The European Union Heads of State agreed on a draft Withdrawal Agreement between the UK and the EU, put forward by British Prime Minster, Theresa May, on the 25th November 2018. The 585-page withdrawal agreement outlines the legal agreement terms of the UK’s exit from the EU and highlights citizens' rights, a £39 billion settlement fee and the question of Ireland’s border amongst other issues.
The draft withdrawal agreement comes after Article 50 was triggered by Theresa May in March 2017 setting into motion the negotiations of the UK’s withdrawal from the EU following the UK’s decision in favour of Brexit in a ground-breaking referendum held on the 23rd June 2016.
Is the Withdrawal Agreement final?
The deal is not yet set in stone, with the British Parliament expected to vote on the draft withdrawal agreement at the beginning of December 2018. Although the UK is set to leave the EU on the 29th March 2019, the result of the vote will determine the future of Brexit as the impending date looms closer.
Although the EU leaders are hoping for an orderly Brexit, the Labour Party, Liberal Democrats, the SNP, the DUP and some Conservative members are all said to vote against the draft withdrawal agreement. In the unlikely event that the UK Parliament does vote in favour of the deal, the UK will leave the EU on the scheduled date and enter a transition period until the end of 2020.
If the UK parliament vote against the treaty, Theresa May would have three weeks to propose an alternative arrangement. Should a solution not be defined in this timeframe, the possible outcome could see a Brexit without any deal, a second Brexit referendum, a general election, or a paid one-year extension, amongst other options.
What does this mean for Businesses in the UK?
There remains a lot of uncertainty surrounding the effects of Brexit on businesses based in the UK, despite the terms of the withdrawal agreement, with reports showing that the UK would most probably lose its position as a leading financial jurisdiction, as it is estimated that billions of euros in investments will leave Britain. With the UK’s financial services heavily based on passporting rights and access to a Single European Market, the loss of these rights would cause a decrease in business as well as the loss of the ability to question EU regulations.
It is also still unclear whether the UK will remain within the customs union, the framework that ensures that all member states trade freely within the EU but restricts them from making their own trade deals. Remaining in the customs territory would mean that the UK would need to abide by EU regulations without having a casting vote on any related decisions. As a result, the British government has said that the UK would leave the customs union after the transition period, however no concrete solution to how this would be replaced has been negotiated as yet. Firms currently based in the UK are looking at the different options available to guarantee free movement and trade within the market to maintain cross-border growth.
Why Malta?
Many companies are looking towards Malta as a pro-business jurisdiction and a suitable alternative to the UK in which to set up shop. As a member of the EU, Malta not only provides access across member states, but the country’s legislation and tax framework are in line with EU regulation. A member of the Commonwealth, Malta upholds a strong relationship with the UK and has the added benefit of no language barriers with English being one of the island’s the official languages. Over and above its relations with the UK and the EU, Malta retains good relationships with Africa and the Middle East due to its ideal geographical location in the Mediterranean which offers facilitated access across borders.
Malta also offers a flexible legal framework as the Malta Financial Services Authority (MFSA), the regulator for financial services in Malta, upholds a strong regulatory but flexible system attracting business to the island.
Another key factor attracting foreign business to Maltese shores is the island’s attractive tax rates which allows for foreign companies to benefit from a reduced tax of 5% after refund. This, paired with inexpensive operational costs and innovate fund structures, has seen business in Malta booming in several sectors.
Pharma
A considerable amount of pharmaceutical companies are relocating to the island as a result of the adoption of an open approach and integration of the Roche Bolar Exemption, whereby pharmaceutical firms may legally affect research and clinical experiments before a patent is terminated.
In 2016, Chemi Pharma Ltd, a pharmaceutical organisation of Italfarmaco Group, set up base in Malta, whilst Amino Chemicals of the Shanghai–based AMA Chemicals Corporation, opened shop over two decades ago.
Insurance
Another thriving sector is the insurance industry resulting from the strong legal framework established by the MFSA as the local regulator for insurance organisations in Malta. The industry is governed by regulations around Solvency II and the jurisdiction adopts International Financial Reporting Standards (IFRS). Additional advantages include structures like the Incorporated Cell Companies and Protected Cell Companies as well as a framework which eliminates the need for additional fronting insurers, hence avoiding additional costs. MAPFRE Middlesea Insurance of MAPFRE Group, one of the largest insurance operators in Europe with presence in almost 50 countries and in 5 continents, as well as Argus Group Holdings Limited, Malta’s second largest broker, have expanded operations to the Maltese shores.
Aviation
The aviation industry in Malta offers attractive benefits and it too has seen big industry players relocate to Malta. Besides tax neutrality for international operators, the aviation sector in Malta offers fiscal incentives and lower effective VAT rates for Malta aircraft leasing set-ups. In 2003, Malta saw one of the largest operators for the maintenance of aircraft, Lufthansa TechniK, open up a base in Malta.
Banking and Finance
Malta was awarded the International Finance Centre- Editor’s Award at the Wealth Briefing Swiss Awards in 2017. Success stories include HSBC, which employs over 450 staff, Banif Bank, Sparkasse, Fimbank and FCM bank.
About Chetcuti Cauchi Advocates
Our specialist service lawyers, having experience in company formation in Malta within every industry, can provide in-house service for every client’s unique requirements. Our services within the area provide a full set of company formation services, ranging from company administration, corporate tax service, company accounting, training, and compliance services. As company administration specialists, Chetcuti Cauchi Advocates ascertains that our client’s companies are in line with Maltese legislation, whether it is financial, tax or corporate regulations. With 15 years’ experience in the field, our team ensures the delivery of a professional service with an international context.
