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INTRO:
We invite you to attend the January 2023 Nomad Offshore Summit here in Lisbon, Portugal.
DERREN JOSEPH:
Welcome here. We are HTJ Tax. We do these live streams every week. Just look at HTJ.tax/events for what’s coming up next for those who did ask. And thanks for all those RSVP and those questions. Yes, this is being recorded. You should have, for those joining us on Zoom, you have got an audible little message saying that yeah, it is being recorded so you can if you’re not able to state for the entire thing, I know some of you indicated that you could not, you can feel free to pick up the recording either on our website, it’s text on our YouTube channel or wherever you get your favorite podcast because it’s gonna be available on SoundCloud, Spotify, iTunes, Google Play, Amazon. Wherever you get your favorite podcast, you should be able to find this and other recordings. We do publish videos every day with interesting tidbits about international tax. But please bear in mind we are licensed, so we are legally obligated to say that this is not advice. So what we are doing is having a general conversation about general principles. If you need what we call actionable intelligence, then you probably wanna engage your preferred tax advisor. Well, today we’re gonna talk about Malta, just so you can reach out to David directly. We provide his contact details and you can, you know, engage him and his team if you want to take this forward. But this is not meant to be advisory. We’re having a general conversation about general principles. What I hope you walk away with is an appreciation of the key tools and issues you would need to consider in engaging your preferred advisor. So again, we do this every week. This is being recorded, so if you have your cameras switched on, understand it, and your image will be picked up, which isn’t a problem for some people, but it is for others. So just keep your cameras switched off. We had probably around 75 RSVPs. Thank you for that. For those who provided your questions in advance, we do have them. Thank you very much. For those who didn’t get a chance to submit their questions, please feel free to type in the box below and we’ll get to them in the order in which, they come across. We’re also doing, we take, you know, now that we are emerging out of the health crisis, we’re gonna be doing an in-person conference in January in Portugal, Nomad Offshore Life. So it’s an opportunity to meet with some of the advisors and hear interesting ideas, and cutting-edge stuff as you formulate your Offshore, your international strategy. So without further, do I introduce David? David, do you wanna say a few words? Introduce yourself. Welcome.
DAVID BORG:
Sure. Thank you. Thank you. Thank you for having, So my name’s David. I’m the tax and advisory partner at an ARQ group, which is a multidisciplinary professional services organization based in Malta. I, I don’t know if you have anything else that you’d like me to add as to who we are and what we do.
DERREN JOSEPH:
Yeah, that’s cool. I guess we’ll get into that as we go through the question. Sure. So historically what we’ve done is kind of like gone through a presentation first and then going to Q and A, but seeing that there are so many questions and so many interesting questions, we’ve found that the audience appreciates it if we just jump right into some of the key topics that they raise. So with that in mind, the first question we got was that someone is saying, Hey, I’m looking at Malta as a potential place to live while growing a consulting business with the non-dom system. How does something like this get set up to minimize taxes overall for an American citizen who’s resident in Malta, both personally and for business? So, David, do you want to talk us through the non-DOM system? How does it work? Is it similar to Ireland and the UK? If not, how?
DAVID BORG:
Yes, it is. I suppose this is similar to the UK. So if you have non-dom resident status, you’re subject to tax in Malta on any income arising in Malta and any income remitted to Malta. So capital gains arising overseas, even if they are limited to Malta, are exempt from multi-stack. Malta also has set up, just launched over the past six, seven-odd years, various residency programs. There’s also a Citizenship program, but I’m, I’m sure we, we’ll, we’ll delve into that later on. But there are residency programs that are designed for people in various stages of their lives. So whether they be in retirement or about, to retire as well as if they’re still active and in business. So it would depend on the particular circumstances of the individual. And then, you know, people like our organization or, or, or others can advise on the appropriate product. Malta is English speaking, so that is a huge advantage. It is one of the few countries where we have two official languages, which are Malta as well as English. It’s a small island about 60 miles south of the north, sorry, about 60 miles south of Italy of Sicily. So literally on the border between Europe and Africa. Well, we are about 120 miles north of the African coastline. It’s a very safe country, which about 500,000 in population, including an element of expatriates who live and work here. It has a thriving tourism sector as well as a thriving financial services sector. Malta was one of the very first countries to regulate and legislate eye gaming. So that has seen over the years an influx of some of the major players in this industry. And some of them have established significant Structures in Malta and this is why there’s also an increase in expatriate headcount, particularly from the UK, Germany, Scandinavia, and Italy, Very few to my knowledge from the US though, although that is changing.
DERREN JOSEPH:
Okay, thanks. Thanks a lot for that. So in terms of the re-dam system, is it, so you’re saying it’s like the UK so once it’s remitted in to be subject to tax now, is it also like the UK in the sense that there’s no particular election to be made in advance? It’s afterward when you’re filing your tax retroactively, you make that sort of declaration. Is, is that accurate?
DAVID BORG:
Correct. Correct. Our tax system is based on self-declaration. Okay. So in June of the following year. So, in the year of assessment, we prepare and file our annual tax declaration in which we are to disclose any income capital gains that we have. We have recorded and received during the proceeding year, and on the back of that, there is a tax calculation is made. And any tax which is due is then settled, as I said, by the end of June of the year proceeding. The proceeding year. It also depends on whether the individual is under a residency program because the various residency programs have different tax regimes attached to them. So one particular program for non-EU nationals is what is known as the global residence program. So that would apply to anyone who comes from any country, which is not part of the EU or the USA. And that is based on a minimum tax of 15,000 euros, which is paid annually. So the 15,000 is, is an assumption that the recipient has remitted to Malta not less than 100,000 euros in active income. And that active income is then taxed at a rate of 15%, a flat rate of 15%. Any remittances that are made, which are in access of that 100,000 euros, are also taxed at the same 15% rate of tax. However, any income sourced from Malta is then taxed at 35%, which is the maximum personal tax rate, which also happens to be the fixed corporate tax rate.
DERREN JOSEPH:
Okay, that’s good to know. Now, in the UK I guess it’s been in the public domain as the newly appointed or elected or selected prime minister, his wifi understanding is on, was previously under the non-dom regime. And there seems to be a lot of pushback, but it’s not recent. It’s been a trend for the past, let’s say five to 10 years, where there’ve been a gradual, I don’t wanna say erosion, but limitations in the non-dom regime in the UK.
Now there are all these deemed domicile rules. Is this, I’m mentioning this because I, I’m curious is a there similar trend in Malta where there’s some pressure being put under the non-dom regime and other domicile rules in play now? Or do you foresee any coming up?
DAVID BORG:
I think, I think the non-dom does allow for some aspects of planning even let’s be frank, aggressive planning, you know, because there are some gaps and, and, and these gaps can and have been exploited at this stage, to my knowledge, there is no particular drive in Malta to towards narrowing the scope. However, Malta is fully compliant with OECD pronouncements and also with UE. So we work hand in hand with our EU partners and if there is any pressure towards revisiting this or, or, or narrowing the options, then of course it is more than likely that Malta will follow suit. However, as we speak today, to my knowledge, again, there does not seem to be any particular focus by the Malta authorities to revisit or change the current rules.
DERREN JOSEPH:
Okay, fantastic. Thanks a lot for that. So now let’s, let’s move down to the second question. The tax system with the rebate of the 35% corporate tax rate yes and such for Malta companies is complex. Yes. Seems potentially risky for compliance now that they’ve added certain CFC control, and foreign corporate rules if your holding company doesn’t have any real management elsewhere. So no real substance elsewhere. And I’ve read that this system is under review since they signed the global minimum tax regime. So could you comment on that, the rebate on the 35% corporate tax system, and the new CFC rules, please?
DAVID BORG:
Sure. So first of all, the Malta tax refund regime is, can be seen to be complicated. It is not, it is very simple and very straightforward. So, I’ll just, I’ll just briefly take a few minutes just to explain how, how it, it, it works because there is a lot of misinterpretation to my knowledge as to how this works. So as we mentioned before, the corporate tax rate in mortar is fixed at 35%. Once a MALS corporate makes a distribution upward to its non-resident shareholder, which can be either a physical person or a juridical person, the value of that distribution can benefit from a tax refund, a partial tax refund, which is equivalent either to six sevens of the tax paid by the underlying corporate or five sevens in the case of passive income. Okay. So, the effective leakage in the motor can be reduced from 35% reduced to either 10% or 5%. Recently in 2020 MOT also introduced what is known as fiscal consolidation. So where you have a quantifying structure, which is a holding and an underlying subsidiary, that structure, if it meets certain requirements, certain parameters can also benefit from shifting the tax obligations from the subsidy from the operating company to the holding company. And the holding company pays the tax directly at 5%. Okay. So that bypasses the refund mechanism which takes around six months from beginning to end with regards to holding companies, it’s, it’s a very interesting question. It’s a question that we ask ourselves as well as part of our compliance procedures because a holding company by its, by its definition is there just to hold. So, although of course, it needs effective management, management intervention in most holding companies is, is, is very limited because the holding company owns subsidiaries. It receives regular reports from its subsidiaries, which directors are obliged to lead you to make sure that everything is progressing as it should. And at the end of the year, hopefully, it is in receipt of dividends, maybe some interest income from any loans that might have been provided to its subsidiary companies. So in most cases, it does not entail hands-on involvement, from management daily. So how do you quantify substance in Malta? Of course, there are no fixed rules. It’s not as if you can open a manual and say you have to have these requirements and as long as you tick all these boxes, then you’re fine. So I think it is just a question of common sense, you know, so you cannot have a director who is continuously residing in a third country who is taking decisions, even if these are few and far between without ever setting foot on the island without having some kind of presence on the island. Of course, the whole conversation changes when we are talking about operating companies. So companies which have active income, of course, the involvement of management there is more acute and more pronounced. So when it comes to holding companies and CFC, one would need to look at significant people functions where these are being performed, where subsidiaries are located, and whether the subsidiaries are located in countries that have zero tax base or, or or or highly attractive tax base. So there are many observations that one must make.
DERREN JOSEPH:
Thanks, I appreciate that overview. So, we’ve had an increase in interest from US persons in Portugal, and here’s where Malta fits in. Portugal does have its equivalent of a non-dom in the form of a non-habitual resident, but it excludes securities income. So, you know, Entrepreneurs and Investors moving from the US into Portugal, they’re often surprised by the fact that they’re gonna be hit by a 28% tax rate on the sale of securities in the US. However, what some advisors have been saying or suggesting is, hey, if you hold your interest in, in those US securities using a Malta company, then they, when it’s a go through Malta and of course it benefits from the rebate system now, and then you receive your dividends out of Malta into Portugal tax-free. All right. Now how does that fit in with what you just said in terms of the growing need for some sort of substance?
DAVID BORG:
Well, it’s interesting because this is something which is which, which is driven by the parameters you have rightly described under the Portuguese non-habit resident scheme. So one of the conditions for, a beneficiary under this scheme to receive the income net of Portuguese tax or free exempt from Portuguese tax, further Portuguese tax, is that they must receive dividend income from, a company which is domiciled in an EU member state. Okay. So this is why we have seen some, entities being set up specifically to hold assets. In some cases, we also have active companies, which are operating companies, but who pay out dividends to persons who are residents under this team in, in, in port. Again, I suppose it all depends on the advisor and, and his interpretation of substance rules and his risk appetite. You know, so you might come across advisors who say, Look, we’ll just set up a holding company, we’ll just put someone to act as director of this company. And, and, and, and that’s it. You know, I suppose, here again, we always talk around the same argument and that is common sense. You know, you, you need to, common sense should prevail, you need to take a risk-based approach, especially when you are advising your clients and you, I, if I had to error, I would always suggest that our client’s error on the side of caution, it’s better to be able to address any challenges should they ever materialize rather than start on a very weak footing. And if there is a challenge, then, we don’t have trouble.
DERREN JOSEPH:
Mm, okay, thank you. So that, and the, okay, the person who posed the question mentioned that CFC rules if the holding company does not have real management. Okay, Could you, I think you did touch on it previously, but could you just emphasize what are these new CFC rules as it impacts some of these holding companies?
DAVID BORG:
I think the new CFC rules impact, as I said, where key functions, key people functions are being performed, and also the domicile of the subsidiaries. So, you know, you, you need to look at, you need to look at these particular parameters and then see how CFC is going to impact whether it’s going to shift the tax jurisdiction to one state rather than another. But it’s not, it’s, I don’t think that there is a generic answer that I can provide. You would need to look at the specific circumstances and then be able to advise your client accordingly.
DERREN JOSEPH:
Okay, gotcha. And, just to add to that, I know there’s been discussion about some new anti-avoidance, anti-avoidance directives at the EU level. The UN shell rules against the so-called letterbox companies as it gets phased in the next few years, I guess that would also have some impact, but as this person is mentioning companies, I just want to throw in, you know, companies are dealing with company Structures is one thing, but the biggest challenges we see with our clients these days, and I dunno if you’ve seen it on your side as well, but it’s with banking. So my question is, as people set up Structures using mortar, how challenging or, you know, what is the situation with banking for banks in Malta? Sure.
DAVID BORG:
Very honest answer. It’s not easy. Local banks in particular have taken a very risk-averse stance. So unless they are satisfied, of course putting aside the normal due diligence KYC requirements, you know, that, that the person that is sat in front of them can prove without any shadow of a doubt, you know, that what he’s doing is, is completely legal, where his money is being sourced from, from completely legal, legal activities. So putting all of that aside because I think that that is today, you know, part and parcel of what we do. So I don’t think we need to delve much more into that aspect, but my personal experience is that they do not touch exotic activities such as cryptocurrencies, digital, digital currencies, you know, things which they are not particularly comfortable with, and sectors which are considered to be high risk. So that makes opening a banking relationship extremely, extremely hard, if not virtually impossible with a traditional bank. I’m talking exclusively about these online banks that there are, there are of course various options to meet various risks involved, but usually, as long as you can satisfy the bank that there is substance, that management and control are being exercised from Malta that the operations are, are, are simple and the bank can clearly understand the business model, then usually it is, it is not impossible, it is doable and we are startled to see the local banks open up more and more gradually, but, but, but opening up and nonetheless to new business enterprise.
DERREN JOSEPH:
Okay, great. I hope that answers this person’s question. Moving on to the next one, can you talk about what you know about the direction, I know this, this is always an unfair question, but still, you know, given the general political sentiment, what are your thoughts as to where corporate taxation is evolving, generally speaking?
DAVID BORG:
Sure, sure. Million dollar question. So I think you and I have had the opportunity earlier this year now to discuss my personal views and my, my personal views is that maybe it is about time that Malta replaces its, it’s tax legislation which can, can trace its, it’s its births to an ordinance in 1949, if I’m not mistaken, the Minister for Finance recently came out publicly and said that Malta is considering changing its current legislation. Quite likely, I would imagine they would remove the tax refund mechanism and come up with something which is maybe a little bit more straightforward. We do not have any information about what this would look like. There was a lot of speculation at the time that the minister did come out with this and I think it was also a reaction to Bill two and a lot of pronouncements even at the EU level about anti-tax avoidance. However, it does not seem to have it, nothing, nothing has been published to this, to this point. Our thinking is that there will be a reduction in the overall corporate tax rate and I think that’s, that is where it will stand. But again, this is speculation from our end and I think the minister has recently said that kind of everything has been put on hold cause of what’s going on in the global economic scenario. So therefore it’s not the opportune time to create any major changes at this point.
DERREN JOSEPH:
Okay. So that kind of touches on another, another of the person’s subquestions. So we, it’s, it’s gonna change, but then everything does change. Nothing stays the same. Yeah. But in terms of predicting when that’s gonna be tough right now. So for the foreseeable future at least it will be what it will be. So the near term is stable. And so this person is asking, do any tips for working within the existing system to ensure that the rebate is processed quickly and efficiently? What tips and tricks that someone needs to keep in mind to prevent any issues?
DAVID BORG:
Yes, so under our income tax management tax, I think the tax stories are bound to issue the refund within 45-day periods from the application being submitted. However, over the past 3, 4, and 5 years, this has not been maintained. And we’ve had instances where clients were seeking refunds, you know, 12, 12 months down the line, this was due by significant backlog and that was accumulated, everything was backed up and there were also fewer boots on, on, on the ground to manage and process these applications. I think there are no tricks, there are no tricks involved. You know, it’s, it’s a very basic standard refund application process. The company must be up to date is fully compliant with its, with its tax corporation tax, its employee tax, and with its vat because I think that that also helps expedite the process. And an option, alternative to that is fiscal consolidation. So usually when you have a company that can benefit from the refund, it’s not automatic, but it is more than likely that this structure would meet the parameters set out on the fiscal consolidation guidelines. So a migration to this regime would make sense and would eliminate the gaps, that many companies are experiencing in having the refund process.
DERREN JOSEPH:
And again, for those who may have missed it earlier, the fiscal consolidation regime, what exactly does that involve?
DAVID BORG:
So the fiscal consolidation regime is where you have a qualifying structure. So you have a holding company and a Malta subsidiary. The subsidiary no longer pays tax at 35%. Okay. It is assumed that there’s a full distribution of chargeable income made by that operating company to the parent, which can be resident or resident, and it’s then that parent company that is obliged to settle tax. Okay. The rate for disqualifying structure would be set at 5%, no longer 35, and then you get the refund back. So it’s automatically set at 5%. So that eliminates any, any time, time differences also is a, is a huge benefit to cashflow, you know, because you don’t have to pay at 35 and then wait six months, maybe even more to receive the refund. It’s automatic and it’s done straight away at 5%, and you close your tax here.
DERREN JOSEPH:
Okay, perfect. Okay, I hope that answers that person’s question. So another tricky question. So they’re asking about the operating costs and naturally it’ll vary depending on the exact facts and circumstances of your situation and then, your preferred advisory team, but generally speaking for incorporation and the actual running cost or the compliance cost of course. Roughly what is someone looking
DAVID BORG:
At? Yeah, okay. So, incorporating a plain vanilla company, you’re looking at roughly 2,500 to 3000 euros, depending on any add-ons that you might, you might wish to include, you’ll probably be looking at another 500 euros in one-time compliance costs. So that is to perform the initial KYC and due diligence. This may increase if the ownership structure is complicated. And then for a sub 500 annual transactions from an accounting tax compliance, VT compliance, you are probably looking at, at something in the region of, of 3000 to 4,000 euros and then maybe another 2000 euros in annual audits because every company in Malta is obliged to undergo an audit by, by an independent audit firm.
DERREN JOSEPH:
Understand.
DAVID BORG:
So roughly, I think running costs for a, for a, for a small to medium size company would be in the region of, of, of, I would say anything between five and 7,000 euros. And then one time setting up costs probably another 3,500 to 5,000 euros.
DERREN JOSEPH:
Okay, thanks a lot. You mentioned VAT, which is, you know, it, it could be quite interesting for someone for setting up a structure and when they come from outside of Europe where VAT isn’t necessarily part of the, the tax paradigm, is there a threshold for VAT charge or is VAT chargeable from the very first invoice from an within an operating company structure?
DAVID BORG:
No, no, there is a threshold. I think the threshold is, is 30,000 euros. So any small enterprise which is, which is turning over less than 30,000 do not charge VAT, but can no longer claim VAT either.
DERREN JOSEPH:
Right, Okay. And the VAT rate is how much?
DAVID BORG:
Rate? 18% utilities it’s and hospitality it’s 7%. Yeah. So, that’s about it.
DERREN JOSEPH:
Okay. Alright, sounds good. Next question, what kind of deductions can you personally and for the, okay, can you use personally and for your business to reduce your overall taxable income in Malta? And they’re asking how different it is from the American tax system, but generally speaking, what type of deductions are available on your returns and corporate returns?
DAVID BORG:
Okay, so deductions are allowed when these are incurred wholly and exclusively in the production of the income. Okay. So, any expense which is directly incurred in the operation of the business is allowed as a deduction. Now of course the lines blur when you have an independent person who’s providing consultancy services. So our advice is always that they should try and maintain separate books and not confuse or mix personal expenditure with business expenditure. However, of course, there are areas where the lines blur even further. Again, you are counseled to advise to use discretion, you know, and to be consistent in how you apply certain deductions. But a proportion of utilities, if you’re operating from a home office of course, of your utilities are, are perfect to acquire hardware and software. You know, I think if there is a strong correlation between the expense and the business and the business model, I think that there is nothing there, which should be a major concern.
DERREN JOSEPH:
Okay, Yeah, that’s great. So I guess the key point from a corporate point of view, and again, being born of English common law, it’s quite familiar the idea that the expense has to be wholly and exclusively used for whatever your line of business is, which is a slight nuance away from the US it has to be ordinary and necessary. So it’s similar, but you know, there’s some room for varying interpretations, but, and, and I take the key point and hopefully the person who asked the question did as well, that is super important to respect the fact that the company’s a separate legal entity from yourself. And try not to give any excuse for the competent authorities to pass that veil of incorporation, you know, treat it, you know, have, you know, make sure everything is minted, make sure you know, there’s no coming like funds, so on and so forth. All the usual bits of financial hygiene that you would use in the US anyway would apply. Okay, that’s great. Moving down. So, the questions are kind of turning towards zero Citizenship or immigration slash residency side of things. Does anyone get Malta Citizenship through naturalization? If so, what have you seen? I guess how does it happen? How does it happen?
DAVID BORG:
So, yes, Mortis Mortis Immigration Act does consider naturalization and as long as an applicant can prove that he has had very, very strong connections to the island for an uninterrupted period of five years or more, it is possible to apply for naturalization. And there’s a process, there’s an application and there’s a process, there’s a vetting, there’s a, a note of allegiance. There is also, I’m trying to find the right word, a test I suppose to see that the person does appreciate Malta culture and has a good understanding of Malta culture multistory and also the basics of the MALS language. But yes, it’s possible.
DERREN JOSEPH:
Okay. Language tests as well. Okay. Would you say that process, that naturalization process is particularly rigorous I’m aware of jurisdictions where it’s pretty tough, for example, in the UK the average British citizen probably could not pass their life in the UK test that aspires would citizens need, need to study for and pass. So would you say that that that that process of the exams and language is it’s a is a tough hurdle to cross or would you say it’s, it’s doable by the average person?
DAVID BORG:
Of the extent of this test? I would imagine that it is doable, but I would also imagine that it is not easy because the whole plan, the whole, the whole objective I suppose is of course to ensure that people who can contribute to the country obtain, obtain Citizenship by naturalization. So I’m sure that there has to be a little bit about the language and also a little bit about the history and the culture. If you are to integrate well, into any country, not just Malta, you must no longer consider yourself as a stranger or are seen as a stranger, but you integrate well and you respect the culture and the nuances of that country, which is hosting you. So, although I don’t want to say anything which might not be correct or precise, you know, I do believe that the process is imminently doable, but I’m sure that it is not, it’s not straightforward, you know, that anyone can just go and, you know, just sign on the dotted line and that’s it.
DERREN JOSEPH:
Okay, fantastic. Thanks a lot for that. So that’s a great segue into the whole investment migration space. So correct me if I’m wrong in that it’s a common misunderstanding that Malta has a Citizenship by investment program. It is not, it has a residency by investment or golden visa program, which can also have accelerated pathways to Citizenship. Am I correct in saying that way?
DAVID BORG:
No, no, Malta does have a Citizenship by investment program. It’s, it’s called the E S D I and it’s a Citizenship by extraordinary investment. And this replaces the previous program, which was the MIIP, which was the Malta Individual Investor Program. This was revamped in 2021 if I’m not mistaken a thereabout. And today the program is more robust. It has a very, very due diligence process, which is probably one of the toughest available on the market today. And first, so for the applicant and his dependents will receive residency status in Malta and they should maintain that residency for at least one year before becoming citizens.
The second stage is the submission of the full application for Citizenship, which takes anything from 12 months to 36 months, 12 months. There’s a fast track option, where the costs are of course slightly more expensive, or else there is once either the 12 months or 36-month period has lapsed, then Citizenship is, is granted Okay, sorry. Yeah, no, no, go ahead. Go ahead.
DERREN JOSEPH:
So, if I’m understanding, so with that extraordinary investment, the fastest track gets you from point A to point B in 12 months, is that the fastest? Right?
DAVID BORG:
12 months from the time that the application is submitted and of course provided that the application is submitted and on the assumption that the application is complete and, Correct.
DERREN JOSEPH:
Okay, gotcha. And is there a residency requirement, like does the applicant need to be in the country during that period or can they be elsewhere?
DAVID BORG:
In Yeah, in the first year where there is what is known as the residency phase, yes, there, there, there has to be, of course, it doesn’t mean that you have to be here for 365 days in any given year, but there is an obligation on the applicant to spend as much time on the island as possible also because this is the initial period where the applicant starts to get more accustomed, more acclimatized to Malta to Malta culture.
Okay. So, so that is, that is the general intention there of course, and normal absences from the island are of course allowed people still need to maybe travel for, for work, for family, you know, for holiday. So there are no hard rules on this, but again, you know, caution and reasonableness should always apply.
DERREN JOSEPH:
Understood, understood. So, a great segue into the article on particularly high profile, US billionaire Peter Theo, one of the early investors’ co-founders in Facebook and Ethereum and a whole bunch of other stuff. So he apparently, according to the media, he’s on a pathway to, to Citizenship, but just, I mean obviously, we don’t know the intricacies of that situation, but generally speaking, the program, the program is quite popular. Everything is above board and lots of people have been applying and being successful on that, on that journey to Citizenship. Yeah.
DERREN JOSEPH:
So I was pulling the article, I think it was in the New York Times Yeah. On building a pizza into the, into the home. And you know, the article tried to sensationalize it a bit, but essentially that the Citizenship by Investment program as you’ve just described, it’s completely normal, it’s completely legit. Everything is above board and lots of people all over the world have been taking advantage of it. Is that, is that fair to say? What are your comments on it?
DAVID BORG:
Yes, I think that’s the process to have the tendency to, sens, sensationalize and dramatize, especially when certain individuals are involved and, and, and, and, and the individual in question is of course a very high profile individual, especially in, in, in the US as I said, Mo has a very, very robust, it was designed to ensure that undesirables do not filter through. I think what was unfortunate in this case, and I do not doubt that this was a genuine mistake, was that the address that this applicant selected as his residential address during the application process was also advertised as a premise for Airbnb. With Airbnb. I would not doubt in my mind that this was an oversight, but that is also what caused a lot of the sensation. Mo is very keen to promote Citizenship, but again, Citizenship with sides. So the idea is that these people, and usually it is people who have been successful in life, in their business life, in their careers, you know, take up Citizenship in Malta because it is also seen as a way where they can contribute to the Maltas economy contributes to multis philanthropy. And there’s also, you know, the notion of a, a transfer of, of skills potentially as well as the potential to open up extensive, especially Malta startups, Malta repositioning itself as a, as a hub for startups, startups in general, but particularly technical text startups. So of course having high-profile people with sound and extensive business connections can help a multis entrepreneur or, any entrepreneur whose startup business from Malta can help propel them to the next level quicker and faster.
DERREN JOSEPH:
Okay, great. And unfortunately, it’s not just the media, we’ve seen that the European Union like Brussels seems to have some level of discomfort with Citizenship by investment. We saw it with Cyprus and we saw it in some of the commentaries about certain Caribbean islands and now there appears to be some sort of situation with more too, I know it’s sensitive, but do you wanna comment generally on it?
DAVID BORG:
Yes, I mean, the only comment that I can make and, and it’s not a partisan comment, is the comment that resonates with what the MALS government said. And the MALS government is very, very serene about the robustness of the program. And therefore they are very confident that they will address this challenge by the courts at the level. So I suppose it’s just a watching brief and we just have to see how this whole thing pans out.
DERREN JOSEPH:
Okay. , another point that I wanted to touch on and get, your comments on. I think before we went live we were talking about more to positioning itself as a grid jurisdiction for family offices. Do you wanna say a few words? Do you wanna comment on that?
DAVID BORG:
Sure, sure, sure. I think my personal opinion is that, that Malta is, is a, is a very good jurisdiction for family office-type Structures. Why? Because we have an extensive tax treating network. We have a very simple and, and, and sound tax system, which has been peer-reviewed by the Europeans. We also as a jurisdiction, work very well with other jurisdictions like the UK like Germany, and Switzerland. So it’s very easy to have a family office but then outsource portfolio management, for example, to a Swiss portfolio company or a wealth management company. So I think there’s a, there’s a, there’s a, a tremendous pool of highly qualified persons within the financial services sector. It’s a sector that MOT has been developing since its first foray in 1988 with me back.
So there’s a good body of knowledge there and, and a good basis on which to build. So I think that that is where we will start to see more activity from, from service providers such as, such as our own, who was able to, to develop that market more extensively.
DERREN JOSEPH:
Right. But I wanna comment on that the talent pool, because I guess that’s a criticism that’s been levied on other smaller jurisdictions that are pursuing that, that family office, there’s substance is the name of the game right now, so you need to have boots on the ground and if the talent pool is shallow and it’s difficult to attract talent in and there’s, there are size restrictions because, you know, the island is only so big, does that place a natural limit as to how far the sector can go? Okay. I think. Okay.
DAVID BORG:
Yeah, I think, I think I got the basic thrust of what you, what, what your question is. So Malta Malta has, as I said before, been developing a financial services sector for several years now. So the local technical institutions and universities have reacted to that. And so we have a very high level of education, more high standard of education. So the talent pool has been augmented over the years by people coming here to set up Structures in Malta, particularly when it comes to, for example, the gaming sector or up to a few years ago the investment fund sector. So, many of these people have moved on, and some have stayed, stayed here, but the pool is pretty strong.
DERREN JOSEPH:
Okay, great. So yeah, I’m looking at my various screens and I think that that’s it in terms of questions. Thank you for sharing some of your valuable time and, and, and feeling these questions. It has been quite a, it’s an important topic right now because Walter is a jurisdiction very much in the limelight. Any parting words, or any final comments before we close?
DAVID BORG:
No, not really. I, of course, want to thank you. I look forward to maybe other opportunities in the future to discuss more in-depth other areas that might be of interest to you, and to your followers as well.
DERREN JOSEPH:
And if somebody wants to, you know, they’re keen on Malta, like the person who asks some of these questions, consultants, family offices, people want to use Malta Structures, how can they find you? What’s the best way to reach David?
DAVID BORG:
Well, the best is via email of course, but I’m, I’m, I’m, I’m also more than happy to share my, So yeah, after this.
DERREN JOSEPH:
What’s your email address?
DAVI BORG:
So my, shall I, maybe I should type.
DERREN JOSEPH:
Oh yeah, you can type, yeah.
Okay. So I’m gonna read it out just for anybody who you know, lot, most people aren’t in our Zoom chat. So it’s david.borg@arqgroup.com. And I guess you can find out, they can find out more information on your, on your organization, on your team by just going to arqgroup.com.
www.arqgroup.com. All good. Perfect. Perfect. Fantastic. Again, thank you very much, and thank you to those who have tuned in and are listening, and we’ll see you next time. Have a good day ahead. Bye-bye now.
DAVID BORG:
To everyone. Bye-bye. Bye-bye.
OUTRO:
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