Malta: destination of foreign investors
Malta is a destination of interest to a range of foreign investors, due to its politically stable parliamentary republic, which is well regarded as a safe and secure place to do business. Malta enjoys an 'A' investment grade rating by Standard's and Poor's and "00A3 by Moody's. Both agencies rate Malta's outlook as stable. Malta has been widely recognized as a location for FDI also due to its clear and Malta is one of the most stable investment business environment. Malta enjoys an 'A' investment grade rating by Standard's and Poor's and "A3" by Moody's.
Malta has put foreign investment at the top of its economic list of priorities, utilizing the Maltese technological, financial and marketing expertise for foreign investments. Its growing reputation as an international finance centre of repute, is attributed to its location, its excellent communication structure, its skilled labor, English-speaking population, a stable political situation, a, strong industrial relations record and great climate. Besides, Malta is still a reasonably priced location where the cost of living is relatively and a strong international tax treaty network is in place, which can provide competitive tax advantages.
Due to the amount of foreign companies investing in Malta, one may find specific laws which regulate issues that may arise.
· The Income Tax Act which established a single rate of taxation of 35% for limited liability companies in Malta
· The Business Promotion Act which authorizes the government to allocate fiscal and other incentives to companies engaged in manufacturing
· The Companies Act which regulates the creation of limited liability companies
The Malta Financial Services Authority Act of 1989 is the agency responsible for the regulation of investment services in Malta and The Investment Services Act of 1994 contains a package regulating investment services, including banking and insurance. Private foreign investors are free to make equity arrangements as they wish, ranging from joint ventures to full equity ownership.
As a member of the EU, all products Malta exports to the EU have full tariff free access. Malta also benefits from the trade agreements with an extensive network of non-member countries and trading blocs. Moreover, there are agreements for the protection of investments so as to protect the investors against loss of their investments as a result of a natural disaster. The agreements similarly regulate the matter of recovery of capital and profits for foreign investors.
In terms of benefits related with the foreign investments, Malta provides incentives to attract investments in manufacturing, transshipment and servicing industries, especially generic pharmaceuticals manufacturing, information and computer technology (ICT) as well as financial services.
The main industrial incentives are found in the Malta Enterprise Act, which aims to encourage and promote investment in Malta. Other incentives are available under other legislation, including the Income Tax Act and Business Promotion Act (named already above). The incentives are targeted principally towards companies carrying manufacturing and other industrial activities or services of an industrial nature, as well as other sectors.
The main industrial incentives are subject to the approval of the Malta Enterprise Corporation (MEC); an autonomous government agency with proposal is to take into account factors like its viability, the processes involved, the size of the capital investment, the sources of finance and the employment to be generated.
In order to attract as much external investment to Malta, the government offers generous incentives to trading and financial companies registered with the Malta Financial Services Authority. Some of the incentives for investment are:
· Investment Tax credits are available for qualifying companies (pharmaceuticals, plastics, biotechnology, electronic and electrical activities)
· An Investment Allowance of 50% on plant and machinery and 20% on industrial buildings and structures, in addition to normal tax depreciation.
· Tax on Reinvested Profits is reduced from 35% to 19.25%.
· Incentives for job creation
· Factory Buildings are made available at competitive prices
· Soft Loans
· Training and management service grants depending on whether the company is classified as a large enterprise or an SME
· Indefinite work permits are granted to shareholders or their nominees holding more than 40% of the equity.
Companies operating within the Malta Freeport, benefit from two main incentives: reduced rates of taxation and investment tax credits. Nevertheless, treatment of domestic and non-Maltese investors is identical, thus non-Maltese investors do not receive special treatment.