FIAU Notice: Publication Of Revised Version Of The Implementing Procedures (Applicable To All Subject Persons) – Part I

Author: Jurgen Dalli – Junior Legal Associate, PKF Malta
Published on the Malta Chamber 3rd November 2020

A money Laundering Reporting Officer (MLRO) ought to be appointed by a subject person in order to assess transactions. The latter officer ought to have a degree of seniority and command in order to be appointed. Hence, such MLRO ought to occupy a position such as an executive director who does not engage in internal audit functions.

Nonetheless, the MLRO need not be located locally and can be assigned to someone residing elsewhere as long as the subject person believes such a person is capable of conducting his or her duty as MLRO. Such MLRO must be provided with all the relevant information and data in order to allow the latter to properly conduct his or her duty. These have not been tampered with and retain the same structure as before the issued changes.

Nonetheless, FIAU reviews all appointments of such MLRO. Moreover, the FIAU ought to be notified of any new appointment or removal of such MLRO in order to assess whether such an elected person has the required skill set to properly conduct his or her duties and obligations.

The updated version introduced by FIAU allow for an appointment of an assistant due to the possibility of an overwhelming volume of work thereby allowing the MLRO to have an active assistant. Such designating employee has the prerogative to request an STR unlike other employees merely assisting the MLRO. Hence, such designated employee must firstly be approved by the MLRO. All these functions have been introduced by virtue of the new changes since there were no such possibilities prior to said amendments.

The FIAU now also requires that reporting should be conducted when there is knowledge or suspicion of a transaction being connected to ML/FT due to the subject person becoming aware of any information or matter that in his or her opinion gives rise to transactions connected to ML/TF. Moreover, the FIAU now also requires that such reporting is also conducted by those who are merely engaged in providing services and not only to subject persons. This was undoubtedly introduced in order to allow the possibility of tackling potential ML/TF transactions from all aspects and allowing any person to report any occurrence of such illicit transactions.

This report ought to be made by the next working day and also must ensure that the MLRO is aware of such knowledge or suspicion. All other employees ought to familiarize themselves with the procedures required to be conducted in the case where there is the absence of the MLRO conversely to the previous version, thereby incorporating anti-ML/TF initiatives with all employees rather than solely the MLRO. Moreover, such reports can be either made electronically or in writing but preferably should be made in the form of a template in order to ensure continuity and consistency in how reports are being submitted thereby avoiding having a different style of reporting for each and every report submitted.

It is important that such report encapsulates all the details showing the concerns of the employee. It is possible that prior to the filing of a report, the concern is raised to one’s superior which ought to take priority before raising such concern to the MLRO. This took the place of the team which used to assess such reports prior to the changes introduced. The report no longer requires the inclusion of the information which gave rise to the knowledge or suspicion but information or matter that gave rise to the employee’s concern.

Software solutions could be used by subject persons and where there is further evidence of ML/FT then the MLRO ought to be made aware by the next working day. The new changes allow the employees who detect such suspicious transactions to further scrutinize the case at hand before immediately informing the MLRO of the occurrence, once again reinforcing the importance of having all employees taking an active stance against possible ML/TF cases. It is then the duty of the MLRO to decide if an STR ought to be filed or whether further information is required for such action. In the case of the latter, the MLRO may even obtain information from the customer or person subject to such a report.

The collection ought to be made without unreasonable delay. The FIAU has taken the time to elaborate on as to what an unreasonable delay constitutes, unlike the previous version which omitted from taking this initiative. This initiative was mainly adopted in order to limit any ambiguity as to what an undue delay might comprise of, thereby eliminating the possibility of having subject persons resorting to delays to justify their omissions. According to amended guidelines, an unreasonable delay is one where the MLROs are not to conduct investigative work, priority ought to be given to those cases involving substantial funds, MLROs should have the backing of both human and technical resources, a request for intel must be made promptly and the failure to provide information is to raise suspicion.

An STR report may be conducted by other employees apart from the MLRO and the designated employee as long as the other employees are being supervised. Also, the MLRO may seek the assistance of other employees, however, in this case, attention should be given to the sensitivity and confidentiality of the information being disclosed. In the case where not sufficient suspicion is gathered and hence no report is conducted, the MLRO must keep an electronic or manual copy of such an account.

These possibilities were all introduced by virtue of the new changes as prior to this there was no mention of the possibility of having the designated employees or other employees being able to determine where an internal report gives rise to knowledge or suspicion of ML/TF. Moreover, the MLRO is no longer prohibited from seeking assistance from external advisors. One can always notice the importance FIAU is giving to give subject persons and their employees to tackle ML and TF from all angles and utilise all tools at their disposal to uncover those transactions which have an illicit background. These changes have expanded on the importance of internal reporting procedures in order to have a clear and unambiguous set of instructions which elaborate and explain how proper internal reporting ought to be conducted.

Where an external report is being conducted, it is now possible that the suspicion need not arise at that time but could arise later. Any disclosures should be made to the FIAU promptly, meaning that a suspicious transaction report should be submitted on the same day when knowledge or suspicion of ML/FT is considered to subsist by the MLRO. This notwithstanding, the FIAU recognises that in certain more complex cases the compilation and submission of the STR within the same day when the knowledge or suspicion of ML/FT would prove challenging in view of the extensive volume and/or complexity of documentation that may need to be provided. In such instances, the MLRO shall ensure that the STR is submitted within the shortest time possible.

All information giving rise to suspicion ought to be given to the FIAU as required by due diligence. STRs are to be submitted to the FIAU in electronic format as may be indicated by the FIAU from time to time using such templates as may be provided. In exceptional cases, when subject persons do not have access to IT systems to submit STRs online, manual submissions are also accepted.

In completing this report MLROs should seek to provide as much detail as possible together with the relevant identification and other supporting documentation. It is important to keep in mind that subject persons must file STRs only with the FIAU and with no other supervisory authority. This creates a stronger appreciation to the work being conducted by the FIAU as having such sensitive data and information being shared with other entities might hinder the work of the FIAU. All these measures have been recently adopted by the FIAU as these where not included in the guidelines on the reporting of an STR prior to the recent changes.

Subject persons are required to report also attempted transactions that are deemed suspicious but which never materialise, as by way of example the subject person would have desisted from servicing or on-boarding the customer in question. The recent changes have removed the need to file a report where suspicion does not exist but may arise later.

Subject persons that are payment service providers have additional reporting obligations in terms of Regulation (EU) 2015/847. This Regulation obliges payment service providers that are acting either as a payee’s payment service provider or as an intermediary payment service provider to notify the FIAU about payment service providers that repeatedly fail to include information required in terms of this Regulation with the transfer of funds. Reports ought to be made to External disclosures should ideally be submitted to the FIAU in writing and marked as strictly confidential. Submissions may be sent either via e-mail on or in writing, addressed to the FIAU’s Whistleblowing Reports Unit.


Author: Jurgen Dalli – Junior Legal Associate, PKF Malta
Published on the Malta Chamber 3rd November 2020
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Current Drone Legal Framework

Author: Jurgen Dalli – Junior Legal Associate, PKF Malta
Published on PKF Malta 27th October 2020

  • At present, in October 2020 there are essentially no specific set of rules and regulations that apply directly to drones.[1]
  • Nonetheless, there are some provisions found in the Air Navigation Order[2] which are also applicable to drone activities.
  • Malta does not differentiate commercial & leisure drone use. Thus, both are subject to a code of conduct & registration.
  • An individual may sign and submit a self-declaration form thereby allowing him or her to operate these drones in question within a prescribed amount of conditions and boundaries.[3]
  • A self-declaration permit will be applicable and valid for use for 6 months, after which another permit has to be applied for.
  • However, it may be possible that an individual requires to exceed these boundaries which are being imposed by the self-declaration form, in which case, one requires a one-off permit which is issued by the Director-General for Civil Aviation whereby a risk assessment will be conducted.
  • When applying for such a permit, a number of documents ought to be submitted, such as;
  • Type of drone (or drones) to be used
  • Submission of technical data or manual of instructions of each drone to be used
  • Submission of any flight safety programmes or operations manual that the operator may have
  • Submission of any previous authorisations from any other civil aviation authority or exemptions
  • Submission of details of the operator and proficiency of the drone pilots
  • Copy of the original signed insurance document for third party liability covering the scope and complexity of the requested operation covering the specific geographical areas/limits for such operation
  • Submission of a risk assessment identifying hazards and the mitigations to be put in place on how to protect aircraft, persons, vehicles, vessels, and property.
  • Past a number of boundaries, one would require the permission of the Civil Aviation Directorate in order to fly a drone. One of these instances materializes when the drone weighs more than 250 grams, in which case a permit is required in order to fly the drone in question.
  • Having said that, since all drones having attached with it or incorporated with it; a camera more often than not will require a permit as these would generally weigh more than 250 grams due to the added weight of the camera.
  • Hence, it is the case that those drones being used for commercial purposes and activities will require a permit in order to fly such drones by the Civil Aviation Directorate.
  • Drones weighing 25kgs or more cannot be used altogether.[4]
  • Similar to when driving a car, when manning a drone, one should also provide valid drone insurance.
  • When it comes to distances regulations, one’s drone must always be within visual line of sight and cannot exceed or be more than 300 meters apart from the person who is manning the drone and cannot exceed 60 meters above ground level.
  • Furthermore, no drones can be flown within an airport without permission from the Civil Aviation Directorate and a distance of 5km from such establishment must be kept at all time.[5]
  • For data protection purposes as well as privacy purposes, drones are to be kept a distance of 50m from persons, vehicles, ships, and structures who are not involved in the flying of the drone.
  • In fact, drone pilots should be aware that the collection of images of identifiable individuals, even inadvertently, when using cameras mounted on small drones, may be subject to Malta’s Data Protection Act[6].
  • Although extended, there is also a distance capping on certain establishments such as police properties, military and industrial plants, power plants, hospitals, embassies and consulates, ports, buildings of international organizations, and crowds having at least 12 people; in these cases, the minimum distance the pilot must adhere to is 120 meters.[7]
  • Moreover, drones ought to be manned in such a manner as to have a clear view of where the drone is and have clear sight, hence, drones may not be flown during the night-time unless the view is very visible.[8]
  • Flying drones is strictly prohibited in Maltese nature reserves.
  • Therefore, the regulations mentioned above such as the rule of having 50 meters distance from persons and the drone would not be applicable for commercial drones if such persons are part of the activities which the drone is being flown for.
  • Following the introduction of the Basic Regulation 2018/1139 of the European Parliament and of the Council of 4 July 2018 on common rules in the field of civil aviation and establishing a European Union Aviation Safety Agency[9], the Commission took it upon itself to establish rules for unmanned aircraft, whilst ensuring the institutional, regulatory and architectural framework with the aim of enabling complex drone operations.
  • The following year the Delegated Regulations (EU)2019/945 of 12 March 2019 on unmanned aircraft systems and on third-country operators of unmanned aircraft systems[10] continued to build upon the national rules that were in place in the Member States and started to provide a harmonized framework across the European Union. These set of rules determined the features and capabilities that unmanned aircraft must have in order to be flown safely and, at the same time, helped foster investment and innovation in this promising sector. These rules were based on an assessment of the risk of operation and attempted to strike a balance between the obligations of drone manufacturers and operators in terms of safety, respect for privacy, the environment, protection against noise, and security. Nevertheless, apart from the technical requirements adopted, the Commission also intended to cover all operation of drones[11], from those not requiring prior permission, to those involving certified aircraft and operators, as well as minimum remote pilot training requirements.
  • A few months later the European Commission adopted the Implementing Regulation (EU)2019/947 Of 24 May 2019 on the rules and procedures for the operation of unmanned aircraft[12] making sure that the increasing drone traffic across Europe is safe and secure for persons on the ground and in air.[13] Such laws, being applicable to both professional and recreational operators of drones, replaced the local rules of the Member States and kept building upon the measures already in place mitigating security risks and preventing unlawful drone activities. This was be achieved through operators’ registration, remote identification and definition of geographical zones. In fact, from the beginning of this year, all drones within EU perimeters have to be registered with local authorities. Even if these rules are enacted in respect to all drones regardless of weight, it is relevant to note that the majority of drones are part of the market of mass-produced drones, which do not necessarily meet the minimum requirements.
  • As a response to the steady development of innovative legislation in this regard, the European Commissioner for Transport Violeta Bulc held that “The EU will now have the most advanced rules worldwide. This will pave the way for safe, secure and green drone flights. It also provides the much-needed clarity for the business sector and for drone innovators Europe-wide.”[14]
  • The core objectives of the European Commission, together with the aid of the European Union Aviation Safety Agency (EASA), is to apply the already existing safety standards obtained in manned aviation and implement them to drones as well. In fact, The Aviation Strategy for Europe[15] safeguards the highest levels of safety and support in relation to the competitiveness of the EU’s Aviation Industry. The European Commission and EASA will be soon publishing guidelines and “standard scenarios” to assist drone operators to comply with the pertinent legislation like the EU’s approach is to ensure that drone operators – whether recreational or professional – have a clear understanding of what is allowed or not.

Author: Jurgen Dalli – Junior Legal Associate, PKF Malta
Published on PKF Malta 27th October 2020
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*All reference links were last accessed 7th October 2020


[2] S.L. 499.09




[6] Chapter 586 of the Laws of Malta










EU moves to shut down Malta Passport by Investment Program

Author: Dr Samuel Sciberras
Published 26th October 2020 on PKF Malta

The European Commission has initiated legal proceedings against Malta over the Individual Investor Program (IIP[1]) due to allegations that the scheme increased possibilities of money laundering, tax evasion and corruption.[2]

Malta, who joined the European Union in 2004, introduced the investment citizenship scheme in 2014 allowing a person to acquire a new nationality based on payment. The Commission had been issuing warnings about the risks posed by the schemes but had not taken any concrete action.

Nonetheless, the Commission has now written to Malta via a procedure called ‘Letter of Formal Notice’ requesting explanations on the immigrant investor program. Such a letter is the start of a process referred to as ‘Infringement Proceedings’.

Infringement Proceedings, deriving from Articles 258 and 260 of the Treaty for the Functioning of the European Union (TFEU), is divided into two parts: The Pre-Litigation Stage and Litigation Stage.

The Pre-litigation is an opportunity for the Member State to justify or remedy the infringement before the matter goes to the Court of Justice of the European Union (CJEU).

  • A Letter of Formal Notice is sent to the Member State informing it of its breach of EU law. The letter, being an essential procedural requirement, must specify the obligation that the state has failed to fulfil. In the current national issue, the Maltese Government would have two months to reply to this letter, and if the Commission is of the opinion that the reply put forward is not satisfactory or that the matter has still not been resolved, the Commission may then issue a Reasoned Opinion. This opinion is somewhat of a last warning, but not an executive order having no legal effect, and must contain the same issues as the Letter of Formal Notice. The commission would usually give a prescribed period in which the state would have to comply.

Nevertheless, the Commission may then opt to initiate the second stage being the Litigation Stage in which it files a case at the CJEU against the Member State. The burden of proof lies on the Commission, and it is mandated to bring the proceedings itself in its supervisory role as the guardian of the treaties. For the case to be admissible, the pre-litigation stage has to be properly conducted, and pleas put forward by the Commission must be in line with those at the pre-litigation stage.

It is important to note that any a modification of national or supranational law after the pre-litigation stage does not prevent the Commission from going to Court. Likewise, if the Member State remedies the issue after the case has been filed, the action may still be brought because the state would have complied after the expiry of the prescribed period.

The action is objectively establishing if there was an infringement or not, and thus in its defence, a Member State cannot justify its infringement by proposing that it was not intentional or it did not ‘harm’ anyone. Defense typically consists of pleas refuting the breach in an objective manner or the challenging of the legality of the Union Act at stake.

The consequence of the action is that since these judgments apply erga omnes, a decision will have legal force on the Member State concerned, other Member States and the Commission itself. However, it is important to note that the Court will stop at a declaration of infringement and will not impose fines or penalties.

After the adjudication, the state would have the duty to remedy the infringement, but what happens if there is a continuation of non-compliance?

If the Commission is still of the opinion that the state concerned has still not taken the necessary measures to comply, it may bring the case before the Court for a second time, now without the Pre-Litigation stage. Now the CJEU may impose a lump sum and/or penalty payment as a measure to urge fast compliance.

The Maltese Government plans to defend the scheme since citizenship is a matter of Member State competence[3] and due to the overall good, it had brought. The axing of the scheme would presumably have negative consequences to Malta’s economy, especially due to the ongoing COVID-19.


Author: Dr Samuel Sciberras
Published 26th October 2020 on PKF Malta
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Malta’s main Budget Highlights for 2021

Malta’s main Budget Highlights for 2021, summarised by our advisory team at #PKFMalta. 

#Social Security measures, #Parents and families, #Elderly & pensions, #Taxes, #Businesses, #Healthcare#Transport#Property#Gozo and #Tourism, #Environmental measures.

All details found here:

Covid-19 -Now Upsetting The Elderly Homes Sector

Author: Jurgen Dalli – Junior Legal Associate, PKF Malta
Published on Malta Chamber 8th October 2020

Amongst the many sectors that Covid-19 has affected during this pandemic, one can find the elderly residential homes which have been impacted a great deal as of lately, especially in the last few weeks where a number of cases as well as deaths have been registered in a number of elderly homes around Malta. As a matter of fact, the European Centre for Disease Prevention and Control has labelled Malta as a high concern country in their latest report on Covid-19 transmissions, after the spike in cases, especially the increment in cases in elderly homes.

In Malta, there are more or less 40 elderly homes at the moment; both private and state-owned. One particular home; St Joseph Home or Residenza San Guzepp in Fgura, released a statement in late September stating how 41% of 278 resident living in the home tested positive for Coronavirus. Out of these 113 residents, 29 were staff members whilst another 50 are being held in quarantine. Despite being the most direly affected, Residenza San Guzepp is not the only elderly home which was afflicted with a spike in cases, in fact, a flare-up in cases was noted in four homes.

The management in their statement also confirmed and put a lot of minds at rest as they argued that the different clusters are being held in different groups without contact; i.e. the positive cases, negative cases, and persons in quarantine are not in contact with one another. Interestingly enough, cases in elderly homes have only been registered in privately owned homes as no cases have been reported in any other residents at the other state-run elderly homes declared the Minister for Family, Children’s rights and Social Solidarity, Michael Falzon.

In fact, the other spike in cases was noted in Simblia Care home in Naxxar where there were two cases and a further two cases in Casa Antonia in Balzan.

As part of their obligations during this pandemic, elderly homes are being requested to conduct a swab test on residents once every three days following a containment plan. However, this is not the only measure being introduced in order to contain the virus from spreading even more. The new measures mean that visits are only possible by virtue of an appointment during all days of the week between 9:30 am and 11 am and between 5 pm and 7 pm.

Moreover, these visits can only last to a maximum of 15 minutes. Only four people are allowed to visit residents during the allocated time whilst only one parking space is being made available for visitors outside the main entrance. The necessary screening will be taken such as thermal scans in order to ensure that the visitors do not have any symptoms themselves such as high temperatures due to fever. A shuttle service from and to the main entrance of the visiting points is being provided whilst the wearing of a mask or visor is mandatory and cannot be removed at any time. The 15-minute clause is being strictly followed and visitors are being asked to leave without delay upon the lapse of these 15 minutes. Moreover, if the visitors arrive late for their appointment, time will be deducted from their visit.

Visitors bringing medicine with them must do so in a consignment of two months, to avoid having items coming from outside entering the facility on a regular basis. Food or drinks that do not require refrigeration can be dropped off at the main entrance with the name of the resident marked on the item.

Apart from the measures being adapted for elderly homes, the health authorities are also conducting inspection and checks on weddings, cultural events, entertainment outlets and other establishments, in order to ensure that all the preventive measures in place are being adhered to. Those who are found to breach such measures are being fined. The Malta Tourism Authority has been entrusted with inspecting weddings, sporting events, cultural events, and entertainment outlets to ensure compliance with Covid-19 protocols. In a recent press release, the MTA reported over 500 inspections had been conducted in one single week at various establishments and events.

Out of these inspections, it resulted that 12 establishments had been found in breach of the protocols introduced amidst the Covid-19 pandemic which resulted in them being subjected to a fine. These new protocols include the capping of 300 people for outdoor events and that of 100 for indoor events whilst also having a limit of one person per 4 square meters and having groups consisting of not more than 10 people.

Moreover, in establishments such as restaurants, people ought to wear a mask or visor whilst waiting to be seated and are required to wear a mask to roam under the restaurant such as to go to the bathroom or to leave the establishment. The wearing of masks is also required on public transport as well as to traverse with the Gozo ferry. Events with more than 100 people will have to carry a risk assessment prior to permission being given by the MTA and health authorities. As the number of deaths among the elderly due to Covid 19 increases, one hopes that better care and attention is given to residents in all homes.

Legal research has always been something Jurgen felt passionate about, primarily because the law is one of the main elements which contributes to how society evolves with the passage of time. Jurgen is currently in his third year of studies at the University of Malta where he is reading law and studying to achieve a bachelor’s in law. Jurgen joined PKF Malta and has acquired copious legal knowledge and experience by virtue of the incredible team of professionals who form the legal support section at PKF Malta. PKF Malta has the tools necessary to help potential clients with regards to cutting edge reporting of business innovation. PKF Malta ensures an efficient and effective service with an all-around pleasant experience due to its 25+ years of experience in the field.

Author: Jurgen Dalli – Junior Legal Associate, PKF Malta
Published on Malta Chamber 8th October 2020
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The pain and pleasure of working from home

Author: George Mangion
Published on Business Today 1 October 2020

With most office staff in the financial services and banking sector working from home, now for the seventh month running, one cannot but reflect how our lives have changed dramatically.

We cannot ignore news about the penurious spread of coronavirus. This news of a spreading pandemic fills the media waves making our subconscious feeling depressed and bereft of inspirations.  On the international scene, we note how large operators like Facebook announced that it would allow as many as half of its nearly 50,000 employees to work from home permanently, following some smaller tech firms such as Twitter.  Experts tell us that the crucial challenge of remote working depends solely on the ability of managers to maximise productivity from remote workers.

Certainly, traditional control processes may not apply. Management practices must change for an organisation to get full value from telecommuting staff.  This means that with all good intentions and best endeavours, companies believe that the teleworking performance will never match that which occurred when office routine was the norm.  Efficiency and productivity suffer in the long run.

In fact, the Economist Intelligence Unit (EIU) forecasts that the global economy will expand by a mere 2.4% in 2020.  It notes that rich economies are expected to grow at roughly the same uninspiring pace as they did in 2019.  A continuation of the global slowdown in manufacturing will also drag down growth worldwide. For many in Malta, the pandemic created hardships and staff are counting the days until they can return to the office. Others, however, are finding their groove – and have discovered they really are more productive and happier when working from home.

The secret to successfully working from home is to treat your “working time” as sacred.  It will be important to show your employer that they’re getting the full value of your time. One of the most frequently cited challenges reported by seasoned remote workers is the worry of being “out of sight, out of mind”.  Pre-pandemic, the few who worked from home could easily become invisible and drop off of their managers’ radar. Naturally, the problem is magnified now that the number of remote workers has grown so dramatically.

Compounding this challenge is the reality that local business leaders (not so directors in public service) are distrustful of the virtual arrangement.  In many cases, it is because they’ve not yet mastered the art of effective objective setting, check-ins, offering support and holding workers accountable remotely. In other cases, they’ve been let down by people who’ve taken advantage of the situation.

There are also concerns that the lack of serendipitous encounters with office workers could stifle creativity and reduce team cohesion. School closures during the first and second semester, meanwhile, have placed an extra burden on working parents.

No one can look into a crystal ball and know exactly where they will be next year. But if we want to be in a better environment (possibly buttressed with an effective vaccine), we must make smart decisions not to slacken our resolve on social distancing as advised by the health authorities. During this tale of woe, we have witnessed political leaders constantly vying for attention reminding us that the sun will soon shine over the cloudy days that lie ahead of us in the winter days.

Little do we empathise with the thousands of elderly locked in care homes, vulnerable people and pregnant women hardly daring to look to the future in these dismal times. It is in the spirit of solidarity and other Christian virtues that we must support them in their temporary isolation as advised by the health authorities.

The bitter pill is the routine to face the boredom of staying indoors and contemplate on their lack of mobility and human interaction.  The picture we get from the media is that there is no way we can avoid drinking from the poisoned chalice of a pandemic – it comes with no known date of closure. It is then, up to our political leaders to think outside the box and in a non-partisan manner endeavour to minimise the burden of suffering among all and sundry.

This is a time for a call for common sacrifice, burden-sharing and a cohesive national policy.  We have thousands of healthcare workers and other public servants putting their health and lives at risk to treat those infected both now and in the future.

We have teleworkers denying themselves not only the benefits of comingling with other office mates but feeling stressed due to the confinement of homes.  The coming 2021 budget is expected to reduce electricity tariffs, trim vat and slash duty on fuel (oil and LNG prices are down to almost 45%) apart from other welfare increases to mitigate the loss of earnings and cost of living increase.  Part of these budget proposals will reduce the cost of home working.

A lot of sacrifices have been taken by companies to retain staff: in fact, August unemployment went up by a mere 2,000. Can we succeed in keeping the commerce afloat over the coming winter? Not unless furlough workers continue to receive a wage supplement.

Large hotel chains have recently placed their workers on a two-day routine in an effort to reduce their winter operating costs in the most pragmatic way.  Be that as it may, we also have other home-grown nuances. With an ageing population, a growing trust gap between politicians and ordinary people, the lack of adequate investment in physical, social and economic infrastructure render the Covid19 challenges formidable.

Taken together, this social anomaly is generating a time bomb for inequality. Economists tell us that more educated, higher-earning employees are far more likely to work from home – so they are continuing to get paid, develop their skills and advance their careers.

At the same time, those unable to work from home – either because of the nature of their jobs or because they lack suitable space or internet connections – are being left behind.  The latter face bleak prospects, especially if their skills and work experience erode during a winter shutdown and may fall in the poverty trap.

Author: George Mangion
Published on Business Today 1 October 2020
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PKF releases Worldwide Tax Guide 2020-21

Our flagship yearly publication, the Worldwide Tax Guide (WWTG), has just been released. This incredibly thorough and comprehensive report details the taxation and business regulation regimes of the world’s most significant trading countries, this year comprising 146 jurisdictions.

Given that a country’s tax regime is always a key factor for any business considering moving into new markets, this guide helps to answer accountancy professionals’ and international businesses’ most pressing questions when looking to expand or set up in a new jurisdiction, including around corporate tax rates, incentives for overseas businesses, whether there are double tax treaties in place, and how foreign source income might be taxed.

From Afghanistan to Zimbabwe, the guide considers each country in turn and details the major taxes applicable to businesses, plus the country’s personal tax regime, with key points compiled by PKF experts in each region.

The production of the publication is a huge team effort and we would like to thank all tax experts within PKF member firms who gave up their time to contribute the vital information on their country’s taxes that forms the heart of this publication.

We’d like to offer our especial thanks to the individual who spent a huge amount of time and effort to compile the guide, Stefaan De Ceulaer. As Tax Director at PKF International, Stefaan is a seasoned tax professional with 22 years’ experience in mainly international tax law. He started in private practice in one of Belgium’s best tax law offices, then went into corporate (telecoms and extractive industries), finally joining PKF in January 2017. He is also a fully qualified barrister. Stefaan gives up a significant proportion of his time every year to put this guide together, helping to make it our most popular publication.

For a copy of the Worldwide Tax Guide 2020/21,
contact PKF Malta on or call on 2149 3041.

Cannabis-Infused Products The Future Of The European Market?

Author: Jurgen Dalli – Junior Legal Associate, PKF Malta
Published on Malta Chamber of Commerce Blog:  6 August 2020

Perhaps, Europe has been one of the most active communities in this regard as many have legalized medical cannabis and have delved into the exportation and importation of cannabis. The latest novelty vis-à-vis cannabis in Europe is that of creating cutting-edge cannabis-infused products for the European Internal Market such as beverages, chocolate, and oils as well as dog treats amongst others.

This innovation has been dabbled with by Canadian syndicate: The Valens Company, which asserts that the future of the cannabis industry lies in marijuana-infused consumer goods manufactured via advanced extraction and formulation techniques. On paper, this revolutionary notion appears spotless, however, the fact still remains that much legislation has to be achieved first. The benefits of cannabis-infused products are plentiful, despite this, such products require extremely advanced methods of extraction in order to reap the full potential cannabis plants have to offer.

The Valens Company has managed to compute five types of cannabis extraction including supercritical and subcritical CO2 extraction, ethanol extraction, hydrocarbon extraction, solventless extraction and terpene extraction. Moreover, due to the introduction of these extraction procedures, cannabis-infused products are not merely limited to creams and beauty products, on the contrary, The Valens Company has expanded its remit and is infusing a plethora of products with cannabis particles.

A particular product which becomes very prevalent in our society are edibles such as cannabis chocolates. Edibles are extremely popular especially amongst the youth for recreational functions. However, its use is not only limited to recreational uses as edibles are also used as a means to digest one’s medicine. Hence, one would be taking his medicine and enjoying a delightful snack at the same time.

Edibles mostly take the form of cookies or brownies and recently have taken the shape of marijuana gummies as well. Prominent makers of such chocolates are Kiva and Defonce who are offering a new perspective of how we view chocolate. Nonetheless, these companies still operate solely in the US and have not penetrated the European market. The Valens Company has not wasted time and expanded its reach not only to Europe but also to South America and Australia. In the EU, the latter entity has a current area of interest in almost all countries and has exclusive rights in the EU and in the UK over SoRSE Emulsion Technology.

The situation is rather similar in South America in countries such as Brazil, Columbia, Peru, and Uruguay. It goes without saying that the company has facilities in North America and is waiting to open another facility in Australia where the medical cannabis market is booming. Cannabis-infused beverages are already present in Los Angeles but have not reached mainstream popularity. Europe has the opportunity to experience a refreshing way to enjoy beverages and other products, however, in most European jurisdictions, cannabis is only legalized for medical purposes. The projections for cannabis-based drinks by 2024 are expected to be somewhere in the region of €1.13 billion.

Some countries even omit cannabis for medical uses. At the moment, there is no European consensus on whether CBD products are legal or not due to the fact that laws differ on this issue. Industrial hemp is grown abundantly in Europe for the manufacture of CBD products. Once again, these products may face some hindrances from the legal aspect. For instance, in countries such as the UK, France, Germany, Sweden and Denmark; incarceration is even possible for minor cannabis possession. Nonetheless, medicinal cannabis is legal in 33 European countries, hence the Canadian exporter may be able to introduce these products is intended for medical purposes.

Medical cannabis is legal in countries such as France, Germany, Portugal, Italy, Czech Republic, and the UK amongst others, however, apart from medicinal cannabis, possession of marijuana is illegal. It seems that only a select number of countries have opted to legalize recreational cannabis such as the Netherlands and Portugal.

In Malta, recreational cannabis is illegal, however, possession in small amounts showing the intention of personal use rather than distribution is not punishable by incarceration. Nonetheless, Malta was one of the pioneering countries in legalizing medicinal cannabis, therefore, such products would once again most likely be allowed to enter the local market if these are strictly for medical benefits.

PKF Medical Cannabis advisory division can assist with company formation & setup, AML & compliance, assistance with preparation of relevant application and submission to Malta Enterprise & application management handling through until completion, assistance with relevant application for land allocation by MIP including legal assistance with contract review/assistance with sourcing private qualifying land & application management handling through until completion, assistance with relevant application for submission to Malta Medical Council & application management handling through until completion.

Author: Jurgen Dalli – Junior Legal Associate, PKF Malta
Published on Malta Chamber of Commerce Blog:  6 August 2020
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After bailing out the hospitality sector, should banks follow?

Author: George Mangion
Published on Business Today 6 August 2020

In a wave of bad reports on bank profit statements, one realises that the drop in profits caused by the COVID-19 pandemic encouraged overseas bank directors to trim their salaries/bonuses in sympathy with their suffering depositors.

In the first quarter of this year, HSBC’s chief executive said he would donate a quarter of his base salary, about £160,000, to charity for six months. He will also not take his annual cash bonus, which would have been as high as £1.2m. This gesture was copied by the CFO who is donating £93,000 and forgoing £706,000, while chairman Mark Tucker will donate his entire 2020 fee to charity, about £1.5m.

HSBC is not the only top global bank to show solidarity with the community. Its example is followed by other directors of major UK banks, including RBS and Lloyds, who agreed to give up their bonuses for this year. Due to the dire financial position of UK banks, the Bank of England recommended a restriction of bonuses during the pandemic. Why this sudden drop in profits by banks – a sector which perennially beats the trend and sails through any rough weather?

In the last 2007/8 financial crisis, many bankers were blamed for triggering the global recession due to light-touch regulation – particularly over risky investment banking adventures. Most global banks were bailed out by their respective governments as they were considered too big to fail. Financial stability was gradually restored at a heavy cost to taxpayers.

Barclays, the darling bank that sponsors the UK Premier football league, has taken a further £1.6 billion hit from the coronavirus crisis in the second quarter of the year. It posts a pre-tax profit of £1.27 billion in the first half of the financial year, down from £3 billion the year before. The badly bitten wolf has reported that the impairment charge will reach a little over £1.4 billion as the bank prepared for a slew of bad loans. As expected, it is citing the impact of coronavirus.

But how did the local banks fare? At this juncture, both BOV and HSBC in Malta reported disastrous results over the first six months of this year.

Not to worry, say the pundits as there is nothing fundamentally wrong in the prowess of management. All is well, they reply in unison, since one can really and truly conveniently blame COVID-19, for the shameful results.

Sadly, for the first six months of 2020, the Bank of Valletta Group is reporting a profit before tax of €13.8 million, a severe drop from the previous year when it posted a respectable €54.3 million. Employing thousands and having a substantial slice of the local business, BOV humbly reports that its annualised return on equity (pre-tax) is just 2.6%.

The acting chairman blamed COVID-19 and its gremlins for the disastrous show. The bank blames de-risking exercises which partly contributed to a drop in results. In the first place, commentators ask why the recent Brussels-led regulation of BOV resulted in such a costly pruning exercise. Apart from the coronavirus-induced business shrinkage, BOV has a number of skeletons in its cupboard.

One salubrious case is the trust it holds on behalf of the Deiulemar group – a defunct Italian shipping company. This group is claiming €363 million from BOV to which recently it pledged an out-of-court settlement of €50 million. This was rejected. The offer also comes two years after BOV appealed an Italian court’s order for a precautionary warrant that requested it to hive off €363 million, as a provision for damages requested by foreign bondholders. The Italian court in Torre d’Annunziata, a province of Naples, upheld the claim back in March 2018 after it was brought by liquidators of the Deiulemar group.

Yes, Malta had its fair share of bad apples and one cannot always blame the virus. No heads rolled but the MFSA is investing a cool €12 million and recruiting more experts to fine-tune its filtering prowess. The government is gung-ho that the final report by Moneyval over money laundering and terrorist financing shortfalls will see us sail through unscathed early next year.

Malta as a financial jurisdiction is to be saved the dreaded fate of becoming a greylisted domicile. The prime minister is hopeful that we shall be spared this poisoned chalice.

Back to the BOV, one is encouraged to hear the words of its newly appointed CEO, Rick Hunkin. This bank, with a majority investment by the state, reported that its pre-tax profit dropped by 75 percent in the first six months of this year. Commenting on the results, Hunkin said: “In line with the rest of the world, these are trying times for Malta and for Bank of Valletta and we are rising to the occasion by supporting businesses, customers and the wider community”.

But wait a minute, who is to blame and bear the brunt of the shortfall? None other than the shareholders who for the fourth year will not receive a dividend. Take heart, because Hunkin assures us that BOV’s self-induced reforms will result in a more efficient, more digitally-focused and more customer-oriented bank.

Does this mean that in the past the bank was rather too generous in gauging its risk appetite? The CEO is assuring shareholders that the current de-risking programme is proceeding at an accelerated pace. This comes at a cost. Pruning dead trees from your garden means a lower harvest next time around. By the way, there was no appetite by management to donate part of their salaries to charity in recognition to the suffering caused to the community.

HSBC Malta said the economic impact of the COVID-19 pandemic has been the main driver of the change in financial performance in the first half of 2020. The bank (which locally closed nine branches and internationally seeks to lay off 35,000 workers) issued the following data: Profit before tax down €19.1m to €1.8m due to higher than expected credit losses and lower revenue reflecting the impact of the COVID-19 outbreak.

It comes as a stark pointer that during the first six months, lending increased by a mere 1% and deposits grew by just 3%. The sad news for shareholders is that the profit of €1.2m resulted in earnings per share of a miserable 0.3 cents compared with 3.8 cents in the same period in 2019.

Does this mean that banks need a bailout to help them sharpen a blunted profit edge and to reinvigorate management to think outside the box at a time when most borrowers complain about the risk-averse attitude of banks? Needless to say, the generous collateral afforded by Malta Development Bank (a state-owned credit institution) to all local banks should in theory lead to expanded lending – not the reverse. So what went wrong?

We’re now seeing, for example, unprecedented levels of government support for a Keynesian intervention into the economy (such as wage supplements, free cash vouchers, and extensive road repairs). If this medicine works, party apologists predict that the patient may soon be up and running (provided a second lockdown is avoided).

One hopes that sanity prevails and a branch and root reform are undertaken in local banks to help them seek new opportunities for growth among the cash strapped local business community.

George Mangion

Author: George Mangion
Published on Business Today 6 August 2020
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Hard Brexit means no deal?

Author: George Mangion
Published on Malta Independent 28 July 2020

UK’s economy was badly hit by the lockdown and its health authorities are battling the consequences of infections, amid even strict orders for citizens to maintain social distancing.  Measures were taken, not only to protect the health of most vulnerable communities but also their quality of life more broadly – including their financial security, mental health, access to resources, and social relationships. Even so, the economic and social disruption is clearly visible.

The streets of London, so ever fully populated by Londoners and tourists alike, are now bare and gloomy. Time will tell if the Chancellor’s tough financial package to fight the outbreak will be sufficient to meet people’s core needs. This unexpected calamity has exasperated the double whammy of a recession combined with a no-deal Brexit. Brexit will undoubtedly bring long-term systemic changes to the UK economy, politics, and society, and there continues to be uncertainty about how leaving the EU might affect the lives of the UK’s inhabitants. It is interesting that a government document outlining “reasonable worst-case assumptions” in the event of such a no-deal Brexit, has warned of rising food and fuel prices, disruption to medicine supplies, and public disorder.

The UK would have to apply tariffs and quotas to goods coming into the country from the EU, and the EU would apply its “third-country” tariffs and quotas to the UK. That means the UK would be hit by big taxes when it tries to sell products to the EU market. The bloc’s average WTO tariffs are 11.1% for agricultural goods, 15.7% for animal products, and 35.4% for dairy.

The prospect of a trade deal between the UK and the EU in time for the end of the transition period is becoming increasingly unlikely following a stalemate between negotiators.  Government sources now believe that no such trade deal will come to fruition and the UK will begin trading on the WTO come midnight on 31 December.

The concern seems to be that the economic costs of abruptly withdrawing from the European Union without a trade deal might be buried by Boris Johnson beneath the damage wreaked by the Coronavirus. Can this strategy be resisted and normality maintained since it goes without saying that vulnerable groups will be affected? Undoubtedly, there will be unintended consequences.

The poisoned cocktail of Brexit and the Coronavirus in the UK will probably affect badly the lower working classes and the disadvantaged, albeit to a different extent. Indeed, Brexit without a trade deal is likely to exacerbate some of the deleterious effects of the virus. It can be argued that leaving the EU without a deal will make it more difficult to fight the pandemic.

The UK left the EU at the end of January and is now being excluded from EU decision-making – and any collective support packages, for instance, the EU’s Coronavirus Response Investment Initiative – on the pandemic. The British government has stated that it does not plan to take the option to extend the transition period by up to two years. One cannot but lament the loss of some EU nationals working in the health and social care sector since Brexit, at a time when they are most needed. Readers may ask, why is there so much fuss about the UK leaving without a deal? For a start, the consequences of an economic divorce will most probably leave some disadvantaged people with less financial and social resilience therefore more vulnerable to both Brexit and the Coronavirus.

The European Union’s chief negotiator, Michel Barnier said progress in four areas of discussion had been “disappointing” while a British statement said “limited progress was made in bridging the gaps between us and the EU” One can never be fooled that having six months till the end of the year is sufficient time to reach a trade deal on complex issues which took over 40 years in the making. To be realistic, it is pushing it when Boris Johnson reiterates that there will be no extension beyond the end of the year.

There are complex matters to be negotiated starting on the critical issues of aviation to fisheries, new customs posts at the border, and a new immigration system. Little can be more vexatious than agreeing on how best to set up new border checks for both exports and imports. As stated earlier, this could result in higher prices, border backlogs and delays, and even shortages of staples, such as food and medicine. When the prospect of a no-deal arose last year, some British companies and citizens began stockpiling goods.

Thankfully, one major hurdle was solved that in case of a no-deal it will not lead to a so-called hard border between Northern Ireland and the Republic of Ireland, but rather to customs’ checks on goods traversing the Irish Sea. The developments come after the first ministers of Scotland and Wales wrote to Johnson demanding an extension to the transition period past the end of December.

Last year saw several international firms that shifted their investments from the UK to elsewhere in the EU. Aerospace giant Airbus is a prominent example, pointing towards a policy of directing funds and jobs away from the UK if there is no trade deal. Such moves could put tens of thousands of British jobs at risk. Without sounding partisan to the EU’s interest, yet one must admit that London’s role as a world finance leader could also be in jeopardy.

Previously, as a full EU member, one notes that the UK’s financial services provided 11% of tax revenue; 44% of exports go to the EU. If the majority of economic forecasts are correct and the UK’s economy suffers post-a-no-deal Brexit, the negative effect will impact all those groups represented in the low-income bracket (that is, ethnic minorities, the disabled, refugees and asylum seekers and people who are precarious workers) who rely more on public services and benefits and have less disposable income and spending power.

One augurs that Boris Johnson, takes the bull by the horns and prioritises the immediate damages inflicted by the pandemic and in a pragmatic manner seeks an extension so that the UK is adequately positioned to resolve the tangled web of a hard Brexit.

George Mangion


Author: George Mangion
Published on Malta Independent 28 July 2020
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