Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

MALTA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of December 31, 2006)

Status under IMF Articles of Agreement
Article VIIIDate of acceptance: November 30, 1994.
Exchange Measures
Restrictions and/or multiple currency practicesNo restrictions as reported in the latest staff report as of December 31, 2006.
International security restrictions
In accordance with IMF Executive Board Decision No. 144-(52/51)Yes.
Other security restrictionsMalta complies with all sanctions imposed in accordance with relevant UN Security Council resolutions. These are incorporated in national legislation. Currently, financial restrictions and the freezing of assets apply to listed individuals and organizations or entities of the following countries: the Islamic Republic of Afghanistan (Al-Qaida and the Taliban), the Democratic Republic of the Congo, Côte d’Ivoire, The Islamic Republic of Iran, Iraq, the Democratic People’s Republic of Korea, Liberia, Somalia, Sudan, and the former Federal Republic of Yugoslavia.
References to legal instruments and hyperlinksn.a.
Exchange Arrangement
CurrencyThe currency of Malta is the Maltese lira.
Other legal tenderMalta has 25 denominations of gold coins, 54 silver coins, and 2 cupronickel coins that are legal tender but do not circulate.
Exchange rate structureUnitary.
Classification
Conventional pegged arrangementMalta participates in the ERM II. The central rate of the lira vis-à-vis the euro is Lm 0.429300 per €1. A fixed spread of approximately 0.0625% is applied to the middle rate to compute the buying and selling rates for transactions between the Central Bank of Malta (CBM) and credit institutions. These transactions may be conducted only in euros, 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 credit and financial institutions may quote in the foreign exchange market.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketYes.
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 in euros with credit institutions. Forward rates are based on interest rate differentials between domestic and international money market rates.
References to legal instruments and hyperlinksn.a.
Arrangements for Payments and Receipts
Prescription of currency requirementsNo.
Payments arrangements
Regional arrangementsMalta is a member of the EU.
Administration of controlAccording to the External Transactions Act, all external transactions and related payments have been liberalized. The Act also gives the MOF the power to reimpose (in exceptional circumstances, related to a balance of payments crisis) capital account restrictions for a limited period of time. Restrictions may also be imposed under UN or other international directives. The minister of finance has appointed the CBM to act as the MOF’s agent for any purpose of the Act. Although external transactions are liberalized, reporting agents have an obligation to report information on these transactions for statistical purposes.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)No.
Controls on exports and imports of banknotesThere are no limits on the amount of foreign and local currency that may be exported and imported. However, exports and imports of banknotes and other monetary instruments equivalent to or exceeding Lm 5,000 must be declared to customs.
References to legal instruments and hyperlinksExternal Transaction Act (Cap. 223); docs.justice.gov.mt/lom/legislation/english/leg/vol_5/chapt233.pdf; docs.justice.gov.mt/lom/Legislation/English/SubLeg/233/05.PDF; docs.justice.gov.mt/lom/Legislation/English/SubLeg/233/06.pdf; docs.justice.gov.mt/lom/Legislation/English/SubLeg/233/07.pdf.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyYes.
Held abroadNo restrictions apply to accounts in EU member states.
Accounts in domestic currency held abroadNo.
Accounts in domestic currency convertible into foreign currencyNo.
References to legal instruments and hyperlinksn.a.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Domestic currency accountsYes.
Convertible into foreign currencyYes.
Blocked accountsNo.
References to legal instruments and hyperlinksn.a.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsNo.
Import licenses and other nontariff measuresThe Ministry of Competitiveness and Communications administers certain import controls in accordance with the Importation (Control) Regulations.
Negative listAn import license is required for the importation of certain items listed in the schedules of the Importation (Control) Regulations. These items include meat and fish products, fruit and vegetables, beverages, toxic chemicals, petroleum products, rough diamonds, explosives, and weapons. Textile and steel products imported from certain countries also require an import license.
Open general licensesAll products not listed in the schedules of the Importation (Control) Regulations may be imported without a license.
Other nontariff measuresQuantitative restrictions apply on textiles and steel products imported from certain non-EU countries.
Import taxes and/or tariffsYes.
State import monopolyImports of petroleum products are controlled by a state monopoly.
References to legal instruments and hyperlinksn.a.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsNo.
Documentation requirementsNo.
Export licenses
Without quotasExports of articles of historical value, antiques, Maltese worked stone, and rough diamonds require a license, in accordance with the Export Control Regulations.
Export taxesNo.
References to legal instruments and hyperlinksn.a.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersNo.
References to legal instruments and hyperlinksn.a.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
References to legal instruments and hyperlinksn.a.
Capital Transactions
Controls on capital transactionsIn accordance with the External Transactions Act (Cap. 233), the MOF has lifted all remaining restrictions on external transactions, except transactions in real estate with residents of third countries (i.e., non-EEA countries).
Repatriation requirementsNo.
Controls on capital and money market instruments
On capital market securities
Shares or other securities of a participating natureTransactions in securities registered in Malta but not listed on the Malta Stock Exchange and originating from residents of a non-EEA country have to be cleared by the Registrar of Companies of the Malta Financial Services Authority (MFSA). This procedure, however, is not applicable in the case of international companies as defined in Article 2 of the Income Tax Act, or to companies owning a vessel registered under the Merchant Shipping Act, and where resident participation does not exceed 20% of the equity.
Controls on derivatives and other instrumentsNo.
Controls on credit operationsNo.
Controls on direct investmentNo.
Controls on liquidation of direct investmentNo.
Controls on real estate transactions
Purchase locally by nonresidentsAll applications for the acquisition of real estate in Malta by nonresidents from outside the EU/EEA area require MOF approval. Nonresidents from the EU/EEA area may acquire one piece of immovable property in Malta to be used as their primary residence; they are not permitted to acquire a secondary residence without MOF approval unless they have resided in Malta for a period of not less than five years. Nonresidents from the EU/EEA area may acquire property freely 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 MOF.
Controls on personal capital transactionsNo.
References to legal instruments and hyperlinksExternal Transaction Act (Cap. 223); docs.justice.gov.mt/lom/legislation/english/leg/vol_5/chapt233.pdf; docs.justice.gov.mt/lom/Legislation/English/SubLeg/233/06.pdf; Immovable Property (Acquisition by Nonresidents) Act (Cap. 246); docs.justice.gov.mt/lom/legislation/english/leg/vol_6/chapt246.pdf.
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutionsThe liberalization of external transactions also applies to the financial sector. These, however, remain subject to prudential regulations.
Open foreign exchange position limitsOpen foreign exchange position limits are subject to the following prudential limits set by the MFSA: a total open foreign exchange position not exceeding 20% of the credit institution’s own funds, with individual currency limits of up to 5%, except for up to 20% in euro-denominated holdings.
Provisions specific to institutional investors
Insurance companiesPrudential regulations impose limitations on the types of assets insurance companies are required to maintain to cover technical liabilities arising from their business. They also impose diversification rules and limits on the amount of assets such companies may maintain. The regulations do not impose restrictions on the location of these assets; therefore, assets covering technical liabilities can be located outside Malta.
Pension fundsIn accordance with prudential regulations, pension funds (i.e., occupational pension schemes and related investment vehicles) are required to comply with prudential investment restrictions to ensure diversification and minimize exposure to single entities or issuers. Certain borrowing restrictions also apply.
Investment firms and collective investment fundsFor prudential purposes, investment firms are subject to certain minimum financial resource requirements, and collective investment funds are subject to certain investment and borrowing restrictions.
References to legal instruments and hyperlinksMalta Financial Services Authority; see Legislation section of www.mfsa.com.mt.
Changes during 2006
No significant changes occurred in the exchange and trade system.

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