Economy of Malta

Exports & Imports

Malta's export profile continues to be interesting. While electronics and pharmaceuticals remain major contributors, recent data shows a surge in exports of machinery and mechanical appliances in 2023. This trend reflects increasing diversification within the manufacturing sector. Imports are still dominated by machinery and transport equipment, reflecting continued investment in infrastructure and industry.

Balance of Trade

Malta's trade deficit remains a feature of its economy. While the deficit narrowed slightly in 2023 due to rising exports, the gap persists. This is partly due to the country's reliance on imported fuel and raw materials for its manufacturing base.

Infrastructure Development

Malta's road network is extensive, with a total length exceeding 3,360 kilometers as of 2023. This represents steady growth, with ongoing projects focusing on improving road quality and expanding public transportation options. Investments in other vital infrastructure like water management and renewable energy are also underway.

Fiscal Policy

The Maltese government maintains a commitment to fiscal responsibility. Their goal is to balance the budget while strategically investing in key areas. Recent years have seen success in improving tax collection efficiency, with a projected budget surplus for 2024.

Monetary Policy

Following its Eurozone membership in 2008, Malta's monetary policy is still determined by the European Central Bank (ECB). The ECB's current focus is on combating inflation within the euro area, with recent interest rate hikes impacting borrowing costs in Malta.

Trade Agreements

Membership in the European Union remains a cornerstone of Malta's trade strategy. It provides access to the vast European single market, facilitating seamless trade with other member countries. Additionally, Malta has free trade agreements with several non-EU countries, further strengthening its position as a trade hub.

Environmental Regulations

Malta is actively addressing environmental concerns. The country has implemented regulations to tackle waste management, air and water pollution control, and promote sustainable development. These regulations aim to ensure economic growth aligns with environmental responsibility. Malta is also focusing on increasing the use of renewable energy sources.

Tax System in Malta

Capital Gains Tax:Malta offers a capital gains tax exemption for most individual investors. However, for some specific situations, such as selling property held for less than three years, a capital gains tax of 35% might apply.
Corporate Tax Rate:Malta boasts a headline corporate tax rate of 35%. However, the system incorporates a full imputation system. This means companies pay the corporate tax, and upon distributing dividends, shareholders receive a tax credit equivalent to the corporate tax already paid. This can significantly reduce the effective tax burden on dividends, especially for non-resident shareholders who can claim a refund of a portion of the withheld tax.
Sales Tax:Malta follows the European Union's Value Added Tax (VAT) system. The standard VAT rate is 18%, but a reduced rate of 7% applies to specific necessities like medicine and some foodstuffs.
Property Tax:Property tax in Malta varies depending on the property type and location. Typically, it ranges from 0.15% to 0.6% of the property's annual imputed rental value.
Payroll Tax:Similar to many European countries, Malta has a social security system funded through mandatory contributions from both employers and employees. These contributions are part of a single tax called Social Security Contributions (SSC).
Tax Deductions and Credits:Malta offers various tax deductions and credits to incentivize specific activities. These might include deductions for business expenses, research and development costs, or investments in specific sectors like innovation or renewable energy. Additionally, the partial imputation system allows companies to claim tax credits for a portion of dividends received from other Maltese companies.
Tax Compliance:Tax compliance in Malta has improved considerably in recent years. The government has implemented initiatives like digitalization of tax administration and stricter enforcement measures. However, some challenges remain, particularly in ensuring compliance within the informal sector.
Tax Burden:The overall tax burden in Malta is considered relatively attractive compared to some European counterparts. The effective corporate tax rate can be as low as 5% for non-resident shareholders, and the government offers various tax breaks to encourage investment. The tax-to-GDP ratio in Malta hovers around 38%, indicating a moderate tax collection level.