World Economic Forum
The Global Competitiveness Report for 2018 issued by the World Economic Forum ranks Malta as 36th out of 140 countries. Malta rankings were the best it has seen throughout history. Amongst others, Malta obtained
- 1st position in Macroeconomic Stability, which means that Malta has a stable economy which provides a framework for an improved supply-side performance;
- 16th position in Health;
- 24th in ICT Adoption together with Labour Market; and
- 29th in Financial System, amongst others.
Malta: The Financial Services Hub
The financial services industry in Malta experienced an unprecedented growth in recent years. This is mainly due to its full accession to the European Union in May 2004, and further adoption of the Euro in 2008. This milestone in Malta’s history provided Malta with the spur it needed to grow into the strong financial services destination it is nowadays, supported by modern, EU-harmonised legislation, a highly skilled, English-speaking labour force, and ethical business practices.
Both European and Maltese regulations provide a secure, highly-regulated and stable framework for prudential supervision, consumer protection, market surveillance and prevention of money laundering, putting Malta on par with any other European destination.
With English as one of its two official languages and a highly skilled work force, Malta is the ideal location for businesses wanting to relocate to a politically stable EU destination, that offers a modern legal and tax framework, and comparatively low costs for setting up and running a business.
Malta boasts an array of well-trained and experienced professionals ranging from accountants, legal professionals and regulatory analysts who are proactive and dedicated to ensure that Malta keeps high regulatory and supervisory standards with respect to the Capital Markets and Financial Services Industry, holistically.
Highly Approachable Regulatory Authority
The Malta Financial Services Authority (MFSA) is the single regulator of financial services in Malta. The MFSA regulates banking, financial institutions, payment institutions, insurance companies and insurance intermediaries, investment services companies and collective investment schemes, securities markets, recognised investment exchanges, trust management companies, company services providers, pension schemes and most recently virtual financial assets. The MFSA is also the Listing Authority and approves admissibility to listing on Recognised Investment Exchanges.
Recently, the MFSA has taken a more proactive approach by establishing regular contact with industry players, allowing promoters to develop new products and/or services to meet the changing investor needs and then ever-more innovative industry.
Re-domiciliation or Continuation of Companies and EU Passporting Rights
Malta has a dedicated subsidiary legislation dealing with the continuation of companies (Continuation of Companies Regulations (subsidiary legislation 386.05 of the Laws of Malta)), more commonly known as the re-domiciliation of companies or “flight” of companies. The Regulations are applicable to all types of companies, including securitisation vehicles, which have gained popularity in the last five years. The Regulations are divided into two parts: Part I is focused to the continuation in Malta of foreign companies, whereas Part II deals with the opposite scenario of Maltese companies continuing outside Malta.
Similarly, regulatory licensed entities which obtain a license in Malta also benefit from the possibility of passporting their services to other EU and EEA Member States. With the introduction of passporting rights, allowing companies to setup a branch or giving them the freedom to provide their services on a remote basis, many business opportunities opened up between Malta and the rest of the Union.
Malta Tax Regime
Malta boasts a worldwide network of double taxation treaties with around 80 countries (with all EU and most OECD member states) which is continuously expanding.
Malta also has a very competitive tax regime based on the imputation system of taxation whereby companies effectively pay corporate tax at a rate of thirty five percent (35%), but in certain instances of companies owned by foreign non-resident shareholders, tax refunds may apply, up to a 6/7ths refund of tax paid.
In Malta, same as in the rest of the world, regulatory compliance and reporting need to be viewed as a natural extension of the corporate governance duties shouldered by senior management and corporate boards of any given company.
Likewise, only good governance can ensure that compliance is aligned with the company’s business objectives and risk management strategies. This is the only way how a company can ensure that it adds value to its business and not just look at regulatory compliance as being a cost and a burden on the organisation. The goal is to ensure that the spirit of compliance and the letter of the law are embraced holistically throughout the company.
In essence: Why Malta?
Apart from offering an advantageous geographical location, it is also a full member state of the European Union and part of the Eurozone, providing Malta-based businesses with instant access to the EU’s internal market of over 500 million people.
Malta offers high quality of life in a Mediterranean island environment and a politically stable environment, coupled with unanimous political support for the country’s position as an international financial centre.
About the Author
The article has been authored by Dr Ursula Farrugia, Advocate at CSB Legal, who specialises in Company Law, Financial Services, Compliance & AML and the Fintech Industry. Dr Farrugia Ursula is a member of the Chamber of Advocates and the Institute of Financial Services Practitioners. CSB Legal is a boutique law firm in Malta which brings together a team of dedicated, solution-oriented professionals to support clients with focused regulatory and legal consultancy.