Malta is positioning itself as an alternative for companies willing to enter the EU market, and plans to use the EU Presidency, which passes to Malta for the first time in January 2017, to promote itself to UK-based international banks.
A recent visit to the island’s highly competitive, English-speaking (yes, we are not the only ones touting this advantage after Britain exits) and onshore EU jurisdiction allowing “passporting” and “re-domiciliation” of funds, with an efficient fiscal regime, a balmy Mediterranean climate and an ethical and professional workforce, left me with the impression that we will need to put our best foot forward to attract financial services from London as the Brexit talks get underway next year.
Many of the world’s major banks who have their European headquarters in Britain are preparing to move some of their operations out of Britain in early 2017 due to the uncertainty over the country’s future relationship with the Europe.
The UK financial sector employs more than 2 million people and makes up almost 12% of the economy. Banks in London depend on a European passport to serve clients across the 28-country bloc. Lenders worry that this right will end after Brexit.
“Most international banks now have project teams working out which operations they need to move to ensure they can continue serving customers, the date by which this must happen, and how best to do it,” said Anthony Browne the chief executive of lobby group British Bankers’ Association in a recent interview .
“Their hands are quivering over the relocate button. Many smaller banks plan to start relocations before Christmas; bigger banks are expected to start in the first quarter of next year,” he said.
Malta, in a Trojan-horse-like-strategy, is focusing on maintaining the harmonious relationship it has with the UK.
“We see ourselves partnering with UK operators to provide solutions to help them sustain their business models; we’re not looking to try and take business away from the UK,” said Kenneth Farrugia , chairman of Finance Malta, which promotes Malta’s fund management industry overseas, as well as its insurance sector, trust and foundations and wealth management.
Financial and insurance activities contributed €149bn or almost 98% of all foreign direct investment in Malta last year. It is obviously an important industry for Malta.
From a regulatory and legal perspective it is difficult to differentiate Malta from other jurisdictions such as London, Paris, Frankfort, Rome or Dublin.
But Malta has some key elements that have enabled it to attract business over recent years, not least of which is the special tax regime to attract highly qualified and skilled people to the country.
The scheme enables them to avail of a flat 15% on their income, which is very attractive for people relocating from cities like London where the tax rate is much higher.
This works out at about half the special Irish income tax rate under the Special Assignee Relief Programme, or Sarp, used to attract foreign nationals to Ireland’s financial services sector.
Malta will be particularly overloaded with work during its EU presidency because of the start of the Brexit negotiations half way through its term.
Key EU legislation that will be discussed next year includes the finalisation of the digital single market, an energy union to ensure continent-wide clean energy and a labour mobility package intended to tackle both unemployment and skills shortages.
Its presidency will also coincide with the abolition for good of mobile roaming charges across the EU.
However, the bottom line is that Malta has mostly always had good relations with the UK, thus placing the island in a good position to negotiate a favourable deal for itself during the EU presidency.
In addition, through prime minister Joseph Muscat, Malta is the current Commonwealth chair for the coming years.