Malta is a small country in the Mediterranean Sea with just over a half million people. In fact, the country has been considered one of the best investment destinations for years. At first sight, the country looks promising: it has a great location, low taxes, and even personal benefits that simplify moving to Malta.
However, like any other country, Malta has flaws regarding those who decide to invest in the local economy. Therefore, we’ll cover the crucial advantages and disadvantages of investing in Malta to help potential investors make the right decision.
Why Invest in Malta?
When capitalizing on Malta’s resources and economy, investors receive various benefits such as tax reductions and residence permits.
Tax Benefits
Malta’s taxation system is among the most favorable in Europe for foreign investors. Those who decide to start a company here will have to pay 35% of the corporate tax. Besides, entrepreneurs can benefit from Malta’s tax refund system even if they don’t reside in the country. Regarding the distribution of dividends, the tax paid in Malta significantly decreases, amounting to no more than 5%.
Investment-Friendly Environment
The reason Malta has such an attractive tax system is that the government warmly welcomes foreign investors. Malta can’t boast a wealth of natural resources, so it is highly dependent on foreign capital. That is why the government has streamlined many of its business regulations, making setting up and operating businesses in Malta more manageable and cost-effective.
Another advantage is pro-business policies, which attract investors from various sectors, such as iGaming, financial services, and tourism.
Opportunity to Obtain Citizenship
Another critical reason to invest in Malta is for a residence permit or Maltese passport. Resident status not only allows investors to stay in this beautiful country longer but also opens doors to Europe. Malta joined the EU in March 2003. Since then, it has had preferential conditions for trade and goods transportation. EU membership also makes hiring employees from other European countries more accessible.
Strong Maltese Passport
As previously mentioned, Maltese citizenship simplifies business operations in the country. At the same time, a Maltese passport allows investors to enjoy citizen’s rights, including voting in elections, accessing free healthcare, and setting up retirement plans. That also applies to freedom of movement within EU countries. This aspect can be critical when it’s necessary to travel across the border for business purposes.
The Passport Index for 2023 ranks a Maltese passport as the fifth strongest passport in the world. Thanks to this ranking, Maltese passport holders can travel to 170 countries with no or minimal visa requirements.
Limited Language Barriers
Due to its close relationships with the UK, Malta has two official languages — Maltese and English. The ubiquity of English breaks down the barriers between foreign investors and their local partners. Moreover, 66% of Maltese speak Italian, and over 17% of the population speak French. Such a multilingual environment allows foreign investors to adapt to Malta without speaking English or Maltese.
Why Investing in Malta is Risky
Despite the significant advantages, investing in Malta includes some drawbacks every investor should be aware of before capitalizing on Malta.
Corruption
Corruption is a painful topic in Maltese society. According to a Eurobarometer survey in 2022, 54% of Maltese company owners think corruption is common in awarding tenders. Furthermore, out of 253 company owners in Malta, 45% believe that funding political parties in exchange for contracts is the most widespread practice in the country.
The current landscape also doesn’t contribute to investors’ optimism. Several journalist investigations against Christian Borg and his dubious wealth caused a great resonance in Malta. Worst of all, the Times of Malta reported Borg was connected with the Abela family in 2018 — they exchanged four payments equaling € 100,000.
All of this cast a shadow on the reputation of Malta and continue to scare away potential investors.
Judicial System Downfalls
The judicial system in Malta also experiences a crisis of great mistrust because of its ridiculous decisions or total inaction.
One of the scandalous examples today is the Cauchi family case. In 2016, Moira Cauchi was hit by a taxi driver while walking along the crosswalk. This tragedy left the woman with grievous injuries causing her 80% disability. However, the punishment for the driver was far from fair: a three-year driving ban, a suspended sentence, and a €1,683 fine. Seven years after the incident, the Cauchi family can’t achieve justice.
The main problem is that the judicial system prompts people in Malta to feel unsafe. Even in the face of conclusive proof, there is a chance that an offender will avoid the punishment, and the victim will be subjected to criticism.
Small Domestic Market
Malta is one of the least populous countries in Europe, with less than a million people living here. Such a small population limits the local market, so reaching high revenue may be challenging when investing in local businesses. Besides, there are few profitable areas in Malta, which lead to intense competition. The combination of these two factors may require substantial investments to realize any returns.
High Living Cost
Foreign investors can see Malta’s relatively high cost of living as a barrier. Price increase makes attracting and retaining skilled employees more challenging, as they may need higher salaries to afford living in the country. It also complicates reaching consumers who can spend more money due to high living expenses. As a result, achieving desired returns on investment takes more time.
Limited Infrastructure
The infrastructure in Malta poses a major challenge for businesses operating on the island, with congested roads and unreliable public transportation being some of the most significant drawbacks. These issues can make it difficult for businesses to move around, resulting in increased operating costs. These consequences negatively impact foreign investors wanting to capitalize on local enterprises.
