Malta Overview

Malta is the smallest member of the European Union (EU) and has one of the fastest growing finance sectors in the world. Malta enjoys the lowest tax rate in the EU, excellent regulation and a highly skilled but affordable workforce. English is the first language and Italian is widely spoken. The currency is the euro and the timezone is GMT +1. Malta offers low tax companies, trusts and funds as well as some products aimed at UK expats such as QROPS. Malta is an important maritime centre with the largest registry in Europe and has an emerging aviation industry. Many world leading companies have relocated to Malta to take advantage of its low tax, affordable workforce, and well regulated financial services industry especially in the area of online gaming and fund administration. Malta’s geopolitical position also makes it a popular choice for trading in the Middle East/North Africa (MENA). Malta’s economic track-record shows constant growth since it joined the EU in 2004 having passed through the global recession without the need for support. The connection with the United Kingdom (UK) from which it became independent in 1964 makes it a popular destination for British migrants and retirees and the legal system is a hybrid of civil law and common law with most commercial law being based very closely on English law. Finally Malta also enjoys a subtropical climate.

Taxation
Malta’s main appeal is its favourable tax environment. It has the lowest corporate tax rate, intellectual property rate, VAT rate and gaming tax in Europe as well as a host of other financial incentives outlined below.

Regulation
Malta is a well regulated country and being part of the EU conforms to international standards of regulation. As would be expected banks, lawyers, accountants, auditors, trustees and providers of investment services are licensed. eMoney operators can also obtain a licence in Malta distinct from a banking licence. Employment agents are licensed only if they operate locally and estate agents can operate without a licence. The provision of corporate services such as the formation of companies and provision of professional management is not for the time being regulated though it is likely to become licensed this year (2013). Consultation documents suggest that lawyers and holders of trust licences will be exempt from these requirements. Whilst the decision to regulate this area may affect a handful of smaller providers it is not seen as making any difference to the smooth running of the financial services area in Malta and is generally welcomed.

Companies, Foundations, Funds and Trusts
Companies, foundations and trusts pay as little as 5% tax on trading income, 10% from passive income and 0% on dividends received from subsidiaries while funds may be exempt from tax altogether. This is the lowest tax environment in the EU making it a popular choice for both holding and trading entities where clients do not want to use an offshore solution. Please see our main articles for more details on Maltese companies, foundations, funds and trusts.

Regulated Entities
Many regulated companies are established in Malta given its excellent access to the regulator and fast licence turnaround. These firms take advantage of EU wide passporting rules which often allows them to operate or market in any other EU member. This is especially interesting for funds, online gaming companies and eMoney issuers. For more detail on this please see our main article on funds, eMoney licences and online gaming.

Residency Programmes
Maltese income tax is charged on a tiered basis up to 35% but since little or no income may be chargeable the effective rate can be much lower or nil. Aside from income tax Malta has one of the lowest social security rates in Europe which is capped at around 3,500 EUR annually (total of employer and employee contributions). An EU citizen can pay their Social Security in any member state and many foreign nationals prefer to pay in Malta. Maltese residency is straightforward for European Union citizens who have a Treaty of Rome right to live and work in Malta without the the need for work permits or residency permits. Non-EU citizens can become resident on a number of grounds including following the grant of a work permit and such residency may grant some freedom of movement within the Schengen area. Please see our main article on Maltese residency for more details.

Intellectual Property
Malta can be used as a centre for holding intellectual property (IP) and income from qualifying inventions may be exempt from tax. For more information on how the separating of IP from other income can be used for tax advantages please see our main article on IP in Malta.

Vessel and Aircraft Holding
Malta is an excellent country for registering vessels and has the largest maritime registry in Europe. Malta has also an emerging aviation industry. There are numerous benefits to registration of vessels under the Maltese flag including benefiting from Malta’s excellent tax environment and the use of Malta’s excellent infrastructure of related services and skilled and affordable workforce. For more information please see our main articles on the Maritime and Aviation sectors in Malta.

Value Added Tax (VAT) Reducing Scheme
Malta offers a VAT reducing scheme which can make the importation of vessels into Malta highly attractive as it offers an effective rate of as little as 5.4%. For our main article please see the Maritime and Aviation sections.

Banking
Malta is becoming increasingly popular as a banking centre following recent issues in Cyprus as well as the movement of funds out of Switzerland especially by Austrians and Germans. Please see our main article on banking in Malta.

QROPS
QROPS are of potential interest to anyone who has a UK pension. Malta is able to provide both of these and is the only European state in this position. It is seen by many as the most sustainable of QROPS providers.

Why Malta?
Malta is not in competition with traditional offshore centres which offer no tax companies with little or no reporting and are considerably cheaper. By contrast Maltese structures need to pay some tax (albeit the lowest rate in Europe) and have a much higher standard of reporting and regulation. Malta’s main strength lies in its reputation as an EU member and it is suitable for clients who believe that offshore solutions and 0% tax areas are becoming increasingly difficult to defend.