Chapter

MALTA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2004
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(Position as of December 31, 2003)
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 24 denominations of gold coins, 52 silver coins, and 1 cupronickel coin that are legal tender but do not circulate.
Exchange rate structureUnitary.
Classification
Conventional pegged arrangementThe exchange rate of the Maltese lira is determined on the basis of a weighted basket of currencies. The basket consists of the dollar (10%), the euro (70%), and the pound sterling (20%). A fixed spread of approximately 0.125% is applied to the middle rate to compute the buying and selling rates for transactions between the Central Bank of Malta (CBM) and credit and financial institutions. These transactions may be conducted in dollars, euros, or pounds sterling, normally in amounts of not less than the equivalent of Lm 150,000. The CBM also quotes indicative rates for other currencies based on international market rates. There is no limit on the spread between the buying and selling rates that authorized dealers may quote in the foreign exchange market.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange market
Official cover of forward operationsThe CBM may provide forward cover directly to government departments and public sector agencies. In exceptional circumstances, the CBM may also engage in forward transactions with credit institutions that are permitted to provide forward cover to their resident customers. Forward rates are based on interest rate differentials between domestic and international money market rates.
Arrangements for Payments and Receipts
Prescription of currency requirementsNo.
Payments arrangements
Bilateral payments arrangements
OperativeA banking agreement with Libya operates through the respective central banks to clear payments in connection with commercial transactions between the two countries. Outstanding balances are settled in convertible currencies at the end of each calendar quarter.
Administration of controlThe CBM, as agent for the Ministry of Finance and Economic Affairs (MOFEA), administers exchange controls. In turn, the CBM has delegated authority to approve most bona fide current and capital account transactions to authorized dealers (i.e., credit institutions and foreign exchange bureaus).
The MOFEA has delegated responsibility for the approval of inward foreign direct investment to the Malta Financial Services Authority (MFSA), which is the regulator of financial services in Malta and is also responsible for the registration of companies.
International security restrictions
In accordance with IMF Executive Board Decision No. 144-(52/51)Yes.
In accordance with UN sanctionsRestrictions apply on payments and financial transfers to the Democratic Republic of the Congo, Liberia, Rwanda, and the UNITA movement in Angola. All assistance except for humanitarian assistance to Georgia is prohibited. In accordance with UN Security Council resolutions, assets of certain individuals associated with the former governments of Iraq and the former Federal Republic of Yugoslavia and organizations and other entities identified as terrorists or as sponsors of terrorism are frozen.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)
Controls on domestic ownership and/or tradeTrade in unrefined gold and gold for industrial use may be undertaken only by licensed gold dealers in accordance with the Gold (Control) Regulations (1996). Residents are permitted to hold or acquire manufactured articles of gold, including coins.
Controls on external tradeOnly licensed dealers are permitted to trade in unrefined gold or gold for industrial use.
Controls on exports and imports of banknotesOn January 1, 2003, all controls on exports and imports of domestic and foreign currency banknotes were eliminated for all permitted transactions. However, all exports and imports of banknotes (foreign or domestic) in excess of the equivalent of Lm 5,000 (prior to January 1, 2003, Lm 15,000) must be declared to customs.
On exports
Domestic currencyThere is no limit on the amount that residents may export.
Foreign currencyNonresident travelers may export foreign currency up to the amount they brought into the country.
On imports
Domestic currencyNonresidents entering Malta should declare to customs any imports of domestic currency in order to facilitate their reexport.
Foreign currencyNonresidents entering Malta should declare to customs any imports of foreign currency in order to facilitate their reexport.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyEffective January 1, 2003, resident individuals may hold up to the equivalent of Lm 100,000 (previously, Lm 50,000) a year in savings and time deposit accounts denominated in foreign currency, provided that these funds are held therein for a minimum period of six months. Effective the same date, residents may also hold up to Lm 20,000 (previously, Lm 15,000) in demand deposit accounts with authorized dealers, provided the funds originated from abroad. Credit balances in these accounts may be debited with payments in foreign currency related to current account transactions.
Export companies may deposit export proceeds in these accounts for a maximum period of one year.
Corporations that act as commission agent on behalf of foreign companies may receive and deposit with local banks foreign currency payments made by local companies.
Effective January 1, 2003, resident businesses in the retailing sector may hold up to the equivalent of Lm 20,000 (previously, Lm 15,000) in cash or in foreign currency accounts with local banks. These accounts may be debited with payments in foreign currency related to current account transactions.
Approval requiredYes.
Held abroadEffective January 1, 2003, residents may open savings and time deposit accounts with nonresident banking institutions and may deposit a maximum amount of the equivalent of Lm 100,000 a year (previously, Lm 50,000), provided the holding period is at least six months.
Approval requiredYes.
Accounts in domestic currency held abroadYes.
Accounts in domestic currency convertible into foreign currencyConversion is allowed freely for all current transactions and permitted capital transactions.
Nonresident Accounts
Foreign exchange accounts permittedThese accounts may be credited with funds from external sources or with proceeds from permitted activities carried out in Malta.
Domestic currency accountsThese accounts may be credited with funds from external sources or with proceeds from permitted activities carried out in Malta.
Convertible into foreign currencyNo.
Blocked accountsBalances in blocked accounts usually originate from the liquidation of investments in real estate in Malta. These balances are retained temporarily until the relevant legal and financial procedures have been completed.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsPayments for authorized imports may be made freely, provided that supporting documents—including the customs entry form (for imports with a minimum value of the equivalent of Lm 20,000) and, in some cases, an import license—are submitted to an authorized dealer.
Domiciliation requirementsImport payments must be effected through authorized dealers.
Import licenses used as exchange licensesWhere import licenses are required, they must be presented to an authorized dealer before payments may be effected.
Import licenses and other nontariff measuresThe Commerce Division of the MOFEA administers certain import controls in accordance with the Importation (Control) Regulations.
Negative listLicenses are required only for imports of items that need clearance for health, safety, security, or environmental reasons, as well as for certain items such as fresh and frozen fish, handmade lace, and gold and silver filigree.
Open general licensesAll products not on the negative list may be imported without a license.
Import taxes and/or tariffsImports originating from non-EU countries may be subject to import duties. Additionally, a number of imports are subject to protective levies.
State import monopolyImports of barley, maize, hard and soft wheat, and certain petroleum products are subject to state monopoly.
Exports and Export Proceeds
Repatriation requirementsProceeds must be received within six months of shipment.
Surrender requirementsExport proceeds must be surrendered to authorized dealers. However, exporters may retain export proceeds in foreign currency deposit accounts with authorized dealers for up to one year to make import payments connected with their exporting business.
Financing requirementsNo.
Documentation requirementsNo.
Export licenses
Without quotasExports of works of art and certain essential goods require a license in accordance with the Exportation (Control) Regulations.
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 dealers before payment is effected.
Payments for travelEffective January 1, 2003, there are no limits on payments for travel.
Personal payments
Quantitative limitsMost payments must be supported by relevant documentation. Effective January 1, 2003, the annual limit each resident may transfer abroad to other family members is the equivalent of Lm 20,000 (previously, Lm 10,000) a person a year.
Indicative limits/bona fide testSupporting documents must be presented to an authorized dealer.
Other paymentsResidents are not permitted to enter into long-term assurance contracts with nonresident companies outside of EU or EEA member states.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsYes.
Surrender requirementsProceeds must be received within six months of payment and surrendered to an authorize dealer.
Restrictions on use of fundsFunds deposited in foreign currency accounts with authorized dealers may be retained for maximum period of one year and may be used for export-related payments.
Capital Transactions
Controls on capital transactionsYes.
Controls on capital and money market instruments
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsNonresidents are permitted to purchase securities that are listed on the Malta Stock Exchange. However, approval must be obtained from the MFSA to purchase or acquire unlisted securities.
Purchase abroad by residentsCredit institutions and insurance companies are permitted to purchase these instrument! abroad, subject to prudential limits. Effective January 1, 2003, fund management companies are permitted to invest up to 15% of the funds they collect from their reside customers (previously, 10%) in foreign currency-denominated instruments.
Effective January 1, 2003, individuals and nonfinancial companies are allowed to invest abroad up to the equivalent of Lm 100,000 (previously, Lm 50,000) a year; investments may not be made in financial assets with maturities of less than six months.
Bonds or other debt securitiesThe regulations governing shares or other securities of a participating nature apply.
Purchase locally by nonresidentsYes.
Purchase abroad by residentsYes.
On money market instrumentsThe regulations governing shares or other securities of a participating nature apply. In addition, the approval of the CBM is required if the money market investment has an original maturity of less than six months.
On collective investment securities
Sale or issue locally by nonresidentsThe regulations governing shares or other securities of a participating nature apply.
Purchase abroad by residentsThe regulations governing shares or other securities of a participating nature apply.
Controls on derivatives and other instrumentsControls apply to all these transactions.
Controls on credit operationsEffective January 1, 2003, local banks may extend credit in domestic currency to nonresidents carrying out economic activities locally.
Commercial credits
By residents to nonresidentsExport proceeds must be received within six months of shipment, unless otherwise authorized.
Financial credits
By residents to nonresidentsEffective January 1, 2003, residents may extend credit to nonresidents for periods exceeding six months (previously, one year).
To residents from nonresidentsEffective January 1, 2003, residents are permitted to borrow from nonresidents as long as the original maturity period exceeds six months (previously, one year).
Controls on direct investment
Outward direct investmentThere are no limits on the amount that resident individuals may transfer abroad for direct investment purposes. Approval for such investment, however, is subject to the condition that the resident acquire a controlling interest in the overseas company.
Inward direct investmentDirect investment by nonresidents is usually permitted in all sectors except real estate, wholesale retail trade, and public utilities. Nonresident participation may not exceed 50% of equity in businesses involved in information technology services.
Controls on liquidation of direct investmentYes.
Controls on real estate transactions
Purchase locally by nonresidentsAll applications for real estate acquisition by nonresidents require MOFEA approval. Nonresidents may acquire one piece of immovable property in Malta for their own residence (subject to MOFEA approval), on the conditions that the funds originate from overseas and that the cost of the property to be acquired exceeds Lm 30,000 in the case of an apartment and Lm 50,000 in the case of a house; additional pieces of built-up property may be acquired in specially designated areas of the country.
Sale locally by nonresidentsNonresidents are not allowed to engage in real estate property transactions, except for sales of properties that were acquired with the approval of the MOFEA.
Controls on personal capital transactions
Loans
By residents to nonresidentsEffective January 1, 2003, loans extended by residents to nonresidents must be for maturities exceeding six months (previously, one year).
To residents from nonresidentsEffective January 1, 2003, residents may borrow from nonresidents if the original maturity exceeds six months (previously, one year).
Gifts, endowments, inheritances, and legacies
By residents to nonresidentsThe limit is the equivalent of Lm 20,000 (prior to January 1, 2003, Lm 10,000) for all gifts. There are no limits on endowments, inheritances, and legacies.
Provisions specific to commercial banks and other credit institutions
Borrowing abroadCredit and financial institutions are permitted to borrow from nonresident sources if the maturity period of the borrowings exceeds six months. Effective January 1, 2003, borrowings for periods of six months or less require CBM approval (previously, one year or less).
Maintenance of accounts abroadEffective January 1, 2003, financial and investment services operators may maintain accounts with foreign banks abroad on behalf of their clients. These accounts are to be used strictly for the temporary deposit of funds received from clients, prior to the use of the funds for new instruments. Details of these accounts must be reported to the CBM immediately after they are opened.
Lending to nonresidents (financial or commercial credits)Credit and financial institutions may lend to nonresidents in foreign currency if the maturity period of the borrowings exceeds six months. Borrowings for periods of six months or less require CBM approval. Credit and financial institutions may also lend any amount to nonresidents in local currency for local investment. Loan facilities may be provided for any purpose, including the purchase of securities in the local capital market, provided that the original term of maturity of the loan exceeds six months (prior to January 1, 2003, one year).
Lending locally in foreign exchangeLending is permitted for loans with maturities of more than six months. Borrowing with maturities of six months or less requires CBM approval.
Open foreign exchange position limitsOpen foreign exchange position limits are subject to prudential limits set by the MFSA.
Provisions specific to institutional investorsOverseas portfolio investments by insurance companies are fully liberalized, but remain subject to foreign currency limits set by the MFSA.
Investment management companies are permitted to invest, without limit, eligible funds originating from both resident and nonresident sources abroad.
Limits (max.) on securities issued by nonresidentsCollective investment fund companies that collect funds in local currency from residents with the aim of investing in local currency-denominated securities on the local market may invest up to 15% of shareholders’ funds in foreign currency assets (prior to January 1, 2003, 10%). There are no limits, however, on the amount that may be invested by resident shareholders’ funds.
Other controls imposed by securities lawsNo.
Changes During 2003
Arrangements for payments and receiptsJanuary 1. All controls on exports and imports of domestic and foreign currency banknotes were eliminated for permitted transactions. The amount at which imports and exports of foreign or local currency must be declared to customs was reduced to the equivalent of Lm 5,000 from Lm 15,000.
Resident accountsJanuary 1. Resident individuals were allowed to hold up to the equivalent of Lm 100,000 (previously, Lm 50,000) a year in savings and time deposit accounts denominated in foreign currency in resident and nonresident banking institutions, provided the holding period is at least six months.
January 1. Residents were allowed to hold up to the equivalent of Lm 20,000 (previously Lm 15,000) in demand deposit accounts denominated in foreign exchange with authorized dealers, provided the funds originated from abroad.
January 1. Resident businesses in the retailing sector were allowed to hold up to the equivalent of Lm 20,000 (previously Lm 15,000) in cash or foreign currency accounts with local banks.
January 1. Residents were allowed to open savings and time deposit accounts with nonresident banking institution, and the maximum balance in these accounts was increased to the equivalent of Lm 100,000 a year from Lm 50,000, provided the holding period is at least six months.
Payments for invisible transactions and current transfersJanuary 1. The limits on payments for travel were eliminated.
January 1. The limit on personal payments to family members abroad was increased to the equivalent of Lm 20,000 a person a year from Lm 10,000.
Capital transactions
Controls on capital and money market instrumentsJanuary 1. Fund management companies were permitted to invest up to 15% (previously, 10%) of the funds they collect from their residential customers in foreign currency–denominated instruments.
January 1. The limit on foreign portfolio investments denominated in foreign currencies by individuals and nonfinancial companies was raised to the equivalent of Lm 100,000 from Lm 50,000 a year, and investments in financial assets with maturities of less than six months were not allowed.
Controls on credit operationsJanuary 1. Local banks were permitted to extend credit in domestic currency to nonresidents carrying out economic activities locally.
January 1. The minimum maturity of loans extended to or by nonresidents was reduced to six months from one year.
Controls on personal capital transactionsJanuary 1. The minimum maturity of loans extended to or by nonresidents was reduced to six months from one year.
January 1. The limit on gifts was increased to the equivalent of Lm 20,000 from Lm 10,000.
Provisions specific to commercial banks and other credit institutionsJanuary 1. Borrowings abroad for periods of six months or less require CBM approval (previously, one year).
January 1. Financial and investment services operators may maintain accounts with foreign banks abroad on behalf of their clients.
January 1. Credit and financial institutions were permitted to borrow from or lend to nonresidents if the maturity of the loans exceeds six months (previously, one year).
Provisions specific to institutional investorsJanuary 1. The amount of investment that collective investment fund companies that collect funds in local currency from residents with the aim of investing in local currency–denominated assets was raised to 15% from 10%.

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