Malta Island of opportunity
Dr Joseph Vella and Dr Albert Grech of GVTH Advocates explore the benefits that foreign investors can find on the island of Malta
T
hanks to the availability of EU funds and the government’s push to promote investment in Malta, business has become increasingly cost effective for foreign companies wishing to operate from the island. Malta already has a favourable tax system for foreign shareholders
of Malta-based companies, but the government has employed a number of tax credits, grants, soft loans, and favourable regulations aimed at encouraging employment in place of direct corporate tax revenue to supplement the existing framework. The Employment and Training Corporation has employed a number of schemes which subsidise
employment for target groups such as the Employment Aid Scheme and the government in its com- mitment to encouraging the necessary skilled workforce to come to Malta, a number of tax-incentive schemes, for example, the Highly Qualified Persons regime allows people moving there to work in the financial services and gaming industries to benefit from a 15% tax rate. There are R&D grants and tax credits aimed at encouraging high tech start-ups from Malta
Enterprise. The government has also set up an Export Credit Guarantee Department to facilitate exports. To bolster this influx of high value industry, there has been heavy investment in education, an example of which is the University of Malta’s new ICT Faculty, or the new Malta College of Art Science & Technology campus in Corradino, which provides technical training for persons joining the aviation industry. This denotes the general trend in Malta towards the growing value-added industry. This has been
seen in the IT sector with SmartCity, as well as in the aviation maintenance industry, and pharmaceu- ticals – the authors have advised on the acquisition of a major international generic manufacturer and their expanding operations in Malta. The financial services sector is expected to reach about 25% of GDP in a few years and employ thousands of people, and tourism also remains a cornerstone of the economy. As FDI spending increases and there are more jobs, more tax revenue and more disposable income,
there will be increased infrastructure projects (including alternative energy, roads, water and waste management) as well as business opportunities, meaning that there will be a shift towards greater local consumption as a proportion of the economy, which will in turn spur growth further. Malta benefits from its Anglo-Saxon heritage in that the language is the same, the work ethic is the
same and there have been tremendous efforts to cut red tape in attracting foreign investment. Corporate set ups take a matter of days, and thanks to Malta’s desirable EU address and attractive tax regime, the country is really geared up to attract investment. Helping matters further, there are no restrictions prohibiting foreign lawyers from practising in
Malta, save for the need for a warrant to appear on judicial matters – moreover a number of foreign lawyers practice in the jurisdiction. The big international firms have remained firmly out, meaning that expertise on Malta-specific issues has been concentrated in the leading family firms.
Growth opportunities Over the past 12 months, the investment services and funds industry have maintained growth thanks to regulatory developments and competitive cost of doing business in Malta in times when margins are slim. The pensions administration industry also took off quite rapidly following Guernsey being blacklisted by the UK. Overall, Malta specialists are bullish for the future of financial services. That is not to say, however, that the rest of the island has been stagnant: over the past few years,
the aviation engineering industry has really taken off, and gaming has been consolidated – for exam- ple, the authors recently advised on the concession of a new 10-year licence for the provision of oper- ations of the national lottery against an investment of €40 million ($51.4 million). Another key consideration is the change of regime in Libya and the cessation of hostilities, which
has allowed some large clients to get back to business as usual, and focus on the rebuilding of the country and creating a new identity as a place to attract investment. There are no major political risks expected to upset the order of things – an election is expected
www.iflr.com IFLR|FOREIGN DIRECT INVESTMENT 017 “ The general trend
has been towards the value-added industry
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