Malta’s location in the centre of the Mediterranean has long made it of strategic interest to foreign powers, and this has been reflected in its long history. While the geopolitical situation in the region may have changed somewhat, the country still draws attention from the outside world. This time the interest is in foreign investment in Malta which is driven by, among other reasons, political stability of the island republic and its excellent government regulations and incentives. These benefits are reflected by the investment grade ratings for the country of A by Standard & Poor’s and A3 by Moody’s.
Government Incentives to Encourage Foreign Investment in Malta
Malta’s government has made foreign investment a significant economic priority, and this is manifested in the numerous incentives they have implemented to encourage foreign investment.
The government has promoted the manufacturing industry with targeted incentives that are laid out by The Business Promotion Act. As an autonomous government agent, the Malta Enterprise Corporation (MEC) is responsible for approving these incentives based on factors such as the viability of the enterprise, the size of the capital investment, the sources of finance and the employment to be generated. And incentives extend beyond manufacturing. Trading and financial investment companies that are registered with the Malta Financial Services Authority (MFSA) also benefit.
The incentives they receive can include:
- Investment Tax credits for qualifying companies engaged in pharmaceuticals, plastics, biotechnology, electronics and the electrical industry.
- Investment allowances of 50 percent on plant and machinery and 20 percent on industrial buildings and structures. This is in addition to regular tax depreciation.
- A reduction in tax from 35 percent to 19.25 percent for reinvested profits.
- The availability of training and management services grants depending on how a company is classified as a large enterprise or an SME.
- Shareholders, or their nominees, who hold more than 40 percent of equity enjoy indefinite work permits.
- Other job creation incentives are available, and competitive prices exist for factory buildings.
Further benefits exist for foreign investors that operate within Malta Freeport, which is one of the busiest ports in Europe. These investors enjoy the same reduced taxation rates and investment tax credits that are extended to their domestic counterparts.
Other Factors that make Malta a Desirable Destination for Foreign Investment
Aside from the numerous benefits to encourage foreign investment in Malta, there are many other desirable factors:
There is plenty of expertise available in Malta in the areas of technology, finance and marketing.
- Malta enjoys an excellent reputation as an international finance centre, and this can only continue to grow with the country’s political stability, excellent location, highly skilled English-speaking workforce, excellent communications structure and good industrial relations.
- Malta is quite simply an excellent place to live. The cost of living is relatively low, and the island boasts a fine health care system. Residents and visitors enjoy a pleasant Mediterranean climate, and much of the island is rustic, allowing one to get away from it all. Those preferring a livelier scene with great restaurants, shopping and sightseeing can visit one of the more urban areas such as the port city and UNESCO World Heritage Site of Valletta.
- Good international tax treaties are in place that offer investors tax advantages.
- Malta’s status as an EU member means that all exports to other member countries enjoy full, tariff-free access. Outside of the EU, Malta’s government has negotiated agreements with beneficial export conditions with many other countries and trading blocs.
Regulations and Agreements that Govern Foreign Investment in Malta.
As foreign investment has become such a large segment of the Maltese economy, The government has developed numerous regulations and agreements to provide a framework for foreign investment. The Companies Act regulates the creation of limited liability companies, and the taxation of these companies is governed by The Income Tax Act which sets a single rate of 35 percent.
Since 2002, the MFSA has regulated the highly developed investment services industry in Malta. Foreign investment in Malta can take the form of either joint ventures or full ownership of equity. These investors are safeguarded by regulations that are in place to regulate the recovery of capital and profits as well as to protect investments from natural disaster.