Over the past 15 years, Malta has moved seamlessly from an offshore to an onshore jurisdiction, through the implementation of legal, tax and regulatory rules intended to stimulate domestic and international economic activity. It has experienced extraordinary growth and resilience, especially in the midst of the financial crisis writes Sharon Cilia Tortell
Malta continues to receive glowing reviews internationally as a stable financial services centre of repute within the European Union.
The country’s financial sector has grown exponentially during the past 15 years, attributable primarily to the fact that Malta’s regulatory approach has created the right environment to maintain stringent EU standards without imposing bureaucratic burdens on operators.
This is also due to the fact that the Malta Financial Services Authority (MFSA) applies rigorous regulatory standards with a pragmatism and approachability. The MFSA is the single regulator for financial services activities in Malta. It regulates and supervises credit and financial institutions, investment, trust and insurance business and also houses Malta’s central Companies Registry.
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Over the past years, Malta has developed a solid reputation as an e-commerce hub within the European Union. In the context of these developments, significant opportunities have emerged for the establishment and operation of Electronic Money Institutions and Payment Services Providers or Payment Institutions which are regulated within the EU’s harmonised financial regulatory framework which includes the EMI Directive (2009/110/EC) and the Payment Services Directive (2007/64/EC), which have been transposed into the local ‘Financial Institutions Act’ (Chap 376, Laws of Malta – the ‘Act’).
This Act regulates non-banking financial institutions whereby the distinguishing feature between banks (credit institutions) and financial institutions lies in the acceptance of deposits of money from the public, which activity is reserved exclusively for banks. Since payment services and electronic money are the subject of harmonized EU legislation, it is only these specific activities that may be pass ported into other member states and EEA jurisdictions.
The World Economic Forum (WEF) has recently confirmed Malta’s position as leading financial jurisdiction amongst the top 20 out of 148 countries and has retained its status of an innovation-driven economy. Several entrepreneurs have selected Malta as the right jurisdiction for the establishment and regulation of their financial business, including Payment Service Providers and Electronic Money Institutions.
Whilst the financial services supply chain continues to evolve, predominantly shifting towards an online-based operational environment, the operator’s physical presence in the jurisdiction where it seeks to be regulated remains a critical factor and consideration. Establishing the necessary operational presence in Malta would effectively entitle Malta-licensed operators to offer their services across borders, reaching out to the EU’s consumer base of 740 million people, unless such activities are excluded from the significant spectrum of "pass portable" financial services.
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By GlobalDataOnline operators find this cross-border right particularly accommodating to the internet’s explosive growth as a distribution channel for such services, also being a hub for e-commerce businesses including online gaming and FX brokers requiring online payment solutions.
Financial operators based in Malta also benefit from the jurisdiction’s favourable tax regime and a network of over 60 double-tax treaty networks. Both these factors have been a major driver for the tremendous growth in the sector.
A Company’s shareholders also stand to benefit from a tax refund on the company’s distributable profits; whilst on a personal taxation level, specific tax amendments have been implemented in 2011 to attract qualified skill and talent to live in Malta and work in the financial series industry. Such "Highly Qualified Persons" may effectively benefit from a favourable personal Malta tax rate of 15% on their employment income, serving to attract top talent to bolster the growth in the sector.
These qualified persons also join a highly-skilled and multi-lingual workforce already present on the island, which as reported by the World Economic Forum’s Global Competitiveness Report 2013-2014, the quality of Education ranks 8thbest in the World.
Malta’s ability to provide a balanced environment of rigorous regulation and attractive business incentives has proven to be a winning formula for financial operators seeking a reliable business hub within the EU.
As a witness of such success, in 2011, CSB Group together with CSB Advocates, assisted the first Electronic Money Institution in obtaining its licence from the MFSA. CSB Group, is one of Malta’s leading Service Providers, and is a member of the European Payments Consulting Association (EPCA), a pan-European association of national consultancy firms based in major European Countries. Through the added benefits of EPCA’s members’ expertise, CSB hopes to drive improvements in its services, including the licensing of payment institutions, regulatory and legal aspects of payment services implementation of various payment options, IT auditing and assurance, risk management frameworks and merchant account set-up.
Sharon Cilia Tortell works with the Malta-based consultants CSB Group
