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Doing business in Malta

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Finance and Investment

Exchange Control

There are no exchange controls in Malta on inward or outward investment, however, long-term insurance contracts with insurance undertakings that are non-EEA, are prohibited. Foreign currencies can be bought and sold freely and there are no restrictions on the maintenance of foreign currency bank accounts in Malta. Clearance is required for the acquisition of shares in a Maltese non-listed company by residents of a non-EEA country. This does not apply to International Trading Companies, International Holding Companies or Shipping Companies, or in the event that the percentage shareholding in the Maltese company by Maltese residents is less than 20%. Documentary requirements are still applicable for monitoring and statistical purposes only.

There are no limitations on the repatriation of profits from Malta.

Malta, in common with the rest of the EU, has enacted laws to prevent the laundering of the proceeds of serious crime. Financial and some other institutions must obtain and retain satisfactory evidence of the identity of a potential customer before they do any business with that customer, even for relatively small sums. Failure to report suspicion of money laundering to the appropriate authorities can result in serious penalties.

Sources of Finance

Banking

The Central Bank of Malta acts as banker to the Government. It is responsible, inter-alia, for setting base interest rates through its Monetary Policy. Overdrafts with fluctuating interest rates are the most commonly used facility for financing working capital or to fund seasonally affected business. Technically, overdrafts are repayable on demand. Banks also offer short, medium or long-term loans. The repayment terms are negotiable and the rate of interest may be fixed or variable. To obtain bank finance the business will normally be required to provide adequate security. Security will typically be in the form of a fixed charge or floating charges over the business assets, as well as, in certain circumstances, personal guarantees from the owners. Certain banks offer specialised financing arrangements such as credit finance, factoring and invoice discounting.

Stock Exchanges and Trading Facilities

The Malta Stock Exchange provides a market for shares and other securities issued by public companies. A Malta Stock Exchange listing would normally be expected to make a company more attractive to private and institutional investors, and thus make it easier to raise new capital. To become and remain listed, a company has to satisfy and abide by the extensive Listing Rules established by the Listing Authority of the Malta Financial Services Authority. The Malta Stock Exchange can accept the admission of a company to its Official List in line with its Bye- Laws after the Listing Authority has authorised it. Companies that do not meet the full requirements of the Listing Rules may seek a listing on the Secondary Tier Market (STM) where requirements are considered less onerous. Companies wishing to list in accordance with the STM rules as laid down in the Listing Rules need not have a trading record and must have a flotation capital of not less than Lm 75,000 or equivalent in a convertible currency in case of equity and not less than Lm 1,000,000 in case bonds. For both Tiers of listing, the company must appoint the services of a Sponsor to guide and advise the company on its listing process. A company with securities that are not publicly traded and that wishes to enter these markets to raise new capital or to enable security holders to realise all or part of their investment, will have to go through the process of listing. The main methods of entering markets are:

  • Admitting existing securities to trading.

  • An offer to sale (IPO) - this involves an offer to the public of securities at a fixed price or by way of an auction for which a minimum price is stated. The offer is made by a third party such as a merchant bank or stockbroker.

  • A placing - this involves the marketing of securities to a more restricted group of investors. For a company already listed on an overseas stock exchange an introduction can be made by a broking firm to allow its securities to be traded on the Malta Stock Exchange.

Once a company's securities are traded on the Stock Exchange further capital can be raised by rights issues, auction placing or by further offers for sale.

Venture Capital Companies

For businesses that are not large enough to consider Stock Exchange entry but which require finance, venture capital companies can provide equity for start-ups, for development or for management buy-outs. Venture capital companies can also be a source of finance for a business that does not have sufficient security to borrow from a bank, but they may require a higher return than a traditional bank.

Malta Enterprise

Malta Enterprise is a government body which aims at promoting Maltese and foreign investments through tax incentives and Government grants, to invest in entrepreneurial unquoted companies. To be eligible, the company must be incorporated and reside for tax purposes in Malta and it must carry on a qualifying trade, largely within Malta.

Investment Incentives

Assistance to Gozo

Gozo has been named as a priority area, and as such, investment undertaken in Gozo is eligible for further incentives under the Business Promotion Act.

Industrial Estates and Techno Parks

A number of Industrial Estates and Techno Parks have been created throughout Malta, offering various benefits to companies located in these areas.

Malta Freeport

Malta has one Freeport wherein imported goods may be stored or processed duty free for re-exportation. Through its ideal location in the centre of the Mediterranean, Malta has established its Freeport operation very successfully, and is today a major hub for the transshipment of containers.

Film Production

Malta is an attractive site for film production. Film producers are eligible to a reimbursement of a maximum of 20% of expenses incurred directly in Malta to produce a film.

Research and Development Support

There is a scheme which provides grants to small and medium sized enterprises for feasibility studies into innovative technology and development up to pre-production proto-type stage of new products and process. Financial support is also available for research programmes.

Acquisition of Maltese Real Estate

A citizen of another member state of the EU may acquire immovable property in Malta for primary residence purposes without a permit. A resident of another member state who has resided in Malta for 5 years, may acquire immovable property in Malta for residence purposes without a permit. The acquisition of immovable property for secondary residence purposes by EU nationals requires a permit on condition that the individual has not resided in Malta for at least 5 years. Residents from non-EU member states are not permitted to acquire immovable property in Malta without a permit issued from Central Government.

Permission to acquire immovable property is granted in so far as, the immovable property was required for an approved touristic or industrial project, or if the property was of a certain value. Finally, a resident company does not require a permit to acquire immovable property for the purpose of carrying out the activities for which it is set-up. This means that, companies resident in Malta may freely acquire immovable property in Malta as an office or factory, from which they propose to carry out trading activities.