MALTA: An Introduction

Malta Country Overview 2023 

General Overview 

Malta registered the fastest growth in the European Union (“EU") in 2023, with its debt to GDP ratio being one of the lowest in the EU. Malta was also only one of two EU countries in 2023 that managed to shrink its deficit without resorting to scrapping energy subsidies introduced to combat inflation. In addition, the European Commission is forecasting a 4% economic growth for Malta in 2024 and 2025, which sets out Malta as the EU country with the largest expected growth during this period and the EU country with the lowest unemployment. Malta’s continued strength in 2023 was characterised mainly by decreasing unemployment figures and high private consumption. In particular, substantial growth was experienced across the financial services, professional services, manufacturing, aviation and tourism sectors. In spite of the suboptimal international economic situation, Maltese companies were still able to continue increasing their exports by up to 13% higher than the mark observed before the pandemic.

Activity and Trends 

While strong performance was recorded across most sectors of the Maltese economy, the Maltese government implemented a number of strategies and initiatives throughout 2023 in particular areas of deemed importance for the future of the Maltese economy.

Digitalisation and Green Initiatives 

The Maltese government placed a particular emphasis on the digital and green transitions in 2023. The push locally for digilatisation in the public sector manifested itself in the reorganisation and digitalisation process undertaken by the Malta Business Registry, which was aimed at easing processing for companies and corporate services providers thus making it easier for companies to be set up and operate in Malta. With respect to green initiatives, as part of the 2023 Budget, the government announced that a consultation process for offshore wind farms shall be launched in due course. The Environment Ministry also set up ‘Project Green’, a new agency to implement the Government’s seven-year plan to give families in Malta and Gozo more public gardens, parks and other open spaces. In addition, Malta’s first-ever Green Bond was launched in 2023 by the Water Services Corporation.

FinTech  

Malta is particularly thriving in the FinTech space: Malta’s FinTech sector is already recognised among the top performers, with a number of prominent global entities having set up shop in Malta. In 2023, the Malta Financial Services Authority (“MFSA”) also launched the second version of their FinTech sandbox as part of its strategy for Malta to become an International FinTech hub. Given that Malta was one of the first countries world-wide to introduce comprehensive regulation for Crypto Assets and Blockchain in 2018 by means of its home-grown Virtual Financial Assets Act, the country is well placed to be a first mover in the post-Markets in Crypto-Assets (MiCA) world and is set to attract a number of established market players, with a host of license applications in the pipeline.

Financial Services 

The financial services sector is one of the pillars of the Maltese economy, contributing over EUR1 billion to the economy annually. Given the critical nature of the financial services sector to the Maltese Islands, the Malta Financial Services Advisory Council launched the National Strategy for Financial Services (the “Strategy”) in 2023. The Strategy identifies over one hundred and seventy five (175) substantive initiatives which are aimed at re-focusing energy, investment and growth into the Maltese financial services sector. The priorities of the Strategy focus on streamlining Malta's regulatory processes and institutional architecture, building a national payments infrastructure, consolidating identity management, enabling financial services law reform and harmonisation, modernising Malta's tax structure, and building up Malta's talent pool in the financial services industry. Besides enhancing the financial services industry in Malta, the Strategy is also aimed at preparing the country for success in an environment of substantial change within the industry both globally and within the EU, especially in the areas of taxation, regulation and compliance.

Maritime & Aviation 

By the end of 2023, the ship register in Malta was ranked in the top ten largest ship registers in the world. It is expected that this position will be further strengthened with the introduction of proposed amendments to the Merchant Shipping Act (chapter 234 of the laws of Malta), as well as the continued implementation of local policy related to superyachts. The aviation sector in Malta has also seen substantial growth over recent years, with aircraft registrations totalling eight hundred and sixty four (864) aircraft by the start of 2024. Moreover, the Maltese government launched Malta’s Civil Aviation Policy 2023-2030 (the “Policy”) in 2023, which focuses on five pillars aimed at providing strategic direction to all stakeholders through the consolidation of environmental, economic, social and sustainability considerations which will shape and determine the future of the aviation sector.

Main Legislative Updates 

A number of new legislative acts were enacted into Maltese law in 2023 to support investment.

The enactment of the Accountancy Profession (General Accounting Principles in respect of certain Eligible Entities) Regulations, 2023 (Legal Notice 299 of 2023) (“GAPEE”) allows eligible insurance entities to be able to opt out of IFRS 17. IFRS 17, which must be adhered to by all companies in the preparation of their financial statements for year ended 2023, is a more complex standard than IFRS 4 and represents a major departure from the way in which insurance companies are currently accounted for. GAPEE allows eligible insurance entities to apply the general accounting principles set out in the schedule to the Regulations which reflect the old standard IFRS 4, thus bringing major cost savings to eligible entities in not being required to overhaul their accounting system to adhere to the IFRS 17 standard. Eligible entities include captive (re)insurance undertakings, Solvency II Directive exempted insurance undertakings, specialised run-off undertakings, ancillary (re)insurance undertakings, protected cell companies, cessation undertakings, redomiciled undertakings, insurance and/or reinsurance parent undertakings. The GAPEE shall apply for financial reporting periods commencing on or after 1st of January 2023.

During 2023, Malta also transposed into national legislation the EU Mobility Directive on cross-border conversions, mergers and divisions (Directive (EU) 2017/1132), through the Cross Border Regulations for mergers, conversion and divisions (Legal Notices 26, 27 and 28 of 2023). The Regulations encourage free movement and make it easier for European companies to become established in Malta, and give employees a voice in a cross-border mobility operation whilst safeguarding their interests.

The Air Navigation Act came into force at the start of 2024 and regulates the navigation of aircraft over the Maltese airspace, including the technical compliance requirements for aircraft registered in Malta. This act defines the scope and functions of the Civil Aviation Directorate of the Authority for Transport in Malta (“TM-CAD”), which is tasked to perform the oversight of (i) aircraft registered in Malta and their crew (regardless of their location), and (ii) such other aircraft within the Maltese territory (irrespective of their country of registration) to which the Act applies. This ties up with the mission statement of the TM-CAD, being, inter alia, the fostering of safety in the aviation industry in Malta. The Act also repeals a number of existing laws and introduces clear reporting requirements for TM-CAD, showing Malta’s commitment to enhancing the legal framework in the aviation industry and maintaining its efficiency.

Finally, in 2023 the MFSA also issued rules pertaining to the highly anticipated framework for Notified Professional Investor Funds (“NPIFs”). As with Notified Alternative Investment Funds, NPIFs – which are available to managers which qualify for de minimis status under the AIFMD - are not authorised or licensed by the MFSA but merely notified, allowing them to be launched within a maximum of 10 working days from submission, while also benefiting from lower setup, operational and regulatory costs than those currently associated with operating a fully licensed fund. The NPIF structures is set to be used as a vehicle out of which private wealth is managed, for years to come.