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In the past decade Malta has established itself as a well-known reputable jurisdiction with a strong financial services, online gaming and maritime sector. The success of the sectors can be attributed to two primary key elements, a robust but flexible legislative framework on both the specialized sectors and the general company law sector and serious but business friendly regulators.
The Maltese Company
At the epicenter of the success of these sectors, one will find the Maltese Company and the Tax refund system which apply to any company incorporated for Financial Services, Gaming or Shipping purposes in addition to the specialized legal regimes of the respective sector. Opening a company in Malta is quick and efficient, with incorporation completed by the Registry of Companies in a matter of days. Following incorporation, the typical business man has a number of banking establishments to choose from allowing him a great choice from who to select with which banking establishment to operate. Notable players include Bank of Valletta, Sparkasse Bank, Mediterranean Bank, Sata Bank, Pilatus Bank, Banif Bank, APS Bank and HSBC Bank. With Malta being a reputable jurisdiction and a full Member of the European Union and the Eurozone, the company can then trade with relative ease within the EU and internationally.
The tax refund system then allows Companies to maximize their profits to be further invested in their business through a tax regime which effectively reduces taxation on corporate income to between 0% to 6.25%. Maltese law allows companies, who are initially taxed at a flat rate of 35%, to ask for a refund of varying amounts, on the tax paid by the company which reduce the effective tax rate significantly by paying a refund of the tax paid directly to the shareholders of the Company. By imposing a second Maltese Company between the Trading Company and the shareholder, the refund will thus be paid to the holding company, allowing the holding company to further invest such income into the trading company.
In addition Malta has no transfer pricing, thin capitalization or CFC rules, no exit or entry taxes and has over 70 Double Taxation treaties to benefit businesses incorporated in Malta.
Financial Services are regulated by the MFSA, which is a robust but flexible regulator. In this regard all sectors in this sector have been growing at a substantial pace with Malta harboring 27 banking establishments, 33 financial institutions or quasi banking establishments, over 600 funds, over 60 Insurance undertakings and numerous trust and wealth management services providers. Potential applicants for business would require a license to operate which the MFSA would grant following an application process. The MFSA essentially treats every application on a case by case basis and adapts its rules and requirements depending on the size of the businesses and is very open to meet with potential applicants to discuss their proposals. Setting up such businesses is also very efficient with applications for financial services licenses being processed in less than 6 months. Membership in the EU also grants Malta strong passporting opportunities, allowing Maltese Financial Services companies to be passported under the relevant laws and regulations, including UCITS, MIFID and AIFMD.
Online Gaming in Malta is regulated by the Malta Gaming Authority, which like the MFSA has acquired a reputation of being robust but very business friendly. With over 470 gaming licenses issued, Malta has been quoted to be for a number of times “Europe’s Gaming Hub” housing some of the biggest players in the sector, including BWIN, Betsson, Betway, Amaya, Betfair and Unibet. When dealing with potential applicants, the MGA adopts a similar approach as the MFSA allowing for meetings with potential applicants and adopting the rules as needed for the businesses of the applicants. Taxation for gaming companies operates on a 2 stage level. In addition to the corporate taxes, the MGA levies an additional gaming tax on the gaming revenue of the company which in no case may exceed € 466,000
Maritime and Shipping
The Maltese shipping register is the biggest shipping register in Europe and the 6th largest globally having over 66 Million in gross tonnage. In addition maritime commercial shipping, the Maltese register also comprises one of the largest super yacht registries in the world, with over 500 super yachts being registered. Malta’s strategic position has no doubt contributed to its success in this sector, being an island, in the center of the Mediterranean and a bridge between Continental Europe and Africa. However a strong legislative framework and an advantageous tonnage tax regime, coupled with the benefits of having a Maltese company own any vessel, further enhances Malta’s position in the sector. Malta has further adopted a VAT lease scheme allowing owners of yachts to reduce their VAT on yachts to as low as 5.4%. Furthermore, Malta has no restrictions on transfers of vessels or of shares in companies owning such vessels.
To further assist these sectors, Malta grants numerous residence schemes for high net worth individuals, highly skilled individuals and pensioners who would like to move to Malta and granting them a very beneficial tax rate of 15%. The Malta Individual Investor Programme provides a further opportunity for High Net Worth Individuals to obtain a European Passport through investment.
After weathering the financial crisis, Malta’s growth stands to remain one of the best in the European Union registering a 6.3% growth in 2015 and also having one of the lowest unemployment rates standing at a 5.1%. With a booming financial, gaming and maritime sectors, Malta will most certainly remain a key player in the industry for years to come.
This article was written by Dr Josef Cachia - Legal Advisor at KSi Malta
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