Relocating to Malta - Helping you to relocate to Malta

Relocating your business to a new country is a big step which is usually a strategic business decision that is based on the l relocation Malta

ocation, tax incentives, cost of living, education, cost of work force and most importantly the system and the logistics of dealing with the Government in that specific country. RE/MAX Malta has a specific task force that specialises in coordinating and managing any services you may require. From setting up your business to relocating families to Malta, we have the know-how and the contacts to make sure that your move is smooth.

Being pioneers in providing this comprehensive service, the RE/MAX Malta team have the answers to most frequently asked questions and most resources to guide any ex-patriot in the right direction for advice on various matters including taxation, setting up of offices/commercial activity in Malta, legal advice, residency permits, schooling for children and other services that may be required depending on the individual.

Identifying the right location and the best suitable office space is an important task that companies require professional guidance on. Our experience dealing with key clients and helping them acquire and finish office space to the highest specifications can prove a major asset to any company planning to set up an office in Malta.

LOCATION

The Maltese Archipelago lies virtually in the centre of the Mediterranean Sea, some 93kms south of the Italianisland of Sicily. Yet Malta is just a few hours’ flying time from most mainland European cities (London Malta flying time only 3 hrs) and has excellent intercontinental connections. Malta has a long tradition of international business that goes back as far as the Phoenicians in the first millenium BC. The Carthaginians, Romans, Arabs, Knights of St John and others, along with the French and British, all realised the economic potential of the Maltese islands. For close to two centuries Malta was the Royal Navy's Mediterranean home port. This laid the foundations for the islands' subsequent industrial development.

SETTING UP YOUR BUSINESS IN MALTA

Over the years, RE/MAX Malta has built very good relations with International auditing firms and legal offices that have representation in Malta. We recommend that companies seek advice from real professionals when they get to Malta.

If required, we will be happy to recommend to you the best auditing firm or legal office that should best suit your requirements. We can also supply you with a list of firms and contact details of the right people to talk to.

WHY SET UP YOUR BUSINESS IN MALTA

Malta's solid background has led to today's favourable industrial climate that together with its pro-business environment makes Malta an ideal location for foreign direct investment. There are now well over 200 foreign-owned enterprises on the island - involved in electronics production, medical equipment, pharmaceuticals, software development, plastics, automotive components, tool-making, aviation-related services and maintenance, furniture and food. Economic stability, healthy industrial relations and competitive labour costs have been the pillars sustaining the success stories of many a foreign company over the last four decades.

Foreign direct investors have found that Malta offers definite advantages in short production-runs, product development and research, sales and marketing. Furthermore, a number of bilateral and multilateral tax treaties and agreements ensure favourable export conditions to Europe, United States, Japan, North Africa and the Middle East.

Education

The standard of education in Malta is high, with English as an official language, it is also the language utilised for instruction in most subjects across the board. The business languages practiced are mainly Maltese and English, with English being the most spoken. The Maltese are fluent in Italian and also speak German and French.

The Malta University today provides free education to some 8, 000 students in disciplines that range from medicine, to law, architecture, engineering, IT, business studies, management and accountancy and communications amongst others. 1800 students graduate from University every year.

In addition the Malta College of Arts and Technology provides vocational and professional training of an international calibre in several disciplines incliding information and communications technology, art and design, electronics and engineering, building and construction, mechanical engineering, community services, business and commerce and maritime affairs. All this has a marked effect on the calibre of labour available for recruitment.

The Workforce

Despite the absence of raw materials and minerals, Malta has one seriously valuable asset – its labour force. The Maltese people today remain as hardworking and enterprising as they have been throughout there colourful history. They are highly educated and easily trained. On the shop floor this makes rejection rates in any industry operating in Malta the lowest in the Mediterranean and elsewhere.

The Maltese people have drawn every lesson there was to learn from their history. As a result they made every experience work to their advantage. Their probably is no workforce in Europe today that matches the many attributes Maltese workers bring to one’s business. This, in great measure, explains Malta’s ongoing economic success.

FINDING YOUR PREMISES

Our experienced team can assist you in searching for your strategic business premises. With what is possibly the largest database of commercial properties available on the market, we are always in a position to offer a wide range of choices to suit any client, not only with regards to location but also size and level of finish.

If your request is for office premises, retail outlets, small or large catering establishments, warehouses or indeed any other type of commercial property our comprehensive database is sure to offer an idea to suit your needs.

RESIDENTIAL LETTINGS

Any foreigner coming to Malta on a work appointment, to retire or simply to take up residency on our island

is able to rent a property. Indeed there are no laws stopping foreigners from finding a rental home/Property to let to take up as a residence with the exception of permanent residency.

Our letting department, established since 1999 under the J&K Properties name, has moved from strength to strength and thanks to our hard working team has increasingly gained more market share to become a household name and leader in the letting sector, specialising in providing individuals, company executives, consultants, staff, diplomats and friends’ a fully comprehensive service catering for both short term and long term letting periods in Malta and Gozo.

In Malta, there is a vast selection of properties to rent/to let located in various areas, suiting a wide variety of budgets as well style of life requirements of each potential client.

In the case where a client is to be based on the island on a work assignment it is most likely that the location of your workplace would be within the Sliema. St.Julians possibly Valletta areas. These towns are well serviced with most of the main requirements typically necessary for normal day-to-day living such as shopping centres, supermarkets, beaches (rocky), a variety of restaurants and also cinemas and night life entertainment. Properties found in these areas range from modest (standard) apartments to townhouses as well as the upmarket seafront apartments, which as they overlook the promenade offer some spectacular sea views. On the outskirts and more inland, property types will include terraced houses, more apartments and maisonettes and also high quality villas and bungalows, with or without pool.

If the choice is to stay away from the typical hectic city life of the above mentioned cities a good answer would be to move inland and look at some of Malta’s old towns and villages, or further out still to the country where besides the types of properties already mentioned above one could find some unique character houses and farmhouses with or without pool, typically renovated to modern day standards but still retaining their two, three and sometimes even four hundred year old charm.

The proximity between the selected home and business/work place can make a difference. Although Malta is small, traffic to and from areas can be slow and frustrating. In our endeavour to make living here as pleasant as possible for you we take an interest in giving advice regarding travel time to workplace as well as central shopping centres and towns.

Every client is treated with the utmost professionalism but at the same time with the right dose of personal touch. At REMAX Malta we know that finding a home, in what is more often than not, new surroundings can prove quite tough and trying but we are also confident that our years of experience will prove essential in the various stages of selection right from the ability to understand the needs of the client right though to the time of actually signing the lease agreement with the owners.

Our associates are professionally trained to find you the right rental property, negotiate the best price and keep in touch with you to make sure that you are happy with your new home. We back this up with a 24hr, 7 days a week service.

RE/MAX MALTA is committed to deliver a fully comprehensive, professional, stress free service at value for money to all their customers.

SCHOOLING

No doubt, schooling is an issue to be taken quite seriously when sending families to a new destination. It is good to know that Malta has a number of English and International Schools. We will be very happy to advise you on the various choises available on the Island.

CORPORATE SERVICES SUPPORT

At RE/MAX MALTA we supply a twenty-four hours/seven-day-a week service. For any problems that may develop you know we are a phone call away.

MALTA ENTERPRISE'S BUSINESS PROMOTIONAL ACT

The Malta Enterprise has been set up by the Maltese Government to help businesses set up in Malta. The Business Promotion Act (BPA) which succeeded the Industrial Development Act and which has been in force since 2001, introduces greater scope and flexibility to the incentives available for the promotion of business, and covers a much wider range of qualifying sectors and activities than before.

The BPA provides incentives for those industries demonstrating growth and employment potential that are engaged in manufacture (including software development), repair, improvement and maintenance activities.

The Business Promotion Regulations, issued in terms of the Business Promotion Act, provide attractive fiscal incentives for companies engaged in particular manufacturing and qualifying activities.

The incentives available under the Business Promotion Act may be subdivided under two headings namely, tax related incentives and non-fiscal related incentives.

A. TAX RELATED INCENTIVES

1. Reduced Rates of Income Tax

This incentive applies only to qualifying companies engaged in those particular activities listed under the Business Promotion Regulations. These activities include pharmaceuticals, plastics, biotechnology, electronic and electrical equipment.

Such qualifying companies benefit from the following highly favourable tax rates, as applicable and up to 31/12/2008:

2. Investment Tax Credits

This incentive, in terms of which the tax payable is reduced and even eliminated, may be availed of only by those qualifying companies that are entitled to benefit from reduced rates of income tax.

Tax credits unutilised during a particular year are carried forward to the following year and increased by 7%.

The combination of the above incentives would normally result in minimal or no taxes being paid for a number of years.

3. Value Added Incentive Scheme

This incentive is applicable to those qualifying companies that are not eligible for reduced rates of income tax, and consists of a scheme whereby such companies benefit from reduced rates of income tax according to the increase in value added derived from their activities.

The reduced rates of tax apply to part or indeed a multiple of the increased profit when compared to a base period. For new companies, since the base period would be Nil, all the profits in the initial three years would be taxed at the reduced rate of 5%.

4. Investment Allowances

5. Reduced Rates of Tax on Reinvested Profits

The tax on profits that are reinvested in projects approved by Malta Enterprise is reduced by 19.25% from 35%.

6. Incentives for Job Creation

The creation of new jobs for particular persons, e.g. persons unemployed for more than two years, disabled persons, would entitle a company to an additional tax deduction based on the wage cost of such persons.

7. Tax Treaties

Malta has concluded tax treaties with a number of countries (mainly European but including Canada and Australia) which enhance the incentives provided by Maltese domestic legislation.

Most of these treaties ensure that profits generated in Malta are either exempt from tax in the country of residence of the investor, or that such a country will provide a tax credit for the Malta tax spared as a consequence of the incentives Malta provides.

B. NON FISCAL INCENTIVES

1. Provision of Immovable Property

Malta Enterprise approves the allocation of industrial buildings at competitive rates of rent.

2. Soft Loans

Qualifying companies may benefit from low interest rate loans covering up to 75% of the qualifying expenditure undertaken by the company.

3. Loan Interest Rate Subsidies

Alternatively, companies may qualify for a subsidy on the interest rate payable on loans taken up from licensed financial institutions to acquire additional assets.

4. Loan Guarantees

Malta Enterprise may guarantee up to 75% of loans taken up by qualifying companies to finance the acquisition of assets.

5. Training assistance

Qualifying companies may benefit from substantial training assistance. Depending upon whether a company is classified as “large”, “small or medium” enterprise, such assistance may vary from 35% to 80% of costs incurred on training.

6. Work Permits

Indefinite work permits are granted to shareholders (or their nominees) holding more than 40% of the equity. Definite work permits for specialists are granted according to company requirements.

INTERNATIONAL TRADING COMPANY

Definition

An international trading company (ITC) is a normal Maltese onshore company, which is engaged in trading activities from Malta, rather than in Malta, with non-residents. ITCs can purchase goods of local origin provided that the acquisition is not made from anyone who holds more than 15% of the share-capital of the ITC. Trade may also be carried out with other ITCs and offshore trading companies.

An ITC is a flexible vehicle and its uses are various as long as they fall within the definition of trade. The most obvious use would be that of general trading companies or purchasing houses for companies operating outside Malta. It could be used for group financing purposes, to channel management or other consultancy services. Captive management companies with ITC status may manage resident captives trading exclusively with non-resident persons.

Fiscal Benefits

The company is taxed at the normal rate of company taxation, that is 35%, however, upon distribution of profits by the ITC to its non-resident shareholders, the following refunds reduce the tax burden to 4.2%:

Corporate Tax Computation	LM	Effective tax burden	LM
ITC taxable profits 1,000	1,000	Tax paid by ITC	350
Less		Less
Tax paid in Malta by ITC @ 35%	350	Total refund to non-resident shareholders	308
Profits available for distribution	650	Effective tax burden	42

Distribution		Effective tax rate after payment of refunds	4.2%
Dividend grossed up 1,000
Tax on NON-resident shareholder (27.5%)	275
Less Corporate tax (35%)	350

Refund to shareholder	75
2/3 refund of tax paid by ITC	233
Total refunds to non-residents shareholders	308

The International Tax Unit provides Advance Revenue Rulings, which establish the tax implications of a project prior to its commencement, thus providing certainty and clarity. Rulings are binding for five years but may be renewed for another five-year period. The rulings are effective for a further 2 years from a change in legislation.

General

The identity of the beneficial owners of an international trading company may remain confidential if the company is incorporated through a licensed nominee company unless money-laundering activities are identified.

The sole restrictions applicable to an ITC is that a company cannot manage or service another Maltese company, or act as a trustee for any trust established or carry on the business of financial services without a license or other appropriate authorization from the respective competent authority.

Company set-up costs

The following table is an indication of corporate features and the appropriate leaflet, Setting up a Company in Malta, should be referred to for further details:

Capital requirements	Minimum share capital of 500 ordinary shares, 20% paid up
Government registration fees	Varies in accordance to the share capital, ranging from Lm 100 to Lm 573.
Minimum number of shareholders	2. However, single member companies are permitted subject to one object clause
Minimum No. of Directors	1 – does not need to be Maltese national
Company secretary	Required. Has to be an individual not a body corporate
Registered office	Local
Time scale to incorporate	Minimum 2 weeks
Name restrictions	Anything identical or similar to the name of a company already incorporated or reserved. Anything that in the opinion of the Registrar of Companies is offensive or otherwise undesirable.
Audited accounts	Compulsory
Annual return	Compulsory – an annual fee payable in accordance to the authorized share capital (between Lm 50 and Lm 250).

INTERNATIONAL HOLDING COMPANY

A Maltese registered company whose activities are restricted to the holding of overseas equity interests is commonly referred to as an International Holding company (IHC), although no specific IHC tax regime is in place. A Maltese International Holding Company may qualify to hold a “participating holding” in an overseas company. A participating holding is categorized into:

Holdings of 10% or more of shares of an overseas company.
Of less than 10% of shares of overseas company but that:
Is entitled at its option to purchase balance of equity shares of overseas company.
Holds first right of refusal on a disposal of equity shares of the overseas company.
Is entitled to be represented on the board of the overseas company.
The value of the shareholding exceeds Lm 500,000 or equivalent in foreign currency.
Holds shares in overseas company in furtherance of its own trade (strategic holding).

Fiscal Benefits

The company is taxed at the normal rate of company taxation, that is 35%, however, upon distribution of profits by the company to its non-resident shareholders, or to a Maltese dividend feeder company, a refund of 2/3 of the tax paid to be reimbursed by the Inland Revenue by not later than 14 days from the end of the month in which it becomes due. Where the investment is a participating holding, the non-resident shareholders qualify for a full refund of the Malta tax paid by the Maltese company on income arising from these foreign holdings.

Since the benefits hinge around a refund mechanism, the cash-flow disadvantage that the company may suffer is mitigated by a deferral in the payment of tax. The company has the choice to pay tax either on payment of dividends or within 18 months from the accounting year-end.

The trust of these companies lies in their tax efficiency. Malta has an extensive double taxation treaty network and it also embraces other methods for obtaining double taxation relief on cross border transactions, namely Commonwealth relief, unilateral relief and flat rate foreign tax credit.

In the case of companies with non-participating holdings, an effective tax rate of 6.25% (or even lower) can be achieved through the claim of a flat foreign tax credit (FRTC) of 25% company’s net income. An auditor’s certificate attesting that the income originates from abroad is required.

The international tax unit will issue advance revenue ruling confirming whether an investment is a participating holding. These rulings may also be issued in respect of the tax treatment of any transaction concerning any financial instrument or other security or transactions involving international business. It could also be requested to ensure that a transaction does not fall within the anti-avoidance provisions. Rulings are binding for a five-year period, renewable for a further five years and survive two years if there is a change is legislation.

Other Considerations

The identity of the beneficial owners of an international holding company may remain confidential if the company is incorporated through a licensed nominee company unless money laundering activities are identified.

A company cannot manage or service another Maltese company, or act as a trustee for any trust or carry on the business of financial services.

Important factors to be taken into consideration when selecting the ideal jurisdiction to base a holding company is the absence of capital gains on the disposal of investments in subsidiaries and withholding tax on payment of dividends, which Malta meets favourably.

The following table is an indication of corporate features and the appropriate leaflet, Setting up a Company in Malta, should be referred to for further details:

Capital requirements	Minimum share capital of 500 ordinary shares, 20% paid up
Government registration fees	Varies in accordance to the share capital, ranging from Lm 100 to Lm 573.
Minimum number of shareholders	2. However, single member companies are permitted subject to one object clause
Minimum No. of Directors	1 – does not need to be Maltese national
Company secretary	Required. Has to be an individual not a body corporate
Registered office	Local
Time scale to incorporate	Minimum 2 weeks
Name restrictions	Anything identical or similar to the name of a company already incorporated or reserved. Anything that in the opinion of the Registrar of Companies is offensive or otherwise undesirable.
Audited accounts	Compulsory
Annual return	Compulsory – an annual fee payable in accordance to the authorized share capital (between Lm 50 and Lm 250).

PERMANENT RESIDENCE

Malta has attracted a considerable number of foreign residents over the years. Although the prospect of a low tax regime is alluring, several other factors have contributed towards this success. The equitable climate is attractive and the cost of living is relatively low when compared to the rest of Europe. Furthermore, the standard of housing is high and real estate has proven to be a sensible investment in a country were land is scarce.

Definition

Permanent residents hold a special residence permit entitling them to remain in Malta without any obligation to spend a minimum time in Malta. A prospective applicant can apply for permits to include dependants, namely children under 18 years of age, the spouse, parents and grandparents maintained by the applicant.

Conditions to be fulfilled

A prospective permanent resident has to provide evidence that he is in possession of Lm 150,000, which need to be remitted to Malta or a worldwide annual income of Lm 10,000 per annum.

The annual income to be remitted to Malta must not be less that Lm 6,000 for one person plus Lm 1,000 for each dependant.

Investment in real estate limited to one owner occupied residence is compulsory. It can either take the form of ownership of residence at not less than Lm 50,000 (Lm 30,000 in case of an apartment) or lease/rent of not less than Lm 1,800 (plus 5% VAT) per annum. The investment is to take place within 12 months from the date of permit. There are no other restrictions to capital investment in Malta.

Concessions

Permanent resident holders are taxed at a flat rate of 15% on income remitted to Malta, subject to a minimum tax rate of Lm 1,000 per annum, after relief from double taxation.

The following items are imported free of duty within six months from the date of arrival in Malta. No import licenses are required in such circumstances:

· One private motor vehicle by a person (husband and wife counting as one person). In this case the time limit hinges on the later of six months from date of permit or residence.

Repatriation of Capital and Income

Any unspent residue of Capital brought to Malta and any income therefrom accumulated during resident’s stay may be repatriated.

Application Procedure

· A certificate from the applicant’s bankers confirming this criteria and the ability to remit the minimum stipulated amount to Malta.

· Police or judicial conduct of certificate issued from the authorities of the country of residence of the applicant.

· Copy of deed of purchase or rental agreement if the property is already acquired/rented.

Why Relocate to Malta?

Education

The Workforce

A. TAX RELATED INCENTIVES

1. Reduced Rates of Income Tax

2. Investment Tax Credits

3. Value Added Incentive Scheme

4. Investment Allowances

5. Reduced Rates of Tax on Reinvested Profits

6. Incentives for Job Creation

7. Tax Treaties

B. NON FISCAL INCENTIVES

1. Provision of Immovable Property

2. Soft Loans

3. Loan Interest Rate Subsidies

4. Loan Guarantees

5. Training assistance

6. Work Permits

Definition

Fiscal Benefits

Corporate Tax Computation

Effective tax burden

Distribution

Effective tax rate after payment of refunds

General

Company set-up costs

Fiscal Benefits

Other Considerations

Definition

Conditions to be fulfilled

Concessions

Repatriation of Capital and Income

Application Procedure