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DOING BUSINESS IN MALTA

Malta Business Services Overview About Malta Setting up a Business in Malta Taxation

ABOUT MALTA

Overview

The Republic of Malta is a small island nation situated in the central Mediterranean Sea and consists of an archipelago in the middle of the Mediterranean Sea, of which only the three largest islands Malta (Malta), Gozo (Ghawdex), and Comino (Kemmuna) are inhabited. The strategically located islands constituting the Maltese nation have been ruled by various powers and fought over for centuries, and they have a deeply rooted history dating back to neolithic times.

According to the last demographic survey (September 2008), the estimated population of Malta at the end of that year (including foreign residents) was 410,290. The Maltese-resident population was of 389,769. Malta is currently the smallest European Union country in both population and area.

The Economy

Until 1800, Malta’s main economic activities were based around agriculture and ship-related services, the latter being provided from the natural harbours around which the island’s oldest cities, including the capital city Valletta, are built. The dockyard was later used by the British for military purposes. In times of war, Malta's economy prospered due to its strategic location in the middle of the Mediterranean and at the crossroads of Southern Europe, North Africa and the Middle East.

In 1869, the opening of the Suez Canal benefited Malta's economy greatly due to the huge increase in the level of shipping entering the port with Malta becoming one of the principal coaling stations for steamers bound for India and East Asia. In 1988, the Malta Freeport was established and it is now one of the key players, within the Mediterranean region, in maritime trans-shipment logistics.

Nowadays, Malta’s major resources are its favourable geographic location, and a highly productive, educated labour force. The country’s economy is predominantly driven by service-based industries, including prospects of foreign direct investment in Information and Communication Technologies. The agricultural sector is small, with potatoes being the only major export commodity. Although Malta is an island, the fishing industry is also relatively insignificant. Malta produces only about 20% of its food needs, has limited freshwater supplies, and has no domestic energy sources. The economy is dependent on foreign trade (serving as a freight trans-shipment point), manufacturing (especially semi-conductors and electronics) tourism and financial services. The tourism infrastructure has increased dramatically over the years and a number of quality hotels, including international brands like Radisson SAS, Hilton and InterContinental have now become established on the island. Tourism now accounts for over a quarter of Malta's foreign exchange earnings.

Following the overhaul of Malta’s financial legislation, which was undertaken in earnest in the early 1990s, Malta has obtained international recognition as a stable financial services centre of repute. Today, Malta’s regulatory framework for financial services is fully consolidated and aligned to internationally recognized standards. Its onshore regime provides a seamless framework that supports both domestic and international economic activity. The Malta Financial Services Authority (MFSA) is Malta’s single regulator for banking, investment services, insurance and other financial services activity. The regulator’s accessibility and its pro-active approach to addressing market developments, balanced against the rigorous application of international financial regulatory standards, have proved to be a highly successful formula.

The Maltese financial services industry has witnessed a rapid growth over the last decade, with over 6,000 people presently employed within the financial services sector (excluding law firms, corporate services providers and accountancy firms) which contributes a significant 12% to the country’s GDP. The Maltese Government continues to evaluate and update relevant legislation and regulations, keeping abreast of developments in the industry with a view to maintaining Malta’s competitiveness in this sector.

Malta was part of the EU enlargement in 2004, along with nine other countries. Several state-controlled corporations have been privatised and markets have been liberalised in anticipation of Malta’s EU membership, and the Government’s remaining participations in the private sector continue to be privatised. The Maltese government entered the ERM II framework in May 2005, and has adopted the Euro as the country’s currency, replacing the Maltese Lira as from the 1st January 2008. Malta has also adopted regulations implementing the Schengen Treaty provisions.

The Government of Malta is additionally undertaking a strategic plan intended to bring Malta to the forefront of the information technology and telecommunications industries in Europe. In keeping with this ambition, an agreement has been signed between the Government and a Dubai-based company to set up a “SmartCity” in Malta. This is projected to include a new fully-fledged ICT and Media Smart City, modelled on the basis of the “Dubai Internet City” developed by the same group in Dubai, and a similar “Smart City” being undertaken in Kerala, India. The project is expected to generate a substantial demand for knowledge-based jobs, particularly in the ICT sector.

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The Government

Malta is a democratic republic whose parliamentary system and public administration is closely modeled on the Westminster system in the United Kingdom. The unicameral House of Representatives, known in Maltese as il-Kamra tad-Deputati, is elected by direct universal suffrage through the single transferable vote (STV) every five years, unless the House is dissolved earlier by the President on advice of the Prime Minister. The party who wins the majority of the votes, forms the cabinet. The House of Representatives is made up of 65 Members of Parliament. However, where a party wins an absolute majority of votes, but does not have a majority of seats, that party (the cabinet) is given additional seats to ensure a parliamentary majority. By the Constitution of Malta, the President appoints the Prime Minister, who in general is the leader of the party forming the cabinet.

The President of the Republic is elected every five years by the House of Representatives. The role of the president as head of state is highly ceremonial. The main political parties are the Nationalist Party, which is a Christian democratic party, and the Malta Labour Party, which is a social democratic party. The Nationalist Party is currently at the helm of the government, and the Prime Minister is Dr. Lawrence Gonzi.

Since 1993, Malta has been subdivided into 68 local councils or localities (54 in Malta and 15 in Gozo), elected for a term of three years. These form the most basic form of local government. There are no intermediate levels between local government and national government.

Business Practice and Etiquette

The business practices and etiquette in Malta are very much akin to those of the United Kingdom and this can be attributed to the presence of British forces in Malta. The country's official languages are Maltese and English, although Italian and French are also widely spoken in the business community. Business correspondence is conducted primarily in English. Laws and regulations are published in both of the official languages.

On the whole, Maltese business people have a conservative approach to business. Punctuality is expected and appreciated and dress codes in offices are conservatively smart. Meetings should be arranged several days in advance and it is customary to shake hands when being introduced or when meeting someone, as well as when leaving. Business cards are usually exchanged during business meetings, either at the beginning or at the end of a meeting. During social events business cards may be provided if specifically requested by another person.

Typical office hours are between 0830 and 1730 Mondays to Fridays, with a one-hour break between 1300 and 1400, however many executives work longer hours. On Saturdays, retail outlets are generally open between 0900 and 1300. Business entertaining can be conducted during any meal and generally the individual or body who initiates this is expected to pay.

Laws, Regulations and Standards

Maltese law is broadly structured on the continental civil-law structure, but most administrative, financial and fiscal legislation is based on British law. The courts are divided into three principal jurisdictions namely civil (including commercial matters), criminal and voluntary (mainly dealing with family matters). Precedents have persuasive but not binding value before the Maltese courts, and therefore a previous court decision does not affect the court’s freedom to decide disputes in whatever way it considers appropriate.

In-keeping with the reduction of the government’s involvement in the private sector, several bodies have been set up for the purposes of regulating specific sectors. Examples include the Malta Resources Authority (MRA) with responsibility for energy, water and mineral resources, the Malta Communications Authority (MCA) with responsibility for telecommunications, the Malta Financial Services Authority (MFSA) who regulate the financial services sector, and the Malta Lotteries & Gaming Authority (LGA) who regulate the gaming industry. These regulatory bodies seek to limit the government’s role to the regulatory and licensing function, although certain monopolies in the energy and water services sector are still government owned and run.

The MFSA’s premises also house the Registry of Companies, which is responsible for all matters relating to the registration and maintenance of Maltese companies, the redomiciliation of overseas companies from recognised jurisdictions to Malta and the registration of branches of overseas companies establishing themselves in Malta. All Maltese companies are required to submit independently audited annual reports to the Registry of Companies.

All companies in Malta are required to file audited accounts with the Registry of Companies within 42 days after the 10th month following the end of the company’s financial year-end. A default financial year end of the 31st December applies, unless a company elects otherwise.

Companies, however, who satisfy certain requirements and are classified as “small companies” may submit an abridged version of their audited accounts, to include an abridged profit and loss account, abridged balance sheet and abridged notes to the accounts. Small companies are defined by Article 185 (1) (a) of the Companies Act as companies which on the balance sheet date do not exceed the limits of two of the following three criteria:

  1. Balance sheet total: two million five hundred and sixty two thousand three hundred and ten euro and seventy four cents (EUR 2,562,310.74)
  2. Turnover: five million one hundred and twenty four thousand six hundred and twenty one euro and forty eight cents (EUR 5,124,621.48)
  3. Average number of employees during the accounting period: 50

Article 185(1)(b) of the Companies Act 1995 exempts private companies from the requirement to audit the accounts, which on their balance sheet dates do not exceed the limits of two of the three following criteria:

  1. Balance sheet total: forty six thousand five hundred and eighty seven euro and forty seven cents (EUR 46,587.47)
  2. Turnover: nine three thousand one hundred and seventy four euro and ninety four cents (EUR 93,174.94)
  3. Average number of employees during the accounting period: 2

Additionally, small companies that also qualify as “exempt companies” in terms of Article 211 of the Companies Act and in this case may take advantage of their exempt status and submit accounts consisting of an abridged balance sheet only.

Public liability companies, insurance companies and financial institutions are obliged to file full financial statements within 42 days after the 7th month following the end of the company’s financial year-end.

The most common public information of legal entities available at the Registry of Companies includes the company’s registered address, details of directors, shareholders and company secretary and details of nominal, issued and paid up capital. Accounts and Annual Returns are to be submitted for registration on an annual basis.

Facts and Figures

Official Name Malta
Capital City Valletta
Population 410,000
Official Languages Maltese, English
Other Spoken Languages Italian, French, German, Spanish
Currency Euro (EUR)
Exchange Rate EUR 1.2078/GBP 1.00
EUR 0.7879/US$1.00
GDP (nominal) €4,489 million
GDP (Real) Annual Growth Rate 2.5%
GDP Composition by sector Agriculture = 2.19%
Industry = 17.89%
Service = 70.91%
Inflation Rate (average HICP annual rate) 4.7%
Religion Roman Catholic
Country Tel code +356
Internet domain code .mt

Above figures are quoted as at December 2008.

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