Entering the Maltese Market

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The Maltese Market

Foreign companies expanding into Malta are entering an economy ranked as one of the most dynamic in the Euro Zone, according to the International Monetary Fund. Unemployment was among the lowest in the European Union in 2021 at 3.6% and despite being the smallest economy in the EU, Malta boasts a skilled, flexible, multi-lingual, and cost-effective workforce.

However, incoming companies intending to set up a subsidiary will find these economic attractions balanced by a difficult employment market where some employee benefits are covered by laws, some by collective agreements and others a matter of individual contracts.

There are speedier and more cost-effective alternatives to launching a subsidiary, with Bradford Jacobs opening the door to a hassle-free route into Malta.

Starting a Business in Malta

The World Bank estimated industry represents around 12% of GDP, and manufacturing 7%. However, Malta’s economic strength lies in the services industry, and it is now one of the largest in the Mediterranean region in this sector, representing over 80%% of GDP and employing 80% of the workforce. The financial sector managed assets equivalent to 500% of GDP according to the World Bank. Malta was the first EU state to regulate online gaming. Being part of the EU, gives tariff-free access to the world’s third largest economy with nearly 500 million consumers.

The system for opening a company in Malta is well-structured but demands a clear understanding of the requirements. The World Bank ranked Malta 88th globally for ‘ease of doing business’ out of 190 nations in its most recent global assessment. But companies looking to open a subsidiary should beware – Malta ranks 152nd out of 190 when it comes to registering a property.

Foreign companies pressing ahead with plans to open a subsidiary must follow this procedure:

  • Reserve unique company name by checking availability via Registry of Companies’ website.
  • Draft Memorandum and Articles of Association through a registered corporate services provider.

Further procedures to start the business in Malta are:

  • Obtain Tax Identification Number (TIN) from the Companies Registry by providing confirmation of reserved company name, notarized Memorandum and Articles of Association, confirmation of deposited share capital, copies of the passports/ID of each shareholder, director, and company secretary.
  • Register for Value Added Tax, obtain the employer ‘Permission to Employ’ (PE) identification number and register employees with Jobsplus.

Expanding into Malta

Opening a business in any overseas territory brings issues. Moving staff across the world means lengthy processes to obtain visas and work permits. When employees are in place, who will handle payroll? How will your company deal with regulations on taxation, entitlements and benefits, termination, and severance?

Drawing up an expansion blueprint is not enough. Your business plan will have to answer all these questions.

Malta welcomes foreign investment, but the employment market is complicated by its mix of laws, supplementary statutes and collective agreements affecting employee benefits and entitlements. There are other questions too: where will you find distributors, manufacturers, and offices?

There is a simple alternative. By partnering a Professional Employer Organization (PEO) and Employer of Record (EOR) such as Bradford Jacobs, companies can plot a time-efficient and cost-effective path to locating and employing staff in Malta.

Malta Business Facts

  • Capital city – Valletta
  • Population – 520,000 estimated by end of 2021
  • Regions – Archipelago of Malta; Islands of Gozo and Comino
  • Official Languages – Maltese and English
  • Economy – US$16.7 billion GDP; Ranked 122 in the world by GDP
  • Leading sectors by GDP 2020 – services (76%); industry (13.4%); agriculture (0.6%). Largest industries include tourism, finance, manufacturing, IT, and communications.
  • Main exports – refined petroleum, electrical equipment, and machinery e.g., integrated circuits and semi-conductors, packaged medicines, toys, and books.
  • Main imports – petroleum, yachts, ships and aircraft, integrated circuits including computers, chemicals.
  • Main trading partners – EU, Singapore, UK, USA, S. Korea, and China.
  • Government – Democratic Parliamentary Republic.
  • Currency – Euro.

Advantages and Challenges of the Maltese Market

Advantages of expanding into Maltese market include:

  • Workforce: Malta has a multilingual, highly skilled, educated, and adaptable workforce. Many investors praise the work ethic of the Maltese who produce high quality work at a fraction of European and North American costs
  • Politics: Politically stable as a parliamentary republic, Malta has good relations with its closest neighbor nations
  • Sectors: Malta has maintained traditional economic sectors such as tourism, pharmaceutics, and manufacturing, but has developed new sectors in financial services, iGaming, and digital technology, while several leading aerospace companies have established subsidiaries there
  • Logistics: Malta’s location in the Mediterranean is economically beneficial for business with North Africa, the Middle East, and Southern Europe
  • Global Position: Malta’s successful integration into the European Union and the Schengen area and adopting the Euro as its currency has continued to propel the island’s economic growth
  • Economy: Malta is a free market economy with no restrictions on exchange controls and has few obstacles to trade and enterprise, although all dealings must be in line with EU directives

Challenges of operating in the Maltese market:

  • Labor: The relatively small workforce can create skill shortages in some sectors
  • Finance: The International Monetary Fund identified that anti-money laundering safeguards needed upgrading

Limited Company / Subsidiary or Branch Malta?

International companies targeting Malta for expansion will generally choose a private limited liability subsidiary. Subsidiaries can have a totally different name from the parent company, pursue different business activities and form their own contracts.

Branches, in comparison, are an extension of the parent company and are not a separate legal entity. Subsidiaries and branches have differences in how they are registered and operate.

A subsidiary must have minimum share capital of approximately €1,200 (US$1,374), whereas there is no such requirement for a branch. A branch is considered a permanent establishment under Malta’s double tax treaties, so the parent company could benefit from various tax deductions and exemptions. Branches and subsidiaries must both have registered offices in Malta.