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Corporate Services in Malta and the Economic ImpactMEDIA ROOM
August 4, 2020
ACT No. XX of 2013, published in Malta on the 24th of December 2013 was purposely enacted to make provision with respect to Company Service Providers, to provide for matters ancillary or incidental thereto, and to amend various Financial Services Laws. This Act is commonly referred to as ‘The Company Service Providers Act, 2013’ and amongst others, its purpose was to implement Article 36 of Directive 2005/60/EC of the European Parliament and of the Council of 29th October, 2005 on the prevention of the use of the financial system for the purpose of Money Laundering and Terrorist Financing, in so far as the said article applies to Company Service Providers.
To date, as quoted on the Malta Financial Services Authority’s website, the Regulator has issued 190 licences to Companies registered to act as Company Service Providers in terms of the Company Service Providers Act, 2013; 2 licences to a Company Service Provider registered in terms of Article 3(5)(a) of the Company Service Providers Act, 2013; and 17 licences to individuals registered to act as Company Service Providers in terms of the Company Service Providers Act, 2013. Included are foreign Corporate Services Providers who have decided to set up shop in Malta in order to be in a better position to cater for their International client requirements. CSB International Ltd (C38923) that forms part of CSB Group is one of the licenced companies in Malta that the Malta Financial Services Authority authorised to act as a Company Services Provider.
The Importance of Legislation
The Company Service Providers Act is seen as a breakthrough that introduced further regulation in the sector. It is an important piece of legislation for Malta’s growing Financial Services sector as it has led to higher operating standards and importantly aims to establish a level playing field for all - local or foreign Company Service Providers operating from Malta. With current statistics showing that the Maltese Business Registry handles the registration of circa 4,500 new Companies per year, established Corporate Service Providers like CSB Group generally welcome such legislation and consider it to be good news.
Furthermore, it reflects Malta's continued commitment towards its AML / CFT (Anti-Money Laundering / Combating the Financing of Terrorism) obligations and in the long-term it is also likely to add further credibility to Malta's growing Corporate Services Industry. The MFSA has also during the past months reconsidered the whole system with the intention of raising the standards for persons that are active in the Corporate Services Industry. It has done so by introducing a number of proposals for evaluation by the stakeholders of the Industry with the main aim being to address points raised in an Evaluation Report by the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism.
Gaming and the new Licence Regime
It is generally agreed that the Maltese economy has become significantly more diversified in recent times and positive results have been emerging from a number of sectors. The remote gaming industry for example, currently ranks as one of the largest contributors to the National economy by contributing over one billion Euro, which results to around 10% of the Country’s GDP (gross domestic product).
In addition, back-office service providers and Financial Services operators seem to be keeping up their growth and contribution levels steadily. This success is also partly thanks to the result of the Country being innovative in its promotion of the sector and by keeping up-to-date with its regulations.
In 2018 the Maltese Gaming Regulatory framework went through a radical legislative overhaul in order to update the said regulatory framework. The new regulations include the Gaming Authorisations Regulations, the Gaming Commercial Communications Regulations, the Gaming Compliance and Enforcement Regulations, the Gaming Definitions Regulations, the Gaming Player Protection Regulations, the Gaming Premises Regulations, the Gaming Licence Fees Regulations, the Gaming Tax Regulations and the Social Causes Fund Regulations.
Moreover, the new fiscal structure has become effective as of 1st January 2018 and a transitory period was also granted whereby licensees that were already in existence should have continued paying license fees in accordance with the previous Remote Gaming Regulations until 30th June 2018. As of 1st July 2018, licensees were to start paying gaming license fees according to the new regulations. A reconciliation took place in order to calculate the difference between what was due for the first 6 months of 2018 and the rest of the year (under the new regime).
Licensees that would have paid more than what was due have received tax credits equivalent to the excess amount paid and licensees that would have paid less have paid the difference accrued by the end of September 2018. As of 1st January 2019, the new gaming license fees regulations then came into force therefrom.
Cryptocurrencies and Blockchain Technologies
Furthermore, Malta has also, since June 2018, experienced the approval of 3 bills in relation to Cryptocurrencies and Blockchain technologies which have become effective as of the 1st of November 2018. The primary legislation is The Virtual Financial Assets Act which has been enacted for the purpose of regulating Initial Coin Offerings (ICOs) and Virtual Financial Services Providers. It outlines the conditions and steps that each project has to go through in order to be compliant.
Then there is The Malta Digital Innovation Authority Act which stipulates the setup of an entity with the aim of governing the development as well as the implementation of certain guiding principles set forth in the Act. The entity is also empowered to have regulatory functions and is known as the “Malta Digital Innovation Authority”.
Finally, The Innovative Technology Arrangements and Services Act then defines the enterprises that are based on blockchain and makes them recognizable in the eyes of the law. It was drafted with the aim to serve as the basis for the operation of the previously mentioned Acts in its efforts to make Malta a leader and a pioneer in pursuing such regulations and to make the Country one of the most attractive jurisdictions for incorporating and forming Cryptocurrency and Blockchain based enterprises.
The Impact on the Maltese Economy
Despite being small geographically, Malta is leading the route to becoming a frontrunner in technology, particularly within the iGaming and Financial Technology sectors and the recent developments have had a positive impact on the Maltese economy. The iGaming sector has already managed to attract thousands of young as well as already established foreign entrepreneurs to the island.
The Cryptocurrency and Blockchain sector, albeit relatively ‘new’ to the Country is another area that seems to be rising worldwide, and Malta’s foresight and innovative mindedness should also lead to the gaining of further positive economic results which would undoubtedly continue to steadily attract investment into other sectors including ancillary services such as Corporate and Trust services, Accounting and Payroll services, Auditing, Legal and Compliance services, Tax Consultancy services, Recruitment and HR Consultancy services, Business Information services, Immigration, Relocation and Real Estate, amongst others.
About the Author
This article has been authored by Sacha J. Farrugia, CSB Group Senior Manager - Corporate Services. For any additional information or support required please contact us on [email protected].