MSI Global Alliance public balance sheets showcase a highly- In 2016, foreign direct investment in industrialised, service-based economy Malta stood at €161.4 billion, an increase with services representing 80%. of €9.5 billion compared to the previous Malta has a total population of over year. 460,000 inhabitants (2016). Other economic sectors include foreign trade, manufacturing, tourism and financial services. Mata has a strong Malta is a unitary parliamentary republic. labour market participation and one of Economic activity is primarily undertaken The current President, Marie Louise the smallest unemployment figures in by self-employed individuals (sole trader) Coleiro Preca, is the Head of State, whilst the EU. During the past months, or through partnerships, companies, Joseph Muscat, the current Prime significant increases were attributed to branches of foreign companies or Minister, is the Head of Government. the following sectors: cooperatives. The Maltese Parliament is the fintech and financial services. constitutional legislative body and is professional, scientific and composed of the House of technical activities, 1. Limited liability company Representatives made up of 67 the arts, entertainment and 2. Partnership representatives, including the Prime recreation, 3. Branch of foreign company Minister, Ministers, Leader of Opposition wholesale and retail, and all other members of parliament. transportation and The legal form most commonly chosen The President of Malta promulgates laws accommodation by international investors to set up passed by the Parliament business in Malta is a Private Limited Italy, United Kingdom and Germany are Liability Company (Ltd). A Malta Ltd must The President is appointed by a the country’s main import partners, have a registered office in Malta and a resolution of the House of while Germany, Libya and France are the minimum issued share capital of Representatives for a five-year term main export countries (2014). €1,164.69 or equivalent in any foreign however the role is largely ceremonial. currency, with at least 20% paid up on incorporation. The issued share capital must be subscribed by at least 2 The national language is Maltese. Malta is a member state of the European shareholders. However, provided certain However, Malta’s official languages are Union and provides an attractive system conditions are satisfied private both Maltese and English. for foreign investment and doing companies may have a single business. During the last couple of shareholder. The company may have decades, it has enjoyed political stability individual or corporate directors. The national currency is the Euro. and a long period of uninterrupted Fiduciary shareholders are permitted economic growth. Moreover, Malta under Maltese law however bearer offers a transparent administrative and shares are not. Company incorporation GDP (PPP, 2018): €15.94 billion legal framework, skilled workforce, low is a swift process and registration with Income per capita (GNI, 2016): €28,887 incorporation and maintenance costs for the Registry of Companies may take Inflation (2017): 1.4% companies and a highly efficient, EU- place as quickly 48 hours from approved tax regime. submission of documentation. The country’s favourable economic Due to the EU passporting regime, Malta Malta partnerships are also popular conditions and sound policies, along collective investment schemes can offer vehicles. A partnership en nom collectif with a number of major reforms their units for subscription throughout is formed by at least two partners, supported by improved private and the EU + and EEA states. whose liability for the partnership’s Malta | 2 MSI Global Alliance obligations is unlimited, joint and stamp duty on immovable property on source income and capital gains several. A partnership en commandite when transferring a family business and foreign source income remitted to must have at least one ‘general partner’ a beneficial scheme for transfer of Malta. with unlimited liability and at least one shares. Other governance incentives 2. Domiciled and ordinarily resident ‘limited partner’ with liability limited to include a number of advisory services, individuals are taxed on a worldwide the amount contributed to the capital. education and training schemes and basis. The capital of a partnership en investment aid. 3. Individuals who are not resident and commandite may or may not be divided not domiciled and temporary into shares. individuals are taxed on a source basis. A limited liability company is set up by Individuals are taxed at progressive rates The taxes charged under Maltese law means of the Memorandum and Articles of between 0-35%. include income tax, capital gains tax, of Association, signed in original by the property tax, Value Added Tax, duty on shareholders or their authorised documents and other transfers (stamp representatives. A company is Malta resident and domiciled companies duty) and excise tax. Malta does not levy incorporated by registration of the are subject to tax on their worldwide a wealth or inheritance tax. Memorandum and Articles with the income less deductible expenses at a Registry of Companies. standard corporate income tax rate of Malta’s income tax acts together with the 35% on income less deductible expenses EU Parent-Subsidiary and the Royalties & including deductions for notional Interest Directives promote a pro- interest on risk capital. All companies must prepare audited business environment for the creation of business value within European shores, financial statements annually, which Foreign incorporated companies which offering legal and fiscal certainty within a statements also form the basis of their are resident in Malta are taxable in Malta context of a quality standard of living tax reporting. A financial year is by on a source and remittance basis. associated with Euro-Mediterranean default a calendar year. However, Branches of foreign companies are states and with the high levels of companies may choose to have a taxable in Malta on Malta source income professional and business services different financial year if they wish. attributable to such branch. associated with Continental European countries. Malta is compliant with all Upon receipt of a dividend, the Through entities such as Business First international tax best practices and shareholders are eligible to claim a and Malta Enterprise, the Maltese initiatives. refund of all or part of the tax paid in government offers a number of Malta at the level of the company. incentive schemes in various sectors to The Maltese government has signed support companies in their business over 70 double tax treaties with different The same would apply to shareholders operations. These schemes include countries around the world and of foreign companies with a branch in innovation aid, aid for research and continues to seek further collaboration Malta that receive dividends out of development projects, start-up financing, in tax matters with new reputable branch profits which have been subject knowledge transfer schemes, soft loans, partners. to tax in Malta. capacity building funds, interest rate subsidies, loan guarantees and rent The amount of the refund would depend The general VAT rate is 18%. subsidies on the type and source of income Accommodation and use of sport received. The application of the refund facilities are charged the rate of 7%, Moreover, Malta offers personal tax results in an effective tax of 0-10 % in whilst activities such as electricity and incentives to attract highly qualified Malta. foreign executives in the financial medical activities are charged at 5%. services, gaming and aviation sectors. Malta is one of the few remaining Such executives may avail of a flat 15% jurisdictions to operate a full imputation The connecting factors for tax purposes personal income tax rate on income up system. The full imputation system are residence and domicile: to €5 million with any income above that provides relief from economic double figure being tax free. taxation on dividend income by granting 1. Individuals who are ordinarily a credit of the tax paid at source on resident and domiciled in Malta are Formal recognition as a family business profits by a Malta company to its taxable on a worldwide basis. Whilst grants a number of beneficial fiscal shareholders upon receipt of dividends individuals who are resident but not incentives such as a reduction in stamp with the result that no further tax is due domiciled are taxed on a more duty for parents transferring their family in Malta on the dividend at the level of restricted basis and are subject to tax business to their children, a reduction of the shareholders. Malta | 3 MSI Global Alliance The national minimum wage per week of Income or capital gains derived by Malta whole-time employees for 2018 is companies from qualifying €172.51. participations, the most common of which is an equity holding of 5% in an EU Employees are granted a statutory or trading subsidiary may qualify for allowance of 25 days of vacation leave exemption from tax in Malta in terms of for 2018. the participation exemption provision. The income tax due by employees on The participation exemption may also their employment income is deducted at apply to holdings in other entities such source by the employer under the Final as a Maltese limited partnership, a non- Settlement System and paid to the resident body of persons which has Commissioner for Revenue on his similar characteristics, as well as a behalf. collective investment vehicle where the liability of the investors is limited, provided the criteria for the application All employed and self-employed persons of the exemption are satisfied. who are over the age of 16 and who have not yet attained retirement age of 65 years are obliged to pay weekly Social Malta permits inbound and outbound Security Contributions. Equivalent re-domiciliations. Upon re-domiciliation contributions are also paid by the to Malta, a company is permitted to step employer. up the base costs of its assets to market value at the time of redomiciliation.