Malta

 

 

 

 

 

 

QUICK FACTS

Full name: Republic of Malta

Capital city: Valletta

Population: 475,701 (31 December 2017)

GDP in Current Prices: USD $12.54 billion (2017)

GDP real growth: 6.6% (2017)

Area: 316 km2

Government: Unitary parliamentary constitutional republic

President: Marie Louise Coleiro Preca

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. The average annual temperature is around 23°C.

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 on 1 January 2008 it became part of the Eurozone.

 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, Marie-Louise Coleiro Preca, is the youngest person to have held the office of President, aged 55 when she was sworn in in April 2014, and is the second woman to have held the post. The current Prime Minister is Joseph Muscat, leader of the Labour Party, with the main opposition leader being Adrian Delia, leader of the Nationalist Party.

Economy

Malta is a highly industrialised, high-income, advance service-based economy and is listed within the top 30 countries by the International Monetary Fund (IMF). Malta’s real GDP growth in 2017 of 6.6% was one of the highest growth rates in the EU and was forecast to rise by 5.4% in 2018 by the European Commission, although initial figures released by the NSO for the first three quarters of 2018 suggest a higher figure is likely to be achieved.

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. In 2007 the government sold off its 40% stake in ‘MaltaPost’, and by 2010, Malta had managed to privatise 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. 2017 brought over 2.273 million inbound visitors to the country, 15.7% higher than in 2016 and nearly twice the 2009 total of 1.183 million.

The latest published figures from Malta’s National Statistics Office show that in the first ten months of 2018, the number of inbound tourists had exceeded 2.302 million – an increase of over 10% over the corresponding figure of 2017 – while the total tourist expenditure was estimated at nearly €1.9 billion, an increase of 8.6% 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 (such as water, waste management, hotels, beaches and roads), with overcrowding 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.

The United Kingdom and Italy remain Malta’s most important source markets, accounting for 24.7% and 16.0% of total visitors, respectively, with Germany and France the next most important markets. Malta’s performance compared positively with other countries. According to the World Tourism Barometer, arrivals in Southern and Mediterranean European countries grew by an annual rate of 12.6%, while the global tourism industry registered a 6.7% increase in 2017.

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 97.9% of its international visitors arrive. Passenger numbers have been growing rapidly, from 3.5 million in 2011 to just over 6.0 million in 2017. 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 with a trade volume of 3.084 million TEUs (twenty-foot equivalent units) in 2016.

Future outlook

According to the Central Bank, the economy is expected to see 6.8% GDP growth in 2018, falling to 4.8% in 2019 and 4% in 2020. Aside from these, the Central Bank also has said its projections for the government balance were also looking better than first expected, with the debt-to-GDP ratio falling to 44.6% by 2020, with domestic demand to replace net exports as the main driver of economic growth. The government budget is also forecast to remain in surplus, and Malta’s debt-to-GDP should fall below 50% for the first time in more than 20 years.

Citizenship by Investment

Introduced at the beginning of 2014, the Malta Individual Investment Programme (IIP) 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 IIP has raised more than €1 billion in revenue for the government. In total, 833 main applicants (plus 2,107 dependents) had been successful in obtaining citizenship as at 30th June 2018. The original IIP regulations put a cap of 1,800 successful applicants (excluding dependents) for the duration of the programme, so they have nearly reached half the pre-established target.

However, it should be pointed that Malta exercises tight due diligence. During the year July 2017-June 2018, 75 applications were rejected or withdrawn. On average, one in five applications fail for whatever reason as Malta strives to be more transparent, especially after the Prime Minister confirmed in November 2017 that the IIP would be extended and made more exclusive.

The fifth annual report of the Office of the Regulator Individual Investor Programme (ORiip), published in November 2018 and covering the year 1st July 2017 to 30th June 2018, calculated that the total amount raised through property purchases and rent, investments and contributions made under the IIP during the reported year equated to approximately 2.09% of Malta’s GDP relative to the same period.

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.

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 Country Spotlights.

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