Chapter

MALTA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2000
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Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: November 30,1994.
Exchange Arrangement
CurrencyThe currency of Malta is the Maltese lira.
Other legal tenderMalta has 23 denominations of gold coins, which are legal tender.
Exchange rate structureUnitary.
Classification
Conventional pegged arrangementThe exchange rate of the Maltese lira is determined on the basis of a weighted basket of currencies comprising the dollar, the euro, and pound sterling. Unless market conditions indicate otherwise, a variable spread of approximately 0.125% is applied effective January 1, 1999, to the middle rate to compute the buying and selling rates for transactions between the Central Bank of Malta (CBM) and the credit institutions (authorized banks). These transactions may be conducted in dollars, euros, or pounds sterling, normally in amounts not less than Lm 150,000. Transactions in smaller amounts are handled through the interbank market. There is no limit on the spread between the buying and selling rates the credit institutions may quote. Authorized banks may also establish rates for currencies not quoted by the CBM based on the latest international market rates.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange market
Official cover of forward operationsThe CBM provides forward cover directly to government departments and public sector bodies in respect of such transactions. Forward rates are based on interest rate differentials between market rates and international money market rates.
Arrangements for Payments and Receipts
Prescription of currency requirementsAuthorized payments to and proceeds from exports to all countries may be transacted in any foreign currency.
Payment arrangements
Bilateral payment arrangements
OperativeThere is a banking agreement with Libya operated by the respective central banks to clear payments in connection with commercial transactions, outstanding balances being settled in convertible currencies within 90 days.
Administration of controlThe CBM, as agent for the MOF, administers exchange controls. Authority to approve and effect particular current and capital account transactions is delegated to authorized credit institutions (mainly foreign exchange bureaus).



Effective January 1, 2000, the MOF delegated responsibility for the approval of inward direct investment by nonresidents to the Malta Financial Services Centre (MFSC), which is the institution that is responsible for the registration of companies and, together with the CBM, for supervising and regulating financial services in Malta.
International security restrictions
In accordance with Executive Board Decision No. 144-(52/51)Yes.
In accordance with UN sanctionsCertain restrictions on payments and transfers to Angola, Georgia, the Federal Republic of Yugoslavia (Serbia/Montenegro), Iraq, Liberia, Libya, Rwanda, Sierra Leone, and Somalia remain in force in compliance with UN Security Council Resolutions. Effective April 30, 1999, restrictions on transactions with Libya were suspended following the suspension of such sanctions by the United Nations. Effective December 21, 1999, similar restrictions apply to payments and transfers to the Taliban (the Islamic State of Afghanistan).
Payment arrearsNo.
Controls on trade in gold (coins and/or bullion)
Controls on domestic ownership and/or tradeResidents are allowed to hold gold coins that are legal tender in Malta, but must obtain permission from the CBM to purchase and sell any other gold coins.
Controls on external tradeAuthorized businesses may import gold bullion solely for the manufacture of gold articles. The importation of gold coins for numismatic purposes and the exportation of unworked gold by residents other than the monetary authorities are subject to CBM approval. Licenses are required for the importation of gold filigree.
Controls on exports and imports of banknotes
On exports
Domestic currencyResidents and nonresidents may export up to Lm 25 a person.
Foreign currencyNonresident travelers may export foreign currency up to the amount they bring into the country. Effective January 1, 2000, the limit for residents was increased to Lm 5,000 a trip (from Lm 2,500).
On imports
Domestic currencyOnly Lm 50 in notes and coins that are or have been legal tender in Malta may be imported.
Foreign currencySubject to the provisions of the Money Laundering Act, any amount of foreign currency may be imported.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyEffective January 1, 1999, resident individuals may invest up to Lm 8,000 (previously, Lm 5,000) a year in savings and time deposit accounts denominated in foreign currency. Effective January 1, 2000, this limit was increased to Lm 15,000 a year. Export companies in the manufacturing sector may deposit export proceeds in such accounts for a maximum period of six months. Effective January 1, 2000, this facility was extended to firms in all other export-oriented activities.



Effective January 1, 2000, resident businesses in the retailing sector may hold up to Lm 2,500 in foreign currency time and savings deposits on the condition that the funds be used in relation to their business activities and payments to nonresidents in connection with current account transactions.



Effective January 1, 2000, residents may also hold up to Lm 2,500 in demand deposit accounts. Credit balances in these accounts may be used for payments to nonresidents in connection with current account transactions.



CBM approval is required for any transactions involving foreign exchange accounts held by residents with local banking institutions above the limits and conditions stated above.
Held abroadResidents are permitted to open savings and time deposit accounts with nonresident banking institutions and may deposit in such accounts a maximum amount of Lm 15,000 a year.



CBM approval is required for any transactions involving foreign exchange accounts held by residents with nonresident banking institutions outside the limits and conditions stated above. CBM approval is also required if residents wish to open and maintain demand deposit accounts with nonresident banking institutions.
Accounts in domestic currency convertible into foreign currencyConversion is allowed freely with regard to all authorized transactions (mainly current payments).
Nonresident Accounts
Foreign exchange accounts permittedThese accounts may be credited with funds from overseas sources or with income earned from permitted activities carried out in Malta.
Domestic currency accountsThe same criteria apply as for foreign exchange accounts.
Convertible into foreign currencyYes.
Blocked accountsBalances retained in blocked accounts are usually limited to those arising from the liquidation of investments in real estate in Malta. Such balances are temporarily retained until proof of the validity of any agreements entered into in terms of the underlying transaction is provided, and until it is shown that the relevant legal and financial conditions have been met.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsPayments for imports may be made freely, provided that currency regulations are complied with and that supporting documents, including the customs entry form for imports with a minimum value of Lm 20,000 and related import license, where applicable, are submitted to the intermediary bank.
Domiciliation requirementsImport payments must be transacted through authorized credit or financial institutions.
Import licenses used as exchange licensesWhere import licenses are required, such licenses must be presented to the authorized credit and financial institutions to obtain foreign exchange.
Import licenses and other nontariff measuresThe Director of Imports and Internal Trade in the Ministry for Economic Services administers certain import controls in line with the Importation Control Regulations.
Negative listLicenses are required only for the importation of items that need clearance for health, safety, security, and environmental reasons, as well as for particularly sensitive items, such as fresh and frozen fish, handmade lace, and gold and silver filigree.
Open general licensesAll other products may be imported without an import license.
Import taxes and/or tariffsImports originating from non-EU countries are subject to import duties. Additionally, a number of imports are subject to protective levies.
State import monopolyThe importation of barley, maize, hard and soft wheat, and certain petroleum products is undertaken only by state-owned enterprises.
Exports and Export Proceeds
Repatriation requirementsProceeds must be received within six months of shipment.
Surrender requirementsExport proceeds must be surrendered to the authorized credit and financial institutions. However, effective January 1, 1999, exporters in the manufacturing sector may retain export proceeds in foreign currency deposit accounts with authorized banks for up to six months to make import payments connected with their exporting business. Effective January 1, 2000, the retention of proceeds in foreign currency deposit accounts was extended to firms in all other export-oriented activities.
Financing requirementsNo.
Documentation requirementsExporters must submit a CBM form for exports over Lm 20,000.
Export licensesWith the exception of works of art and certain essential goods, all products may be exported freely.
Without quotasCertain items of clothing for export to countries in the EU are subject to indicative ceilings and EU statistical surveillance.
Export taxesNo.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersPayments for invisibles may be made freely, but supporting documents must be presented to authorized credit and financial institutions before payment is effected. In some cases, such as travel-related payments and gift remittances, these payments are subject to limits on the amounts remitted, to prevent capital transfers.
Payments for travelThere are no quantitative restrictions on payments for accommodation and transportation expenses, as long as they are paid for in Malta or abroad with credit cards.
Quantitative limitsResidents are entitled to a travel allowance equivalent to Lm 2,500 a trip. Effective January 1, 2000, the travel allowance was increased to the equivalent of Lm 5,000 atrip.
Indicative limits/bona fide testAmounts in excess of the above limit maybe granted upon submission of documentary proof of need.
Personal paymentsThere are no restrictions on the transfer of pensions. Payments that are directly related to medical treatment, education, family maintenance, and alimony are permitted, within reasonable limits.
Quantitative limitsThe annual limit each resident may transfer abroad to other family members or as a cash gift was Lm 2,500. Effective January 1, 2000, this limit was increased to Lm 5,000. Remittances above this limit require exchange control approval.
Indicative limits/bona fide testSupporting documents must be presented to the intermediary bank.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsProceeds must be received within six months of payments.
Surrender requirementsReceipts must be offered for sale to an authorized credit or financial institution or, if permitted by the CBM, deposited in a foreign currency account with a local institution.
Restrictions on use of fundsFunds deposited in foreign currency accounts may not be utilized for capital transactions without CBM authorization.
Capital Transactions
Controls on capital and money market instrumentsEffective January 1, 2000, individuals and nonfinancial companies are permitted to invest up to Lm 15,000 a year. Any investment above this amount requires CMB approval.
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsApproval from the CBM must be obtained to purchase or acquire securities that are not listed on the Malta Stock Exchange (MSE). Effective January 1, 2000, approval must be obtained from the MFSC.
Sale or issue locally by nonresidentsSecurities may not be issued without the approval of the MFSC.
Purchase abroad by residentsEffective January 1, 2000, individuals and companies are permitted to invest up to Lm 15,000 a year (previously Lm 8,000). Any investment above that amount requires exchange control approval from the CBM. Credit institutions and insurance companies are permitted to invest in such securities as long as the holding of such investment is in line with prudential supervision regulations and currency exposure limits stipulated by the CBM and the MFSC.
Sale or issue abroad by residentsResidents are permitted to sell their approved holdings of foreign portfolio investments and acquire other such investments. Effective January 1, 2000, locally registered companies may list their securities on recognized stock exchanges overseas without CBM approval.
Bonds or other debt securitiesThe same regulations apply as for shares or other securities of a participating nature.
On money market instrumentsThe same regulations apply as for shares or other securities of a participating nature.
On collective investment securities
Sale or issue locally by nonresidentsSales are permitted, but the issue of these securities requires the approval of the MFSC.
Purchase abroad by residentsThe same regulations apply as for shares or other securities of a participating nature.
Sale or issue abroad by residentsThe same regulations apply as for shares or other securities of a participating nature.
Controls on derivatives and other instrumentsPresently, such transactions take the form of forward currency deals. Such transactions are generally only allowed as a hedging instrument to cover an underlying current account transaction.
Purchase locally by nonresidentsYes.
Sale or issue locally by nonresidentsYes.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsYes.
Controls on credit operations
Commercial credits
By residents to nonresidentsExchange control approval is not required for commercial credits, but export proceeds must be received within six months of shipment, unless otherwise authorized.
Financial credits
By residents to nonresidentsResident credit and financial institutions are permitted to lend to nonresidents in foreign currency. Such lending is subject to prudential directives issued by the CBM. The directives cover large credit exposures and other regulations on currency exposure limits. Resident credit and financial institutions may also lend to nonresidents in local currency any amount, subject to prudential directives issued by the CBM, as long as the funds borrowed by the nonresident are used for financing operations in the local economy.
To residents from nonresidentsResident credit and financial institutions are permitted to borrow from nonresident financial institutions as long as the maturity period of the borrowing exceeds three years. Borrowings for periods of three years or less require CBM approval. All such borrowings must be reported to the CBM.
Guarantees, sureties, and financial backup facilities
By residents to nonresidentsThese transactions are allowed if related to trade transactions.
Controls on direct investment
Outward direct investmentEffective January 1, 1999, residents, individuals and companies, were allowed to remit up to Lm 300,000 a year (from Lm 150,000 a year) for direct investment purposes. Investments in excess of that amount required CBM approval. Effective January 1, 2000, all limits on the amount that resident individuals may transfer abroad for direct investment purposes were removed. Approval for such investment, however, remains subject to the condition that the resident acquire a controlling interest in the overseas company. Details of the state of the investment must be reported to the CBM annually.
Inward direct investmentPrior CBM approval is required. Except in a few areas, direct investment by nonresidents is usually permitted. Direct investment is usually prohibited in the real estate, wholesale, and retail trade sectors (particularly the importation of consumer goods for resale). Applications for direct investment in other activities may also be refused if the sectors involved are considered sensitive from a national perspective.
Controls on liquidation of direct investmentApproval is usually granted once financial statements and documentary evidence of the original investment are submitted to the MFSC.
Controls on real estate transactions
Purchase abroad by residentsEffective January 1, 2000, residents may invest up to Lm 50,000 a year in real estate abroad, subject to presentation of documentation to the CBM. Residents are also allowed to purchase real estate overseas using funds already held in portfolio investments abroad.
Purchase locally by nonresidentsEffective January 1, 1999, nonresidents may acquire immovable property in Malta as their own residence, with the permission of the MOF, on the condition that the cost of property to be acquired exceeds Lm 30,000 in the case of an apartment and Lm 50,000 in the case of any other residence (previously Lm 15,000), and that funds originate from overseas; additionally, the ad valorem stamp duty on the value of property sold to nonresidents was reduced to 10% from 17%. The MOF may allow nonresidents to acquire more than one property in specially designated areas.
Sale locally by nonresidentsNonresidents are not allowed to engage in real estate property transactions in Malta, except to sell any property acquired with the approval of the MOF.
Controls on personal capital movements
Loans
By residents to nonresidentsEffective January 1, 2000, loans extended by residents to nonresidents are permitted up to a limit of Lm 20,000, provided that the loan is for a period of more than three years and related documentation is submitted regularly to the CBM for statistical purposes. Borrowing in excess of Lm 20,000 and/or for a period of three years or less is subject to specific CBM approval.
To residents from nonresidentsLoans in excess of Lm 5,000 may be obtained from foreign sources, provided that the loan is for a period of over three years and related documentation is submitted for statistical purposes. Borrowing in excess of Lm 5,000 with less than three years’ maturity is subject to specific CBM approval. Effective January 1, 2000, this limit was increased to Lm 20,000.
Gifts, endowments, inheritances, and legacies
By residents to nonresidentsEffective January 1, 2000, the limit on gifts was increased to Lm 5,000 from Lm 2,500, but there are no limits for endowments, inheritances, and legacies, although documentary evidence must be submitted to an authorized credit or financial institution.
Settlement of debts abroad by immigrantsYes.
Provisions specific to commercial banks and other credit institutionsEffective January 10, 1999, credit institutions, other than those that are authorized to transact only in currencies other than the Maltese lira, as well as other financial institutions, may hold foreign assets in unlimited amounts, but subject to prudential regulations issued by the CBM.
Borrowing abroadResident banks and financial institutions are permitted to borrow from nonresident financial institutions as long as the maturity period of the borrowings exceeds three years. Borrowings for periods of three years or less require CBM approval. All borrowings must be reported to the CBM.
Maintenance of accounts abroadCredit institutions may hold accounts for both liquidity and investment purposes, subject to prudential regulations.
Lending to nonresidents (financial or commercial credits)Lending and purchases of securities abroad are permitted, subject to banking directives on large exposures and regulations on currency exposure limits. Resident banks and financial institutions may lend to nonresidents in local currency any amount, subject to prudential directives governing large exposures, as long as the funds borrowed are used for carrying out operations in the local economy.
Lending locally in foreign exchangeLending is permitted, subject to prudential regulations issued by the CBM with regard to exposure limits.
Purchase of locally issued securities denominated in foreign exchangeThis is permitted, subject to prudential regulations issued by the CBM with regard to exposure limits.
Open foreign exchange position limitsOpen foreign exchange position limits are subject to prudential regulations issued by the CBM with regard to exposure limits.
Provisions specific to institutional investorsEffective January 1, 2000, overseas portfolio investments by insurance companies were completely liberalized, but remain subject to prudential regulations introduced by the MFSC. These regulations, issued in the form of directives, are in line with those in force in the EU. The regulations also refer to asset quality and currency matching.



Investment management companies are permitted to invest, without limit, eligible funds that originate from overseas from both resident and nonresident sources. In addition, they are permitted to invest overseas funds that originate from local sources belonging to residents, on the condition that the funds invested by the resident with the investment company do not exceed the yearly portfolio investment allowance (currently Lm 15,000 a person).
Limits (max.) on securities issued by nonresidents and on portfolio invested abroadYes.
Limits (max.) on portfolio invested abroadYes.
Currency-matching regulations on assets/liabilitiescompositionYes.
Other controls imposed by securities lawsNo.
Changes During 1999
Exchange arrangementJanuary 1. The composition of the Maltese lira basket was revised to take into account the introduction of the euro. The euro was allocated the previous weight of the ECU component, excluding the sterling weight within the ECU. The latter was allocated to the weight of the sterling in the Maltese lira basket.



January 1. The variable spread used for the computation of the buying and selling rates for transactions in foreign exchange between the CBM and the credit institutions was reduced to approximately 0.125%.
Arrangements for payments and receiptsApril 30. Restrictions on transactions with Libya were suspended following the suspension of sanctions by the United Nations.



December 21. Restrictions were placed on payments and transfers to the Taliban (the Islamic Republic of Afghanistan).
Resident accountsJanuary 1. The allowance for investments in foreign currency by resident individuals and nonfinancial corporate bodies, without specific exchange control approval, was increased to Lm 8,000 from Lm 5,000 a year.
Exports and export proceedsJanuary 1. The period during which exporters in the manufacturing sector are allowed to retain export proceeds in foreign currency deposit accounts was extended to six months from four months.
Capital transactionsJanuary 1. The allowance for investments in foreign currency by resident individuals and non-financial corporate bodies, without specific exchange control approval, was increased to Lm 8,000 from Lm 5,000 a year.
Controls on direct investmentJanuary 1. The allowance for direct investment abroad by resident individuals and corporate bodies, without specific exchange control approval, was increased to Lm 300,000 from Lm 150,000 a year.
Controls on real estate transactionsJanuary 1. The “ad valorem” stamp duty on the value of property sold to nonresidents was reduced to 10% from 17%. The minimum value of property to be acquired by nonresidents was increased to Lm 30,000 from Lm 15,000 in the case of apartments and to Lm 50,000 from Lm 15,000 in the case of other residences.
Provisions specific to commercial banks and other credit institutionsJanuary 10. Credit institutions, other than those that are authorized to transact only in currencies other than the Maltese lira, as well as other financial institutions, were allowed to hold foreign assets in unlimited amounts, subject to prudential regulations issued by the CBM.
Changes During 2000
Arrangements for payments and receiptsJanuary 1. The MOF delegated responsibility for the approval of inward direct investment by nonresidents to the MFSC.



January 1. Residents were allowed to export up to Lm 5,000 in foreign currency a trip (previously Lm 2,500).
Resident accountsJanuary 1. The allowance for investment in foreign currency by resident individuals and nonfinancial corporate bodies, without specific exchange control approval, was increased to Lm 15,000 a year from Lm 8,000 a year.



January 1. Firms in all other export-oriented activities, not just export companies, were allowed to deposit export proceeds in savings and time deposit accounts denominated in foreign currency for a maximum period of six months.



January 1. Resident businesses in the retailing sector were allowed to hold up to Lm 2,500 in foreign currency time and savings deposits on the condition that the funds be used only for receipts related to their business activities and payments to nonresidents in connection with current account transactions.
Exports and export proceedsJanuary 1. The retention of proceeds in foreign currency deposit accounts was extended to firms in all export-oriented activities.
Payments for invisible transactions and current transfersJanuary 1. The annual limit each resident may transfer abroad to family members or as a cash gift was increased to Lm 5,000 from Lm 2,500.



January 1. The travel allowance was increased to the equivalent of Lm 5,000 a trip from Lm 2,500 a trip.



January 1. The allowance for investment in foreign currency by resident individuals and nonfinancial corporate bodies, without specific exchange control approval, was increased to Lm 15,000 a year from Lm 8,000 a year.
Capital transactions
Controls on capital and money market instrumentsJanuary 1. Locally registered companies may list their securities on recognized stock exchanges overseas without CBM approval.



January 1. Approval to purchase or acquire securities that are not listed in the MSE must be obtained from the MFSC, not the CBM.
Controls on direct investmentJanuary 1. Limits on the amount that resident individuals may transfer abroad for direct investment purposes were removed.
Controls on real estate transactionsJanuary 1. Residents were allowed to invest in real estate abroad up to Lm 50,000 a year.
Controls on personal capital movementsJanuary 1. The limit on transfers of gifts was raised to Lm 5,000 from Lm 2,000.



January 1. Loans extended by residents to nonresidents and by nonresidents to residents for a period of more than three years were increased to Lm 20,000 from Lm 5,000.
Provisions specific to institutional investorsJanuary 1. Overseas portfolio investments by insurance companies were completely liberalized, but remain subject to the prudential regulations introduced by the MFSC.

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