Sector guides 2O15-2O16. INSURANCE & reinsurance. A CountryProfiler Publication

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1 Sector guides 2O15-2O16 INSURANCE & reinsurance A CountryProfiler Publication

2 2 1 About FinanceMalta A Culture of Getting Things Done FinanceMalta, a non-profit public-private foundation, was set up to promote Malta s Business & Financial Centre, both within, as well as outside Malta. It brings together the resources of the industry and government, to ensure Malta maintains a modern and effective legal, regulatory and fiscal framework in which the financial services sector can continue to grow and prosper. FinanceMalta s Board of Governors, together with the founding associations that include the Malta Funds Industry Association, the College of Stockbrokers, the Malta Bankers Association, the Malta Insurance Association, the Association of Insurance Brokers, the Institute of Financial Services Practitioners, and the affiliated Malta Insurance Management Association, as well as its members and staff, are committed to promoting Malta as a centre of excellence in financial services and international business. Membership FinanceMalta offers two types of membership: Corporate and Affiliate. Corporate Membership is open to entities operating within the financial services industry, such as fund, insurance and pension management companies, while Affiliate Membership is designed for organisations and companies wishing to take advantage of the growth of Malta s finance industry and the FinanceMalta network, including firms providing Real Estate Services, Recruitment Services, Business and Professional Services, and Media Organisations. For further information on membership categories and classification, visit Board Members Kenneth Farrugia (Chairman) Prof. Joe V. Bannister (Vice-Chairman) Charles Borg / Mark Watkinson Matthew Bianchi Chris J. Naudi Annalise Micallef John Huber André Borg Bernice Buttigieg (Secretary to the Board) Benefits of FinanceMalta Membership: Direct access to the experience and knowledge of fellow members. Receive regular updates, newsletters, and publications on relevant issues. Attend partner seminars, training and workshops on a wide range of specialist subjects at heavily discounted rates, with some events being complimentary. Influence the market, regulators and law makers through FinanceMalta s lobbying activities. Benefit from FinanceMalta s marketing and PR initiatives. Regular opportunities to showcase your firm on the international scene under the umbrella of FinanceMalta. Opportunity to publish white papers and articles on FinanceMalta s website and to take part in topical webcast series. FinanceMalta Leadership Team Over the past ten years, Malta s financial services industry has developed from one that was primarily led by the domestic market into a truly international financial services centre, attracting many top-rated financial services firms. Kenneth Farrugia Chairman chairman@financemalta.org FinanceMalta is working with all stakeholders to ensure that more qualified individuals enter the industry as the finance centre grows. We also offer training and re-training initiatives in order to help professionals remain informed. Bernice Buttigieg Head of Administration bernice.buttigieg@financemalta.org We are aiming to take Malta to the next level and create a globally recognised international financial services sector that is based on our skilled workforce, a stable regulatory environment and business-friendly policies. Ivan Grech Head of Business Development ivan.grech@financemalta.org FinanceMalta, Garrison Chapel, Castille Place, Valletta VLT Malta E: info@financemalta.org T: F: Follow us on: FinanceMalta FinanceMaltaYT Promoting and Fostering Malta s Finance Centre

3 4 5 Finance Industry Stakeholders Ministry for Finance Prof. Edward Scicluna Minister for Finance Ministry for the Economy, Investment and Small Business Dr Christian Cardona Minister for the Economy, Investment and Small Business Dr José Herrera Parliamentary Secretary for Competitiveness and Economic Growth Malta Financial Services Authority (MFSA) Prof. Joseph Bannister Chairman Central Bank of Malta Prof. Josef Bonnici Governer FinanceMalta Kenneth Farrugia Chairman Malta Stock Exchange Paul Spiteri Chairman Finance Industry Associations Malta Association for Retirement Scheme Practitioners (MARSP) Malta Bankers Association (MBA) Malta Fund Industry Association (MFIA) Malta Insurance Association (MIA) Malta Insurance Management Association (MIMA) Institute of Financial Services Practitioners (IFSP) Association of Insurance Brokers (AIB) Society of Trust & Estate Practitioners (STEP) Malta Chairman: Bethell Codrington Chairman: Mark Watkinson Chairman: Kenneth Farrugia Director General: Adrian Galea Chairman: John Tortell President: Christopher J. Naudi Chairman: Mark Spiteri Branch Chair: Dr Jean-Philippe Chetcuti Additional Resources Malta Institute of Taxation Malta Institute of Accountants (MIA) Malta Institute of Management (MIM) Malta Chamber of Commerce Institute of Directors (IoD) Malta Malta Enterprise Malta Chamber of Advocates

4 6 7 International Finance Centre Malta at a Glance GOZO International Finance Centre A Partner for Success Located in the centre of the Mediterranean, Malta is rapidly growing into one of the foremost business hubs for international financial services in the Euro-Med region. Country Knowledge Economy Wealth Management Domicile at a Glance 0.8% Inflation rate (January 2015) EU: -0.5% 3.3% GDP Growth (2014) Total area Maltese Islands: 316km 2 6.0% Unemployment rate (January 2015) EU: 9.8% IFRS Accounting Standards Currency Euro 68 Number of Double Tax Treaties 136.8bn FDI (June 2014) Time 1 hour ahead of GMT Redomiciled Companies Sovereign Ratings Population 421,000 (2014) In 2013, 111 companies transferred their domicile to Malta, which represents an increase of over 60 per cent from the previous year, 70 per cent of transferred companies were from non-eu countries while the remaining 30 per cent from EU countries A (Fitch, 2015) A3 (Moody s, 2014) BBB+/A-2 (Standard & Poor s, 2015) Rain Annual rainfall 600mm Finance Centre (2014) Contribution to GDP...13% Employees... 10,000+ Companies on the register... 65,000+ New registrations... 5,144 Number of new companies... 5,061 Number of new partnerships Time to start up a business...1 week Sunshine 300 days a year Temperature Winter 12ºC Summer 31ºC European Economic Forecast (Winter 2015) Tax rate 35% MALTA Forecasts for Malta GDP growth (%, yoy) Inflation (%, yoy) Unemployment (%) Structural budget balance (% of GDP) Gross public debt (% of GDP) Current account balance (% of GDP) Recession Proof Malta stands alone as an oasis of financial prosperity in a Europe desiccated by the financial crisis. From a financial standpoint, Malta is proof that you do not have to be a big country to be a big player. Home to a population of just over 421,000 people and just 316 square kilometres in area, the island prides itself on being one of the best performing eurozone economies, registering healthy economic growth and low unemployment. Adapting and Growing As a hub for business from European and North African countries, Malta is marked by its flexibility, innovation and competitiveness. It is with these qualities that Malta has gone from strength to strength since it gained independence from Britain in In particular, Malta s financial services industry has been a key focus of the government and a great success story in the country s growth. Business in English International Malta uses English as an official language, alongside Maltese. Use of English is universal, making Malta instantly accessible to anyone conversant in English. Many Maltese also speak a third language, usually Italian, German or French. Central Location Located at the centre of the Mediterranean, the Maltese Islands lie virtually midway between Europe and North Africa, some 90 kilometres south of Sicily and 300 kilometres north of Libya. This makes the island an excellent gateway for business between Europe, Africa the Middle East and Asia. The capital city, Valletta, is both the administrative and business centre of the country. Committed to Business Malta s parliament recognises the importance of business success to the nation s prosperity. This is why Maltese political leaders are committed to developing key industries, such as finance, ICT and aviation, as well as encouraging more direct foreign investment. Over the past years, both government and opposition have worked hand-in-hand to create the right legislative and regulatory framework for financial services firms to grow and prosper. Economic Power Malta has posted healthy economic growth for the last four years. In 2014, the economy and the labour market continued to perform well, and the outlook for 2015/16 is favourable. Strong labour market fundamentals, recovering investment and an accommodative fiscal stance are projected to have resulted in real GDP growth of 3.3 per cent in This has also allowed Malta to maintain one of the lowest unemployment rates in Europe, hovering around 6 per cent against the EU average of 10 per cent. Diversified Economy Over the past years, Malta has diversified and thrived. Popular as a safe and sunny tourist destination for sunstarved northern Europeans, the tourism sector contributes some 25 per cent to the island s GDP. However, a variety of service businesses have joined the traditional economic generator, and services now account for 75 per cent of Malta s GDP. Industry accounts for 23 per cent and agriculture for 2 per cent. A Future in Services Malta has played to its strengths by establishing itself as the most successful knowledge-based economy in the Mediterranean region. Key to this success has been 3.3% GDP Growth in % Services sector share in Malta s economy the growth of service-focused businesses in fields such as ICT and the booming Maltese financial services industry. Expansion of the aviation and maritime industries together with life sciences and education pave the way for a prosperous future. Strong and Healthy Banks Much of Malta s economic growth can be attributed to the excellent regulation of banks and the financial services sector. Maltese banks also have a strong local deposit base, and the banking sector is not significantly exposed to foreign sovereign debt risks. In addition, assets held by the island s five core banks are twice the size of Malta s GDP, which itself is only half the EU average. Towards the Future As hard work and diligent regulation have built the foundations for Malta s recent achievements, the country s future wellbeing is crucially linked to its success in moving further up the value chain and finding markets for the export of high-quality products and services. One of Malta s aims is to become the European financial centre of choice. Outside of Europe, Malta continues to build its good relations with China, with both nations keen to encourage cooperation between their financial services sectors.

5 th Soundest Banking System World Economic Forum Global Competitiveness Index Finance Centre Serious Business Malta s ascent into an international centre of repute has been one of the fastest and most remarkable growth stories in recent times. Recognised for its probusiness attitude, excellent regulation and competitive cost of doing business, Malta has become the go-to finance centre for start-ups, growthminded entrepreneurs and Fortune 500 companies alike. Europe s Fund Gateway The fund industry is one of the finance centre s main engines of growth. Malta hosts over 580 investment funds which have a combined net asset value of almost 10 billion. While Malta has a reputation as a jurisdiction for smaller financial services companies and start-ups, the fund sector is maturing and attracting sophisticated asset management activities. Strong Ratings and Rankings Maltese banks are some of the world s safest credit institutions. The World Economic Forum rated the island s banking system as the 10th soundest in its Global Competitiveness Index. Institutions such as the International Monetary Fund, the European Commission and international credit rating agencies confirmed the sector s robustness and resilience, while Bank of Valletta and the parent banks of domestic subsidiaries such as HSBC have passed the EU-wide stress tests of recent years. Winning in Wealth Management The country is a welcoming place for high-net-worth individuals due to its mixture of innovative products, experienced professionals and strong regulatory framework. It offers all the favourite investment vehicles of wealthy clients, while allowing investors to protect their assets through the establishment of trusts and foundations. Malta is also presenting itself as a holistic lifestyle and residency destination for affluent foreigners. Pushing Growth through Captives Malta is a relative newcomer to the international insurance market, yet it has made significant strides in attracting world-class companies to its shores, including some of the largest blue-chip corporations in the world. Malta championed the introduction of innovative structures such as Protected Cell Companies (PCCs) and Reinsurance Special Purpose Vehicles (RSPVs), and has built up a reputation for being a cost-effective EU base for insurance and reinsurance providers and a highly attractive captive domicile. Diversified International Finance Centre Insurance Banking Investment Funds Asset Management Holding & Trading Companies International Pensions Capital Markets Wealth Management Trusts & Foundations Maritime & Aviation Islamic Finance Expat Residency Financial Institutions Family Offices Foreign Exchange Competitiveness A Leading Centre Malta regularly receives high rankings in benchmarking reports and was named Most favoured domicile in Europe for investment funds in the Hedge Funds Review Service Provider Rankings in 2013 and In addition, the World Economic Forum ranks Malta above average for almost every metric in financial market development. Innovation through Regulation Malta s financial regulatory framework is among one of the most robust in the world and is fully harmonised with EU and OECD rules, while still being sophisticated enough to remain a flexible platform for the financial services industry. The proactive approach taken by the regulator the Malta Financial Services Authority (MFSA) has supported the country in becoming a leading financial centre in Europe. High Performance Unlike many of its EU peers, Malta s financial services sector has not been affected by the financial crisis. While other nations were trying to minimise their losses, Malta was posting year-on-year growth. Its financial sector alone has expanded around 25 per cent annually, and the banking sector did not have to carry out any restructuring or re-capitalisation exercises. EU & OECD Approved financial services framework 25% Annual expansion of Malta s financial sector Low-Risk Environment As a European Union member with a longestablished democratic tradition, Malta offers a veritable safe haven for investors. Liberal economic policies and a government committed to an open business environment are important factors for many investors looking for longterm stability. The Maltese tax system is the only remaining full imputation system in the EU. The system has been in use since 1948 and is fully approved by the EU and OECD. Quick Start-Up Time Malta s financial regulator, the MFSA, has set timeframes for the approval of licence applications for financial services such as investment funds and insurance vehicles. The authority takes a diligent, risk-based approach to each licence application. This allows for the fast-tracking of applications when needed and incorporating a company in Malta takes just a few days.

6 10 11 Market Access Global Business Gateway Malta s internal market is relatively small, and the real opportunity lies in using the country as a stepping stone to markets in Europe and North Africa. Strategically located at the centre of the Mediterranean, between Europe and North Africa, Malta has historically been the link between the two continents. This is why so many investors see the benefits of using Malta as the first step towards success in surrounding markets. Single EU Passport Since becoming an EU member in 2004, Malta has experienced accelerated growth in all sectors of its financial services industry. With the introduction of passporting rights, allowing companies to establish a branch or provide services in any other EU country, many business opportunities opened up between Malta and the EU. Establishing a business in Malta provides instant access to the EU s internal market of over 500 million people in 28 EU economies. Easy Access to World Markets Malta also enjoys excellent relations outside of the EU, specifically with other Mediterranean nations in North Africa and the Middle East, making it an attractive base for European, American or Asian companies wishing to enter the relatively untapped markets to the south. In addition, Malta is a signatory to some 70 doubletaxation treaties, covering most of the world s highgrowth markets facilitating international business. Perfect Timing Malta is in a convenient time zone to do international business. The island is one hour ahead of GMT, thus matching office hours with Asia in the morning, Europe throughout the day and the US in the afternoon. This allows international business conducted from Malta to be timely and profitable. Ahead of the Curve In a changing regulatory landscape with tighter requirements, Malta offers a safe EU location with a firm but flexible regulatory framework. Malta is quick in transposing EU directives related to the financial services sector into local law. The island also works closely with other regulatory authorities to provide access to international markets and to ensure a smooth international trading environment for financial services. Infrastructure GOZO COMINO MALTA Sliema Malta International Airport St. Julians Valletta Malta offers easy access to EU, African and Middle Eastern Markets A Platform for Business As a rapidly expanding economy, Malta has consistently delivered on demands to its infrastructure. Substantial investments have created a highly sophisticated business environment. Thanks to its financial infrastructure, pro-business climate, and growing international trade and investment in new industries, Malta is well positioned to seize economic opportunities. State-of-the-Art Telecoms In overcoming its geographical limitations, Malta has built up one of the world s best telecoms infrastructures. Currently it ranks 3rd of 144 countries worldwide for international internet bandwidth per user, as ranked by the World Economic Forum s Global Competitiveness Report This incredible level of internet service is maintained by two satellite stations and four submarine fibre-optic links to mainland Europe. Growing Industry Cluster In growing its financial services industry, Malta s government has the support of a vibrant community of progressive-minded officials and committed business leaders. Today, a growing business cluster is driving productivity, new business and innovation within Malta s finance industry. There are also many entities offering expert legal and support services to local and international clients. Network of Worldwide Connections Located on the main shipping routes, Malta has been a significant port for most of its modern history, with links to other major ports in Europe, North Africa and Asia. Malta is connected by air to almost every major city in Europe, and to key destinations in North Africa and the Middle East, most only a few hours flight-time away. Affordable Office Space A wide range of office space can be found across the island, rents are reasonable and finding an office close to popular residential areas and amenities is relatively easy. Office space is available in purpose-built office blocks, as well as in converted houses and apartments, or within brand new mixed-use developments. Costs have become even more reasonable with business electricity tariffs being lowered by 25 per cent in rd out of 144 countries Malta s ranking for International bandwidth per user World Economic Forum Global Competitiveness Index

7 12 13 Lifestyle Living the High Life Aside from being a great place to invest and run a business, Malta also offers an excellent quality of life. With its Mediterranean environment, Malta is far more relaxed and reasonably priced than other major European finance centres. The island also has your day-to-day needs covered, with some of the best medical care in the world and an excellent education system, whether private or public. The Mediterranean at its Best Malta is abundant with beautiful, easily accessed beaches and many offices for rent enjoy a sea-view. Thanks to the warm summers and mild winters, it is easy to make the most of your free time in Malta, whether you prefer to enjoy fine dining al fresco, relax by the sea or engage in other outdoor activities. Top Leisure Activities Malta offers much more than just the traditional sun and sea package. Leisure activities such as horse riding, archery and bowling are available alongside traditional sports clubs such as football and rugby as well as a variety of great gyms to keep you fit. You can also pamper yourself with a fantastic selection of restaurants, spas and hotels or visit one of the many lively night spots to dance your cares away. Feel at Home It is easy to feel at home in Malta. Chances are the local supermarkets will stock products you know from home, and the high streets and shopping malls host most of the big brand names. All your personal needs from private banking to tax planning are catered for. When you are ready to find a place to settle down, Malta has a wide range of properties from luxury penthouses and villas to modest apartments and office spaces, all at very reasonable rents. Relaxed Atmosphere It is easy to strike a great work-life balance in Malta. The country s small size means that commuting times are minimal, giving you more time to enjoy the island. As one of the safest countries in the world with a very low crime rate, Malta is an ideal place for the whole family. Regulation and Legislation Robust Regulation The country s legislation is in line with EU law and is built on best practices from other finance centres. It caters for the regulation of investment funds, banking, insurance business, pension funds, as well as investment service providers and trustees. Maltese legislation is designed to efficiently meet the needs of both the industry and the consumer and is updated continuously to reflect the latest market demands. Efficient Regulator At the heart of Malta s finance centre is an independent, risk-based regulator, the Malta Financial Services Authority (MFSA), which grants licences and regulates all financial activities. The MFSA ensures best practice and compliance, while the fact that it regulates all financial services allows it to streamline procedures for companies, to reduce bureaucracy and to offer lower regulatory fees. Risk-based Regulator The Malta Financial Services Authority Working in Partnership The MFSA is known for being as thorough in their regulation as they are easy to approach and associate with. The country s small size allows direct contact with licensees, which gives the MFSA a good understanding of the soundness of the licence holders. The MFSA establishes constructive working relationships with companies investing in Malta, which helps ensure a smoother start up and full compliance with all regulatory standards. Integrity and Low Risk Having joined the European Union in 2004, Malta strictly adheres to EU anti-money laundering policies, insider dealing and professional secrecy laws, and its frameworks are aimed at attracting only international businesses of repute. Malta s adoption of the euro in 2008 has added further stability and increased the ease of doing business across frontiers. The Right Tools The island s legal system is rooted in both the Anglo- Saxon common law tradition and the Continental European Napoleonic/Justinian code. However, Maltese corporate law is firmly based on British models. The MFSA also has advantageous regulation for re-domiciling companies into and out of Malta. This allows established businesses to set up shop in the country, while preserving the continuity of company legacy, reputation and its financial track record.

8 14 15 Costs and Fees Value for Money No amount of sun, sea and sand can drive a business decision as much as cost. Fortunately, Malta offers great cost advantages as a finance centre, especially when compared to the rest of Europe and other leading jurisdictions. International companies often note that they receive great value for money when considering the skills and expertise present in the Maltese market. Despite its size, Malta is a compelling alternative to other larger financial hubs in Europe. Low Operational Overheads What makes Malta particularly attractive to international companies is that legal and accounting fees, as well as certain regulatory fees, are lower in Malta than in most other European jurisdictions. Overall ongoing operational costs are approximately per cent lower than those in the UK, Germany, France, Belgium, the Netherlands and Luxembourg. This means companies can offer their services to clients at an attractive cost rate. Fiscally Efficient Framework Malta offers a tax-friendly base for financial services companies, operating a full imputation tax system. While all companies pay tax at a rate of 35 per cent, certain shareholders are entitled to refunds for the tax paid by the company and there is no withholding tax on dividends. In addition, companies benefit from a wide network of double tax treaties. This combined with a number of other incentives make the costs of doing business in Malta more than affordable. Low Living Expenses Malta has one of the lowest costs of living in the EU. Rents are cheaper than in most other European countries, and apartments are often fully furnished. Public transport and taxi fares are also lower. Some household and personal care items can be more expensive in Malta as the majority of products are imported, yet food prices are more or less the same as in other European countries. Free state healthcare and education is available in addition to private clinics and schools. Competitive Personal Tax Rates Salaries in Malta are usually one-third lower than in the more established finance centres. Nevertheless, the purchasing power of Maltese people is much stronger thanks to the country s lower living cost and competitive personal tax rates. Individuals are charged on their income at progressive tax rates up to a maximum of 35 per cent. However, for 2015, Malta reduced the top rate of income tax for those who earn less than 60,001 to 25 per cent. 15% Highly qualified foreign professionals can benefit from a flat tax rate of 15% Advice and Assistance Outstanding Human Capital Malta s drive to become a global financial services centre has helped generate around 10,000 jobs in this sector. With 60 per cent of Maltese students going on to further education, the island has a highly educated and multilingual pool of talent from which to hire. Malta is continually cultivating the right talent, with more University of Malta graduates coming from the economy and management faculty than any other in % 10,000+ Operational costs are 20-30% lower in Employed in international Malta than in other finance centres financial services in Malta Established Service Providers Malta has both a proud tradition of family-run financial services firms, as well as being home to offices of The Big Four Deloitte, KPMG, EY and PwC. In addition, a large number of law firms operate on the island, most being part of international networks such as Lex Mundi and Lexis Nexis and regularly ranked on Chambers, Martindale- Hubbell or other similar institutions. Malta also provides an array of corporate service providers offering solid business advisory and back-office support. Finely Honed Skills Service companies in Malta are efficient and have developed expertise in key areas such as captive insurance, funds, trusts and wealth management. The island s support services are top class, and professionals of the same calibre of those in London, Dublin or Luxembourg are easily found. To ensure that growth can be sustained, Malta is eager to expand its pool of highly specialised professionals. Attracting Foreign Talent To attract further expertise in core sectors such as financial services, Malta offers a reduced 15 per cent flat tax rate to highly qualified persons in key positions within those industries. The island s laws on immigration are in line with the European Union s visa obligations for foreign nationals, and EU and European Economic Areas (EEA) citizens are free to work and reside in Malta. Multilingual Services The British influence is clear in the work ethic present in Malta, and aside from English and Maltese most locals also speak Italian, French or German. Malta has a vast pool of multilingual talent in the form of professional expatriates from all over the world.

9 16 17 Key Reasons to do Business in Malta Insurance is a dynamic growth industry in Malta thanks to its solid regulatory framework and EU membership, which allows companies licensed in Malta to write business in any other member state. The country has already attracted a number of Fortune 500 companies to set up captives in Malta, among them multinationals such as BMW, Peugeot, Citroen, Vodafone and Virgin. With financial and insurance activities accounting for over 90% of Malta s FDI stock, the sector has a highly international focus and is set for further growth. EU and EEA Passporting Rights Thanks to the EU passporting regime, insurance companies, brokers and other intermediaries can offer their services in any other EU or EEA member state. This opportunity has boosted Malta s desirability as an insurance domicile and is attracting increased numbers of insurers seeking a cost-effective jurisdiction from which to operate on an international level. Also non-eu insurance companies and intermediaries have seen the advantages of Malta when seeking to tap into the EU insurance market, as it provides insurance directly across Europe, avoiding fronting costs and collateral requirements. Wide Variety of Insurance Structures Maltese law recognises the different requirements of business operators and provides a beneficial framework for general insurance business and captive insurance. Captive insurance companies, Business Model which under Maltese law are referred to as Affiliated Insurance Companies (AICs), enjoy a fast-track application procedure and have attracted international corporate groups wishing to self-insure or reinsure. Malta is also the only EU member state with unique legislation allowing for Protected Cell Companies (PCCs) and Incorporated Cell Companies (ICCs). Both structures enable companies to write risks through cells within the same company and provide businesses with a cost-effective alternative to setting up a stand-alone insurance company. These structures have now also been extended to investment funds and to securitisation vehicles. Solid Legal Foundation Maltese corporate law is firmly based on British models, although its legal system is rooted both in the Anglo-Saxon common law tradition and the Roman civil law. Having a solid British foundation makes it easy for foreign practitioners to familiarise themselves with Standalone Insurance/Reinsurance Company Affiliated Insurance/Reinsurance Company Cell in a Protected Cell Company Cell in an Incorporated Cell Company the country s framework. Insurance business is regulated by the Insurance Business Act and the Insurance Intermediaries Act. The Insurance Business Act provides for the authorisation and supervision of insurance companies by the regulator, while the Insurance Intermediaries Act governs insurance agents, insurance brokers, insurance managers and tied insurance intermediaries. Both laws are fully EU compliant, but also tailor-made to set up a variety of structures, including companies carrying on Affiliated Insurance Business (captives), Protected Cell Companies, Incorporated Cell Companies, reinsurers and insurance intermediaries. Approachable and Efficient Regulator The single regulator, the Malta Financial Services Authority (MFSA), has built an international reputation for being dynamic and flexible. The MFSA has supported the growth of the sector through its stable and consistent approach to licensing and Permitted Business Insurance/Reinsurance Self-insurance/Self-reinsurance regulation and for always being on the look-out for how to further improve the country s competitiveness. Understanding the needs of the industry, the MFSA encourages companies to consult with its officers when deciding to set up in Malta to ensure a smooth running of the licensing process. Insurance/Reinsurance - Self-insurance/Self-reinsurance Insurance/Reinsurance - Self-insurance/Self-reinsurance Solution to Higher Solvency Margins Malta s legal framework can provide a number of options for insurance companies to manage their solvency ratios under Solvency II, especially for smaller insurers. In Protected Cell Companies (PCCs), for example, each cell is only obliged to hold capital needed to protect its risks, while the own funds requirements apply to the PCC as a whole. The MFSA is constantly working to ensure that the PCC regime is at all times in line with the Solvency II regime. Similarly, PCCs potentially offer captive owners and third-party writers the opportunity to share the higher capital and management costs expected from the new rules. This reduces set-up expenses and running overheads in a jurisdiction that already provides other cost-advantages. Lower Operational Costs When compared to other finance centres, fees for professional services, salaries and other operational costs are highly competitive. The streamlined procedures of the MFSA, the single regulator for all financial services, have resulted in lower fees and compliance costs and wages can be one-third to half of those in other Western European jurisdictions. Sophisticated Finance Infrastructure Insurance companies and structures operating in Malta can benefit from the fullyfledged finance centre. Malta s banking sector is strong and global custody service providers, among them HSBC and Custom House, as well as the top four international accounting firms have a presence in Malta. The country s legal firms are world class with the majority also part of international networks, such as Lex Mundi and Lexis Nexis, and ranked on Chambers or Martindale-Hubbell. Outsourcing Destination The country s infrastructure, state-of-the-art telecoms network and its skilled multilingual workforce, make Malta an ideal outsourcing destination for insurance companies, managers, brokers and other intermediaries. Malta has already built up a reputation as a call-centre destination and functions such as claims administration, analytics, customer care, policy administration or sales and distribution can be relocated to Malta to reduce costs. Easy Migration With its innovative legislation and operational advantages, Malta tops the list for companies seeking to relocate to another jurisdiction and require vehicles for specific needs such as third-party business or solutions to reinsurance issues. Malta s re-domiciliation legislation allows for a seamless transfer of structures in and out of Malta, without the need to wind up operations. Maltese legislation allows re-domiciliation from all EU, EEA and OECD countries and from a number of other states such as the Bahamas, Bermuda, the British Virgin Islands, the Cayman Islands, Gibraltar, Guernsey, the Isle of Man, Jersey and Mauritius, which have the required provisions in their laws. Varied Advisory Network Malta currently boasts 15 registered insurance management companies, ranging from well-known international names to more boutique establishments. They have the knowledge and experience to assist newcomers to the captive insurance market and can advise on the formation of, and the day-to-day operation of, an insurance business. With financial services being a high-growth area, a wide range of local professionals have also developed insurance expertise. The country s lawyers can assist in setting up insurance companies, in the process of obtaining a licence from the MFSA as well as provide solid advice on other regulatory and compliance matters. The insurance sector in Malta is strongly supported by a large pool of accounting and auditing practitioners, ranging from local practices to the global Big Four accountancy firms. Wealth of Insurance Professionals Employment in the insurance sector has risen to over 1,200, which is almost double the pre-eu accession level. Office and administrative support such as secretaries, bookkeeping and accounting, as well as insurance claims and policy processing clerks can easily be sourced in Malta. The language capabilities of the Maltese workforce provide a further advantage for companies. While many professionals continue to obtain their degrees abroad, Malta s university also offers courses in insurance and finance. Staff across all sectors of the industry is being trained at various institutes in Malta and is ready to join the trade as claims adjusters or appraisers amongst others. Senior management employees, such as actuaries, have usually obtained their qualifications overseas, for example from the Institute of Actuaries in the UK.

10 18 19 Key Facts and Figures Malta has established a solid reputation for the provision of innovative financial services and products, especially in the insurance landscape. The sector has seen enormous growth in the last decade and firmly stands at the forefront of Malta s development as a financial centre. The country has proven attractive for companies looking to self-insure or reinsure through captives or cells of Protected Cell Companies, and today offers the new addition of Securitisation Cell Companies. Insurance business is a licensable activity in Malta and the industry has seen substantial growth, with the number of insurers increasing from only eight in 2004 to 60 in Malta s attractive offering, coupled with the fundamental right of every insurer and reinsurer to passport its business throughout the EU, growth of the insurance sector is likely to continue. A growing number of reputable insurance management companies ranging from well-known international names to boutique institutions are being licensed in Malta, reflecting the international orientation of Malta s insurance sector Q3 Industry Growth (end of Sept.) 58 Total businesses businesses Total of which: Domestic Insurers 8 Affiliated Insurers 11 PCCs (18 cells) 8 Foreign Insurers 1 of which: Domestic Insurers 9 Affiliated Insurers 11 PCCs (22 cells) 10 Foreign Insurers 1 Total businesses of which: Domestic Insurers 9 Affiliated Insurers 10 PCCs (27 cells) 11 Foreign Insurers 1 As of the end of 2014, there were 60 undertakings authorised by the MFSA to carry out insurance and reinsurance business under the Insurance Business Act (Cap. 403). Life / Non-Life Life Composite Reinsurers Why Malta? EU and EEA passporting rights Effective and flexible regulation Versatile insurance structures Sound company law modelled on English Law Cost-effective solutions Accessible regulator Easy migration Established finance centre Educated and experienced workforce Competent professional advisory network Insurance Intermediaries: Companies Insurance Intermediaries: Individuals During the first quarter of 2014, Malta s Gross Value Added on financial and insurance activities amounted to 130 million in absolute terms bn Total gross written premiums (2013) 15 out of which 0 PCCs Enrolled Insurance Agents of: 9 11 Local Foreign Insurers Insurers 29 out of which 0 PCCs Tied Insurance Intermediaries Registered Insurance Managers out of which 3 PCCs (2 cells) Enrolled Insurance Agents of: 9 11 Local Foreign Insurers Insurers 30 out of which 2 PCCs (1 cell) Registered Insurance Agents Registered Insurance Brokers out of which 3 PCCs (2 cells) Enrolled Insurance Agents of: 9 11 Local Foreign Insurers Insurers 30 out of which 2 PCCs (2 cells) Total licences 2012 Total licences 2013 Total licences 2014 Q3 (end September) Total licences 2012 Total licences 2013 Total licences 2014 Q3 (end September)

11 20 21 Regulation & Legislation Insurance businesses operating in Malta benefit from EU legislation and regulation, in addition to the country s tailor-made regulatory measures that have increased the attractiveness of the domicile. Malta is the only EU member state with enacted Protected Cell Company (PCC) and Incorporated Cell Company (ICC) legislation, which makes it one of the most advantageous locations for insurance activities. MFSA FOCUS The protection of Malta s reputation The promotion of competition and choice The protection of investors and the general public The Regulator The Malta Financial Services Authority (MFSA) is the single regulator for all financial services in Malta. The MFSA aims to meet the needs of insurance business, but also applies a rigorous due diligence process and takes a firm approach in regulating the industry. The authority is accessible to professionals and companies seeking to discuss solutions for their insurance needs and encourages regular consultation sessions throughout the licensing process of a potential insurance business, to ensure the company meets all regulatory standards. Legal Framework The insurance industry in Malta is regulated by two separate, but complementary laws: Insurance Business Act: Provides for the authorisation and supervision of insurance companies by the MFSA Insurance Intermediaries Act: Governs insurance agents, insurance brokers, insurance managers and tied insurance intermediaries Malta s legislation provides for: Captives (Affiliated Insurance Companies) Protected Cell Companies (PCCs) Incorporated Cell Companies (ICCs) Reinsurers and insurance intermediaries Securitisation Cell Companies (SCCs) Application Procedure Re-Domiciliation An insurance company or an insurance management company established in another jurisdiction may continue in Malta under certain conditions and does not need to wind up in the country of its incorporation. Maltese law allows foreign entities to re-domicile their business in Malta, if: The entity is formed and registered in an approved jurisdiction (including EU, EEA and OECD states as well as most offshore centres) The entity is similar in nature to a company under Maltese law The laws of the country of incorporation allow re-domiciliation The constitutive documents of the entity allow re-domiciliation The entity is not in the process of dissolution or winding up Application Procedure Insurance companies, Captives, Protected Cell Companies (PCC), Incorporated Cell Companies (ICC) and cells in a PCC or ICC are required to apply for authorisation with the regulator, the Malta Financial Services Authority (MFSA). The application process follows the same pattern for all forms of insurance related companies. The first step would normally include a preliminary discussion on the outline plan proposed by the prospective applicant. The insurance licence application consists of a formal application form which has to be submitted together with all other documentation required by the Act. A due diligence exercise is carried out on shareholders, directors and senior management of the company or the cell to determine they are fit and proper persons. A detailed business plan or scheme of operations of the insurer s proposed business also has to be submitted with the application in order for the MFSA to assess the feasibility of the proposal. The scheme of operations should describe the business model and strategy should include target markets and marketing plan should include financial projections and resources should describe the investment strategy should describe personnel and internal controls should include information on reinsurance or retrocession should include agreements with third parties The statutory maximum period for processing is six months for insurance companies, while a reduced period of three months applies to protected cells, affiliated insurance companies and reinsurance companies. Upcoming Regulation: Solvency II New capital adequacy provisions under the Solvency ll Directive, scheduled to come into force across the EU in January 2016, will have an impact on all insurance companies. Their main aim is to reduce the potential for insolvency. The Directive also plays an important role in developing the single market for insurance products, setting similar standards of consumer protection across the market. The Directive also incorporates a comprehensive risk management framework that will be fully integrated in the licence holder s compliance regime. Malta s regulator, the MFSA, as well as the industry as whole have chosen to see the new regulation as an opportunity rather than a burden, as the increase in reporting and capital demands will also bring better investor protection in its wake. Feasibility study and consultation with the MFSA Submission of application for MFSA review Responding to potential MFSA requests arising from application If MFSA is satisfied with responses, letter of intent is issued Agreement on conditions of letter of intent and submission of remaining documentation Authorisation is issued

12 22 23 Insurance Companies Fully-fledged insurance companies use Malta as an entry point and write third-party business throughout Europe from Malta. Although Malta s local insurance market is relatively small and concentrated, the country is fast developing itself as a centre for direct writers. Key Features of Insurance Companies in Malta Corporate Form: Limited Liability Company (can also be set up as Protected Cell Company or Incorporated Cell Company) Permitted Business: All classes, however, a company is not permitted to carry on long term business and general business unless: long-term business is restricted to reinsurance general business carried out by the company is restricted to accident and sickness classes Reinsurance Companies Malta has welcomed some of the most respected names in the industry with its reputation gaining momentum as an ideal jurisdiction for risk and reinsurance solutions. With more companies seeking an EU base to serve their clients, Malta is becoming a destination of choice. Maltese insurance A company authorised under the Insurance Business Act, with a head office in Malta, is entitled to write insurance business in any EU/EEA state in exercise of a European Right. Reinsurance may only be carried out if expressly authorised under the Insurance Business Act. Malta serves as an ideal base from which insurance companies can expand into the EU. Maltese insurance companies can write longterm business or general business of all classes. Benefits of Direct Writing in Malta Offices in a low-cost jurisdiction: The EU passporting regime allows insurance companies to establish themselves in any member state and offer cross-border services into any other EU country, provided they follow a simple notification procedure and observe local legislation. Availability of highly qualified staff: As an established finance centre, Malta has an excellent pool of human resources, with many professionals having insurance-specific knowledge and qualifications. Sophisticated telecoms infrastructure: Although an island at the centre of the Mediterranean, Malta has overcome its physical limitations by establishing one of the most advanced telecommunications networks in Europe. Access to regional markets: Thanks to Malta s strategic location, it offers access to Europe and the emerging markets of North Africa and the Middle East. Classes of long term business: Life and Annuity Marriage and Birth Linked long term Permanent Health Tontines Capital Redemption Pension Fund Management Collective Insurance Social Insurance Classes of general business: Accident Sickness Land vehicles Railway rolling stock Aircraft Ships Goods in transit Fire and natural forces Other damage to property Motor vehicle liability Aircraft liability Liability for ships General liability Credit Suretyship Miscellaneous financial loss Legal expenses Assistance Licensing Timeframe: Six months Redomiciliation allowed: Yes Minimum Own Funds requirement: General Business: 2.5m or 3.7m, depending on class of business Long-term Business: 3.7m Insurance and Reinsurance, combined: m, depending on class of business Own funds are to consist of: initial paid up share capital which must not be less than 50 per cent of the value of Own Funds requirement; cumulative preferential share capital, subordinated loans, retained profits, reserves other than reserves corresponding to the technical provisions and where applicable, the equalisation reserves and securities with no specified maturity date and other instruments including cumulative preferential shares. *Changes expected in 2016 under Solvency II Solvency Margin: Calculated in accordance with regulations modelled on EU directives. Technical Provisions: Calculated in accordance with regulations modelled on EU directives. Guarantee Fund: Greater of: 1) Minimum Guarantee Fund or 2) the value of one third of the margin of solvency or Malta margin of solvency (as applicable). *Changes expected in 2016 under Solvency II Intercompany Loans: Allowed with approval from regulator the Malta Financial Services Authority. Financial Reporting Requirements: Audited accounts under IFRS. Accounts to be published in local newspapers in abridged form (this requirement will be removed in 2016). Regulatory Fees: Authorisation application fees are one-time fees and non-refundable irrespective of whether the application is accepted or refused. Long term business: minimum fee of 5,000 plus 500 per class General business: minimum fee of 3,500 plus 300 per class Continuance of Authorisation: Annual fee according to Schedule in the Insurance Business (Fees) Regulation. Spreading risk is at the core of insurance business and for insurance companies this involves also spreading their own risk. Reinsurance is about transferring the risks of insurance companies to third-party organisations, making it effectively insurance for insurers. Companies in Malta can either be authorised to carry out insurance and reinsurance activities or only insurance or reinsurance. Benefits of Reinsurance in Malta Wide range of attractive structures: Reinsurance can be provided through a stand-alone reinsurance company, reinsurance captive or cell company. Offices in a low-cost jurisdiction: The EU passporting regime allows insurance companies to establish themselves in any member state and offer cross-border services into any other EU country, provided they follow a simple notification procedure and observe local legislation. Availability of highly qualified staff: As an established finance centre, Malta has an excellent pool of human resources, with many professionals having insurance-specific knowledge and qualifications. Key Features of Reinsurance Companies Corporate Form: Limited Liability Company (can also be set up as Protected Cell Company or Incorporated Cell Company) Permitted Business: Long-term business of reinsurance and general business of reinsurance Licensing Timeframe: Six months, reduced to three months in respect to reinsurance protected cells. Redomiciliation allowed: Yes Own Funds requirement: 3.4m, or 1.2m if carried out through a captive and business is restricted to reinsurance. Own funds are to consist of: initial paid up share capital which must not be less than 50 per cent of the value of Own Funds requirement; cumulative preferential share capital, subordinated loans, retained profits, reserves other than reserves corresponding to the technical provisions and where applicable, the equalisation reserves and securities with no specified maturity date and other instruments including cumulative preferential shares. *Changes expected in 2016 under Solvency II Solvency Margin: Calculated in accordance with regulations modelled on EU directives. Technical Provisions: Calculated in accordance with regulations modelled on EU directives. Intercompany Loans: Allowed with approval from the Malta Financial Services Authority. Financial Reporting Requirements: Audited accounts under IFRS. Regulatory Fees: Authorisation application fees are one-time fees and non-refundable irrespective of whether the application is accepted or refused. Long term business: minimum fee of 5,000 plus 500 per class General business: minimum fee of 3,500 plus 300 per class Continuance of Authorisation: Annual fee according to Schedule in the Insurance Business (Fees) Regulation.

13 24 25 Captives [Affiliated Insurance Company (AIC)] Malta has seen a surge of captives being established in the country following its accession to the EU in Today, Malta is recognised as a versatile and advantageous jurisdiction for captive insurance business, where companies can insure the risks from individuals to parent companies or group undertakings. captive is a company A formed by its owners to insure or reinsure the risks of its parent and/or subsidiaries. In Maltese law, a captive insurance company is referred to as Affiliated Insurance Company (AIC). A captive can operate as a direct insurance company, issuing policies to subsidiaries in a group, or it may serve as a reinsurance company, assuming risks behind commercial insurers in the same group. In Malta, association captives are also permitted as well as captives registered or converted to a Protected Cell Company (PCC). Captives in Malta can insure risks originating from: parent company associated or group companies individuals or other entities having a majority ownership or controlling interest members of an association or an organisation or a particular trade, industry or profession provided that the risks covered are those of that particular trade, industry or profession Captive reinsurance companies are restricted to reinsure risks arising from: undertaking(s) to which they belong or group companies Benefits of Using a Captive Reduced cost of risk financing: Captives enjoy lower transaction and administration costs than traditional insurance programmes. Companies can also retain underwriting profit and investment income earned on technical reserves. Solution to market limitations: Captives provide cover for risks that is not available or unaffordable in the traditional insurance market. Flexible risk management: Customdesigned policies tailored to the needs of the insured. Efficient cash flow management: Companies have control over the payment or premiums and the timing and payment of claims, and can direct the flow of funds to and from the captive according to their own investment strategy, allowing a more efficient use of capital. Direct access to reinsurers: Companies can buy excess loss protection on a wholesale basis rather than on retail basis and benefit from better conditions and the opportunity to directly negotiate price and contract terms. Coordinated risk management: Multinational companies can use a captive to manage risks at group level and centralise their insurance programmes, improving risk awareness and cost-transparency. Protection from price fluctuations: With periodical pricing swings in the traditional marketplace, companies using a captive can negotiate a premium established on the basis of their own loss experience. Other market factors and loss experiences of other insured parties have no effect. Key Features of Captives Corporate Form: Limited Liability Company Permitted Business: Direct captive: life and non-life business must be transacted in separate companies. Reinsurance captive: all classes of life and non-life business. Licensing Timeframe: Three months Redomiciliation allowed: Yes Own funds: Insurance Captive General Business min. 2.5m/ 3.7m, depending on class of business Insurance Captive Long term Business min. 3.7m Reinsurance Captive Restricted to Reinsurance min. 1.2m Insurance and Reinsurance Captive Combined 2.5m to 7.4m, depending on class of business Own funds are to consist of: the initial paid up share capital which must not be less than 50 per cent of the value of Own Funds requirement; and a mixture of issued and unpaid share capital, preferential share capital, subordinated loans, retained profits and reserves. However, the MFSA usually requests that 100 per cent of the initial own funds requirement consists of paid-up capital. *Changes expected in 2016 under Solvency II Solvency Margin: Calculated in accordance with regulations modelled on EU directives. Technical Provisions: Calculated in accordance with regulations modelled on EU directives. Guarantee Fund: Greater of: 1) Minimum Guarantee Fund or 2) the value of one third of the margin of solvency or Malta margin of solvency (as applicable). *Changes expected in 2016 under Solvency II Intercompany Loans: Allowed with approval from the Malta Financial Services Authority. Financial Reporting Requirements: Audited accounts under IFRS. Exempt from: publishing accounts in local newspapers contributing to the Protection and Compensation Fund covering technical provisions by equivalent and matching capital assets to cover currency risk localisation rules and custody of assets rules the payment of duty on any contract of insurance relating to a risk situated in Malta and depositing a minimum guarantee fund with an external institution Regulatory Fees: Authorisation application fees are one-time fees and non-refundable irrespective of whether the application is accepted or refused. Application for Authorisation 5,000 Continuance of Authorisation (annual) 6,500

14 26 27 Protected Cell Companies Malta is the only EU member state with Protected Cell Company (PCC) legislation, which provides numerous advantages compared to stand-alone insurance companies or captives. A unique element of a PCC is that an insurer can write business through the ownership of a protected cell, using the core s capital. The Protected Cell Company (PCC) has garnered much popularity making it one of Malta s flagship structures, and establishing the country as an attractive jurisdiction for those looking to set up a cell company, or simply a cell. A PCC can have within itself one or more cells for the purpose of segregating and protecting the cellular assets of the company from those of other cells or the assets of the core itself. A cell is in turn formed by a class of shares within the cell company. The core and its cells are to be treated as one legal entity, as cells do not have separate legal personality. Once established, a PCC can also form cells for third parties. Operating model of a Protected Cell Company A cell company operates in two parts the company core and the cells. The core part comprises all noncellular assets including the company s core share capital, investments, liabilities and so forth. The core share capital may be the minimum required at law or it may be much larger depending on its activities. The core does not need to take any of the insurance risk itself, but must be solvent at all times based on the business written by the whole company, including the cells. A cell company can create one or more cells within its company structure. The cells are independent of each other and from a legislative point of view are protected from each other. This is done by the issue of cell shares in respect of each individual cell. Each shareholder of a cell receives its own dividend stream. For tax purposes each cell is treated as a separate entity. A protected cell transacts insurance business through the licence held by the PCC. The PCC has a single board of directors which takes responsibility for the transactions within the core and each of the cells and for the statutory and regulatory compliance and corporate governance requirements of the company as a whole. The assets of any one particular cell are only available to the shareholders and creditors of that cell creditors of another cell have no recourse against them. However, in the event that the cellular assets of one cell have been exhausted, the company s core assets may be secondarily liable to satisfy any cellular liability of one of its cells. This can be avoided by a nonrecourse agreement in the case of captives and reinsurance cells. CELL CORE CELL Benefit of a Protected Cell Company The PCC set-up allows the start-up and ongoing regulatory burden of an insurance company to be spread throughout the owners of the various cells and the core of the PCC without putting any individual cell owners assets at risk from liabilities of the others. Cells are particularly attractive to medium-sized corporate groups wishing to establish their own insurance vehicle. CELL CELL Key Features of Protected Cell Companies Corporate Form: Limited Liability Company Name: The name of the company must include the expression Protected Cell Company or its abbreviation PCC. This title needs to be displayed on all its business letters and forms to inform all parties dealing with the company of its status. Each cell needs to have its own distinct name. Permitted Business: The cell company and its cells may conduct business of insurance and reinsurance as principals, captives, insurance brokers and insurance management companies in respect of general and longterm business. However, insurance PCCs can only have insurance cells, management PCCs management cells and broker PCCs broker cells. Licensing Timeframe: Six months, reduced to three months in respect to the individual protected cells. Redomiciliation allowed: Yes. Individual cells cannot redomicile on their own. Own Funds (applying to the PCC as a whole): Long Term Business: 3.7m General Business: 2.5m-3.7m Reinsurance: 3.4m, reduced to 1.2m for affiliated insurance Insurance and Reinsurance: 2.5m- 7.4m Own funds are to consist of: initial paid up share capital which must not be less than 50 per cent of the value of Own Funds requirement, cumulative preferential share capital, subordinated loans, retained profits, reserves other than reserves corresponding to the technical provisions and where applicable, the equalisation reserves and securities with no specified maturity date and other instruments including cumulative preferential shares. The minimum own funds requirements do not apply to individual cells, but to the PCC as a whole. *Changes expected in 2016 under Solvency II Solvency Margin: Calculated on a cellular basis. Any deficit in the cellular solvency margin is funded through non-cellular assets. The solvency margin must not fall below the guarantee fund. Minimum Guarantee Fund: The core of the cell company shall maintain at all times a guarantee fund of an amount of assets equal to the greater of the minimum guarantee fund or the value of one-third of the margin of solvency. Cells can use the minimum guarantee fund of the core. Technical Provisions: Calculated in accordance with regulations modelled on EU directives. Cell Management: The board of directors of the cell company has ultimate responsibility for all cells and cellular assets. The board may delegate the management and administration of a cell, or parts thereof, to a third-party insurance manager or/and a cell committee which many include representatives of the cell owner. Power to contract: Cells contract through the PCC which acts on behalf of the cell. Liability: Assets and liabilities are held separately within each cell. However, if the cellular assets of one cell have been exhausted, the company s core assets may be secondarily liable to satisfy any cellular liability of one of its cells. Intercompany Loans: Allowed with approval from the Malta Financial Services Authority. Financial Reporting Requirements: Audited accounts under IFRS. Captive PCCs are exempt from: publishing abridged accounts in local newspapers contributing to the protection and compensation fund covering technical provisions by equivalent and matching assets to cover currency risk localisation rules and custody of assets rules the payment of duty on any contract of insurance relating to a risk situated in Malta depositing a minimum guarantee fund with an external institution Regulatory Fees: Authorisation application fees are one-time fees and non-refundable irrespective of whether the application is accepted or refused. Application Fees: PCC: 6,500 Individual Cells: 2,500 Annual fees: According to Schedule in the Insurance Business (Fees) Regulations reduced to 3,250 in respect of cells carrying on exclusively business of affiliated insurance

15 28 29 Protected Cells Interest in Protected Cell Companies (PCCs) has been consistent and Malta is now seeing an increased interest in forming insurance cells within existing PCCs. Incorporated Cell Company The Incorporated Cell Company is one of the latest additions to Malta s insurance offering. Built on the familiar cellular model, but with the unique characteristic of cells with their own legal identity, the structure is set to prove innovative in the Reinsurance Special Purpose Vehicle landscape. The purpose of carrying out insurance activities from different cells is to segregate cellular assets and liabilities and allow different owners with varying interests to participate in one company. Captive Cell: Commercial/affinity groups looking for a captive risk financing vehicle Lower access point to captive solution Special purpose applications Access to reinsurers & specialist risk-bearers Third Party Writing Cell: Any business planning to sell insurance to third parties EU cells offer direct access to European market Policyholder Protection Ensured Possible products include bolt-on products to noninsurance sales, short tail risks such as extended warranty, property damage, theft, marine cargo and travel cancellation. Longtail risks also possible Types of Cells that can be set up in any combination within a PCC Fronting Cell: Captive owners wishing to reduce EEA fronting costs Cells in Malta can be used as fronting facilities Fronting cell reinsures most/all of the risk Reinsurer could be a non-eu captive Benefits of Protected Cells in Malta Low Capital Requirements Direct Writing into Europe through the PCC No Setup of Separate Company Easier Access to Captive Solution Cell Assets Segregated No Board of Directors Reinsurance for Smaller Entities Favourable Tax Regime Shared Administration Key Features of a Protected Cell A protected cell in Malta allows cell owners to: Insure own risks in EEA Sell insurance to third parties in EEA Insure on non-admitted basis risks globally where allowed Reinsure risks outside EEA Complies with EU directives through PCC core capital No absolute floor minimum capital requirements Minimum capital is calculated in accordance with MFSA Guidance Note on Solvency Requirements in relation to PCCs No Fronting Required for EU/EEA Risks Reinsurance access for smaller insurers Lower Running Costs vs. Stand-Alone companies Insulation from other Cells and the Core, as a cell has its own income and expenses. Cellular dividend & tax independence When cell liability arises: Assets of the cell primarily used If insufficient PCC s core assets secondarily used (under certain conditions) Use of assets of other cells prohibited An Incorporated Cell Company (ICC) is very similar to a Protected Cell Company, with the exception of each incorporated cell within an ICC having a separate legal entity. Incorporated cells are established within the ICC structure and assets and liabilities are attributed either to the cell company itself, or to a particular separate cell of the company. An incorporated cell in Malta allows a cell owner to insure directly own risks in EEA, sell insurance to third parties in EEA and reinsure risks outside the EEA. Cells can also insure on non-admitted basis risks globally where allowed. Benefits of an Incorporated Cell Direct Writing into Europe: ICCs and incorporated cells licensed in Malta can access EU markets through the single passport route avoiding fronting arrangements. Security: The ICC provides a secure structure for the segregation of assets and liabilities with each cell a separate legal entity. For example, a company could have separate cells for catastrophe and health insurance. Flexibility: Incorporated cells are allowed to enter into binding agreements with one another and with the ICC, facilitating the possibility of financial guarantees or reinsurance arrangements between cells and between the cells and the ICC, where the core acts as the reinsurer to the fronting cell. Key Features of Incorporated Cell Companies Corporate Form: Limited Liability Company Name: The name of the company needs to include the expression Incorporated Cell Company or its abbreviation ICC. This title needs to be displayed on all its business letters and forms to inform all parties dealing with the company of its status. Permitted Business: The cell company and its cells may conduct business of insurance and reinsurance, including affiliated business. Licensing Timeframe: Six months Redomiciliation allowed: Yes Solvency Margin: Solvency requirements for the ICC and each cell are the same as those of a standalone insurer. Guarantee Fund: Both the ICC and the respective Cells are to maintain a Guarantee Fund made up of the greater of: 1) the Minimum Guarantee Fund or 2) the value of one-third of the margin of solvency or Malta margin of solvency (as applicable). *Changes expected in 2016 under Solvency II Technical Provisions: Calculated in accordance with regulations modelled on EU directives. Cell Management: Each cell is a separate company and the board of the company has ultimate responsibility for all cells and cellular assets. The board may delegate the management and administration of a cell, or parts thereof, to a third-party insurance manager. Own Funds: Long Term: Principal Insurance 3.7m / Affiliated Insurance 3.7m General: Principal Insurance 2.5m - 3.7m / Affiliated Insurance 2.5m - 3.7m Reinsurance: Principal Insurance 3.4m / Affiliated Insurance 1.2m Insurance and Reinsurance: Principal Insurance 2.5m- 7.4 / Affiliated Insurance 2.5m - 7m Own funds are to consist of: Paid-up share capital which must not be less than 50 per cent of the value of Own Funds requirement; and a mixture of issued and unpaid share capital, preferential share capital, subordinated loans, retained profits and reserves. The Own Funds Requirement applies to the ICC and to each Incorporated Cell individually. *Changes expected in 2016 under Solvency II Power to contract: Cells have the ability to enter into contracts in their own name. Liability: Assets and liabilities are held separately within each cell. Claims by third parties can only be directed against the cell itself. Intercompany Loans: Allowed with approval from the Malta Financial Services Authority. Reporting Requirements: Audited accounts under IFRS. Incorporated Cells carrying out affiliated insurance are exempt from: publishing abridged accounts in local newspapers contributing to the protection and compensation fund covering technical provisions by equivalent and matching assets to cover currency risk; localisation rules and custody of assets rules the payment of duty on any contract of insurance relating to a risk situated in Malta depositing a minimum guarantee fund with an external institution. Regulatory Fees: Authorisation application fees are one-time fees and non-refundable irrespective of whether the application is accepted or refused. Cell Company carrying out affiliated insurance business: Authorisation application 5,000 Annual continuance of authorisation for cell company 2,500 Each cell carrying out affiliated insurance business: Authorisation application 2,500 Acceptance of Application 2,500 Annual continuance of authorisation for cell company 2,500 Cell Company and Individual Cell carrying out non-affiliated insurance business: Fees according to Schedule in the Insurance Business (Fees) Regulations

16 30 31 Insurance Management & Administration Services The strong growth of Malta s insurance sector is attracting increasing numbers of insurance managers and service providers, who recognise the profitable environment the country has to offer. Today, reputable insurance managers rank Malta as one of the best insurance domiciles within the EU. Insurance Managers Insurance management companies assist in the application process for a licence as well as the management and operation of captives, protected cell companies or cells therein, third-party insurers and reinsurers. Insurance management companies require a licence from the Malta Financial Services Authority. Insurance managers usually carry out the following functions: Assistance in feasibility studies Management of cells in cell companies Management of the insurance or reinsurance business, including premium and rate determination, underwriting, policy development, policy issuance and premium invoicing Accounting Cash management Risk management Claims handling; Company secretarial services Compliance services Any other back-office work Insurance Intermediaries and Brokerage Companies Insurance intermediaries carrying out activities in Malta are required to register with the Malta Financial Services Authority and prove they are fit and proper persons with the necessary qualifications and comply with the relevant legislation and regulation. Brokers and other intermediaries can also benefit from the European single passport, in much the same way as insurers, which has added to the appeal of Malta with European intermediaries seeking international growth in a competitive jurisdiction. Non-EU, including USbased, intermediaries seeking to tap into the EU insurance market have also discovered the potential of the domicile. Brokers can benefit from Malta s PCC legislation, for example by converting a brokerage firm into a PCC offering cells to other brokerage firms. This structure provides brokers based in other EU countries with an opportunity to set up an operation in a costefficient jurisdiction. The opportunity Malta offers is for the front-end business to continue to be carried out through the existing company, for instance in the UK, while all business could be passed through a cell in Malta to benefit from lower operational costs. Benefits of Insurance Management and Administration Services in Malta: Brokerage or Insurance Management through Cells: Foreign insurance brokers or insurance managers may establish cells in a broker- or management-protected cell company providing services such as office support, administration, EU passporting, insurance management and broker expertise. Solid Outsourcing Infrastructure: A multilingual workforce and state-of-the-art telecoms make Malta the ideal location for the establishment of call centres for the outsourcing of claims handling or marketing functions. Cost-Efficient Location: Malta has a lower cost structure, and well-trained workers are widely available. Key Features of Insurance Management Businesses Regulated by: Insurance Intermediaries Act Licensing Requirements: Insurance management companies are licensed and regulated by the Insurance Intermediaries Act. Depending on the contract with the insurance company, the management company requires own funds amounting to: if it holds no appointment: 1, which is the paid-up share capital in terms of the Companies Act, ,803 where acting for, or on behalf of, a company whose business is restricted to affiliated insurance 16,803 or 4 per cent of the annual gross premiums receivable whichever is the higher where it holds an appointment which (i) excludes or does not include authority to enter into contracts of insurance on behalf of a company and /or (ii) includes authority to collect and hold premiums on behalf of a company 58, or 4 per cent of the annual gross premiums receivable, whichever is the higher (i) where acting for, or on behalf of, a company whose business is not restricted to affiliated insurance and which appointment includes the authority to enter into contracts of insurance on behalf of the company; or (ii) where it holds an appointment from a company enrolled in the Brokers List. An insurance manager holding an appointment is required to keep moneys held in a fiduciary capacity separate from its own monies and effect a fidelity bond. The insurance manager is also required to have in its favour a policy of professional indemnity insurance. Insurance Management Company Regulatory Fees: Registration Fee of a person in the Managers Register: 175 Enrolment of a Person in the Managers List: 1,200 Appointment of a person in the Managers List: 650 Enrolment of a cell company in the Managers List: 2,000 Creation of a new cell within a cell company enrolled in the Managers List: 1,500 Annual supervisory fee of: a person in the Managers Register: 200 a person (other than a cell company) in the Managers List: 750 and 450 per appointment enrolment of a cell company in the Managers List: 1,700 Company Registration Fee (one off): 245-2,250 (depending on the company s authorised share capital)

17 32 33 New Frontier for Insurance in Malta s Capital Markets Malta s regulator, the MFSA, has been proactive in introducing innovate structures, particularly in the field of insurance. Special Purpose Vehicles (SPVs) have long been a solid feature of the global insurance industry, and with its strong track record as a finance centre Malta has a lot to offer. The current challenging environment across Europe has increased the need to maximise returns and has stimulated new ways of transferring risk and financing reinsurance. Malta is targeting the insurancelinked securities (ILS), catastrophe bond and reinsurance convergence sector by providing the use of Reinsurance Special Purpose Vehicles (RSPVs). The regulation allows for RSPVs to be authorised, formed and regulated in Malta, and is a move that is expected to attract ILS issuers to the domicile particularly European based transactions. Malta has also broken new ground with the launch of a unique new structure called the Securitisation Cell Company (SCC), the legislation of which came into force in November Securitisation Cell Company (SCC) Malta was the first EU member state to introduce Securitisation Cell Companies (SCCs), which are companies, empowered to establish within themselves one or more cells for the purpose of securitisation transactions. Each cell is a separate patrimony of the cell company, although it does not have a separate legal personality. No prior regulatory approval is required for the establishment of SCCs or cells in SCCs, unless the company issues financial instruments to the public on a continuous basis or accepts insurance risks as part of an insurance securitisation transaction. Reinsurance Special Purpose Vehicle (RSPV) In a typical transaction, an insurance or reinsurance undertaking uses an RSPV to cede risks through a reinsurance contract or similar arrangement. The RSPV funds its potential liabilities under that contract through the issuance of financial instruments such as debt instruments to the capital markets. Structure: The definition of an RSPV found in the Regulations makes use of the term undertaking as it is largely modelled on the definition provided in Article 2(1)(p) of the EU Reinsurance Directive. The regulations however only allow limited liability companies formed in Malta to apply for RSPV authorisation, as the corporate structure is wellestablished in Malta and provides legal certainty. Activities: The object of the limited liability company must be restricted to operating as an RSPV, and the company is restricted from engaging in any other activities. An RSPV may only assume risks from a ceding undertaking through reinsurance contracts or assume insurance risks through similar arrangements. Therefore the link with insurance risk is always required, and other types of risk cannot be transferred through RSPVs. The RSPV enters into a risk transfer arrangement with a ceding undertaking, which takes the form of either a reinsurance contract or a similar arrangement for the transfer of insurance or reinsurance risks, such as a derivative contract. As the definition of an RSPV provides, the RSPV then fully funds its exposure to the risks assumed through the proceeds of a debt issuance or other financing mechanism approved by the MFSA. These proceeds are then invested for greater profitability. RSPVs offer management solutions that enable insurance and reinsurance undertakings to better align their risk profile with their risk tolerance. These vehicles can therefore play a major role in facilitating alternative risk transfer, and may provide additional reinsurance capacity at times in which cover through more traditional channels such as reinsurance companies is limited. Authorisation Process: Procedures for the authorisation of an RSPV for specific use includes Mandatory Conditions required for all Contractual Arrangements to ensure that claims of the providers of capital to the RSPV are at all times subordinated to the reinsurance obligations of the RSPV to the insurance or reinsurance company. Governance Requirements: Qualifying shareholders and key functionaries must be fit and proper persons and the RSPV s system of governance needs to be appropriate to the nature, scale and complexity of the risk that the RSPV assumes. Solvency Requirements: RSPVs must be fully funded at all times, the value of its assets must be equal to or exceed the aggregate maximum risk exposure, so that the RSPV is able to pay the amounts it is liable for as they fall due. Supervisory Reporting: The RSPV is required to report to the MFSA on the value of its assets, its aggregate maximum exposure, any conflicts of interest, as well as any significant transactions entered into within a reporting period. Insurance-linked securities Insurance risk securitisations belong to a broader category of alternative insurance risk transfer often referred to as ART. Insurance securitisation in particular, and ART in general, add to the realm of opportunities that insurers and reinsurers have at their disposal to obtain access to capital resources, in a broader sense, than their own shareholders funds. Insurance-Linked Securities (ILS) is a type of financial instrument used for ART. They are broadly defined as financial instruments whose values are driven by insurance loss events. Typical ILS instruments are those linked to property losses due to natural catastrophes. For investors these represent a unique asset class, the return from which is uncorrelated with that of the general financial market. One type of insurance-linked security is the catastrophe bond, often referred to as a CAT bond. These bonds provide cover for natural disasters and other uncontrollable events. As of February 2012, securitisation vehicles have had the option to have their securities listed on the European Wholesale Securities Market (EWSM), a European regulated market based in Malta. Listing on the EWSM is advantageous to the issuer as it enhances the publicity and credibility of the securities offering.

18 34 35 Key Opportunities Malta continues to be an attractive domicile for investors and financial entities seeking a dynamic European base that is professional, practical, safe and cost effective. Captives Although already an established international centre for captives, Maltese industry players see significant growth potential in the captive market and expect increasing numbers of companies to join the ranks of the many multinationals using Malta today. The PCC regime As one of the key selling points of the domicile, the Maltese Protected Cell Company continues to be popular, providing benefits on all Solvency II pillars allowing substantial cost burden sharing and reducing own funds requirements. RSPVs and CAT bonds The RSPV legislation will support the trend of Malta positioning itself as a key onshore domicile for insurance-linked securities and catastrophe bonds. This area is still relatively undiscovered in Malta and could provide substantial opportunities for pioneers and innovators. Untapped Niche Markets Malta s economy is performing stronger than many of its EU counterparts, providing opportunities for insurers to grow their businesses by tapping into relatively unexploited sectors such as oil and gas, aviation and life sciences. Innovative Policies With Malta continuing to attract high-net-worth individuals and the wealth of the local population growing, there is scope for more innovative and creative policies to protect lifestyle and assets as well as other niche-market demands. Cost-Effective Outsourcing Hub Foreign insurance companies, managers, brokers and other intermediaries are increasingly seeing Malta as an attractive and cost-effective outsourcing destination to locate functions such as claims administration, analytics, customer care, policy administration or sales and distribution. This trend has been boosted by Malta s attractive regulatory framework, sophisticated telecoms and skilled workforce.

19 36 37 A Guide for Doing Business in Malta Open Business Culture As a former colony of the United Kingdom, the Maltese business environment is strongly influenced by British culture, but retains a Mediterranean flavour. Meetings and the way business is conducted may be less formal than in Northern Europe, however, scheduling appointments well in advance is necessary, and punctuality is both expected and appreciated. When it comes to business attire, men wear conservative suits and ties and women suits or dresses. When greeting new business contacts, their title and surname should be used and once a relationship has been established, often a firstname basis is appropriate. Language Maltese and English are the official languages, with English the main language of business and laws and regulations are published in both languages. Many Maltese are also fluent in Italian, German or French. Business Hours Typical office hours are between 8.30 am and 5.30 pm Mondays to Fridays, with a one-hour lunch break between pm and 1.30 pm. In summer, most government offices work half days. Banks are open from 8 am to 2 pm Monday to Friday, and Saturday until 12 pm. Most retail outlets are open from 9 am to 1 pm and from 4 pm to 7 pm Monday to Friday, and on Saturdays shops are generally open between 9 am and 1 pm. Banking & Financial Services The country s banks are able to provide a full range of personal, commercial and trade services to clients. With five retail banks and more than 20 international commercial and trade banks already operating in or from Malta, this sector has become one of the most robust on the island. HSBC and Bank of Valletta are the leading retail banks on the island, while smaller banks such as APS, Lombard and Banif Bank help to keep the banking sector competitive and innovative. Malta is also home to specialists in trade finance such as FIMBank and BAWAG. With the growing number of insurance companies that choose to domicile in Malta, Malta s banks have also built expertise in the management of insurance company investment portfolios. Investment and Trustee Services A number of investment management companies as well as asset managers from the fund industry provide services to the insurance industry. With well over 100 investment services firms licensed in Malta, corporations seeking assistance in the management of their assets are spoilt for choice. In addition, more than 100 Maltese and international fiduciary companies are licensed to offer trust and trustee services on the island. Key Facts Short Travel Times: By air, main European hubs and North Africa can be reached in two to three hours Excellent ICT Connections: Satellite technology and high capacity fibre-optic submarine cables link Malta with Europe Major Transhipment Centre: Malta Freeport is a main regional hub Custodian Banking Malta hosts global custodians as well as several other banks providing custodial services through international partners. Bank of Valletta, Mediterranean Bank, Sparkasse Bank, Deutsche Bank, Swissquote and Custom House hold custody licences in Malta. Retirement schemes are required to appoint custodians and trustees under certain conditions. EU Member State: Passporting rights for services and companies Regional Ties: Malta has cultural and historic connections to countries in North Africa and the Middle East CET Time Zone: One hour ahead of GMT Schengen Zone: Malta is part of the Schengen area, which allows travel between member states without internal border controls Professional Services The excellence of Malta s professional services providers is internationally renowned, and the industry is well-equipped to offer support and strategic guidance. A large number of law firms operate on the island, which are regularly listed in Chambers, Legal 500 and other directories. International firms have a presence in Malta through associate links with local law firms, and many law firms have specialised in assisting international commercial and financial operators seeking opportunities in Malta. Most lawyers have obtained postgraduate degrees at major international institutions and have expertise in organisational structuring and licence applications. Businesses are also supported by a wide range of accounting and auditing practitioners from small boutique practices to the global Big Four accountancy firms, as well as various consultants providing business advisory and back office support. Professional services costs are in general significantly lower than in other Western European locations. Location, Location, Location Malta s strategic location at the centre of the Mediterranean has always been one of the key advantages of doing business in or from Malta. As an EU member state, businesses in Malta can passport their services to all other member states, tapping into the Union s internal market of over 500 million people, while the growing markets of North Africa and the Middle Eastern countries bordering the southern coast of the Mediterranean basin are easily accessible. An insurer licensed in Malta may also cover insurable risks in non-eu countries in which persons are allowed to procure insurance directly from a Maltese insurer. Malta has an extensive network of double taxation treaties for a number of key markets. The country is a signatory to some 70 agreements, among them China, India and the USA. To provide access to international markets and to ensure a smooth trading environment for the financial services sector, Malta is working closely with other regulatory authorities.

20 38 39 Real Estate Malta offers a wide range of commercial and residential property for rent or purchase. Malta s small geographical size is a benefit in terms of short commutes. The travelling time between Malta International Airport and an office is rarely longer than 20 minutes, and overall journeys are seldom longer than 40 minutes. Office space is available in purpose-built office blocks, in converted houses and palazzos, apartments or within new mixed-use developments. Malta offers enviable locations with sea views and marinas as well as prestigious landmark office complexes within A Prestigious Portomaso: per m 2 per annum C Professional Sliema / St. Julians Ta Xbiex / Gzira per m 2 per annum easy commuting distance of residential areas. Overall rental costs are around twothirds to half of those charged for comparable commercial spaces in continental Europe. Malta has also become one of the most sought after locations in Europe for foreign nationals to rent or purchase homes as an investment or for relocation purposes. A wide range of residential property can be found in Malta, ranging from apartments, penthouses, townhouses to villas, with or without a pool. Developments in recent years include marina and coastal complexes at the top-end of the market. Examples of Commercial Property Rental Rates B Prestigious SmartCity: per m 2 per annum D ECONOMICAL Central / North / South part of the island per m 2 per annum Communications Malta s telecoms network is reliable, stable and secure. As the infrastructure has opened up to market forces, access rates have increased and tariffs have lowered. Malta has seen huge public and private sector investment in ICT over the past 15 years and today the country boasts a truly modern infrastructure. The country s ICT industry is a versatile and mature cluster, and the country hosts more than 200 IT companies, including international giants such as Microsoft, Oracle and Cisco. Malta is internationally connected through two satellite stations, one to the Atlantic Ocean region and the other to the Indian Ocean region, and four submarine fibre optic links to mainland Europe, two of which are operated by GO and the rest by Vodafone and Melita respectively. All operators say their cables are designed to carry a lot more traffic than current levels and their capacity is unlimited. Human Capital Highly educated, multilingual and diligent, the Maltese workforce is the country s greatest strength and most valuable asset. Employers will find Malta can offer great value for money as labour costs are around two thirds of those in other Western European jurisdictions. Average Salaries per annum ( ) CEO 96,000 CFO 75,750 Financial Controller 49,000 Management Accountant 32,000 Qualified Accountant 32,500 Accounts Administration 15,000 Senior Compliance Manager 43,129 Compliance Administrator 21,500 Senior Insurance Manager 55,000 Insurance Manager 33,368 Technical Insurance Executive 24,760 Insurance Clerk 15,500 Source: Castille Resources, Salary Survey 2013 D C A B What employers need to know: Probation: The length of the probation period is normally six months unless otherwise agreed by both parties. Weekly working time: 40 hours. Leave: Employees in fulltime employment are entitled to 24 days of vacation leave per year. Maternity leave for female employees in full-time employment is 18 weeks. The law also provides for up to three months unpaid parental leave in the case of birth, adoption or legal custody of a minor. Social security: Employers pay social security contribution at a rate of 10 per cent of the basic wage paid to their employees, subject to a minimum of per week and a maximum of per week. Employees pay another 10 per cent of basic wages, subject to the same minimum and maximum. Taxation Malta s tax system has been deemed by the European Commission to be compliant with EU non-discrimination principles and has also gained approval from the OECD. Corporate Tax Malta offers a highly efficient fiscal regime that avoids double taxation on taxed company profits distributed as dividends. Malta companies are taxed at a rate of 35 per cent. However, a full imputation system applies to the taxation of dividends, whereby the tax paid by the company is imputed as a credit to the shareholder receiving the dividend. Following the distribution of a dividend, shareholders are also entitled to claim a tax refund of 6/7ths of the relevant tax paid in respect of trading income and 5/7ths of the relevant tax paid in the case of passive interest and royalties. The refund is reduced to 2/3rds where the distributing company claims double taxation relief. Income and gains from a participating holding (where a company holds directly at least 10 per cent of the equity shares of a non-resident company, or meets certain other criteria) are exempt from tax. Alternatively, instead of claiming this exemption, a company can choose to pay tax at the normal tax rate and then receive a full refund of the tax paid upon a distribution of dividends. Taxation of Key Vehicles Banks and Financial Institutions: Banks and financial institutions are taxed like all companies registered in Malta. Insurance Companies: Special provisions apply to the determination of total income from the business of insurance. Insurance Managers: Insurance management companies are taxed like all companies registered in Malta. Each cell in a PCC or an ICC is treated as a separate company for tax purposes. Fund Managers / Fund Administrators: Fund managers and fund administrators are taxed like all companies registered in Malta. Investment Funds: Maltadomiciled funds are, as a general rule, exempt from Maltese income and capital gains tax as long as they do not have over 85 per cent of their assets situated in Malta. Trusts: When all the beneficiaries of a trust are not domiciled/resident in Malta and where the trust assets are situated outside Malta, no Maltese income tax (or transfer duty) is payable. Foundations: A foundation may be treated as a Maltese company and benefit from Malta s full imputation system. Foundations may also opt to be taxed in the same manner as a trust. Retirement Schemes: Licensed retirement schemes are exempt from tax on income and capital gains but this does not apply to immovable property situated in Malta. Individuals: Individuals are charged on their income at progressive tax rates up to a maximum rate of 35 per cent. Tax Incentives for Highly Qualified Professionals To attract highly qualified personnel to the financial services industry, Malta introduced an incentive scheme in 2011 targeting well-paid foreign executives. Individuals who have their domicile outside of Malta and are employed in senior positions with a company licensed or recognised by the MFSA to conduct financial business in or from Malta, can benefit from a flat personal income tax rate of 15 per cent on income up to 5 million. Any income over 5 million will be taxfree. To qualify for this tax incentive the employee must earn a minimum of 81,205 (basis year 2014) per year, amongst other criteria.

21 40 41 MALTA A Cosmopolitan Lifestyle in the Med More than just a smart place to invest, Malta is a multi-faceted jewel shining at the centre of the Mediterranean. This small, friendly and welcoming island contains everything you could want to strike that perfect balance between business and pleasure. A Short Flight Away As a leading finance centre, Malta is well connected. Malta International Airport, the island s only airport, is just two or three hours flying time from most European cities. Several airlines operate regular flights to the island including Air Malta, Lufthansa, Emirates, British Airways, Air France, Alitalia, Scandinavian Airlines, Ryanair, EasyJet, Turkish Airlines and Air Berlin. Mediterranean Luxury Determined to uphold its reputation as a five-star destination for high-end travellers and the global business elite, Malta features a number of international and luxury hotels such as the Hilton, Excelsior, Radisson, Intercontinental, Westin Dragonara, Corinthia and the Hotel Phoenicia. Superior accommodation is also offered at the boutique hotel Xara Palace Relais & Chateaux. Gastronomic Delight When it comes to dining, Malta is an island of staggering options. The food scene is defined by an eclectic mix of Mediterranean cooking with strong Italian influences, fuelled by rich ingredients fresh from farm and sea. There are also many restaurants offering international specialities, and the choice is wide, from smart city restaurants in Baroque palaces and family-run trattorias to seafront fish restaurants. The World s Best Climate With more than 300 days of sun a year, expatriates in Malta often become the envy of friends back home. Hot, dry summers and mild winters have earned Malta the title of world s best climate by International Living magazine. Even in winter Malta enjoys an average of 5 to 6 hours of sunshine and more than 12 hours a day in summer. Universal Use of English As an official language of Malta, English is spoken by nearly everyone. English is so prevalent in Malta that thousands of foreign students travel from all over the world to learn English on the island. It is the main business language, while laws and regulations are published in both Maltese and English. Maltese is a unique language with Arabic roots and speckled with Italian, French and English words. Many Maltese are multilingual and also fluent in Italian, German or French. A Home in the Sun For those looking for something more permanent, Malta boasts a wide range of properties available to rent or purchase, from furnished apartments to farmhouses, villas with pools, and even palazzos, all at competitive prices. Finding a good property close to amenities is fairly easy. Most notable properties include five-star apartment complexes built in Tigné and Portomaso. Cosmopolitan, but not Costly Whether choosing a modest apartment or a luxury villa, costs in Malta are very reasonable. Malta comes close to having the lowest cost of living in Europe, while still catering to all lifestyles. Moreover, the island offers highly sophisticated and reliable banking, taxation, insurance, social security and communications services.

22 42 43 The End of Long Commutes In Malta the trip to work is a breeze, as it takes only 45 minutes to cross the entire island. Malta s public transport system covers every corner of the two main islands. Water taxis are a scenic way to jump between the capital Valletta and the nearby headlands of Sliema to the west and the Three Cities to the east. Safe and Quiet Streets Few locations in the world can offer the same high standard of transparency, security and stability that Malta does. The country follows a zero-tolerance policy for corruption, and crime is almost non-existent. Children play on the streets, and there are still some areas where people leave their doors unlocked at night. Family Life Malta has a highly familyoriented culture. Almost all restaurants and public places are family-friendly, while nurseries are free and the Government offers working families subsidies to cover the cost of daycare. Older children can be enrolled in one of many excellent international private or local public schools, nearly all of which teach in English. Tertiary education is offered through the University of Malta and other institutes and private colleges. First Class Healthcare Malta has some of the best healthcare in the world, which is offered free to EU nationals residing in Malta, while foreign residents are advised to take out private medical insurance. As well as local clinics in each town, Malta has a large and modern public hospital, Mater Dei, while also being home to the renowned St James private hospital. Work and Live Visa Free As a member of the Schengen Zone, Malta attracts thousands of professional EU nationals every year, who are free to reside and work on the island. Non-EU citizens can find details about visaexempt countries and visa application procedures on the website of the Ministry for Home Affairs and National Security ( Third-country nationals require work permits, and the granting of these is subject to a labour market test. Outdoor Malta Malta s Mediterranean climate lends itself to a year-round outdoor lifestyle of water sports, golfing, hiking, fishing, horse riding and more. The conditions for scuba diving and snorkeling are excellent, particularly as the sea temperature never drops below 13C (55F). Malta has one golf course, located at the Royal Malta Golf Club, and gyms, football or water polo clubs can be found all over the island. Active in Malta The sea, cafés, restaurants, clubs, cinemas, theatres, sports clubs or gyms are almost always within a walking distance of office complexes or residential areas. Malta also hosts many great festivals of culture and art. Each town or village has its own annual feast and parade for their patron saint. For those in need of some retail therapy, Malta is home to shopping malls for big brand names and markets for local goods. Centuries of Captivating History Heritage forms an important part of island life. With 7,000 years of history and many remains visible to this day, Malta can be described as an open-air museum. Megalithic temples, medieval towns and massive bastions have all been declared as UNESCO World Heritage Sites. These formidable structures regularly provide the backdrop for events listed in Malta s packed cultural calendar such as concerts, plays or art exhibitions as well as its thriving film industry.

23 MALTA The culture of getting things done securely regulated market driven competitively skilled

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