Whether you are coming to Malta as a traveler or a business person there are two things that will definitely make you happy and these are that the Maltese work hard and the Maltese respect law. This combination creates a spectrum of attractive business opportunities and it will be discussed in this article. Here we would like to share our experience and information we have received from a recent business trip to Malta. We will tell you a few tips on company formation, on the laws for anti-money laundering, on the work of notaries public and on residential opportunities.
Registration of companies
You have, probably, seen articles on incorporating in Malta a few times. Here we attempt at giving a slightly deeper outlook at incorporation.
The Malta Financial Services Authority (MFSA), as the website www.mfsa.com.mt explains, is the single regulator for financial services in Malta, established by law on 23 July 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 a fully autonomous public institution and reports to Parliament on an annual basis.
The financial services sector incorporates all financial activity including that of credit institutions, financial and electronic money institutions, securities and investment services companies, regulated markets, insurance companies, pension schemes and trustees. The MFSA also manages the Registry of Companies and has also been appointed as the Listing Authority.
The MFSA personnel is over 200 employees, consisting of specialist regulators, lawyers, accountants and support staff facilitating the formulation of policy, decision making and support for both licence holders and consumers. The MFSA premises also house the International Tax Unit of the Inland Revenue Department and the Registry of Companies Registry.
As the regulator, the crucial functions of MFSA are supervision of the financial services industry in Malta, protection of the interests of consumers and investors, encouraging the highest possible standards of behaviour in the financial services industry and initiatives to improve standards of education and training, carrying out due diligence and inspections, publishing guidelines and directives. In order to demonstrate Malta’s commitment to global best practice and enhance its international reputation it liaises with national, international and supranational organisations involved in combating financial crime and communicates with media.
From a more practical point MFSA provides clear guidelines on incorporation and maintenance of companies, licencing, fiduciary services and the like. The legislation is easily available to public on the website, properly classified and serves the purpose well. The staff of MFSA provide the highest standard of services, the answer the phone, provide with accurate information and reply to the emails promptly. All this makes incorporation in Malta an efficient and user-friendly process.
Here are some technicalities that have to be borne in mind for the purposes of companies formation and administration:
- The Memorandum of Association has an object clause. The objects cannot be stated simply to be any lawful purpose or trading in general;
- In case of a private company the minimum authorized share capital is EUR 1,164.69, and not less than 20% of the nominal value of each share taken up shall be paid up on the signing of the Memorandum;
- The minimum number of shareholders of a private company is two, however, a single member company may also be registered under the Companies Act. A single member company is a private limited liability company which qualifies as an exempt company and its membership is restricted to one person. An exempt company has certain advantages concerning financial reporting – it can prepare abridged annual financial statements.
- Every private company must have at least one director and a company secretary. They can be of any nationality and individual or a body corporate. The sole director of a company cannot act as the secretary of this company, unless it is an exempt one member company. Neither is it permitted for a company to have as sole director a body corporate, the sole director of which is company secretary of the company.
Licensing of fiduciary services
Companies that provide services related to trusts may be incorporated and managed in Malta in compliance with Maltese statutory requirements. These companies usually provide administrative services in relation to trusts. The MFSA may issue rules to establish which activities constitute administrative services in relation to trusts and to establish the criteria for the conduct of these activities.
Where such companies carry out or intend to carry out fiduciary services along with routine administrative services, they would have to obtain prior authorisation to act as corporate professional trustees from the MFSA.
Anti-Money Laundering Legislation
Anti-money laundering legislation in Malta is sound and efficient. Money laundering is criminalized primarily by means of the Prevention of Money Laundering Act (Cap. 373) which has adopted an “all crimes” approach. Drug-related money laundering is additionally criminalized through the Dangerous Drugs Ordinance (Cap. 101) and the Medical and Kindred Professions Ordinance (Cap. 31).
The Prevention of Money Laundering Act also establishes the Financial Intelligence Analysis Unit (FIAU).
The Prevention of Money Laundering and Funding of Terrorism Regulations (LN 180/2008) implement the provisions of Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on the prevention of the use of the financial system for the purposes of money laundering and terrorist financing and of Directive 2006/70/EC of the European Commission of 1 August 2006 laying down implementing measures. The Prevention of Money Laundering Act and the Prevention of Money Laundering and Funding of Terrorism Regulations are supplemented by the Implementing Procedures issued by the FIAU. The Implementing Procedures are binding on subject persons and failure to comply is subject to an administrative penalty.
Notaries public
Similarly to Russia, notaries in Malta are responsible for the contents of the documents that are being signed in front of them. The notaries would normally certify documents that are in English or Maltese only.
Notaries are the ones responsible for assistance with property transactions. We have had a meeting with a notary public who specializes in property transactions and received a detailed outlook of this matter.
Purchase of property and purchase permit
When property is purchased by a natural person Maltese and EU residents do not require a permit to purchase while foreigners do.
More precisely:
- A person (Maltese or EU national) that has continuously resided in Malta for 5 years or more needs no permit. Continuously means having no gaps of over 90 days one single journey out of Malta.
- A foreigner (a 3rd country national) or a person who did not reside continuously for 5 years needs a permit to purchase property in Malta, the EIP permit. This permit is needed when a local person purchases his second property (as against his first property where he resides).
A company owned by an EU or a Maltese national can purchase property with no permit. When shareholders are foreigners the permit is required. It will be granted if the purchase assists the economy of Malta. Where 75% of shareholding are Maltese/EU citizens permit is not required.
The EIP permit fee is 232 euro payable upon receipt. It takes 40 days to receive it. The application is made to the Minister (the law identified this as the Minister responsible for finance in the Ministry of Finance or an authorized officer so delegated by the Minister. The application form is prescribed by the law and is attached thereto).
The law on the purchase of property Cap. 246 Immovable Property (Acquisition by Non-Residents) Act.
There are locations in Malta (specified in the law) where the purchase of property needs no permit. They are called Special Designated Areas. No permit is required because property costs a lot more there and purchase will automatically be beneficial for the economy of Malta.
A plot can be purchased for development requires a permit. But after the development and construction it cannot be re-sold.
Preliminary agreement
A preliminary agreement (‘con venue’ agreement) is the agreement the buyer and the seller enter into with a promise of sale. This agreement is certified by the notary public. Once signed the buyer can apply for the permit (and submit a copy thereof).
Searches on property
It is the job of the notary to make the searches with the Land Registry to make sure that the proposed property is available for sale, not encumbered in any way. Technically it is difficult for a layman to make the searched on his own because in the Land Registry of Malta people are registered, not property.
Responsibilities of the notary
The new updated in the law regulating notaries run that where a notary makes a mistake (on the searches) within 5 years from the transaction by order of the court the transaction can be recalled and cancelled. The notary will be held liable.
The notary receives a fixed fee for its services as set by the law. An online billing calculator can help the buyer calculate the notary fees. The only fees that are not set are the searches fees.
Loan
If a loan should be sought for the purchase it should be first cleared with the bank whether the loan will be approved. Then the preliminary agreement shall be signed and official application for the loan can be made. When a loan is approved the bank issues a sanction letter. The standard period provided by the agreement to get a loan is 6 weeks, but if the seller agrees to wait for more the period can be longer. If the bank rejects the loan and the buyer informs the seller about the rejection within these 6 weeks, the deposit for the property shall be returned to the buyer, he will not lose his money.
It is an option (provided all the parties agree) to keep the deposit at the account of the notary.
Title Deed
Title Deed is issued by the notary public, he/she describes in detail the property the ownership, confirms the ownership rights of the new owner. It ensures that the buyer is the legal owner of the property.
Residence permit for non-EU citizens - Global Residence Programme
We would like to move on to another topic which may be on interest to our readers. That is the Global Residence Programme. The Maltese government has introduced a new residency scheme in July 2013, with the main aim of attracting wealthy individuals seeking to obtain residence in Malta. To this end, the programme is termed the Global Residence Programme (“GRP”).
The scheme is particularly appealing to non-EU nationals who had sought to obtain residence in Malta under the previous rules catering for High Net-worth Individuals (HNWI), which carried a considerably higher price tag.
The new rules confer an advantageous tax status to qualifying third country nationals, namely a 15 per cent rate of tax on all foreign income remitted to Malta. The programme seeks to attract individuals and their families including business people, pensioners, consultants and holders of intellectual property rights, to the country, who can now avail themselves of a viable alternative place of residence in Europe. For the applicant to qualify as a beneficiary under the programme a number of conditions ought to be satisfied, which are outlined below.
Tax treatment and minimum tax requirements
Beneficiaries under the programme are entitled to pay tax at an advantageous rate of 15 per cent on all that income which is foreign sourced (arises outside of Malta), and which is, in turn, remitted or received in Malta. This is subject to a minimum amount of tax amounting to EUR 15,000 payable by the beneficiary after taking into consideration any double taxation relief which the beneficiary may be entitled to in terms of any pertinent double tax treaty and Malta’s domestic tax legislation. The minimum tax requirement is payable in respect of income arising outside Malta. Furthermore, contrary to the previous rules, no additional tax will be payable by the beneficiary’s dependants. Other Maltese sourced income attributable to a beneficiary, the beneficiary’s spouse and pertinent dependants as outlined hereunder, shall be taxed at a flat rate of 35 per cent.
In the year when the special tax status is confirmed or cancelled, the minimum tax ought to be paid in full. Furthermore, where in the year of application the special tax status is granted before 30th April 2013, the minimum tax for the first year will be payable not later than the 30th April. The confirmation of special tax status will be issued by the Commissioner of Inland Revenue, subject to the payment of the minimum tax within a thirty day time window.
An individual who benefits from the special tax status must submit an annual tax return which includes an annual declaration, by means of which any material changes that affect the beneficiary’s special tax status need to be outlined.
Dependant persons
The rules provide for a definition of dependents, which has been widened from the previous HNWI rules, and which no longer solely comprises the wife and children under the age of 21. To this end, the age limit attributable to children (natural, adopted or in care) is now age 25. The definition also encompasses dependent brothers, sisters and direct relatives in an ascending line provided that the Director of Inland Revenue is satisfied that these are indeed dependents of the beneficiary of the GRP. Employees of the beneficiary are also provided for, in that the regulations include carers/butlers and other persons that may have been employees of the applicant for the preceding two years, as eligible dependants. Such an employment relationship must be evidenced by a contract of service.
Consequently, the definition of dependants comprises the following parties:
a. The beneficiary’s spouse or a person with whom the beneficiary is in a stable or durable relationship;
b. Minor children, including minor adopted children, who are in the care or custody of the beneficiary or persons mentioned above;
c. Persons under the age of 25, including adopted persons, who are children of, and are in the care and custody of, the beneficiary or the person mentioned in (a) above, provided that such persons are not involved in any economic activity;
d. Persons, including adopted persons who are children of, and in the care and custody of, the beneficiary or the person mentioned in (a) above, and who, because of illness or disability, are unable to maintain themselves;
Dependent brothers, sisters and direct relatives in the ascending line of the beneficiary or the person mentioned in (a) above.
Immovable property requirements
In order to be granted the special tax status provided for by the programme, an applicant is obliged to satisfy minimum property purchase or minimum property rental requirements. To this end, the applicant ought to purchase or rent immovable property in Malta or in Gozo. Furthermore the pertinent legislation provides that the property must be solely occupied by the applicant, his/her family members and any special carers accompanying them.
In the event of a property being purchased in Malta, the purchase value must amount to a minimum value of EUR 275,000. Sensitive to the property market values in Gozo and the South of Malta , the pertinent implementing legislation provides for lower property purchase thresholds in both Gozo and the Southern part of Malta, with the minimum value in this case being of EUR 220,000.
The rules also provide for a situation where the applicant is given the option of renting a property. Likewise the legislation provides for minimum rental values being EUR 9,600 per annum in the case of a property being rented in any part of Malta except for the southern part of Malta. In a case where an applicant wishes to rent property in the southern part of Malta or in Gozo, the minimum rental value decreases to EUR 8,750 per annum.
Where an applicant has purchased a property prior to the introduction of the GRP at a cost which is inferior to the aforementioned values, such property will nevertheless still qualify to be considered as a qualifying property within the remit of the rules — if the value of the property, as at the date of application, is duly certified by an architect to be equivalent or superior to the minimum values indicated above.
Fundamentally the qualifying property, whether purchased or rented, ought to be the applicant’s primary residence and a principal place of abode worldwide. The rules also provide for a clear prohibition with regard to the leasing or sub-leasing of the qualifying property.
Minimum stay requirements in Malta
The programme does not impose a minimum stay requirement in Malta. Consequently permit holders need not spend a minimum amount of days in Malta. Nevertheless, beneficiaries under this scheme are required to spend no more than 183 days in every calendar year in any other single jurisdiction.
Application process
Applicants under the scheme ought to submit the application for beneficiary status under the scheme, through an Authorised Registered Mandatory (ARM).
A non-refundable government fee of EUR 6,000 must be paid and submitted together with the application. The fee is reduced to EUR 5,500 where the beneficiary acquires or rents immovable property situated in Gozo or in the South of Malta.
It is fundamental to note that applicants and their accompanying dependants are obliged to be covered by a health insurance policy covering all risks across the EU. Furthermore, applicants must be in receipt of stable and regular financial resources which are sufficient to maintain themselves and their dependants. Applicants are also required to satisfy a fit and proper test as provided by the Maltese Authorities and must be in possession of a valid travel document as required by Maltese immigration law.
The Passport bill – ‘Individual Investor Program’
The last but not the least, we turn to one of the matter that caused a lot of controversy and dispute in the Parliament of Malta of late. It is the recently adopted ‘Individual Investor Program’. The Malta IIP is aimed at high net worth individuals and families worldwide. It offers citizenship in an EU Member State that is stable, neutral and highly respected, an efficient application process, and the world’s strictest due diligence standards and vetting of applicants, thus ensuring only highly respectable clients will be admitted.
EU citizenship gives the right of establishment in all 27 EU countries.
Citizenship is granted to suitable individuals and families who qualify under the very strict due diligence regime and who make a significant contribution to the National Development Fund established by the Government. The minimum contribution levels that must be met in the initial phase of the program have been set as follows:
- Contribution to National Development Fund of EUR 650,000 for main applicant
- Contribution for spouse and minor children: EUR 25,000 each
- Contribution for dependent children 18 to 25 years or dependent parents above 55 years: EUR 50,000 each
Furthermore, Due Diligence fees apply, and these have been set at the following levels: For main applicant: EUR 7,500; for spouses, adult children and parents: EUR 5,000; for children between 13 and 18 years of age: EUR 3,000 each.
Henley & Partners has been awarded a Public Services Concession by the Government with regard to the design, implementation and international promotion of the Malta Individual Investor Program
This Program is aimed at bolstering Malta’s economy, but, needless to say, some vocally oppose it, some opposing parties even called for a referendum repealing the law. Nevertheless, the bill has passed and the law is in place. What remains to be seen is how it will work.
Well, as you see, we have covered various areas of business and opportunities in Malta: company formation peculiarities, anti-money laundering laws, the work of notaries, the opportunities for residence and citizenship in Malta, all because we wanted to share with our readers all the rich facts and experiences from our business trip. In conclusion, we can say that Malta has made for itself a name of a reputable jurisdiction and it is up to you to explore the opportunities.