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Payment Institutions

The iGaming industry as well as the e-Commerce industry have significantly increased the need of payment gateways in Malta.  The Maltese authorities have proactively responded to this change and now Malta become a destination of choice for the setting up of Payment Institutions (PI).  Malta has developed an advanced telecommunications infrastructure and offers a highly skilled multilingual workforce making it a supreme destination to the setting up of customer care centres.  

PIs are regulated by the Financial Institutions Act, 1994. In 2017, the European Union (EU) had published the Payment Services Directive 2 (PSD2) (Directive 2015/2366/EU) to be transposed by Member States, including Malta, into their laws and thereby repealing Payment Services Directive 1 (PSD 1). The transposition deadline for its implementation was set to 13 January 2018. The new directive builds on the previous directive and is designed to increase consumer protection, make payments safer and enhance innovation and competition. The regulatory and supervisory requirements for PIs are less rigid than those required for other credit or financial institutions.

Unlike credit institutions, financial institutions cannot fund their activities through the taking of deposits or other repayable funds from the public.  


Activities of PIs

PIs may engage in the following activities which are laid down in the Second Schedule to the Financial Institutions Act:

  1. Services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account;
  2. Services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account;
  3. Execution of payment transactions, including transfers of funds on a payment account with the user’s payment service provider or with another payment service provider for the execution of direct debits, including one-off direct debits, the execution of payment transactions through a payment card or a similar device and for the execution of credit transfers, including standing orders;
  4. Execution of payment transactions where the funds are covered by a credit line for a payment service user to execute of direct debits, including one-off direct debits, execute the payment transactions through a payment card or a similar device and execute  credit transfers, including standing orders;
  5. Issuing and/or acquiring of payment instruments;
  6. Money remittance;
  7. Execution of payment transactions where the consent of the payer to a payment transaction is transmitted by means of any telecommunication, digital or IT device and the payment is made to the telecommunication, IT system or network operator, acting solely as an intermediary on behalf of the payment service user and the supplier of the goods and services.

PIs may also carry out the following additional activities:

  • The provision of operational and closely related ancillary services such as ensuring execution of payment transactions, foreign exchange services strictly in relation to payment services, safekeeping activities, and storage and processing of data;
  • The operation of payment systems;
  • Certain business activities other than the provision of payment services;
  • When payment institutions engage in the provision of payment services, they may only hold payment accounts used exclusively for transactions, and
  • Payment institutions may grant credit related to certain payment services referred to in (4), (5) or (7) above only if further requirements* are met.

* The further requirements are:

  • the credit is ancillary and granted exclusively in connection with the execution of a transaction; and
  • notwithstanding national rules on providing credit by credit cards, the credit granted in connection with a payment and executed with the act shall be repaid within a short period which shall in no case exceed twelve months; and
  • such credit is not granted from the funds received or held for the purpose of executing a payment transaction; and
  • the own funds of the payment institution are at all times, to the satisfaction of the supervisory authority, appropriate in view of the overall amount of credit granted.


Licensing of PIs in Malta

The law lays down the following statutory minimum requirements which must be satisfied and fulfilled before granting a license to a company:

  • Its’ initial share capital is in accordance with the principles established by the law (see below);
  • There are at least two individuals who will effectively direct the business of the financial institution in Malta, that is, “the four eyes” principle;
  • All qualifying shareholders, controllers and all persons who will effectively direct the business of the institution are suitable persons to ensure its prudent management;
  • The authority is satisfied that the financial institution has sound and prudent management, and has robust governance arrangement;
  • The authority is satisfied that there are no close links between that company and another person/s which through any law, regulation, administrative provision or in any manner prevent the company from exercising effective supervision of the company under the provisions of the Financial Institutions Act.

PIs are required that at the time of authorisation have initial capital as follows:

Activity provided by PIMinimum initial capital requirement
(6) above€20,000
(7) above€50,000
From (1) to (5) above€125,000

In applying for a PIs license with the MFSA, the following documents must be submitted:

  • Form 1 as annexed to Financial Institutions Rule 01 –  Application for Authority to Set up a Financial Institution Operating in or from Malta;
  • Form 2 as annexed to Financial Institutions Rule 01 – Questionnaire for Qualifying Shareholders other than Individuals;
  • In terms of Financial Institutions Rule 01 – Personal Questionnaire for individuals who are or propose to be Directors, Controllers or Managers;
  • A programme of operations setting out in particular the type of activities to be undertaken;
  • Proposed level of initial capital;
  • A business plan including the structure, organisation, management systems, governance arrangements and internal control systems of the institution and a forecast budget calculation for the first three financial years;
  • A description of the procedure in place to monitor, handle and follow up a security incident and security related customer complaints, including incidents reporting mechanism;
  • A description of the process in place to file, monitor, track or restrict access to sensitive payment data;
  • A description of business continuity arrangements;
  • A description of the principles and definitions applied for the collection of statistical data on performance, transactions and fraud;
  • A security policy document;
  • A description of the internal control mechanisms;
  • A description of structural organisation;
  • Audited financial statements for the last three years, if available;
  • The identity of statutory auditors and audit firms;
  • The applicant’s legal status;
  • The address of the applicant’s head office;
  • A description of the measures taken for safeguarding payment service users’ funds.

The authority will determine an application for a licence within three months of receipt of the formal complete application and will determine whether to grant a licence without conditions, a licence subject to certain conditions, or refuse the application for a licence.


A typical credit card payment process

The following are the parties to the payment process when using a credit card:

CardholderA consumer who uses a credit card to purchase goods and services.
MerchantA provider of goods and services who accepts credit card payments.
Payment service providerA payment gateway which is responsible to acquire data authorisation and encryption.
Acquiring bankThe bank which holds the merchant’s bank account.
Credit card brand networkThis includes brands such as VISA, Mastercard and American Express, amongst others, whose networks are used to facilitate interactions between issuers and acquirers when authorising and settling transactions.
Issuing bankThe bank which issued a credit card to the consumer on behalf of card networks.

The payment goes through the following stages:

Authorisation of a transaction
  • The cardholder uses a credit card to settle a purchasing transaction.
  • A merchant’s POS system / e-commerce website contacts the PSP who, depending on the card brand used, contacts the designated acquirer for transaction authorisation.
  • The acquirer sends the payment details to the card association.
  • The latter then sends the payment details to the issuing bank for authorisation.
Authentication of a transaction
  • The issuing bank receives the request for payment authorisation from the credit card network and validates the data received including the credit card number and CVV number, confirms availability of funds and matches the billing address of the credit card and payment files received.
  • The issuing bank approves or declines the payment transaction.
  • The response is sent back to the merchant through the same channels i.e. through the credit card network, then to the acquiring bank, PSP and finally to the merchant.
  • For successful transactions, the issuing bank blocks the purchase amount on the cardholder’s account.

The authorisation and authentication process takes between two and three seconds.

Clearing and settlement
  • The merchant sends the approved authorisations on a daily basis in one batch to the PSP.
  • The latter directs information in batches to the credit card networks for settlement who in turn sends each of the approved transactions to the relevant issuing banks.
  • The issuing bank transfers the funds to the credit card network and the payment goes through the same channels with each party deducting a charge until the merchant’s account is credited by the acquiring bank.
  • Eventually the cardholder settles the bill with the issuing bank.

The settlement process can take anywhere from 24 hours up to 3 days.


Passporting rights for PIs

Through the implementation of the European Passport Rights for Credit Institutions Regulations, a financial institution licenced or holding equivalent authorisation in another Member State or EEA State as a payment institution, may provide the activities for which it has been authorised either through the establishment of a branch or the freedom to provide services, including by engaging an agent.  The law prescribes the communication requirements for PIs that would like to passport the provision of services in Malta.



An application fee of €3,500 is also required upon submission of the aforementioned application.  Financial institutions licensed under the Act must also pay an annual supervision fee of 0.02% of its total assets as reported at the end of the year immediately before the year in which the fee is payable. This must not be less than €2,500.



Financial Institutions are subject to the general rules of taxation in Malta.  Shareholders may avail themselves from the full imputation tax system and therefore when in receipt of dividends they are entitled to a tax credit which is equal to the tax paid by the distributing company on the profits out of which the dividends are paid.  Shareholders may also be entitled to tax refunds upon the distribution of taxed profits. Moreover, Malta has a wide network of double taxation agreements in place. Other benefits emanating from the Maltese tax system include the ‘participation exemption’ on profits derived from participating equity holdings and no capital gains on transfer of shares in a non-property company held by non-resident shareholders.  For further details on the Maltese taxation system, please refer to Corporate Taxation.

How can we help you?

Avanzia Taxand is a corporate service provider registered with the Malta Financial Services Authority and we may assist in the application process with the MFSA, the drafting of documentation in connection with the legal set-up as well as some of the ongoing compliance requirements and filing obligations particularly those related to secretarial and taxation.

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Yacht Registration

Malta has a long maritime tradition and it has established itself as one of the leading maritime hubs and service centres.  The Island has several yacht marinas and offers a whole range of maritime services and facilities. Malta has also developed a very strong legal and regulatory platform and Malta’s shipping register is the EU largest and one of the largest in the world.

All types of vessels, both pleasure yachts and commercial ships, including vessels under construction, may be registered under the Malta flag.  If the owner is not a Maltese resident person or an EU citizen, we may act as a resident agent.

Vessels older than 10 years are subject to additional scrutiny by Transport Malta.  Vessels older than 10 years are subject to an inspection from an authorised flag State inspector whilst vessels older than 15 years are required to undergo an authorised flag State inspection prior to provisional registration.  It is customary for Transport Malta not to accept registration of trading vessels of 25 years and over although in certain circumstances this may be considered.

A vessel / yacht is first registered provisionally under the Malta flag for six months during which period all documentation must be finalised.  It is possible to request an extension of the provisional registration should this be required.

The requirements for provisional registration are:

  • Application for registration by the owner or an authorised representative, including, an application for change of name of yacht, if required;
  • Proof of qualification to own a Maltese vessel.   If the owner is a Maltese company, we will provide all the required documentation, however, if the owner is a foreign corporate entity, we would require a declaration appointing us as resident agent, certified copies of the certificate of incorporation, statute and good standing certificate.  All documents must be notarised and apostilled. We also require a signed legal opinion confirming that the records of the entity have been examined and giving details on the directors and holders of office and of the persons authorized to represent the entity and to bind it with their signature and to appoint a registered agent.
  • Declaration of ownership made in front of the Registrar and signed by the owner or an authorised representative.
  • A copy of the current ship’s International Tonnage Certificate (in case of ships over 24 metres);
  • Evidence of seaworthiness;
  • Payment of the initial registration fees;
  • Application for radio licence.

The following documents are to be submitted during provisional registration:

  • A builder’s certificate in case the yacht is newly built or a bill of sale if acquired;
  • A deletion certificate or cancellation document issued by the relevant authorities where the vessel was last registered, if applicable;
  • A Certificate of Survey and a carving and marking note both signed by an approved surveyor.

Further documents will be required for commercial or larger vessels.

Once all the necessary documents are made available, a certificate confirming registration is issued by the Shipping Directorate of Transport Malta.  The certificate is valid for one year and must be renewed annually together with the payment of the annual registration fees.


Private yachts

The Shipping Directorate of Transport Malta considers a private registered yacht to be any pleasure yacht of 6 metres in length or more, which does not carry passengers for reward and is not engaged in trade but is used for the sole purpose of the owner.


Commercial yachts

Yachts in commercial use which do not carry cargo and do not carry more than 12 passengers can be registered as commercial yachts under the Commercial Yacht Code. Maltese law is very advantageous for the operation of commercial yachts.  

The following classes of yachts will be considered for commercial registration:

  • Yachts in commercial use of not less than 15 metres in length and not more than 24 metres.
  • Superyachts in commercial use of more than 24 metres in length and less than 500 gross tonnes.
  • Superyachts in commercial use of more than 24 metres in length and 500 gross tonnes and over.

A company operating a recognised commercial yacht is exempt from income tax however will be subject to tonnage tax based on the gross tonnage of the commercial yacht.


VAT implications

A Maltese vessel owner acting as a taxable person must be registered for VAT purposes in Malta.  Pleasure boat owners are required to register when the vessel is leased for a short-term period (charters not exceeding 90 days) or a long-term period (charters exceeding 90 days).   



The purchase of the vessel should remain VAT neutral for a VAT registered vessel owner.  A vessel bought by a Maltese taxable person from another taxable person situated in another EU Member State is subject to the reverse charge mechanism and therefore no VAT is actually paid in Malta.  It is also possible for a vessel acquired from outside the EU to have the vessel imported into Malta and request a VAT deferment from the Maltese VAT Department on the understanding that the vessel will be used for commercial purposes.  



The place of supply of a lease of a pleasure boat to a non-taxable person (whether long term or short term) or short-term charter to a taxable person is the place where the yacht is actually put at the disposal of the customer.  This usually means that place of departure of the charter of the yacht. On the other hand, the place of supply of yachts for a long-term period to a taxable person is the place where the customer is established.

Subject to obtaining pre-approval from the VAT Department, the yacht owner may charge VAT on a portion of the lease on the understanding that only a portion of the lease is consumed within EU territorial waters.  The owner of the yacht is required to provide proof of the time the vessel would spend in the EU or, in absence of sufficient information to provide such assessment, the VAT Department may apply a predetermined percentage of the lease taking place in the EU.  Such percentages are based on the length of the yacht. The effective VAT rate will be substantially reduced. We will be able to work out the VAT savings once we have the necessary details.


Operational expenses

As a VAT registered taxable person, the Maltese yacht owner may claim back any VAT incurred on business related expenses in Malta as well as apply the self imposition of VAT on invoices from EU suppliers.  The yacht owner may also opt to claim back any VAT incurred in other EU Member States through the Eighth Directive subject to any conditions imposed by the Member State.


VAT exemption

The supply of sea vessels and provided to such vessels are exempted from VAT.  Such exemption is only granted to sea vessels used for navigation in high seas and for the carrying of passengers for commercial, industrial or fishing activities, sea vessels used for rescue or assistance at sea or for coastal fishing as well as to sea vessels used for war.  This exemption does not apply to vessels used for leisure purposes.

How can we help you?

Avanzia Taxand may act as a resident agent and we offer a one stop shop for owners wishing to register their vessel under the Malta flag.  We may set up a Maltese company to act as owner of the yacht and liaise with certified surveyors as well as the Shipping Directorate of Transport Malta in order to have the provisional registration and permanent registration.

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