Malta Financial Tax Aviation Services

The last budget of this legislature was presented to parliament by Malta’s Finance Minister, Tonio Fenech. Income tax cuts, as originally promised during the Nationalist Party’s electoral manifesto, were announced as were further renewable energy incentives. Plans were also laid out to nurture new industries in Malta and further strengthen the core contributors to the Maltese economy. The Government is projecting a deficit of €95 million, down to 1.7 per cent of GDP in 2013, which should be in line with EU targets to reduce the deficit gradually until a balanced Budget is achieved. The economy expected to grow 1.2 per cent by the end of December, above the Eurozone average, which is reportedly going to recede by 0.4 per cent. Unemployment in Malta was stated to be 6.5 per cent, less than half the Eurozone average.

Income Tax

The reduction in income tax was probably the most anticipated part of the budget presentation and most likely comes as a surprise to many outside Malta, given the austerity measures being implemented. It was announced that middle income earners, that currently pay 35 per cent tax on part of their salaries, will eventually see the tax rate reduced to 25 per cent. The Government proposed that over a three year period income tax for middle income earners will be reduced, as of next year, to 32 per cent, to 29 per cent in 2014 and finally to 25 per cent in 2015. These rates would apply to income between €19,500 and€60,000. Currently, any income over €19,500 is taxed at 35 per cent. Earnings over €60,000 per annum will continue to be taxed at 35 per cent.

Mr Fenech told a press briefing last Thursday that “We expect the reduction to cost the Government €10 million in the first year and €40 million in total”, however, much of that revenue shortfall is expected to be compensated for by excise duty increase on cement, cigarettes and fuel, which were also announced in the budget presentation.

For Married Couples
Chargeable Income in Euros	Rate
0 – 11,900	0
11,901 – 21,200	15%
21,201 – 28,700	25%
28,701 – 60,000	32% (2013)
	29% (2014)
	25% (2015)
60,000 and over	35%

For Parents
Chargeable Income in Euros	Rate
0 – 9,300	0
9,301 – 15,800	15%
15,800 – 21,200	25%
21,201 – 60,000	32% (2013)
	29% (2014)
	25% (2015)
60,000 and over	35%

For Singles
Chargeable Income in Euros	Rate
0 – 8,500	0
8,501 – 14,500	15%
14,501 – 19,500	25%
19,501 – 60,000	32% (2013)
	29% (2014)
	25% (2015)
60,000 and over	35%

Business Growth

A total of €14 million have been allocated for investing in the manufacturing industry and the High Energy Users Scheme (developed last year to support high energy users in the manufacturing industry) will be extended to the Gozitan industry and the tourism sectors. €38 million will also be allocated to the Bio Malta Campus, another €17 million to the improvement of industrial parks in Bulebel, Hal Far, Kordin and Mosta and further investment in opening three new childcare facilities in these areas to attract more people, particularly women, to the work place.

The film industry will be able to take advantage of increase incentives in the form of rebates on film production. Film producers will be able to take advantage of a rebate of between 20 and 23 per cent on their costs. The rebate will increase to 25 per cent on productions that specifically feature the Maltese islands.

The MicroInvest Scheme, which grants tax credits of up to 40 per cent of the investment of small businesses (SMEs), will be extended for another two years.

The Environment

The Finance Minister also announced new feed-in tariffs for those who sell electricity produced from photovoltaic units. It is expected that in 2013, energy will be generated from approximately 67,000 square meters of solar panels following a call for expression of interest in 2009. Another call is planned in order to cover a further 40,000 square meters of roofs of public buildings. Families who cannot install solar panels on their roof should soon be in a position to take part in a common system. Furthermore, the solar water heaters incentive schemes have been further extended.

Tonio Fenech also announced that car registration tax will continue to be tied to the Euro standard, a calculation based on the emissions expelled by vehicles. Plans to significantly reduce the registration tax on the least polluting cars (Euro V) up to 30 per cent were announced in a drive to continue to modernise cars on Malta’s roads. Initiatives introduced last year to discourage those buying the more polluting Euro I and Euro III cars will now be extended to Euro IV cars,

Nurturing the Seas and the Sky

An area of 172,000 square metres, formerly the Marsa shipbuilding site, is intended to be converted into a dedicated maritime park, subject to the approval of an application for the project by the Malta Environment and Planning Authority (MEPA). The application is scheduled to be submitted in 2013. Given that Malta’s maritime register remains one of the largest in the world with more than 5,800 ships and super yachts currently registered, a dedicated maritime park is fitting. It is estimated that the industry contributed approximately €12 million to the Maltese economy this year. The introduction of the park is intended to further cement Malta as a shipping hub and attract more stakeholders in the industry to take a more active role.

A zone dedicated purely to the aviation sector is also planned for the former Air Malta head office in Luqa. The Maltese aircraft register currently includes 104 planes, an increase of 21 per cent over 2010. With the launch of the Aircraft Lease Structure and considerable foreign interest being expressed, the industry needs to be vigorously promoted. The development is therefore expected to take place by means of a joint public-private partnership and will incorporate logistical facilities, education, training and other related activities. The Maltese Government has already invested €17 million in the infrastructure to set up the Safi aviation park with several companies already operating from it.

Strengthening Malta’s Core Services

The Finance Minister also emphasised the importance of the digital gaming industry, the financial services industry and the tourism sector and how we must continuously strive to remain ahead of the pack. Recommendations proposed by the private industry are being taken on board by the Government and will be implemented. A new physical and strategic hub will be created to provide facilities enhancing the development of digital games. Under the auspices of Malta Enterprise the B.START scheme will be introduced aimed at encouraging businesses to invest in the capital of new companies and benefit from a maximum tax credit of €30,000 (as approved by Malta Enterprise), whilst certain licensed hotels will also continue to benefit from investment aid in the form of a tax credit at a rate of 15% of capital expenditure.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Dr Jean-Pie Gauci-Maistre will be speaking at the MIM Conference on Ship Registration in Malta which will be held on 1st November 2012 at the Malta Financial Services Authority.

A memorandum of understanding on bilateral cooperation has been signed between the Malta Lottery and Gaming Authority and the Isle of Man Gambling Supervision Committee. The cooperation will be on the regulation of remote gaming in particular on consumer protection and the protection of society and public order.

The aim behind the cooperation is to develop common regulatory measures and player protection measures in particular the protection of minors. The agreement also addresses cloud regulation and server location.

This agreement, which is the seventh one signed by the Maltese authority, aims to synchronise the efforts of authorities in Europe and beyond in order to offer a safe environment for players while simultaneously ensuring minors protection. Other agreements have been signed with the Danish Gambling Authority, the Ontario Alcohol and Gambling Commission, the Jersey Gambling Commission, FIFA’s Early Warning System and the European Sports Security Association.

Trouble everywhere…yet Malta’s laughing. The renowned Il Sole 24 Ore has lauded Malta as a safe haven from the economical storm that continues to engulf many countries around the world. The piece describes how many companies and private individuals are choosing to relocate their assets to Malta as they are getting the jitters due to the instability in other jurisdictions.

The article goes on to describe the tax regime and what we have propounded for some time now. Apart from the well-known quality of life, climate and cultural attributes, as part of the EU, Malta’s legal structure is regulated by EU norms and standards and is completely transparent.

For the full article, in Italian, please visit Il Sole 24 Ore.

GM Corporate Services will be attending the Marine Money 2012 in Singapore between the 25th and the 26th of September. For any meeting requests kindly e-mail us on finance@gmint.com.

VAT fraud is costing the EU countries a staggering €100 billion a year, according to a report published in 2009. Following this report, Brussels is taking action by launching proposals for joint action to tackle Vat fraud.

The report suggested the setting up of a Quick Reaction Mechanism (QRM) which will enable Member States to address any Vat fraud in their respective countries by implementing unprecedented measures that would otherwise not be allowed under existing legislation. These emergency measures will include the “reverse charge mechanism” which will make the recipient of goods or services pay for VAT rather than the supplier. This new power would, the Commission said, "significantly improve" the chances of a member state being able to effectively tackle complex fraud.

Several local newspapers are reporting that the world renowned Japanese company Mitsuiwill now be handling cargo operations within the Gateway Terminal, Grand Harbour following the acquisition of Portek Group.

Valletta Gateway Terminal, a joint venture between Portek Group and Tumas Group, a partner of was awarded a 30-year concession to operate and manage Grand Harbour Terminals in June 2006. Port operations mainly concern handling Roll On/Roll Off operations, trailers, containers, continental cargo and vehicles. The Portek Group is well known as a leading turnkey provider of equipment, services and solutions for the global port industry with interest in the Asia-Pacific region, Europe, the Mediterranean, Africa and the Americas.

In August last year (2011), in a bid to strengthen its position in port services, Mitsui acquired Portek. Mitsui is currently headed by President and Chief Executive Officer, Masami Iijima, and is one of the most diversified and comprehensive trading, investment and service enterprises in the world. The group boasts of 155 offices in 69 counties with businesses ranging from product sales, worldwide logistics and financing, through to the development of major international infrastructure and other projects in iron and steel products, mineral and metal resources, infrastructure projects, motor vehicles, marine and aerospace, chemicals, energy, foods and retail, consumer services, information, electronics and telecommunications, financial markets and transportation logistics.

Peter Darley, Managing director of VGT Malta emphasised that through the acquisition of Portek and the value the Portek brand stands for within the global port industry, Mitsui stands to grow significantly by adding the Portek operations worldwide, within its portfolio. Mr. P. Darley is of the opinion that with Mitsui’s formidable financial resources, networks, synergies and logistics operations worldwide, VGT in Malta will be in a stronger position to accelerate its growth through its strategic importance as a hub within the Mediterranean and North African region.

The continuing investment that is made by such well established international companies can only instil further confidence in other investors. Malta is continually showing that it is ready to serve the international world, particularly the shipping community, in the most efficient manner possible.

We all know the going has gotten tough….but can the tough really get going? Some owners are still ruing the newbuilding purchases made at the peak of the shipping boom which some of which are still being delivered. The prices paid were astronomical and with freight rates so low only the well established companies have the financial depth to stay afloat. All they need to hear now is that the age of the eco-ship is well and truly upon us.

The effort to reduce operating costs by saving on fuel is nothing new to the industry. Even before the market crash, the cost of oil was consistently hitting new heights and the importance of saving on fuel costs was very much evident. The market nose dive brought about the prolonged, low freight rates which meant that the issue of saving became more imminent – more so for those owners who bought vessels at the height of the market boom. The only instantaneous action that could be taken was to steam at slower speeds. The next step was new hull designs and/or more fuel efficient engines but this was obviously the mid to long term plan. The second hand market is normally more enticing in market troughs as investors wait for the second hand market to hit rock bottom or for competitors to go belly up before they pounce.

However, what we are experiencing is not the run of the mill shipping cycle trough. Freights rates are low, we are in the midst of an economic crisis, with many fearing a double dip, oil prices have not declined much and bank lending facilities are few and far between. When shipyards had an order book that was bursting at the seams, they could name their price, making the more eco-friendly models rather pricey. After all they were selling vessels like hot cakes and had no need to stray from their ‘off the shelf’ models.

The tables have turned considerably and with order cancellations and very few new orders being concluded, shipyards have become very accommodating, much to the detriment of some shipowners. With shipyards willing to lower their prices and offerring more eco-friendly designs, cash rich owners are well and truly ready to usher in the new age of shipping. Tim Huxley, CEO of Wah Kwong Maritime Transport Holdings was quoted in Fairplay as saying “Owners can now negotiate good deals at yards: 50% cheaper and 30% more fuel efficient.”

The ‘old’ design ships could be sliding down the slip way during 2012 in the midst of a horrible market whilst the new eco-friendly ships will start being delivered 1-2 years from now. Only the very bold or the insane would be willing to venture a guess as to the state of the market in two years time however one thing is for sure, even if we are nowhere close to sustainable freight rates, the new ships will already have a considerable advantage over their older counterparts. And it is exactly for this reason that talk is ripe of a two-tier shipping: old expensive vessels versus new efficient ones. In normal market conditions there are always those owners that purchase right before the dip and suffer the consequences. Their mistimed decision made even more evident by the cheap purchases of their competitors during the market trough, who had the competitive edge when negotiating freight rates during the bad times. But that would pretty much be it. Now a new factor comes in to play…eco-friendliness.

No doubt, this is by far an over simplification and countless variables may turn everything on its head. Oil prices could plummet, tonnage demand exceeds supply and freight rates sky rocket, giving the current world shipping fleet what would be considered a new lease of life.

From a flag State point of view, this will soon become a statistic to boast of. Ship registries promote the age of their fleet, the amount of tonnage, the average size of the fleet, the positive accident figures and the companies that fly the maritime flag. Soon they will be promoting who has the most eco-friendly fleet and rightly so. For by attracting an eco-friendly fleet, the previous statistics are all likely to improve themselves.

The content of this article is intended to provide a general guide to the subject matter. Specific questions relating to this article should be sent to maritimeservices@gmint.com or view the website for more information.

The MV Titania, the world’s largest Long Car and Truck Carrier (LCTC), sailed out of the grand Harbour (Malta) on Friday 9th March 2012 flying the Malta maritime flag. The reflagging of the Wilhelmsen owned vessel comes 70 years after another of the company’s ships, the MV Talbot, called at the Grand Harbour delivering vital supplies to the Maltese people.

The MV Titania is the fifth Wilhelmsen owned vessel to be included on the Malta ship register. Needless to say, having a such a long established maritime company of such repute only serves as a testament to the confidence instilled in the Malta maritime flag.

The MV Titania has a length overall (LOA) of 227.8 metres, 52 metres high and a depth to upperdeck draft of 34.7 metres. She has a capacity of 8,000 cars on 13 car decks.

As part of the GM For You program, i.e., the Corporate Social Responsibility program of the Economicard Group, it was decided to host ‘Play Me, I’m Yours’ Malta which was held between Thursday 22nd September 2011 and Sunday 9th October 2011 and was launched in St. George’s Square, Valletta by the Hon. Dr. Mario de Marco, then Culture Parliamentary Secretary. The event was well received by the general public and thanks to the meticulous planning and tireless efforts of the entire team, the event drew to a close without a hitch.

The 15 pianos were placed in carefully selected localities throughout Malta and Gozo. I say carefully selected as we wanted to ensure that we targeted as wide an audience as possible whilst still managing to promote all that Malta has to offer. Malta is all about sun, sea and a very rich cultural history. Ensuring that these elements are all captured whilst still targeting areas with a high foot traffic is not always the easiest of tasks. Having said that, we are convinced that if we had more pianos we would have found adequate locations for all of them with the amount of requests received to host a piano.

Before the pianos were put on site, we sent out a call for artists of all ages and expertise to contribute by decorating the pianos. The response and the outcome of the designs were incredible. Renowned artists saw the opportunity to work on a unique canvas and have their worked displayed in the most public way possible. So they took to it immediately. On the other hand, I must admit that the first brush stroke of each kid was done with slight trepidation as they couldn’t understand how their parents were condoning such an act. Let’s face it, if I ever painted on the piano back home as a kid I’m not sure if I’d live to tell the tale. However, with the first brush stroke complete and no scolding to follow, their imagination ran wild. To be expected I guess, for as Pablo Picasso once said, “All children are born artists, the problem is to remain an artist as we grow up”.

After the decommissioning of the street pianos, most of the pianos were donated to public schools in Malta and Gozo and charitable institutions. Some pianos remain on site till today, so for those who still want to get a feel of what the event was all about keep an eye open as you may very well come across one of them. The fact that some pianos remain on site is testament to the success of the event. It is also an indication that the Maltese public has a thirst for cultural event and would undoubtedly welcome similar initiatives.

Occasionally you may see photos of the event posted on this blog. However, to see more photos and videos do visit www.maltastreetpianos.com or visit our youtube channel.

The annual governance check-up for 2011 entitled ‘Making the Single Market Deliver’ has just been published and is the basis of this blog. This report is somewhat of a milestone as 2012 marks the 20th Anniversary of the Single Market.

The Single Market’s most important aim is to bring down barriers within the EU, followed closely by the need to simplify rules across the board. To say the former hasn’t been achieved in great part is folly, the latter is obviously more debatable, and rightly so. Writing as a consumer or a private citizen if you will, I’d say the effects are more pronounced. I’m not saying that all barriers have been extinguished or that there isn’t room for improvement however for those who disagree with me (and older enough to do so) I say take a moment to look back ten years and see whether moving around Europe hasn’t gotten easier. Or how much easier it has become to buy goods within the EU, to find employment in other Member States or to simply emigrate. As Maltese we feel the difference a lot more than the 15 Member States in 2003. May 2004 brought about a huge change in both the private and commercial lives of Maltese citizens as accession literally opened up a world of opportunities for us. Therefore from this point of view it is no wonder that by and large we see the Single Market as quite a success story.

Nonetheless, I totally appreciate that the Single Market cannot be viewed from only this point of view. Furthermore, we have also witnessed short comings which are felt throughout other European Member States. “Snapshot of citizens’ and businesses’ 20 main concerns” was published in September 2011 to illustrate the most important difficulties that citizens and businesses encounter, based on their practical experiences. This study showed that there is in fact room for improvement. Some of the cross border difficulties encountered include not having qualifications recognised; costly and cumbersome to register a car; and burdensome rules which prevent entrepreneurs and investors from doing business.

In has been recognised that in many cases the obstacles are caused by information gaps (individuals do not have sufficient information about their rights) and by implementation or application gaps (national rules are not in line with EU law or are incorrectly applied).

Internal Market rules can only be effective if they are correctly transposed into Member States’ national law and within the stipulated deadline. In order to monitor the extent to which Member States’ were doing so; the Internal Market Scoreboard was created in 1997. The scoreboard’s purpose is to benchmark Member States’ efforts and provide in particular an overview of their transposition deficit, i.e., the gap between the number of Internal Market laws adopted at EU level and those in force in the Member States.

In this respect Malta has not only met the 1% transposition deficit target set by the European Council, it has achieved first place with 0.1%, i.e., requiring only 2 directives to be notified. Along was off from the worst performer, Belgium, with 30 pending directives requiring implementation. Timely transposition of directives into national law by all Member States is crucial as it can easily preclude a level playing field and create instability.

However, untimely transposition only represents the first step towards the property functioning of the Internal Market. It is also essential that the directives are transposed correctly. In this respect Malta also faired extremely well, ranking second, with only 0.4% of directives being transposed incorrectly. Once again this is well below the EU average of 0.8% and considerably lower than the worst performer, Italy, at 1.9%.

In the great scheme this is far from a great achievement for Malta. However, it does show a positive mentality and provides a level of comfort to those doing business with or in Malta. Our aim is to provide a stable business and legal platform on which to operate, wholly back by the EU framework. The EU in itself has already offered a good degree of comfort to all Malta related stakeholders, the Annual governance check-up for 2011 just confirms that almost eight years on, we’re still just as committed to the cause.

The content of this article is intended to provide a general guide to the subject matter.

The Maltese Permanent Residence Scheme which was suspended at the beginning of the year, is being replaced by a High Net Worth Individual Scheme. The scheme was launched today by the Minister of Finance. The aim behind this scheme is to attract individuals who can contribute to the local economy rather than only buying property locally.

Property bought by EU nationals have to be worth minimum €400,000 or €20,000 per annum in rent and have to spend at least 90 days in Malta. A health insurance has to be provided and recognized across the EU. Applying for this scheme will now cost €6,000.

Non-EU nationals have to renew their visa every three months or enter into a contract with the government in buying a €500,000 financial bond and €150,000 per dependent which a permanent residency will become effective after five years. In addition, the minimum tax payment will be €25,000.

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