By Colin Gregory, Managing Director - Equiom Malta
Why will Malta be an attractive business jurisdiction post-Brexit?
There are several compelling reasons to set up a business in Malta with or without Britain’s impending exit from the EU.
Firstly, Malta is a politically and economically stable jurisdiction. The World Bank rated Malta as the 22nd most politically stable nation, coming in ahead of several European countries. Malta has achieved economic stability too, with a steadily rising GDP and growing potential for expansion in its core industries. The forecast GDP Annual Growth Rate for the first quarter of 2018 is 6.2%, and the forecast unemployment rate is 4%.
Next, Malta has an attractive tax regime and is highly accommodating to expats. There are 10,000 expats registered in Malta and many call it home because it offers an accessible location within Europe where English is spoken and whose legal and regulatory framework very much mirrors the UK’s. It also has a business tax-favourable environment, and only recently, hosted the six-month Presidency of the Council of the EU (from January to June 2017).
Another reason is that Malta is a well-regulated jurisdiction which, over the years of progressing its financial industry, has taken lots of care to develop a financial services hub whose positive reputation precedes it. Despite recent media claims accusing Malta of being the ‘Panama of Europe’, regulations are extremely strict.
The benefits of choosing Malta
70,000 companies have been attracted to Malta and it is likely that Britain leaving the EU will lead to an increase in this number.
On the surface, the main reason Malta will be a more attractive choice of jurisdiction post-Brexit is that businesses are likely to choose the island as a base in order to benefit from the strong trade agreements it enjoys with other countries in the region, with more than 70 double tax treaties. There are also a number of more indirect benefits from which Malta has to gain.
One jurisdiction that may face some challenges post-Brexit is Gibraltar. With Gibraltar’s status as an Overseas British Territory, it may lose some of its appeal after Britain leaves the EU and Gibraltar goes with it. However, Malta sees this as an opportunity for both jurisdictions to work in partnership in order to strengthen their propositions. There are a number of businesses in Malta with an interest in the UK market but who will find it difficult to gain access post-Brexit. For this reason, we can be of assistance to Gibraltar and, in turn, they will be able to refer us businesses with a greater focus on the EU market. I believe that this reciprocal partnership will work well for both parties.
In addition to increased business from other jurisdictions, Malta’s accommodating approach to expats will stand us in good stead. Since the UK referendum, there has been an influx of British citizens applying for Maltese passports and this also extends to other regions throughout the world. This gives us an opportunity to welcome new skills and a more diverse market, all of which contributes to a great place to do business.
With opportunities come challenges, and it would be remiss to assume that Britain’s exit from the EU will not have any negative effects on Malta. The UK is currently a very strong ally of ours and its exit from the EU could have some negative impact as we no longer have its support in discussions, such as at the negotiating table in Brussels. This could result in Malta having less power to protect its unique tax regime. As a consequence, EU countries may start lobbying for a harmonisation of our tax system. This is just conjecture at the moment, but there is the underlying danger of not having the same kind of support to sustain our current policies and systems.
These challenges and opportunities are purely speculative as we have no idea currently where the negotiations are headed. However, with all the uncertainty surrounding Brexit, the only certainty is that one cannot stand idle and we need to plan for the future and have a ‘plan B’.
Brexit must be seen as an opportunity for businesses to consider relocating their operations to other EU jurisdictions. Malta rates highly as a jurisdiction renowned for its economic stability, growth and its position at the forefront of the current transparent and compliance standards.
Today Malta is welcoming multinational businesses who have triggered their contingency plans to select an EU jurisdiction to move their European headquarters to from the UK.
At Equiom Malta we will be watching closely as Brexit negotiations progress and keeping clients informed about any developments which may be relevant to them.