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A Question of Substance

GVZH Advocates
January 21, 2015

Malta continues to receive glowing reviews internationally as a stable financial services centre of repute within the European Union. Over the past fifteen years, Malta has moved seamlessly from being an offshore to an onshore jurisdiction, through the implementation of several legal, tax and regulatory rules intended to stimulate domestic and international economic activity. In this respect, Malta has experienced extraordinary growth and resilience, especially in the midst of the prevailing financial crisis.

The financial services sector has grown exponentially during this period, attributable primarily to the fact that Malta's regulatory approach has created the right environment to maintain stringent EU standards without imposing bureaucratic burdens on operators. Several entrepreneurs have selected Malta as the right jurisdiction for the establishment and regulation of their financial business – be it asset management, online forex brokering, investment fund structures,online payment solutions, insurance and securitisation vehicles.

Whilst the financial service supply chain continues to evolve, predominantly shifting towards an online-based operational environment, the operator's physical presence in the jurisdiction where it seeks to be regulated remains a critical factor and consideration. For a typical online FOREX brokerage set-up, this would effectively involve the engagement of three Directors, two of which are required to be resident in Malta. The said directors (or additional officers of the company) must cover the licensable operational roles within the business and one non-executive and resident Director must fulfil the required Compliance Officer and Money Laundering Reporting Officer roles.

Any person proposed to perform any such role/s must suitably qualified and experienced for the relevant role/s if he/she is to satisfy the Regulator's 'fitness and properness' test, which revolves around three key considerations namely suitability, integrity and competence.

Establishing the necessary operational presence in Malta would effectively entitle Malta-licensed operators to offer their services across borders, reaching out to the EU's consumer base of 740 million people, unless such activities are excluded from the significant spectrum of "passportable" financial services. Online operators find this cross-border right particularly accommodating to the internet's explosive growth as a distribution channel for such services. Financial operators based in Malta also benefit from the jurisdiction's favourable tax regime  and a network of over 60 double-tax treaty networks. Both these factors have been a major driver for the tremendous growth in the sector. On a personal taxation level, specific tax amendments have been implemented in 2011 to attract qualified skill and talent to live in Malta and work in the financial series industry. Such "Highly Qualified Persons" may effectively benefit from a favourable personal Malta tax rate of 15% on their employment income, serving to attract top talent to bolster the growth in the sector.

Malta's ability to provide a balanced environment of rigorous regulation and attractive business incentives has proven to be a winning formula for financial operators seeking a reliable business hub within the EU.

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Tags: Europe | Compliance | internet | offshore | standards | entrepreneurs | regulation | financial services | environment | business | forex | insurance | tax | investment | Malta | law | services



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