1.0 INVESTMENT CLIMATE
1.1 Business environment
Malta is a fully independent republic with a parliamentary democracy and an elected president as the head of state. The president is elected every five years by the House of Representatives, which consists of 65 members of parliament. The role of the president as head of state is largely ceremonial. Executive power rests with the prime minister and his cabinet. Malta has two main political parties, the Nationalist Party and the Labor Party.
Malta's economy is dominated by the manufacturing, financial services, tourism and ICT (information and communication technology) sectors.
Malta relies on foreign trade, as it produces only about 20% of its food needs, has limited freshwater supplies and no domestic energy source. France and Italy are the leading sources of imports. Malta's main exports are machinery and transport equipment. Trade is oriented towards the EU, Asia and the US. In principle, Malta has no restrictions on trade with any country, except for countries with regard to which UN restrictions are imposed.
Malta is a member of the EU and the World Trade Organization (WTO). Malta joined the EU in 2004. As an EU member state, Malta is required to comply with all EU directives and regulations, which it follows with regard to trade treaties, import regulations, customs duties, agricultural agreements, import quotas, rules of origin and other trade regulations. The EU has a single external tariff and a single market within its external borders. Restrictions on imports and exports apply in areas such as dual-use technology, protected species and some sensitive products from emerging economies. Trade also is governed by the rules of the WTO.
Malta has a free market economy in which the principle of market forces is applied to price formation. Direct or indirect fixed purchase and selling prices are prohibited.
According to the Enforcement of Intellectual Property Rights (Regulation) Act, intellectual property rights are rights accorded under the Copyright Act, the Trademarks Act and the Patents and Designs Act. Malta is a member of the World Intellectual Property Organization (WIPO), the Paris Convention for the Protection of Industrial Property, the Berne Convention for the Protection of Literary and Artistic Works, the Universal Copyright Convention (UCC), the WIPO Copyright Treaty, WIPO Performances and Phonograms Treaty and the World Trade Organization (WTO) Agreement. The necessary action is being taken to secure Malta's accession to the Protocol to the Madrid Agreement concerning the International Registration of Marks and the Hague Agreement concerning the International Registration of Industrial Designs.
The Patents and Designs Act provides that, under certain conditions, inventions are patentable if they are new, involve an inventive step and are susceptible to industrial applications. An application for a patent must be made to the Office of the Comptroller of Industrial Property, which maintains a register of patents. The term of a patent is 20 years from the filing date of the application. Malta is a signatory to the European Patent Convention (EPC) and the Patent Co- operation Treaty (PCT), which simplify the filing of patent applications and conducting innovation searches in participating states. Applications for patents under these agreements may also be filed at the Malta Office of the Comptroller of Industrial Property and the countries for which the patent is sought must be designated in the application. The comptroller publishes a notification in the government gazette or other official publication that the Comptroller may prescribe as soon as possible after the decision is made to grant a patent. Infringement proceedings must be brought before the Civil Court, First Hall, within five years from the date the injured party obtains knowledge of an infringement and of the identity of the alleged infringer.
The Copyright Act protects artistic works, audiovisual works, databases, literary works and musical works. Malta has transposed the Berne Convention (Paris Act) into Maltese law and implemented the pertinent provisions of the WTO Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement. A person that infringes a copyright may be subject to damages and/or a fine. A copyright expires 70 years after the death of the author, or 70 years from the year in which the copyright was made or lawfully made available to the public. There is no requirement to register a copyright, but a copyright board exists to protect the interests of copyright holders in the different fields.
A registered trademark is a property right obtained by registration under the Trademarks Act; the proprietor of a registered trademark has the rights and remedies provided by the Act. A trademark means any sign capable of being represented graphically that is capable of distinguishing goods or services. An application for registration of a trademark must be made to the Comptroller of Industrial Property, who maintains a register of trademarks. The act sets out several grounds for refusal of registration. Once an application has been accepted for registration, the certificate of registration must be issued and registration published in the official gazette or other official publication prescribed by the comptroller. European trademark and design registration may be obtained from the EU's Office for Harmonization in the Internal Market (OHIM). Applications are made to the Malta Comptroller of Industrial Property and a selection can be made for any or all EU member states. Infringement of a registered trademark is actionable by the proprietor of the trademark by sworn application filed in the First Hall of the Civil Court.
The currency in Malta is the Euro (EUR).
Countries participating in the Economic and Monetary Union
1.3 Banking and financing
Banking and finance regulation is based on EU rules, in particular, the directives on banking, insurance and capital adequacy. The Banking Act regulates credit institutions and electronic money institutions. The Financial Institutions Act regulates institutions that do not take deposits or other repayable funds from the public.
All banking and financing services are available on the same terms to Malta-owned and foreign- owned companies. Malta is a growing financial center particularly for funds, securitization and (captive) insurance and re-insurance.
1.4 Foreign investment
Malta welcomes foreign direct investment. Malta Enterprise is the agency responsible for the promotion of foreign investment and industrial development and for granting tax and nontax incentives to enterprises that carry out specific activities in Malta. There are no requirements for state or public participation in businesses established by foreigners (save for very few industries).
1.5 Tax incentives
Incentives fall under the following headings: Investment Aid, R&D and Innovation, Access to Finance, SME Development, Employment and Training, and Enterprise Support.
Investment Aid and R&D and Innovation incentives are effected through investment tax credits. The tax credit depends on the size of the enterprise and is offset against the company's tax liability for the relevant year of assessment, with any unabsorbed credits carried forward.
The incentives generally are targeted at enterprises that have a high value-added or high employment potential. Enterprises engaged in ICT development activities, manufacturing, audio visual and filming, healthcare, free port activities, eco-innovation and waste treatment, among others, may benefit from the incentives.
Other incentives are available to persons operating in the shipping industry. Income derived from the operation of qualifying vessels registered under the Maltese flag is exempt from income tax in Malta. The ship owner of a qualifying Malta-flagged vessel instead pays a pre-established annual "tonnage tax" computed on the basis of criteria such as the tonnage of the vessel. Furthermore, the profits of a nonresident ship owner are exempt from tax in Malta, provided the country in which the nonresident ship owner is resident would extend a similar exemption to Malta resident ship owners.
The Freeport is a custom-free port located in the southeastern part of Malta, and is the third largest transshipment and logistics center in the Mediterranean region.
1.6 Exchange controls
Malta abolished all exchange controls when it joined the EU, although it negotiated to retain certain restrictions concerning the acquisition by nonresidents of 25% or more of the shares in a Maltese company that owns directly or indirectly (or wishes to acquire) immovable property situated in Malta. In such cases, authorization must be requested from the local authorities.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.