The Maltese economy is well diversified, encompassing the manufacturing industry, financial services, ICT, tourism and the public sector. To date the lines of business in which Malta has heavily attracted foreign direct investment are ICT, pharmaceuticals and financial services.
In a Country Report issued by the Report Company in The Guardian earlier this year, Hon. Tonio Fenech, Minister of Finance, the Economy & Investment has rightly commented on the fact that ‘when people do taste Malta … they get addicted. This you see from the fact that if you look at international investors in Malta, there are long-standing investors.’ Malta has attracted important international names to set up shop on the Island and to invest in growing their operations due to the unique business and regulatory environment which it offers. The areas of growth are certain financial services, ICT and i-gaming. The Government has issued its plan called Vision 2015 where it is government’s objective that financial services shall contribute to 25% of GDP by 2015. The country is well on target in achieving this objective with financial services currently contributing to around 12% of GDP. But what is it that makes Malta a hot destination for businessmen or companies looking at relocating their operations overseas?
Malta has over the last few years invested in its legal system and IT infrastructure giving flexibility of communication and operations which is essential in any business environment. Combined with its English speaking and highly educated workforce (where particular emphasis has been made in the fields of law, accounting, banking and finance) and relatively lower costs compared to many other EU centres, Malta is definitely a key place for businesses to relocate to.
Another key attraction is Malta’s strategic location. It is easily accessible in no more than a 3 to 4 hours flight from anywhere within Europe and North Africa, and is ideally placed to overlap time zones of the Far East and North America.
Joining the Euro-zone in 2008 helped bring about significant stimulation and inward investment to the Islands and though there are the current problems with the Euro itself the fact that Malta is within the Euro-zone, combined with the other factors, continue to make Malta attractive in particular to companies from higher cost countries from mainland Europe.
However if one had to single out the major contribution to Malta’s appeal is its company taxation system, whereby the shareholders of a company can claim significant refunds of tax paid on profits in Malta and there is an extensive system of Double Taxation Agreements in place which can also help mitigate tax liabilities. Given that the proper structure is in place, Malta companies can be utilized to organize one’s affairs in a tax efficient manner, thus reducing one’s effective global tax burden. Whilst companies are taxed at 35% on their net profits a system of tax refunds available to company shareholders results in an advantageous overall net effective tax.
Moreover, a third country may set up a business in Malta and work for his own business upon satisfying certain criteria, such as a minimum investment or employing a number of EEA/Swiss nationals. Such individual will then be granted Malta residence to be able to pursue his business objectives.
The quality of life in Malta also helps. With a warm climate all year round, the abundance of good restaurants, a striving social and cultural calendar and the innate warmth of the locals, all add up to make any relocation much simpler for any business.
Malta is very well set for those who wish to set up a company. There are in fact a number of Government incentives as set out, for example, in the Investment Aid Regulations and Enterprise Support Incentives Regulations. These give tax credits/ exemptions or grants to certain qualifying activities such as manufacturing, ICT, biotechnology, research and development and private healthcare services among others.
The types of incentives available include cash grants of 25-35% in relation to certain types of expenditure (for example consultancy and legal fees) in the first five years of operation, up to 50% for acquisition of assets/qualifying services for eligible businesses and Investment tax credits.
In addition to access to finance and a multitude of investment aids, one may also benefit from special grants targeting the creation and development of innovative start-ups and the development of forward-looking SMEs as well as Enterprise Support in the form of assistance to businesses to support them in developing their international competitiveness, improving their processes and networking with other businesses. A number of employment and training incentives are also available, administered by the Employment & Training Corporation; whereby enterprises are supported in recruiting new employees and in training their staff.
In terms of property offering for commercial entities, Malta is also on the right track. “Today we are seeing a good number of development projects that are focusing on this market” says Joseph G. Pace, Commercial Properties Division Manager at Frank Salt Real Estate. “The Portomaso tower is one of the favourites, however there are many more in the pipeline, including The Exchange at Pendergardens in St Julians, Smart City, Skyparks at the Malta International Airport and many more.”
According to The City of London’s Global Financial Services Index of 2010, Malta is considered as one of the three financial centres which are expected to grow in importance over the coming years, whilst the World Economic Forum’s Global Competitiveness Index 2010-2011 has ranked Malta as having the 10th soundest banking sector and 11th in financial market development in the world. This robust performance compared to other financial services centres within the EU confirms Malta’s strong position in the sector as well as its future potential, which strength has been witnessed in the manner the country has fared throughout the recent financial crisis.
In David Mason (Manager at STM Malta Trust & Company Management Ltd)’s opinion, Malta holds great potential for the coming years. “Malta is now firmly established as a reputable and well regulated financial centre with a regulatory framework for financial services which is internationally recognised. Given that we keep giving potential investors the regulatory security they require; plus Malta’s membership of the European Union, the sky has no limits.
Dr Pierre Mifsud, Partner at EMD Advisory Services, fully agrees. “Should Malta maintain the balance between the robust yet flexible regulatory framework and the high professional standards at comparatively lower operational costs, it will undoubtedly sustain and generate further growth and provide a gateway for businesses into and out of North Africa and Europe.”