The Malta Freeport
Revision No. 2 - Last Updated : 11-04-2002
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The Malta Freeport is a customs-free zone covering an area of around 35 hectares of land located around a developed harbour in the southern part of the Island.
The Freeport is recognized as a premier port in the Mediterranean presently ranking third amongst the leading transhipment ports in this region and is one of the leading ports in the world container traffic league. Being strategically located on the main trade routes in the Mediterranean between Gibraltar and the Suez Canal with minimal diversion distances, it is increasingly becoming an important node for international business linking markets across continents. Indeed, the Freeport’s strategic location offers several advantages including all year favourable weather conditions, easily accessible port entrance, fewer mainline port calls, reduced voyage times through minimal diversions and shorter transit times by switching east-and-west-bound services over at the Freeport.
Malta Freeport Corporation
Limited: the Freeport Authority
The Malta Freeport Corporation Limited is the sole administrative, regulatory and licensing Authority of the Freeport. Whilst fulfilling its role efficaciously and harmonizing the port operations, it guarantees its clients minimum bureaucracy and red tape in all activities.
The Malta Freeports Act, 1989, was drafted with special attention given to Malta’s application to join the European Union and is, consequently, in full conformity with EU regulations.
Activities undertaken in the Freeport
Three main types of activity are undertaken at the Freeport, namely:
· container and general cargo handling;
· oil products handling and storage; and
· industrial storage/warehousing/distripark facilities and processing.
Freeport Terminal (Malta) plc is the single operating company of the container handling, industrial storage and investment activities. The oil terminal facilities are managed by Oiltanking Malta Limited.
Container Terminal
At present the Freeport is used predominantly as a container terminal. Over 95% of the Freeport’s container traffic is transshipment business. The Freeport focuses on the ‘hub’ concept whereby cargo is discharged from large mother vessels and relayed to a network of regional ports by regular and frequent feeder vessels. The Freeport can handle various types of cargo (including ro-ro and conventional cargo). The fact that the Freeport is a natural deep-water port allows the largest vessels to operate unhindered.
Throughput for the year 2000 exceeded 1 million TEU (20 foot equivalent units) traffic level volume and this is on the increase. In fact, major infrastructural works were undertaken recently at Terminal 2 to increase capacity*.
Various prestigious shipping lines calling regularly at the Freeport which between them connect its terminals with more than 97 international ports on a regular basis and around 53 ports in the Mediterranean and European region.
Oil Products Handling Terminal
The Oil Terminal is operational 24 hours a day, 7 days a week and has an annual handling capacity of around 2 million metric tonnes of products. Products handled include gasoline, gasoil, jet fuel, feedstocks, components (including MTBE), industrial alcohols, heavy fuels, crude oil and other black products.
The Oil Terminal’s principle activity is tank rental but it also provides other services such as blending, storage, butanizing, circulation, ship to ship transfer, leading and injecting of additives/dyes etc..
At present capacity is of 359,000 cubic metres but plans are in hand to expand this to 500,000 cubic metres. Facilities include 3 jetties, 18 oil storage tanks ranging from 5,000m3 to 35,000m3 and a testing laboratory that is run by a totally independent company. The facilities are in accordance with the latest safety and operational standards.
Industrial storage, light
processing and warehousing
The Freeport strives to offer its clients a holistic approach and a complete logistics center through distripark facilities available at the Freeport which lie only 6km from the Island’s International Airport thereby opening up excellent opportunities for sea and air links stretching world-wide.
The Freeport Authority provides warehouses, factories, wharves, tanks, pipelines and any other facility or structure which may be available in the Freeport zone (including, on such terms as may be agreed, industrial buildings and structures constructed or altered according to the requirements of the licensee) to enable licensed companies to carry out specified activities in a customs-free zone.
Handling operations that may be undertaken include:
Cargo consolidation;
break-bulk; re-storage; re-packing; labelling; diving cargo into separate lots;
cooling and freezing; mounting of goods for protection or display; inspection
inventory and sampling; repair following damage incurred during transport or
storage; changing packing marks and numbers; simple sorting or classing
operations; inspection, testing and starting up of engines, equipment and
vehicles; salt removal, cleaning, skin crooping; anti-parasite treatment,
lubrification, rust proof paint and protective coating for transport;
assembling; and elements of processing.
Clients may also set up their own controlled temperature facilities, particularly for meat and fruit products originating from other countries, for regional distribution in the Mediterranean and Northern Europe.
At present the Freeport has 10 general purpose warehouses of 2,400 square metres each having 1,000 square metres of covered space (40m x 25m). Plans are in hand to build a further 18 similar multi-purpose warehousing units.
The approximate leasing costs of these warehouses per annum are as follows:
|
Description |
General support service fee |
Lm |
TOTAL
|
US$ |
|
Lease
of warehouse (1,800 m2 of which 1,000 m2 is covered
area) |
2,200 |
26,400 |
28,600 |
72,000 |
|
Lease
of executive office space |
180 |
2,500 – 2,800 |
2,680 – 2,980 |
6,700 – 7,450 |
Licensing requirement
Companies operating within the Freeport zone require a license from the Freeport Authority. A company qualifies for such a license if it carries out one or more of the following activities:
· labelling, packaging, sorting, warehousing, storage, exhibition or assembly of any goods, materials, commodities, equipment, plant or machinery; or
· the rendering of any services which are ancillary or complementary to the above activities; or
· any activity concerned solely with the conduct of a Freeport including, but not limited to, stevedoring, wharfage, operation of terminals and container handling.
Although the rule is that, in order to qualify for a license, the above activities are to be wholly or mainly carried out or exercised within the Freeport zone, a licensed company may carry out the following activities outside the Freeport:
· the management and administration of the company and of its trade, business or property;
· the execution of instruments, transactions, negotiations or agreements; and
· the transit of goods or their commodities to and from the Freeport.
Only a recognized manufacturer of alcoholic spirits, tobacco products or such other similar commodities as the Freeport Authority may, from time to time, determine may be granted a license to engage in any activities connected with such products and commodities within the Freeport.
No part of the Freeport may be utilized as a bonded store for customs duty purposes in relation to goods which are or which will be imported into Malta but outside the Freeport.
A license (and annual fee) of Lm1,000 (approximately US$2,500) is payable to the Freeport Authority.
For a list of documents and information that has to be submitted to the Freeport Authority to obtain a license please refer to Appendix I
Certificates
The
Freeport Authority may, having regard to a substantial transformation achieved
in the identity of goods or articles and to the value added through any
processing or other operation carried out in the Freeport, release a
certificate indicating that Malta is the country of origin of any such goods or
articles.
Alternatively,
the Freeport Authority may, where it is so satisfied, release a certificate to
the effect that any goods or articles that have been transshipped through the
Freeport have not suffered any manipulation in the Freeport so as to transform
their identity.
Fiscal advantages and other benefits
These
are numerous and include:
· A licensed company is entitled to avail itself of certain fiscal and other incentives including inter alia Reduced Rates of Income Tax, Investment Allowances and Investment Tax Credits. Indeed, the interaction of these incentives would normally result in minimal or no taxes being paid for a number of years (Kindly refer to our fact sheet entitled ‘INCENTIVES FOR THE MANUFACTURING AND SERVICES INDUSTRIES IN MALTA’ for more detailed information.)
· Any profits which are exempt from income tax as provided above shall also be exempt from income tax in the hands of the shareholders.
· Various transactions performed by a licensed company are exempt from stamp duty#.
· Provided Maltese citizens (including companies) are entitled to less than 40% of the issued share capital of a licensed company, any such licensed company is exempt from exchange control regulations*. This exemption shall not, however, apply (except for normal banking transactions) where the transactions and operations are carried out with persons resident in Malta.
· Duty on documents and death duty do not apply.
· Substantially all goods (including raw materials, components, intermediate products, by-products, unfinished goods) imported into the Freeport by a licensed company are exempt from customs duty and the excise laws with goods transferred out of the Freeport into Malta being subject to duty.
It is important to note that the above exemptions
shall only apply with regards to transactions and operations for which such
licensed company has been or will be licensed.
Expatriates in the employment of a licensed company
Expatriates
in the employment of a licensed company are liable to income tax at progressive
rates which reach a maximum rate of 30% (instead of the maximum normal rate of
35% applicable to all other employees).
Such
employees and the licensed company itself are exempt from the provisions of the
Social Security Act and would, therefore, be exempt from paying social security
contributions.
Any
such employee may import into Malta free of customs duty within 6 months of
his/her first taking up residence in Malta his/her used personal belongings
including 1 vehicle suitable for family use.
However, the moment any such item is sold, assigned or otherwise
transferred to a resident of Malta, customs duties will become due.
Ongoing obligations of a licensed company
Any
licensed company shall, under pain of forfeiting the benefits listed above, be
obliged to:
·
maintain
and keep proper and sufficient records and accounts (including appropriate
supporting documentation) in relation to any and all exemptions or benefits
claimed by it;
·
keep
separate accounts as may be necessary to identify and quantify the exemption or
benefit;
·
submit
such computations, returns, statements, particulars, documents as may be
necessary to identify clearly the entitlement to an exemption or benefit;
·
furnish
to the Freeport Authority (or to any other authority) such information,
accounts, statements or other documents as may be requested;
·
attend
or send a representative to attend before the Freeport Authority (or any other
authority) and answer any question lawfully made in connection therewith; and
·
provide
the Freeport Authority (or any other authority) with reasonable access to all
premises, places, books and other documents and allow copies to be made
thereof.
Any
claim, statement, account or document connected (even remotely) with the
entitlement to an exemption or benefit as provided above must be certified by a
certified public accountant and auditor.
The
Freeport Authority may by notice in writing request a licensed company to
comply with any conditions imposed in the license or to terminate any activity
inconsistent with a Freeport. In
default, the Authority may revoke the grant of any exemption or benefit from
such date as may be established by the Authority.
Revocation of license
The
Freeport Authority shall revoke a license if any licensed company carries out
any activity, or is deriving income, from illegal activities. However, The Freeport Authority may not
revoke any such license or revoke the grant of any exemption or benefit unless
the licensed company in question has:
·
been
informed in writing to this effect; and
·
had
an opportunity for a hearing before the Freeport Authority.
Any
dispute in relation to the interpretation of any conditions imposed in a
license or the right of any party or the exercise by the Freeport Authority of
any powers vested in it (including the revocation of a license) shall be
referred to arbitration before an independent Appeals Board whose decision
shall be final.
There are stiff penalties for failure to comply with the requirements of the law including, in cases of fraud, fines of up to Lm10,000 and/or imprisonment for up to 2 years.
Work Permits
Indefinite work permits are granted to shareholders holding more than 40% of the equity. Definite work permits for specialists are granted according to company requirements.
The Malta Freeport: a leader in the Mediterranean
The Malta Freeport has invested in other related activities that include Coastal Management Company Limited and the Freeport Training Centre. Coastal Management Company Limited was set up to provide consultancy services on coastal engineering and is made up of Malta Freeport Corporation Limited and Svasek Ingineurs of Holland. The Freeport Training Centre is responsible for the training of all Freeport personnel and operates in close collaboration with the Port of Rotterdam College for Transport and Shipping.
Malta Freeport has also widened its business horizons and gained a foothold on the European mainland by acquiring a 40% shareholding in Brindisi Terminal Italia S.p.A. thereby enabling it to compete with its counterpart Mediterranean ports on an equal footing.
Downloads:
· This Document in PDF Format.
Further Reading :
·
Incentives
for the manufacturing and Services Industry in Malta