Invest in Malta

Introduction to business in Malta

The Maltese Islands form part of an archipelago strategically situated at the centre of the Mediterranean. Malta's geo-strategic position has, since prehistoric times, been conducive to the conduct of international business.

Malta has a stable economy which has been constantly evolving during the years. Unemployment in Malta is approximately 5 percent and the inflation rate is normally around 2 percent. The stable economy, together with a good infrastructure, and a healthy business environment is generating a considerable amount of investment in Malta, particularly in the financial services sector.

The Financial Services Sector

The developments in the financial services sector started in 1988, when Malta embarked on and has thereafter sought to create and develop a comprehensive legislative and regulatory framework for financial services activities and international business.

Most recent laws, including the various financial services legislation adopted in 1994, as further developed in 2002, trace their sources in English statutes and EU Directives.

The screening exercise recently carried out in Brussels by the EU Commission in preparation for EU membership has confirmed just how closely Malta has adopted the majority of EU Directives relating to Banking, Insurance and Investment Services.

Malta has established an excellent international reputation in the financial services sector, through the highly proficient services and the tax incentives offered. This is evidenced by the investments made by HSBC, Barclays, Volksbank and BAWAG amongst other banks and financial institutions.

Moreover, Malta is widely known for its International Business sector which, when coupled with the wide double tax treaty network, provides a spectrum of international tax planning opportunities. Through efficient planning one may achieve minimal tax charges.

Malta is now building the same level of reputation in the manufacturing sector which currently represents approximately 25 percent of the Gross Domestic Product.

In order to continue the evolving process and to maintain the economy at European standards, in recent years the Maltese government and its agencies have set up various programmes which encourage and assist investment in Malta.

Benefits for The Manufacturing Sector

The manufacturing sector is one of those sectors in Malta where a considerable amount of resources are being directed. Currently, Malta has over 250 foreign manufacturing companies and some 400 Maltese owned manufacturing companies. Despite the interesting substantial investment made by large multinationals such as ST Micro Electronics and Baxter, Malta mainly targets and attracts investment from SMEs.

Investment interest in Malta usually sparks off when investors gain knowledge of the incentives that Malta offers to encourage investment. For example the Business Promotion Act provides incentives for those industries demonstrating growth and employment potential that are engaged in manufacture, repair, improvement or maintenance activities. The provisions of the said act also provide fiscal incentives to qualifying companies. For example certain qualifying companies can have tax rates as low as 5 percent for a number of years.

Moreover, there are various investment tax credits as well as tax incentives to the manufacturing and related service companies. Proper and efficient tax planning could lead to minimal taxes being paid for a number of years. Malta has also a number of tax treaties with various countries which ensure that profits generated in Malta are either exempt from tax in the country of residence of the investor or that country will provide a tax credit for the Malta tax spared as a result of the incentives Malta provides.

Malta also offers a number of non-tax incentives to certain manufacturing and related service companies. For example the Malta Enterprise (ME) provides industrial buildings at competitive rates of rent. Companies, through the ME may also benefit from financial incentives such as loans at subsidised rates. The ME is empowered to determine and decide on the entitlement of such incentives.

Competitive Advantage

Companies in Malta have a competitive advantage over competitors in other Mediterranean countries. Many companies are using Malta's geo-strategic location to generate business in the Mediterranean basin. This is further facilitated by the excellent communications infrastructure and the efficient air and sea connections. One of the large companies that recently decided to benefit from the so called hub concept is Lufthansa Technik.

Many companies already present in Malta have increased their investment and their operations significantly. ST Microelectronics and Playmobil, were a further confirmation that whilst incentives are important to attract investment, once established in Malta, companies quickly understand and appreciate the benefits of operating from Malta.

High skilled labour at reasonable cost

Certain investors are of the opinion that if a company needs qualified and highly skilled labour, at a reasonable cost, then Malta is an ideal location. Apart from the highly skilled labour force Malta offers also a wide range of professionals. Such professionals mainly qualify at the University of Malta or other local institutes. However, there is also a relatively high number of people who qualify from foreign Universities or professional bodies, generally British Universities or professional bodies.

The developments in the educational system at even post graduate level is another asset in Malta. At the moment Malta hosts various first degree and post graduate programmes from various Universities. University of Cambridge, London School of Economics, Henley, Maastricht, University of Leicester are just some in the continuously growing list. This apart from the University of Malta that has a population of 9,000 students. All this in a country with a population of 400,000.

It must however, be noted that some of these University aim also to benefit from the geo strategic position of Malta together with the fact that Malta is multi lingual and multi cultural. Hence, through Malta such Universities may target a potential market of some 220 million through Euromed programmes.

Test Market

The size of the Maltese market and the fact that the Maltese are multi cultural allows companies to test their new products on the Maltese market prior to going to larger International markets. Various companies are using Malta as their a market to test their new products, their marketing campaigns as well as other strategies.

Marketing and Sales Centre

Malta in recent years has also evolved as a marketing and sales centre. The marketers in Malta have found themselves analysing and assessing Mediterranean and European markets. For example certain international banks operating in Malta are marketing their products in other Mediterranean countries through Malta. Maltese marketers have been engaged by various locally based as well as foreign based organisations to market their products/services using Malta as a base.

Acquisitions

Some foreign investors have demonstrated their interest in Malta but would prefer not going through the process of the setting-up phase. Acquisitions remain, in all countries and across all industry sectors the quickest way of investment to complete.

This despite, we have seen more mergers and joint ventures than acquisitions in Malta. This is mainly attributable to the fact that most companies in Malta are not listed on the Malta stock exchange as most companies are private limited liability companies. In view of this, acquisition becomes a harder task to achieve. However, foreign investors are realising all the more that setting up in Malta is a relatively quick process.

Collaborations

Others have preferred entering into collaboration agreements with Maltese companies or otherwise utilise their services, in order to penetrate the Maltese and the Mediterranean market.

Maltese businesses are generally always on the look for new business opportunities. This, added with their flexibility , open-mindedness and forward looking attitude renders the process of collaboration with foreign entities a simplified and professional process.