Capital Markets in Malta
Malta has been developing rapidly as a finance centre since joining the European Union in 2004 and adopting the Euro currency in 2008.
FinanceMalta Sector Guide - Capital Markets
It has been widely recognised that the Maltese regulations provide a secure and stable framework for prudential supervision, consumer protection, market surveillance and the prevention of money laundering. Moreover, the country has gained the international reputation for a robust, yet flexible, regime with a highly approachable regulatory authority.
Malta's capital markets are steadily growing in size as well as liquidity and the jurisdiction's financial markets are remarkably sophisticated.
Why Malta for Capital Markets?
Given Malta’s success as an emerging financial services location, it is now committed to developing capital markets.
In fact, the World Economic Forum Competitiveness Report [2012-2013] ranks Malta as follows: 15th for Financial Market Development; 12th for the Regulation of Stock Exchanges; and 13th for the Soundness of the Banks out of a total of 144 countries.
Moreover, Malta has the necessary infrastructure in place for this growth through its flexible regulatory regime, which is both robust and adaptable, as well as its workforce of well-trained professionals, in both the financial and legal industries. Most Maltese professionals have considerable international experience on structured finance working closely with overseas firms, particularly in the UK and the US.
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Malta has a very competitive tax regime based on the imputation system of taxation whereby corporate tax is paid at 35%. This tax is regarded as a prepayment for the tax due by the shareholder upon the eventual distribution of profits. Consequently, on declaration of dividend, the shareholders receive a refund of 6/7ths of the corporate tax paid by the company. This means that the effective rate of tax in Malta is 5% and it is the lowest tax rate in the EU.
This is Malta's general system of taxation for all trading companies that has been approved by the EU in 2007 under State Aid and Code of Conduct.
Securitisation vehicles are tax neutral and non-resident investors in listed securities are not subject to withholding tax on dividends and capital gains.
The Malta Stock Exchange operates to a high standard providing effective facilities for the trading, settlement and registration of securities, and enjoys a sound reputation internationally.
It plays host to numerous equity and debt transactions, providing facilities through which securities can be admitted and subsequently traded over a secure, well-regulated secondary market.
The Malta Stock Exchange commenced its trading operations in 1992 following the enactment of the Malta Stock Exchange Act in 1990, set up with the main objective to develop the capital market in Malta. The intention of the primary market was to facilitate the mobilisation of savings into productive investment, while the provision of a secondary market was to facilitate trading of listed securities.
The Malta Stock Exchange Act was radically amended and renamed to the Financial Markets Act which came into force on 1st October 2002.
The Financial Markets Act was significantly amended again in 2007, principally to provide for the transposition of MiFID and the Transparency Directive into Maltese Law.
Other amendments within the Financial Markets Act directly affecting the Exchange referred to new provisions regarding the licensing and supervision of central securities depositories.
The Exchange was in fact issued with two licenses in 2007 –
- to provide the services of a regulated market (replacing the previous status of a recognised investment exchange)
- to operate a central securities depository
The Malta Stock Exchange is linked to Clearstream to facilitate international access, as well as providing various back office services through its in-house Central Securities Depository.
The Malta Financial Services Authority
The MFSA is the single regulator for financial services. It is also the Listing Authority and approves admissibility to listing on Recognised Investment Exchanges.
The MFSA has signed a considerable number of MoUs with various non-EU jurisdictions and is also a signatory to the IOSCO and the IAIS multilateral MoUs.
As part of its capital markets development, Malta intends to create a ‘one stop shop’ in the same way that it did for the development of the financial services sector.
Besides the possibility of setting up an efficient securitisation vehicle, Malta is now offering the possibility for the listing of wholesale securities issued by the securities vehicles.
The European Wholesale Securities Market [EWSM] was set up, registered and domiciled in Malta in 2012 as a new regulated market for wholesale fixed income securities.
The EWSM is jointly owned by the Irish Stock Exchange and the Malta Stock Exchange; it is approved as an EU regulated market under MiFID and is a ‘Recognised Stock Exchange’ within the meaning of the UK Income Tax Act, 2007.
Capital Markets Practices
Businesses in Malta dealing in capital markets would typically offer these services:
- Corporate structuring
- Relations with regulatory authorities
- Corporate governance
- Ancillary documentation
- Advice and assistance with the drafting or revisions of the prospectus