MALTA

Situated in the centre of the Mediterranean, Malta has a long tradition of international business that goes back as far as the Phoenicians in the first millennium BC. A favourable industrial climate and its pro-business environment makes Malta an ideal location for foreign direct investment. Over 250 foreign-owned manufacturing companies have already discovered Malta as an ideal business centre. Economic stability, healthy industrial relations and a competitive labour cost structure have been the pillars sustaining the success stories of many a foreign company for the last 30 years.

GOVERNMENT AND THE LEGAL SYSTEM

Malta gained its independence from Britain in 1964 and became a republic in December 1974. Since 1971, Malta has benefited from an Association Agreement with the European Union. This arrangement enables industrial products to enter the EU exempt from payment of customs duty or from any quota restrictions, subject to rules of origin. Government is presently seeking an even closer rapport with the EU through the realisation of a Free Trade Zone, which will result in the gradual and complete liberalisation of bilateral trade.

The legal structure of the country is based on the civil law system of Continental Europe, but most administrative and fiscal legislation is based on English Law. The judiciary is independent of the executive and the legislative.

MALTA'S MANUFACTURING INDUSTRY

The Malta Development Corporation is committed to promoting the right legal and industrial environment to attract and support foreign direct investment. To date this accounts for 25% of the gainfully employed population in Malta.

Malta's present industrial strategy is based on the progressive enhancement of the existing skills base by encouraging higher technology and increased added value. The emphasis is on flexible, fast response activities and high-value added production. For international companies, Malta is the ideal gateway to European, North American and North African markets. The Association Agreement and the fact that some 75% of Malta's exports go to the EU emphasise Malta's close relations with Europe. Maltese goods are also eligible for the US, Canadian and Japanese GSP Schemes.

Among the household names operating in Malta, one finds STMicroelectronics (Malta) Ltd. (ex-SGS-THOMSON Microelectronics), Baxter Ltd., Dowty (M) Ltd., De La Rue Currency & Security Print Ltd., Aeromaritime (authorised maintenance centre for Allison/Rolls Royce Model 250 Engine), Merit-Malta Methode Ltd., Menrad Ltd., Playmobil Malta Ltd., EPO Electronic (Malta) Ltd., ProMinent Fluid Controls Ltd., Seifert mtm Systems (Malta) Ltd., Hyundai Electronic Industries Co. Ltd.

INFRASTRUCTURE

Telecommunications:

Malta is equipped to provide a business service at the highest levels of prevailing telecommunication technology and at the highest level of operational efficiency. A fully digital switching telephone system supported by an optic fibre/digital microwave national transmission infrastructure.

Modern and spacious international connectivity comprising two digital gateway exchanges, an optic fibre submarine cable connecting with the Mediterranean hub in Sicily and two satellite earth stations. Various data services including high speed international leased lines, high speed packet switching and frame relay.

Other services include a cable TV system, cellular mobile telephony (analogue and GSM), national alpha-numeric paging and Internet. ISDN is set to come on line in 1998, and the feasibility of introducing broadband services and cordless terminal mobility (CTM) are being studied.

Travel/Transportation:

Malta lies within easy reach of Europe, North Africa and the Middle East. Air connections to these destinations are efficient and frequent. Most international airlines operate regular scheduled flights to and from Malta. These include British Airways, KLM, Lufthansa, Swissair, Alitalia, Tuninter and Sabena.

Malta's fine natural harbours facilitate sea connections. Extensive, conventional and ro-ro services by international shipping lines, including Sea Malta, carry freight and cargo directly to Mediterranean, North European, Middle East, North American and Asian ports.

The Malta Freeport caters for intercontinental cargo and acts as a distribution centre for the Mediterranean region with a capacity approaching 1 million TEU. The major European lines provide efficient and reliable international trucking services to most European destinations. World-wide regular connections with over sixty ports are in place, including a feeding service to all major ports throughout the Mediterranean and European regions.

HUMAN RESOURCES

A culture of work and of pride in one's job...

With a population of 380,000 and no known natural resources, Malta's most valued asset is its people. They are enterprising and admire the successful entrepreneur. Hard-working and proud of it, Maltese accept the need for flexibility and have a dedicated work-ethic.

Education and Training:

The Standards of education are high. The Maltese are fluent English speakers (English being the language of instruction for most subjects at all levels of the education system). Most communicate well in Italian and in addition many take up French and German.

Malta can boast of having the oldest University in the Commonwealth outside Britain providing education for more than 6,000 students in the main academic faculties.

Substantial investments for the modernisation of vocational and technical education are underway. There are 3 technical Institutes running courses in mechanical engineering, applied electronics and design.

The Employment and Training Corporation (ETC) provides various training schemes to meet the needs of both employers and apprentices, thus matching demand and supply conditions in the labour market.

LIVING IN MALTA

With a long heritage of European culture passed on by over 400 years of close association with Europe, Malta enjoys a high standard of living at a comparatively low cost. Malta has a wealth of history and archaeology to visit and explore. The mild climate encourages an outdoor social and cultural life. Exhibitions, music and theatre performances are organised throughout the year.

All water sports are widely practised and there are facilities for various other sport activities including golf courses, tennis courts and gyms.

INDUSTRIAL ESTATES AND PARKS

Industry is concentrated in 10 Industrial Estates spread throughout Malta and Gozo. Another two industrial zones are earmarked for aviation services and marine related industries.

Ready built standard factories are available on demand with rents starting at US $ 4.50 per sq.m. per annum. Land area for industrial development is available at a rental rate of US $ 2.5 per sq.m. per annum.

SUPPORT MEASURES FOR INDUSTRY

Malta offers a competitive package of conditions and incentives for the foreign direct investor. Industries are free to determine their own equity arrangements and 100% foreign ownership is the norm. There are no currency restrictions and full repatriation of capital and profits is guaranteed by law. A liberal work permit policy is applicable to industry.

INCENTIVES PROVIDED BY LAW

The Industrial Development Act has recently been amended by the Business Promotion Act (BPA), however the latter has not yet come into force. The BPA 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. Incentives are provided for those industries demonstrating growth and employment potential when the activities engaged in by such companies are manufacture, repair, improvement or maintenance activities. New provisions also provide attractive fiscal incentives for companies engaged in certain manufacturing and qualifying activities. The following is a summary of such activities: electronic and telecommunications equipment, software development including installation, implementation, support and training, machinery and engineering, certain fabricated metal products, rubber and plastic items, pharmaceuticals and medicinal products, medical, precision and optical instruments and equipment, production of audio-visual productions including films, advertising programmes, commercials or documentaries, jewellery and related articles, repair, improvement and maintenance of aircraft, yachts, motor-boats, turbines, gantry cranes and their equipment, biotechnology, aquaculture, waste treatment and recycling research and development.

Companies carrying out the specific activities summarised above will qualify for the following tax incentives:

Reduced rates of income tax where the applicable tax rates will be 5% for the first 7 years of operation, 10% for the following six years and 15% for the following 5 years.

Investment tax credits by means of which the tax payable may be reduced or eliminated by investment tax credits calculated at either 50% of the amount invested or 50% of the first 2 year wage cost of new jobs created. For SMEs the percentage for both the above calculations is increased to 65%. In all cases, unutilised investment tax credits may be carried forward.

These incentives result in an extremely favourable tax structure - indeed, the interaction of the above fiscal incentives would normally result in minimal or no taxes being paid for a number of years.

On the other hand all companies qualifying in terms of the BPA may benefit from the following tax incentives:

Value added incentive scheme whereby companies may benefit from reduced rates of tax according to the increase in value added of their activities. In such cases the applicable rates of tax would be 5% for the first 7 years, 10% for the following 6 years and 15% for the
   following 5 years. The reduced rates of tax apply to part or indeed to a multiple of the increased profit when such profit is compared to a base period. For new companies whose base period is obviously nil all profits in the initial three yeas will be taxed at the reduced rate of 5%.

Investment allowances whereby a tax deduction of 50% of the investment is allowed on plant and machinery and a 20% tax deduction is allowed on industrial buildings and structures. This tax deduction would be in addition to the normal tax depreciation. Reduced tax rate for re-invested profits whereby the tax on profits
   re-invested in projects approved by the Malta Development Corporation is reduced by 19.25%. Research and development expenditure is deducted at 120% for tax purposes.

Tax treaties which enhance the incentives provided by Maltese domestic legislation. Malta has concluded tax treaties with a number of countries, and 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.

The BPA also makes provision for non-tax incentives which are applicable to all qualifying companies. These incentives include the provision of immovable property at competitive rates of rent, soft loans of up to 75% of the qualifying expenditure, loan interest rate subsidies for loans required to acquire additional assets, the guarantee by the Malta Development Corporation of loans taken by the company to finance the acquisition of such additional assets, exemption from import duties on plant, machinery, materials, accessories and components which are to be used for processing, incentives for job creation whereby the creation of a new job by the company may entitle such company to write off a percentage of the wage costs of the new job as a further tax deduction, training assistance by means of which qualifying companies may benefit from substantial training assistance. Such assistance may vary from 35% to 80% of the costs involved depending on whether the company is classified as a small, medium or large enterprise. Indefinite work permits are granted to shareholders or their nominees holding more than 40% of the equity. Definite work permits for specialists are also granted according to company requirements.

		Eligible companies benefit from a favourable tax regime;
		An extensive range of double taxation agreements which supports effective tax planning;
		Training grants for approved programmes are offered to employees and management;
		Factory and office space are available at low rental costs;
		The importation of plant, machinery as well as raw materials, components and accessories for export is Duty Free;
		Financial support for research and development is readily available;
		A loan finance scheme is accessible.

For more information please email lexnet@waldonet.net.mt or check out Offices & Contacts