreign firms and local firms regarding participation in incentive programs.
U.S. companies also can partner with local firms to participate in Horizon 2020, the EU Framework program for funding research and innovation. Horizon 2020 will run until 2020 and has a budget of EUR 80 billion (USD 88.5 billion).
Foreign Trade Zones/Free Ports/Trade Facilitation
Malta’s Freeport container port offers modern transshipment facilities, storage, assembling and processing operations, as well as an oil terminal and bunkering facilities. Malta Freeport Terminals Ltd., a private company, operates the Freeport under a long-term concession agreement, handling container vessels at 18,000 TEU and larger at each of its two container terminals.
For a company to carry out business within the Freeport zone, Malta Freeport Authority must grant it a license, and its operations must complement the Freeport’s activities. Through the utilization of these facilities, clients can engage in an extensive range of handling operations, including cargo consolidation, break-bulk, storage, re-packing, re-labelling and onward shipping. Malta Freeport also offers assembly and processing options in accordance with the Malta Freeports Act. The operator must ensure that it does not label goods that have been processed in the Freeport with Malta as their country of origin, unless their identity has been substantially transformed with the zone. Companies operating within the Freeport benefit from reduced tax rates, as well as investment tax credits without customs interventions.
The Freeport offers round-the-clock industrial storage operations supported by a highly developed, customized infrastructure, as well as extensive transport networks which link Malta to various important markets on a regular basis, including port connections in North America, Central America, and South America. Warehousing facilities lie only six kilometers from the island’s international airport, offering excellent opportunities for sea and air links stretching worldwide. In late 2016, the government issued a call for expressions of interest for the development of a logistics hub. The aim of this project is to attract local or international operators to submit their proposals for the concession of the design, construction, financing, operation and maintenance center of international logistics, on 45,000 square meters of land in Hal Far. The Government of Malta’s vision is to have a strategic hub for international trade, serving as a Free Zone or as a Custom Warehouse.
Performance and Data Localization Requirements
Currently, no performance requirements exist, other than the goals that the investors link to applications for assistance with Malta Enterprise. Foreign investors can repatriate or reinvest profits without restriction and take disputes before the International Center for the Settlement of Investment Disputes (ICSID).
The government does not require foreign investors to establish or maintain data storage in Malta. However, the Malta Gaming Authority (MGA), the independent regulatory body responsible for the governance of all gaming activities, requires gaming companies to hold their data in Malta.
Foreign IT providers incorporated in Malta that process personal data in the context of the activities of an establishment in Malta, qualifying as data controllers within the Data Protection Act, fall within the jurisdiction of the Office of the Data Protection Commissioner. The Data Protection Commissioner stated that there has never been an instance where, during an investigation, the Commissioner has requested access to source code or to encryption functions.
Any transfer of personal data by a controller established in Malta to a third country that does not ensure an adequate level of data protection is subject to the authorization of the Data Protection Commissioner as required by the Data Protection Act. In an attempt to facilitate and harmonize the implementation of this requirement, the European Commission adopted model clauses (Standard Contractual Clauses and Binding Corporate Rules – the latter used for sharing of personal data within a group of companies) which controllers may use for this purpose. No authorization is required for transfers made to EU Member States, members of the European Economic Area EEA, third countries which are, from time to time, recognized by the European Commission to have an adequate level of protection, and to companies which are certified under the EU-U.S. Privacy Shield. Furthermore, any personal data shared (rather than transferred) between data controllers in Malta must rely on a legal basis.
Data controllers processing personal data are subject to the rules emanating from the Data Protection Act. These rules must be observed to ensure that the processing activities are carried out fairly and lawfully and with respect to the data subjects’ fundamental rights and freedoms. The competent authority in Malta which regulates and monitors observance with this law is the Office of the Information and Data Protection Commissioner.
The Data Protection Act transposes the provisions of EC Directive 95/46/EC. This legal framework has been revised over the past years and the General Data Protection Regulation has been adopted in May 2016. The regulation, which is binding in its entirety and directly applicable in all Member States, will apply from May 25, 2018. New obligations are envisaged under the new regulation for data controllers to implement.