According to a recent KPMG study, a third of the UK-based firms are considering relocation in an attempt to overcome certain limitations that are expected to be imposed by Brexit. The destinations of their choice range from labour-abundant China and India to nearby EU counterparts, whose trade and legislation have managed to reach a certain extent of integration and conformity with those of the UK. While Ireland is considered to be the top relocation spot, little is known about Malta, another EU member state with English as its official language. There are, however, some hidden gems, apart from 300 sunny days per year, that can help it secure a decent place in the post-Brexit relocation list.
An EU member state historically close to the UK
Strategically located at the intersection of trade routes between Europe, Africa and the Middle East, Malta has been an important ally of the UK throughout its history and remains so today, as a member of the Commonwealth. The British legacy can still be felt through the official status of the English language, bipartisan political system and similar laws and legal procedures, many of which originate from their common law equivalents. These factors, along with a robust financial sector and a portfolio of fund options, position Malta as a promising post-Brexit destination,capable of ensuring a smooth transition from an operational aspect.
EU membership constitutes an added value to all of the above by guaranteeing the four fundamental freedoms, among which unrestricted employment opportunities and access to the single market. This is further fortified by Malta’s membership in the Eurozone, with euro having reaffirmed itself as a stable regional currency.
Lastly, Malta’s political climate is overwhelmingly pro-EU, allowing a certain permanence to any relocation to its shores, as opposed to some other fellow states experiencing the rise of EU-sceptic movements. It also happens to be a neutral and non-aligned republic that pursues peace and stability, rendering the possibility of Malta being involved in any conflict next to none.
An array of swiftly growing industries
Rated by Fitch Ratings as an A+ financial jurisdiction, Malta can offer a very stable outlook for the future. Its GDP has been experiencing continuous growth, which makes it stand out in comparison with larger neighbouring economies crippled by the global recession. Of the EU-28 only Malta and Germany managed to maintain economic growth following the 2008 global financial crisis.
Some of the many diverse economic sectors that Malta has explored and specialised in include the maritime sector, financial services, advanced manufacturing, distribution of pharmaceuticals and the relatively new ICT sector. These industries are booming in Malta, and establishments wishing to relocate from the UK can tap into these areas as they make Malta a base of their operations.
As a result, Malta has managed to win the trust of numerous global brands. It is home to some 300 gaming companies, among which some of the world’s leading market players. Its manufacturing sector supplies products to technological giants, such as Apple, Boeing, Ford, Peugeot and Bosch. A growing number of pharmaceutical companies relocate to Malta due to EU licensing opportunities, a highly trained workforce and geographical proximity to the Middle East and Northern Africa. Finally, with the largest ship registry in Europe and sixth largest in the world, the Maltese flag has become a synonym of excellence and reputability.
Favourable and transparent taxation system
At first glance, Malta’s corporate income tax of 35% seems quite high compared to the UK’s 19% rate. However, its advantageous tax regime provides for full imputation system, while its tax refund system, applicable to shareholders that are not resident in Malta, can help claim back up to 6/7ths of the tax paid on distributed profits, effectively reducing the tax rate to 5%. UK-Malta Double Taxation Agreement further guarantees that tax on dividends in either state will not exceed its equivalent.
At the same time, it is important to emphasise that the government of the country has made every effort to get rid of the offshore status, which resulted in the inclusion of Malta in the “white list” of the OECD, in 2012. In addition, in 2016, Malta joined the agreement on the automated exchange of financial information, aimed at combating tax evasion. The transparency of doing business in Malta has been further reinforced by the introduction of the Beneficial Owner Register regulations, in January 2018.
An opportunity to retain EU citizenship
With 48% of Brits having voted against leaving the EU, there is a high level of interest towards obtaining an alternative EU passport and thus preserving all the respective rights and freedoms. While some of them are seeking citizenship by descent, marriage or naturalization based on long-term residence, well-off individuals with no such ties tend to opt for citizenship by investment programmes offered by several EU jurisdictions.
Malta, in this regard, stands out as the only English speaking EU member state giving foreign investors the opportunity to be naturalised within a record-low period of 1 year. In order to obtain it, Maltese passport seekers must carry out a €650,000 contribution to the National Social and Development Fund, invest €150,000 in government stocks or bonds, and acquire property worth €350,000 or sign a 5-year lease agreement amounting to €80,000. After 5 years, property and bonds can be sold, thus giving new Maltese citizens the chance to return half of the initial investment. Those who have opted for acquiring property can expect additional earnings on capital gains, given the annual growth rate of 14.6% (Knight Frank Global House Index Q2/2017), one of the highest in Europe and globally.
To sum up, in a matter of a decade, Malta has managed to become an EU “economic tiger”, attracting investors from various countries thanks to its stable economic growth and a number of business incentives. Although it is not widely known by the UK businesses eyeing relocation, its popularity might grow as more investors will discover business opportunities hidden under the guise of a sunny Mediterranean island.
Author: Dr Priscilla Mifsud Parker is a private client lawyer heading Chetcuti Cauchi Advocates Families & Wealth practice group. In this capacity, she specialises in trusts and estate planning, wealth and business structuring for high net worth and successful business families. In the structuring field her main specialty is tailor-made solutions for the optimisation and protection of high value assets.
Dr Priscilla Mifsud Parker can be contacted on [email protected] and on +356 2205 6603.