Country Spotlight: MALTA

 

 

 

 

 

 

 

QUICK FACTS
Full name: Republic of Malta

Capital city: Valletta
Population: 475,701 (31 December 2017)
GDP in Current Prices: USD $14.27 billion (2018)
GDP real growth: 6.6% (2018)
Area: 316 km2
Government: Unitary parliamentary constitutional republic
President: George Vella
Prime Minister: Joseph Muscat
Currency: Euro (€) (EUR)
HDI: 29th (2018) – “very high”
Ease of doing business index: 84th (2018/19)
Time Zone: GMT + 1
Dialling code: 356

The Republic of Malta is a small South European island country that lies approximately 80 miles south of Italy and 207 miles north of Libya. Malta is an archipelago in the Mediterranean Sea, but only the three largest islands of Malta, Gozo and Comino are inhabited. The landscape of the islands is characterised by terraced fields, dry vegetation, rock and limestone. This is due to the long hours of strong sunshine that they receive throughout the summers, which are usually dry and hot with temperatures reaching as high as 32°C in July and August compared with 16°C in January.

Malta is the 10th smallest country by land area and one of the most densely populated nations in the world. Its capital Valletta is the smallest national capital in the European Union. Maltese and English are the official languages, although Italian is also widely spoken.

History

Malta is a popular tourist destination due to its warm climate and its architectural and historical heritage. The islands have been inhabited since around 5900 BC and some of the Megalithic Temples of Malta are UNESCO World Heritage sites. The Ggantija temple complex on the island of Gozo pre-dates even the pyramids of Egypt and are reckoned to be the world’s second oldest manmade religious structures, around 5,500 years old.

Malta’s location in the middle of the Mediterranean has historically given it great strategic importance as a naval base and a crossroads between Europe, North Africa and the Middle East. A succession of powers, including the Phoenicians, Carthaginians, Greeks, Romans, Byzantines, Arabs, Normans, Sicilians, Spanish, French, and British have ruled the islands, each adding to the distinctive cultural mix.

Malta is particularly known for its connection with the Order of the Knights of St. John, who were given the island by the Spanish king Charles V in 1530. They introduced the Italian language to the island, built the city of Valletta, and developed the cultural and economic links through the region. The official state religion of Malta is Catholicism, with the island having a long Christian legacy dating back to around AD 60 when St. Paul was shipwrecked in Malta whilst traveling from Jerusalem to Rome and stayed there for three months.

After briefly falling under Napoleon’s rule in 1798, the Maltese managed to oust the French rulers with British help and they voluntarily became a British protectorate in 1800 and a Crown colony of the British Empire in 1813. The importance of their location greatly increased after the opening of the Suez Canal in 1869. During the early years of the Second World War, Malta came under concentrated bombing and naval siege by the Axis powers – so much so that in 1942 King George VI awarded the whole Maltese population the George Cross in recognition of their bravery. A depiction of the medal is incorporated onto Malta’s national flag.

Malta gained independence from the United Kingdom on the 21 September 1964, whereupon it joined the Commonwealth and the United Nations. On 13 December 1974 Malta became a republic with the President as head of state and adopted a policy of neutrality in 1980. It joined the European Union in 2004 and adopted the Euro on 1 January 2008. 

Politics

The parliamentary system is closely modelled on the Westminster system. The parliament is made up of the president, a prime minister and the multi-party House of Representatives. The country is divided into five regions – including Gozo and Comino which are classified as one region – with each having its own Regional Committee which serves at an intermediary level between local government and national government.

The House of Representatives consists of 65 members, with five members being elected from each of the thirteen electoral districts. The role of the President of Malta is largely ceremonial, and he or she is appointed by the House of Representatives for a five-year term. The President appoints a Prime Minister, selecting a member of the House of Representatives who is judged to be best able to command the support of the majority of its members. The current President is George Vella, who was sworn in on 4 April 2019. The current Prime Minister is Joseph Muscat, leader of the Labour Party, who was re-elected on 3 June 2017, with the main opposition leader being Adrian Delia, leader of the Nationalist Party. The next general elections are scheduled to be held by 2022.

Economy

Malta is a highly industrialised, high-income, advanced service-based economy and is listed within the top 30 countries by the International Monetary Fund (IMF). Malta’s real GDP growth in 2018 of 6.6%, compared with 6.7% in 2017, was one of the highest growth rates in the EU and was mainly attributable to domestic demand.

Malta’s main advantage has always been its central location for trade, and the economy reflects that. Being a small island nation, it has limited natural resources and can only produce around 20% of the food requirements for its relatively large population. The economy therefore is dependent on human resources and foreign trade. Malta’s economy is driven by financial services, tourism, real estate, and manufacturing, particularly of electronics. Other significant sectors are pharmaceuticals, information technology and call centres.

There is a strong manufacturing sector for products like electronics and pharmaceuticals, and the manufacturing sector has more than 250 foreign-owned, export-oriented enterprises. Film production is another significant industry. The Maltese government introduced financial incentives for filmmakers in 2005, and currently foreign productions can get up to 27% back on spending incurred.

Ahead of its entry to the EU, the Maltese Government pursued a policy of gradual economic liberalisation and privatisation, taking steps to shift the emphasis from reliance on direct government intervention and control to policy regimes that allow a greater role for markets. By 2010, Malta had privatised its telecommunications, postal services, shipyards and shipbuilding.

Malta produces almost all its electricity from oil, and energy costs – which are some of the highest in Europe – have become an issue. The government is looking into the potential of solar and wind power and Malta and Tunisia are currently discussing the commercial exploitation of petrochemicals on their shared continental shelf.

Malta has managed to maintain a relatively low unemployment rate of less than 4%, mainly because of constant economic growth and by policies encouraging continuous training for the labour force. Malta ranks high on global inward foreign direct investment comparisons and is among the top twenty countries most likely to sustain economic growth. Malta didn’t suffer in the same way as other jurisdictions during the Eurozone crisis, because of low debt and sound banking.

The Malta Financial Services Authority (MFSA), is the single regulator for financial services in Malta. It was established in 2002, taking over supervisory functions previously carried out by the Central Bank of Malta, the Malta Stock Exchange and the Malta Financial Services Centre. The Authority is an autonomous public institution and reports to parliament on an annual basis. It aims to attract businesses, especially aircraft and ship registration, banking licences and also fund administrators. A core part of the growth strategy of the island includes aiding service providers to these industries, including fiduciary and trustee business and encouraging EU compliance. The MFSA forms part of the Single Supervisory Mechanism (SSM) within the European Central Bank and participates in the SSM Supervisory Board decision making.

Other key bodies are The Central Bank of Malta, which has responsibility for monetary policy and the promotion of a sound and efficient financial system, and FinanceMalta, which is the quasi-governmental organisation tasked with promoting Malta as a jurisdiction for finance, banking and insurance. Malta regularly ranks within the top 30 financial systems on the World Economic Forum’s Global Competitiveness Report and placed 36th overall in the 2018 Global Competitiveness Index.

Another major factor in Malta’s economic growth has been its property market, helped by the fact that Malta does not have a property tax. Because of pressure from population growth and foreign direct investors, the property market has been in constant boom, especially in towns like St Julian’s, Sliema and Gzira and around the harbour area.

Tourism

Malta relies heavily on tourism and 2018 has again seen record-breaking arrival numbers. Tourist arrivals and foreign exchange earnings derived from tourism have steadily increased over the last 30 years. 2018 brought 2.634 million inbound visitors to the country, 13.8% higher than in 2017 and more than twice the 2008 total of 1.291 million. The total tourist expenditure was estimated at nearly €2.1 billion, an increase of 8.0% year-on-year. In 2017, travel and tourism contributed 27.1% of Malta’s GDP compared with 21.6% in 2009.

There are currently five times more tourists than there are residents. The increased numbers of visitors have increasingly stretched resources and put pressure on the existing infrastructure, especially during the peak summer months. Consequently, the Malta Tourism Authority (MTA) and the Ministry for Tourism have been promoting cultural tourism and festival tourism as ways to attract visitors during all months of the year, rather than just the summer months.

As part of the Schengen Area, visitors to the EU can travel freely. While Malta cannot unilaterally drop the requirement for nations it makes agreements with to obtain visas to enter the Schengen Area through its border crossing points, it is permitted to offer visa facilitation agreements to some nationalities. Visitors are attracted by the island’s rich history and culture, and the use of English, but medical tourism has also become popular in recent years, helped by government efforts to market the practice particularly in the UK.

Most of Malta’s tourist arrivals come from the EU, with the United Kingdom and Italy accounting for 24.6% and 15.0% of total visitors, respectively, followed by Germany and France. Malta’s tourism performance continues to compare positively with other countries; according to the latest World Tourism Barometer, arrivals in Southern and Mediterranean European countries grew by 7.0% in 2018, compared with a 5.6% increase globally.

 

Transport

The main mode of public transport in Malta is bus, offering a cheap and frequent service to many parts of Malta and Gozo with the majority of buses departing from a terminus in Valletta. There are also frequent daily car and passenger ferry crossings between Malta and Gozo. Car ownership is very high in Malta considering the size and population density of the country.

Malta has just the one airport, located approximately 5 miles southwest of Valletta, through which 96.9% of its international visitors arrived last year. The rest come by sea. Malta has three large natural harbours, one of which – Malta Freeport on the south-eastern side of the island – is the 9th busiest container port in Europe.

 

Citizenship by Investment

Malta currently has two investment migration programmes:

  • The Malta Individual Investment Programme (MIIP) for citizenship
  • The Malta Residence Visa Programme (MRVP) for permanent residency.

 

MIIP for Citizenship

Introduced at the beginning of 2014, the Malta Individual Investment Programme (MIIP) offers high- and ultra-high-net-worth-individuals worldwide citizenship in a highly respected EU member state.

 

Gaining citizenship in Malta via investment is a simple, quick process which can allow the entire family to immigrate with ease. Citizenship is typically approved after just four months processing time. Family eligibility extends to parents of the applicant and spouse, minor children and unmarried adult children under 27. Descendants gain citizenship automatically.

Since its inception five years ago, the MIIP has raised more than €1 billion in revenue for the government. As of June 2019, over 1,000 applications have been made from more than 40 different countries. The original IIP regulations put a cap of 1,800 successful applicants (excluding dependents) for the duration of the programme, so they have reached more than half the pre-established target. However, it should be pointed that Malta exercises tight due diligence; on average, one in five applications fail for whatever reason as Malta strives to be more transparent and more exclusive.

Eligibility

To be eligible for citizenship by investment, applicants must:

  • Be over 18
  • Be in good health
  • Have a clean criminal record
  • Not been refused a visa for a country with which Malta has visa-free arrangements.

The main applicant is required to contribute €650,00 to Malta. Spouses and children are required to contribute €25,000 each and unmarried children between 18 and 25 and dependent parents are required to contribute €50,000 each, although these contributions can be made after application approval.

Applicants are required to invest at least €350,000 in purchasing property or to enter a rental property agreement for at least €16,000 p.a. on five year contract.

Applicants are also required to invest €150,000 in bonds or shares. The investments must be in Stock sanctioned by the Maltese government.

Applications can be supported by a genuine link to Malta through residence.

MRVP for residency

Malta’s Residence Visa Programme was launched in spring 2017, and received over 1,000 applications during its first eighteen months, with 250 (main applicants) visas approved by July 2018.

To be eligible, applicants must be nationals of a non-EU/EEA country and be able to prove that they either have an annual income of at least €100,000 from outside Malta, or have capital assets of not less than €500,000. In addition, the applicant must:

  • Make an investment of €250,000 in Government bonds or accepted securities/shares on the Malta Stock Exchange; the investment must be retained for a minimum period of five years
  • Purchase or rent a property for a minimum value of €270,000 or yearly rental of €10,000 in the south of Malta or on Gozo, or a minimum value of €320,000 or yearly rental of €12,000 if the property is in the north of Malta
  • Make a contribution to the government of €30,000, of which €5,500 is a non-refundable administrative deposit and must be paid upon submission of the application; once it is established that the beneficiary qualifies for such status, the balance of the contribution must be paid.

Benefits of Maltese Citizenship

A successful application for Citizenship by investment in Malta gives the right to live, work and study in any country in the European Union and Switzerland, plus visa-free travel to over 180 countries.

The Maltese tax system is based on domicile and residence, rather than citizenship. Tax is only due on income and capital gains arising in Malta. After a period of five years, property can be sold in Malta completely tax free, so long as it was the resident’s sole residence for at least three years. If selling the property before three years of residence, a tax of 12% is charged on the selling price.

In addition, there are no inheritance or death taxes, no net worth or wealth taxes, no municipal taxes, rates or real estate taxes and no estate duty. With tax benefits such as these, a stable economic climate and banks ranked as some of the most stable in the world, investment in Malta is a sound way to gain citizenship.

Posted in Articles, Country Spotlights.

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