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 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 10 percent for a large enterprise, 20 percent for a medium enterprise, and 30 percent for a small to micro enterprise; 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 through the Micro Invest Scheme assist SMEs in investing, innovating and expanding, or developing their operations. 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. Trade Malta, Malta’s export and trade promotion agency, offers support for trade promotion activities focused on exports.
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 the licensing of patented knowledge.
COVID-19 measures: The government announced several measures as part of financial packages to help the Maltese economy during the COVID-19 outbreak. The financial aid packages mainly aimed to protect jobs and businesses by injecting liquidity into the market through measures including subsidies for partial payment of salaries, deferring certain tax deadlines, and guarantees allowing banks to continue offering loans, grant moratoria, and low interest rates for customers. It has also introduced schemes to encourage teleworking for companies and an RDI fund for COVID-19 related projects.
More information on incentives offered by Malta Enterprise can be found at: https://www.maltaenterprise.com/support and https://covid19.maltaenterprise.com/
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 all companies in Malta are subject to a 35 percent tax rate on profits. However, the fact that the Maltese tax system is a full imputation system – and the only one remaining 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 the end of 2020 and has a budget of €80 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. Following a corporate restructuring from 1998 through 2001, Malta established a distinction between authority and operator of the Freeport. Malta Freeport Corporation Ltd. (“Malta Freeport Authority”) fulfils the role of landlord and authority, whereas Malta Freeport Terminals Ltd. (“Malta Freeport”) carries out the role of operator. Malta Freeport Terminals Ltd. is the single operating company of the warehousing facilities and two container terminals , handling container vessels at 20,000 TEU and larger. In October 2004, the Government of Malta granted a 30-year concession for operation and development of Malta Freeport Terminals CMA CGM, which transferred it half of shares in Malta Freeport Terminals Ltd. to the Yilidirim Group of Turkey in November 2011, and sold a 49% interest in port operator Terminal Link to China Merchant Holdings (International) Company Ltd. in June 2013.
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 within the zone. Companies operating within the Freeport benefit from reduced tax rates, as well as investment tax credits without customs interventions.
Malta 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 – government still has not published a final decision on this call. The aim of the project is to attract local or international operators to submit their proposals for the concession of the design, construction, financing, operation, and maintenance of an international logistics center on 45,000 square meters of land in Ħal 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, does require 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, 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 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 EEA, third countries which are, from time to time, recognized by the European Commission to have an adequate level of protection, and to companies that 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.
The European Union’s General Data Protection Regulation (GDPR), enacted in 2016, entered into force on May 25, 2018. The GDPR, which succeeds the Data Protection Directive of 1995, aims to protect EU citizens’ personal data, harmonize data privacy laws across the EU, and provide for better coordination among EU Member State data protection authorities. U.S. companies wishing to operate in Malta or to do business with Maltese individuals or entities should ensure compliance with the regulation.
Data controllers processing personal data are subject to the rules emanating from the General Data Protection Regulation (GDPR). 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 that regulates and monitors observance with this law is the Office of the Information and Data Protection Commissioner.