Malta is a ‘laboratory economy’ for innovations in various economic sectors, particularly in financial services, and offers an environment that is conducive towards doing business.
There has never been a particular ‘niche’ for growth: Malta, being a small nation, has enabled the authorities to efficiently adapt to many new opportunities as they arose. Authorities in Malta are often described as dynamic because they respond to changes without the bureaucracy found in larger nations. Malta has decades of experience in attracting investments and in fostering new business opportunities thanks to its welcoming and innovative mindset. From the establishment of its Freeport back in 1988, to the subsequent creation of Malta Digital Hub and Life Science Park up to its most recent opening to virtual financial assets and blockchain technologies, the country is building upon its economic successes to expand in new sectors. Over the last two decades, Malta’s international financial services sector has gone from strength-to-strength, attracting clients from Europe, North Africa and further afield in Asia and South America.
Joining the European Union in 2004 was a particularly significant landmark for Malta’s financial services sector; by then a substantial part of its regulation and legislation had been overhauled in order to satisfy EU membership. One of the biggest benefits was the ‘passporting’ of financial products into Europe, an area which continues to attract interest, especially with investment funds. The authorities have long been adept and forward-thinking in the strategy the island should take with regard to its financial services, and the launching of new business sectors, taking great care to retain, as part of its EU-compliant regulation and legislation, an efficient legal & tax regime. Malta’s legal framework is based on the British model. The legislation is drafted in both Maltese and English, a salient advantage which the nation, a former British colony, has over other jurisdictions. So much so, the English language in commercial law prevails in court. Malta is the only country in the EU to have enacted a Family Business Act, to promote and foster the development of family businesses on the island. It is often noted that with a small nation such as this, where people in the sector tend to know each other, needing clarification on a point of law can be done by reaching the people who drafted the legislation themselves.
The country’s tax system is based on a full imputation system whereby tax paid by a Malta company is attributed to its shareholder. Double taxation treaties, based on the OECD model, are in force with over 75 countries. Successive Maltese governments have long recognised the importance of having in place double tax treaties with trading partners as well as with emerging countries in order to encourage the growth of international trade, including that of financial services. The cost of living in Malta is on par with neighbouring Mediterranean countries, with the advantage being salaries and operating costs are comparatively lower than in Northern Europe. Nonetheless, the workforce is highly qualified with many students completing their post-graduate specialisations at reputable universities abroad. Rentals are competitive. Distances are shorter. Flight connections to mainland Europe are extensive.
Looking forward, there’s a commitment in the Government to continue investing in infrastructure and telecommunications, while at the same time keeping the nation’s deficit in line with EU directives. Unemployment is negligible while the island’s credit rating by agencies such as Moody’s and Standard & Poor’s remain strong.
Investment continues to flow into education, placing more importance on training in financial services. To date, financial services in Malta represents over 20 per cent of the country’s GDP and according to observers, this figure is set to grow over the coming years.
Malta is also expected to further introduce changes in its legal and tax systems so as to allow the introduction of new Islamic Finance tools.
There is a firm commitment for the Financial Services Authority (MFSA), the sole regulator, to remain autonomous, open and easily accessible so that emerging opportunities are efficiently seized.