SMALL AND MEDIUM
The importance of their
sustainability and growth
20. MANAGING TALENT WITHIN SMES
By Cathy Peric
24. SME GOING DIGITAL – THE WAY TO
TRANSFORM THE BUSINESS
By Reuben Portanier
57. BUSTING THE BITCOIN MYTHS
by Michael Sciculuna
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spring 2018 | theaccountant.org.mt p.03
MIA NEWS AND FORTHCOMING EVENTS
The Accountant is
MBR Publications Ltd
on behalf of
The Malta Institute of
Michelle Spiteri Bailey
All correspondence, articles for
publication and enquiries are to
be addressed to:
MIA Services Limited
Level 1, Tower Business Centre
Tower Street, Swatar
SUSTAINABILITY OF MALTA’S ECONOMIC GROWTH AND THE ROLE OF SMES
by Aaron Grech
GOING PUBLIC – DR ADRIAN ATTARD TREVISAN
by Claudia Vella Schembri
DIRECTORS AND SMALL COMPANIES – A DISCUSSION PAPER
by Dr David Fabri
GETTING READY FOR GDPR
by Matina Massa
MANAGING TALENT WITHIN SMES
by Cathy Peric
SMES GOING DIGITAL – THE WAY TO TRANSFORM THE BUSINESS
by Reuben Portanier
IS BUSINESS PLANNING RELEVANT FOR SMEs
by Chris Meilak
INVESTING WISELY DIVERSIFICATION AND PICKING THE RIGHT FUND
by Joseph Portelli
REDISCOVERING THE VALUE OF SME AUDIT
by Accountancy Europe
THE START-UP JOURNEY IN MALTA – HOW FRIENDLY IS THE FRAMEWORK
FOR BUDDING ENTREPRENEURS?
by Chris Cachia
THE INSURANCE DISTRIBUTION DIRECTIVE (IDD) – ARE YOU READY?
by Matthew Micallef
TRANSFORMING CHALLENGES INTO OPPORTUNITIES – FEE PRESSURE
by Christopher Arnold and Mats Olsson
BUSTING THE BITCOIN MYTHS
by Michael Scicluna
RECENT AMENDMENTS FOR SMES AND STARTUPS
By Malta Enterprise
(+356) 9940 6743
The Institute does not necessarily concur
with the views expressed in the articles
published in this journal. Articles are
published without responsibility on the
part of the publishers or authors for
loss occasioned in any person acting or
refraining from action as a result of any
view expressed therein. The Accountant
can also be accessed from the website at
LOOKING BEYOND THE GOVERNMENT PENSION-SOME RECENT TAX DEVELOPMENTS
IMPACTING THE LOCAL PENSIONS’ ARENA
by Bernard Attard and Victoria Muscat
GETTING IT RIGHT - RELATED PARTY DISCLOSURE FOR SMES
by Roberta West Falzon
VAT FOR SMALL BUSINESS – EXISTING RULES AND CURRENT DEVELOPMENTS
by Matthew Zampa
LIFESTYLE- REACHING CAMBODIA
by Elaine Marie Debono
WILLIAM SPITERI BAILEY
WILLIAM SPITERI BAILEY
In Europe, there are approximately 23million SME’s, which
is about 98% of the business and provides 2/3 of the
private employment. The number of enterprises in Malta,
grew from just over 72,000 in 2012 to nearly 95,000 in
2016. The National Statistics Office indicated that the bulk
increase in business units in Malta was due to small- and
medium-sized entities. In fact, 99% of the overall increase
was amongst firms that employ fewer than 10 persons,
so-called micro firms. Thus, contributing significantly to
countries’ gross domestic product. SMEs are crucial to the
health, stability, and sustainable economic growth of both
developed and developing economies.
SMEs speed up economic growth. They are more flexible
and have simpler structures, making them more responsive
to change. Yet despite this, it is important that they keep
up to speed when it comes to the advancements and
implementation in relation to new developments such as
digitalisation, as this enables them to remain competitive.
Statistics clearly indicate that SMEs are still in the early
stages when it comes to ICT adoption and usage in their
business, with no real alignment to their business objectives,
and limited applicability to their business processes. There
are many areas that are of concern to SMEs, but when
taken seriously and exploited wisely they can translate into
significant opportunities. An SME should initially assess the
business situation and identify ways how going digital will
improve the entity’s status, thereafter an entity.
A very important regulation that will come into effect
on the 25 May is the GDPR. This is not optional and is a
business concern that can have significant repercussions
if not abided with. It must be seen as an integral part of
businesses, it is all about good business and the obligation
to respect and protect personal data. Any organisation that
conducts business within the EU that collects, or processes
personal data needs to be GDPR compliant, regardless of
A key element for the success of an enterprise is talent
management. As a business owner, one must learn to
attract, select, develop, reward and retain people. Research
confirms that SMEs can provide a creative environment
that encourages new ideas and innovation. It also states
that employees perceive working in an SME as better job
quality, less bureaucracy, higher flexibility leading to better
job satisfaction and a better working environment. These
are all key points that SMEs must use in their favour, as
talent management in SMEs is valid and valuable.
Malta is rapidly gaining international recognition as a
brand denoting excellence in several sectors, including the
pharmaceuticals, life sciences, advanced manufacturing,
fintech, aviation and ICT amongst others. In order to
assist enterprises, particularly SMEs to improve their
competitive edge, Malta Enterprise has developed various
incentives for the promotion and expansion of industry
and the development of innovative enterprises. A series of
new schemes have been launched and a number of other
schemes are work in progress.
SMEs’ demand for advice is influenced by various factors,
which include external factors, such as competition and
regulation, and internal factors, such as the size and nature
of the entity, and the relationship and level of trust between
the small and medium-sized practices (SMP) and the
SME owner-manager. SMPs are considered an important
part of the profession. The vast majority of accountancy
practices worldwide are believed to be SMPs and it is well
recognized that professional accountants are often the
preferred source of advice for SMEs, typically forming longterm
relationships founded on trust. Here in Malta we are
no different and having myself been for a long time an SMP,
I can confirm that SMPs are a preferred source of advice to
SMEs and the more the work relationship grows and the
SMP understands and assists the SME through his advice
to develop his aspirations, the more the SMP will become
the Trusted Advisor of the SME.
Finally, I am happy to say that the Institute wants to be a
catalyst and help its membership with these challenges.
In this regard, our SMP Committee is organising the
annual SME Forum which amongst other topics will deal
with GDPR issues. We are also slowly building up to the
Biennial Conference which will this year revolve around
Digitisation and how this will be affecting our work. I would
like to encourage all SMPs to participate and be active in
our activities. With your help we will continue to make the
Institute relevant to you, its members in today’s world. We
want all activities, communications, and events to focus
on adding value to our members, but also on ensuring
that our members add value to their clients. However, let
us not forget our values of independence, diligence and
integrity when we are offering our services and in our lives
as professional accountants. If values are not given their
due importance we cannot on the other hand add value.
Participate, call us and speak to us about your concerns or
needs. The Institute is there to serve all its members and
William Spiteri Bailey
04 Spring 2018
Women’s day Conference
The Malta Institute of Accountants organised its
first conference dedicated to women titled ‘Inspire
to Achieve’ on 9 March 2018. The conference was
held under the auspices of H.E. Marie-Louise Coleiro
Preca, President of Malta.
During the conference the President of Malta Marie-
Louise Coleiro Preca noted that:
“According to the European Commission's Report,
women across the European Union are still a long
way off from achieving full economic independence.
In comparison to men, women still tend to be
they are employed in lower-paid sectors;
they work, on average, 6 hours longer per week than
men and have fewer paid hours; and
women also face fewer and slower promotions.”
She encouraged all to find ways to empower women
as well as men, which would enable everyone to
work together for the advantage of all.
The Institute will drive to push the profession in terms of
the openings it provides for women who want to achieve
and be part of creating value to society by building on the
values of equality, empowerment and achievements.
To press for progress the Institute will be investigating
the issue of possible pay gap within the accounting
profession. This study will be conducted with the
help of MISCO, a recognised leader in independent
marketing, research and HR consultancy in Malta.
Anti-Money Laundering Conference
The European Union’s 4th Anti-Money Laundering Directive was enacted into Maltese legislation earlier this
year bringing with it some fundamental changes to the anti-money laundering procedures.
National Public Procurement
Anthony Cachia, Lorraine Mangion
Duca, Dr Franco Agius
08 May 2018
National Public Procurement
Lorraine Mangion Duca, Dr Franco
Agius, Ninette Gatt, David Gatt
18 May 2018
The Malta Institute of Accountants chose to discuss this topic during its first conference organised in 2018
because it believes that it is an important and vital issue for our country. As mentioned by the Institute’s CEO,
Ms Maria Cauchi Delia in her opening speech “This isn’t just a regulatory issue but one of national concern”.
The conference brought together a number of leading experts to provide the latest information on the
current anti-money laundering and counter terrorist financing developments and requirements. Sessions
and a panel discussion gave first-hand knowledge discussing topics such as changes brought about by
the 4th Anti-Money Laundering Directive, the upcoming Moneyval inspection, the Beneficial Ownership
Register, and the interaction of GDPR and Blockchain on AML.
Rules and Regulations applicable
for Corporate Service Providers
Dr Joseph Saliba & Dr Nicole Demicoli
22 May 2018
Value drivers and controls in
Jacqueline Camilleri & Jonathan Dingli
29 May 2018
Collective Investment Schemes
and the Investment Management
31 May 2018
Block Chain and Smart Contracts
Dr Ian Gauci, Dr Cherise Abela Grech
and Dr Emma Portelli Bonnici
06 June 2018
Collective Investment Schemes
and the Investment Management
12 June 2018
The formation and support of
shipping and aviation companies - A
Dr Denise Abela & Dr Nicholas Valenzia
15 June 2018
Introduction to cryptocurrencies
and their tax implications
Josef Mercieca & Dr Chris Agius
19 June 2018
VAT for financial services
Graziella Demanuele Bianco
26 June 2018
Access our website for a continuous update
06 Spring 2018
25th May 2018
08:15 - 17:00 Intercontinental
3rd July 2018
Save the date
the yearly MIA/ACCA
Two new partners at RSM Malta
RSM, one of Malta's leading audit, tax and advisory firms
has announced the appointment of Timothy Zammit
and Gordon Micallef as partners with the firm. Given
their experience, Timothy and Gordon’s appointment
will further strengthen RSM’s corporate structure.
Timothy will be responsible for the tax and corporate
services unit while Gordon will be responsible for the
technology consulting practice of the firm.
Together with a team of financial and legal professionals,
Timothy will be assisting clients with enhancing their
fiscal efficiencies through the setting up of companies,
special purpose vehicles and corporate restructuring
while providing transactional support in acquisitions,
mergers and divisions. Together with his team, Timothy
also works on business succession planning while
ensuring clients’ full compliance with their tax and
corporate obligations. Prior to joining RSM Malta as
a tax lawyer in 2010, Timothy served as the head of
corporate and tax services at mid-tier firms specialising
in international structuring and cross border companies.
Timothy read law at the University of Malta having
graduated as a doctor of laws in 2005 and called to the
bar in 2006. Timothy subsequently read for a Master of
Arts in Financial Services from the University of Malta.
He is also a member of the Malta Institute of Taxation
and Institute of Financial Services Practitioners, sitting
on the Tax & EU Affairs Sub-Committee.
As the leader of the technology consulting practice of
the firm, Gordon assists organisations in addressing
their digital agenda by guiding board of directors and
executives to develop and execute transformation
strategies enabled by technology. Together with
his multidisciplinary team of technology, business
analysists, and legal specialists, he also delivers
managed services to various industries including
cyber security, privacy, regulatory technology, and
data management. He joined the firm in 2014 and is a
Certified Public Accountant (CPA), Certified Information
Systems Auditor (CISA) and holds other certifications
in governance of IT (CGEIT), risk management (CRISC),
and project management (Prince2).
Peter J Baldacchino
Twenty-five years ago, Peter J Baldacchino, Head
of the Department of Accountancy, was the first
member of staff at the University of Malta who,
after graduating as a chartered certified accountant,
decided to undertake a postgraduate research
degree in accountancy - at the time this involved a
Master of Philosophy thesis based on Malta at the
University of Loughborough titled "The Auditor-
Management Relationship in a Microstate". Recently
Peter decided to undertake another research study
in a related area, this time a Doctor of Philosophy
(Ph.d) with a thesis titled "Auditing and Corporate
Governance in a Small State-the Case of Malta".
He finalised this latter study in March.
As one would expect, the thesis stemmed from
selected academic research following his MPhil.
It presents a portfolio of fourteen papers offering
insights on major issues affecting the accountancyrelated
areas of external auditing and corporate
governance in the small state of Malta.
The portfolio contributes to literature notably by its
original highlighting of the significance of a number
of sub-themes on various aspects of external
auditing and corporate governance in a small
state. Furthermore, the portfolio impacts Maltese
external auditing and corporate governance
practices, particularly by emphasising the need to
go beyond the adoption of imported regulatory
frameworks. For those interested, links to most
papers included in the thesis are found on Peter's
pages on ResearchGate and Linkedin.
Peter J Baldacchino is the Head of the Department
of Accountancy in the Faculty of Economics,
Management and Accountancy, as well as Advisor
to Rector - Financial Affairs at the University of
Malta. He teaches auditing, corporate governance
and financial strategy in postgraduate professional
and business programs. His research publications in
various international journals focus on auditing, its
regulation and relationship to corporate governance.
He is also Director at the Central Bank of Malta
and Chairman of its Audit Committee, Director
at the University Group of companies as well as
Chairman of the Maltese Accountancy Board. He
has extensive experience in the governance of
Maltese listed entities, with past positions including
chairmanships and memberships of audit and risk
management committees in large organisations.
08 Spring 2018
Members are invited to inform the Institute about their appointments for due consideration, to be included in this section of the journal.
LOOKING TO GROW?
Career Opportunities at BDO Malta
There are many world-class accounting firms. Far fewer that offer a culture so rich
in professional opportunity, personal fulfillment, and long-term growth. At BDO,
we understand that exceptional service to our clients begins – and ends – with
exceptional regard for our people. Because at its core, our business is not about
numbers or spreadsheets, euros or cents, but about people working with, for, and
in service of others. In short, because relationships matter.
Due to its continuous investment and growth, BDO Malta is seeking to recruit for
the following roles:
For a list of benefits offered to BDO staff members and for further information,
please visit our website on www.bdo.com.mt/careers
Tower Gate Place
Telephone: 2131 3060
BDO Malta, a Maltese civil partnership, is a member of BDO International Limited, a UK company limited by
guarantee, and forms part of the international BDO network of independent member firms. BDO Consult
Limited and BDO Services Limited are companies registered in Malta and form part of the BDO Malta group.
BDO is the brand name for the BDO network and for each of the BDO member firms.
Sustainability of Malta’s economic
growth and the role of SMEs
DR AARON GRECH
DR AARON GRECH IS THE CHIEF
OFFICER OF THE CENTRAL
BANK’S ECONOMICS DIVISION
AND DEPUTY CHAIRMAN OF THE
MALTA STATISTICS AUTHORITY.
In recent years, the Maltese economy has
expanded very strongly. Since 2010, Malta’s
gross domestic product has grown by 46%,
whereas in the European Union the increase
was of just 10%. Furthermore since 2012 Malta
has consistently had the highest growth in
employment amongst all European Union
countries, such that the unemployment rate
has fallen below 4%.
This growth has been accompanied by a significant
turnaround in the country’s balance of payments, which
now features a considerable surplus which contrasts
with the deficits that had characterised previous years.
At the same time, rapid growth has also resulted in a
large fiscal surplus, as buoyant revenue has offset rising
Malta was largely unaffected by the financial crisis of
2007-08 and the subsequent European sovereign debt
crisis. One of the main reasons for this was that Malta’s
economic growth is based on a significant restructuring of
the islands’ economic structure. Whereas in countries like
Ireland, Cyprus and Spain, high economic growth before
the crisis was due to the accumulation of macroeconomic
imbalances, such as fast credit growth and a significant rise
in consumption, in Malta most of growth has reflected
an increase in exports. The latter reflected the fact that
after accession to the European Union, a number of new
high value added export oriented services were attracted,
which complemented the islands’ strong manufacturing
and tourism sectors. Access to the European Union’s
single market, combined with flexible, well-trained and
competitively priced labour resources and a businessfriendly
environment, led to increased foreign direct
investment, while reforms to liberalise the economy
strengthened existing sectors. The resulting diversification
of economic activity made the country more resilient
and less dependent on sectors such as semiconductor
manufacturing and package tourism, which are more
prone to cyclical fluctuations in demand.
When analysing recent economic developments, there
has been a tendency to overemphasise the contribution
of certain large foreign direct investments and particular
sectors. However a closer look at official statistics
paints a rather different picture where small and
medium-sized entities accounted for the lion’s share
Between 2012 and 2016, the number of enterprises
in Malta grew from just over 72,000 to nearly 95,000.
This reflects the fact that the rate of new businesses
being established nearly doubled to more than
11,000 a year, while the rate of business closures
remained relatively stable.
Data published by the National Statistics Office 1
indicates that the bulk of the increase in business
units in Malta was due to small- and medium-sized
entities. In fact, 99% of the overall increase was
amongst firms that employ fewer than 10 persons,
so-called micro firms. Overall the number of firms in
this category grew by 32% in just four years. That said,
there has also been significant growth in the amount
of firms employing between 10 and 49 employees,
which was up by 16%, and in the number of firms
employing more than 250 employees, which was up
by 22%. By contrast the number of firms employing
between 50 and 249 employees rose by just 2%.
Official statistics show that small and medium sized
entities in Malta are very diverse. Micro enterprises
are dominated by the wholesale and retail sector,
which comprises nearly a fifth of all micro firms. This
is followed by the financial and insurance sector, at
16%, and the professional, scientific and technical
activities sector, at 12%. While micro wholesale and
retail firms have continued to grow healthily, rising
by nearly 16% between 2012 and 2016, the largest
relative growth has been amongst administrative and
support services micro firms, whose numbers were
up by close to 69% over their 2012 level. The number
of financial and insurance micro firms, together with
professional, scientific and technical micro firms also
grew very strongly, with growth rates of 62.8% and
56.1%, respectively. Other services sectors, such as
information, communication, education, remote
gaming and real estate, also showed strong double
digit growth in the amount of operating firms.
10 Spring 2018
Growth in the number of small-sized entities, i.e.
those employing between 10 and 49 employees, was
also fairly spread across sectors. The largest growth
appears to have been in the accommodation and
food services sector, followed by remote gaming,
wholesale and retail, professional, scientific and
technical sectors. By contrast, growth in the number
of medium-sized entities, i.e. those employing
between 50 and 249 employees, was nearly equally
divided between the education and the remote
Besides information on the number of firms by
employment size, the Eurostat database also gives
a lot of additional data on their performance. For
instance, it indicates that the value added of micro
firms in Malta nearly doubled between 2011 and
2015 (the latest year for which data are available).
In fact, Eurostat data suggest that while in 2011
micro firms generated 29% of all the value added of
the business economy sector, by 2015, their share
had risen to 37%. By contrast the value added of
large firms, i.e. those employing more than 250
employees, rose by just 10% during the same period
and their share of value added fell from 28% in 2011
to 21%. This indicates that over time, the relative
contribution of small- and medium-sized entities to
the generation of value added has risen greatly.
A recent survey carried out by the European Investment
Bank amongst Maltese firms indicates that micro
and small firms 2 in Malta are planning to focus their
investment much more to be able to launch new
products. They are also planning to focus much more
than large firms to invest on software and information
technology. This suggests the potential for further
growth in this sector. However, the survey shows that
micro and small firms are relying to a large extent on
internal financing, on account of high cost of financing
and the need for collateral.
Further innovation and diversification are key to the
sustainability of Malta’s economic growth. Small and
medium-sized firms have a big role to play, possibly
even more than in recent years. Taking steps to
ensure that they operate in an optimal business
environment, particularly good access to finance, is
therefore very important.
Small and medium-sized entities have also been
the main generator of jobs according to Eurostat’s
annual enterprise statistics for Malta. Between
2011 and 2015 there was an increase of 13,595
persons employed in the business economy sector.
Out of this growth, less than 14% was due to firms
employing more than 250 persons. Micro firms
registered an increase in employment that was
nearly double that observed amongst the largest
firms. That said, while employment in micro firms
grew by nearly 9%, in small- and in medium-sized
entities the increase in employment was at 16% and
These trends show how vital the contribution of
small- and medium-sized entities has been to the
success of the Maltese economy. While largescale
investments are undoubtedly important, the
reality on the ground is that a lot of the dynamism
of the islands’ economy is due to the efforts of
entrepreneurs and relatively small-scale operators.
These have created the bulk of jobs and played a key
role of the diversification of the islands’ economy.
DR ADRIAN ATTARD TREVISAN
DR ADRIAN ATTARD TREVISAN IS
A NEUROPHYSIOLOGIST WITH
A WIDE EXPERIENCE IN THE
FIELD OF HUMAN PHYSIOLOGY
AND MEDICAL DEVICES. HE WAS
FOUNDER, CHIEF EXECUTIVE
OFFICER AND CHIEF SCIENTIFIC
OFFICER OF AAT RESEARCH,
A GROUP OF COMPANIES
INVOLVED IN THE DEVELOPMENT
OF CERTIFIED MEDICAL
DEVICES. THE COMPANY HAS
SINCE REBRANDED ITSELF AS
BECOMING A PUBLICLY LISTED
COMPANY ON THE AUSTRALIAN
SECURITIES EXCHANGE (ASX),
OF WHICH ADRIAN IS STILL A
NON-EXECUTIVE DIRECTOR. HE
IS A CO-FOUNDER AND CHIEF
EXECUTIVE OFFICER OF UMANA
MEDICAL TECHNOLOGIES, A
DEVELOPER AND MANUFACTURER
OF PATENTED TEMPORARY
TATTOO SENSORS THAT
ENABLE PATIENTS AND
TO MONITOR VITAL SIGNS OF
PATIENTS, WITHOUT THE USUAL
RESTRICTIONS OF CABLES AND
WIRES THAT EFFECT QUALITY
The technical team of the Malta Institute
of Accountants, interviews co-founder
and Chief Executive Officer of Umana
1. How would you describe yourself in 3 words?
I believe I am very persistent, focused and a risk taker.
2. What led to the change from a researcher
to an entrepreneur?
This was very easy, I hate stalling a good project when
the research funds finish, and unfortunately that is
very often the case when working in academia. I
wanted to be in a position where I could follow an
idea/ concept from start to finish.
3. Considering that the setup of both companies
are based on two innovative ideas, what is the
key to generating new ideas?
In this field it is a combination of the need to help
others and being in the right place at the right time.
The idea of the first research project started from
the desire to help a child when living in France. In
the case of the other project I was approached by
two professors, who had developed a material, but
needed someone to develop it into a commercial
product. In the medical world only 3 in 100 medical
technology start-ups succeed, therefore there is a lot
of pressure in order to make it work.
a market for the product and that its features
distinguished it to the other available products.
5. What are your responsibilities as a business
The heftiest responsibility is towards the patients.
In view of the fact that we produce medical
devices it is a highly regulated environment. We
are subject to a number of EU Directives and legal
requirements. Other responsibilities include the
usual legal and financial responsibilities and meeting
the expectations of the investors. Another important
responsibility is the well-being of my employees and
the security of their jobs.
6. When you started the first company what
where the main challenges that you had to
At the beginning it was very difficult, yet it was also
a very exciting period. Together with a colleague of
mine we started developing medical devices from
home. Obtaining finance was one of the initial
challenges and often meant not earning a salary for a
number of months.
It is unfortunate that even though you would like to
help people, feasibility of the project is key. If the
product will only help a few people then it cannot be
developed and if possible we try to find alternative
ways how to help the people involved. On the other
hand, if it affects 10-15% of the population, then the
project is viable.
7. In your opinion what was the catalyst for
the company’s growth?
A catalyst for the company’s growth is vision. You
need to execute the vision you set at the outset.
Although one also has to be realistic. In our sector
another important thing is the technology and
12 Spring 2018
4. What is unique about your business?
It is a niche market. Before starting out the project
we performed the necessary research and feasibility
studies. This enabled us to ensure that there is
8. At what stage did you engage people to
help you execute your ideas?
Knowing one’s strengths and limitations is important.
I believe that my greatest strength is that of an
MAZARS: IT’S NOT
A FIRST JOB
IT’S A FIRST STEP...
YOUR YEARS AT MAZARS
YEARS THAT COUNT.
MAZARS IS AN INTERNATIONAL, INTEGRATED AND INDEPENDENT ORGANISATION, SPECIALISING IN AUDIT,
ACCOUNTANCY, TAX, LEGAL AND ADVISORY SERVICES. AS OF 1 ST JANUARY 2018, MAZARS OPERATES
THROUGHOUT THE 84 COUNTRIES THAT MAKE UP ITS INTEGRATED PARTNERSHIP. WE DRAW ON THE
EXPERTISE OF 20,000 PROFESSIONALS TO ASSIST MAJOR INTERNATIONAL GROUPS, SMEs, PRIVATE INVESTORS
AND PUBLIC BODIES AT EVERY STAGE OF THEIR DEVELOPMENT.
www.mazars.com.mt - #LookingForTalent
32, Sovereign Building,
Zaghfran Road, Attard ATD 9012,
Tel: +356 21345 760
entrepreneur. During the initial stages the input of
the entrepreneur is idea generation and risk taking.
As the company matures the role of the entrepreneur
changes to that of a CEO, with more focus on setting
up an appropriate structure for the company. I do not
believe in starting big, but a company has to grow
steadily. However I believe that the right people need
to be involved with the adequate expertise starting
from the early stages of a company.
9. Finance for SMEs is challenging. How did you
overcome this and obtain investment for your
One of the crucial points is establishing a good
relationship with your bankers and building
a relationship of trust. In depth research and
preparation is key to obtain other sources of finance.
This enabled us to identify potential investors and
meet with the prospective investors.
Other sources of finance included obtaining support
from EU funding. Although it involves time and resources
to apply for the requested funds. However this was vital
particularly in the early stages of the start-up.
10. Considering the fierce competition in today’s
business world, how do you highlight your
company’s competitive advantage?
What we do is analyse our competitor’s product,
study it and make ours better. In the case of our
first the product was unique. However this time
it is different nonetheless the product is also very
innovative and is protected via patent legislation.
11. How do you promote your business and
build a successful customer relation?
At the outset I start by getting an understanding the
operating environment within a specific country.
This is necessary to determine whether it is viable
to enter the market in that country and to identify
eligible distributors. We operate using a network
of distribution partners. Once the possible
distributing partners are identified, they are asked
whether they are interested in selling the product
and are thereafter requested to submit a three-year
12. How do you define success and what is
the best way to achieve long term success?
It’s all a matter of culture and client loyalty. One
of our values is that whatever we do is targeted
towards the end user. If you actually build a company
based on the wellbeing of your end customer and
instil that culture in your employees, it will lead to
13. What do you feel is your greatest
In the case of the first company the first important
achievement was actually managing to get the
necessary certification considering all the challenges
we had to face and the lack of experience. The other is
when after a lot of hard work we managed to go public
on one of the largest stock exchange in the world.
14. What is your greatest support when facing
up hardships in business?
No doubt - family.
15. What is your greatest fear when it in running
Relevance. Will my product be relevant to the user?
16. In your opinion, what do you think are the
5 key skills needed to manage an SMEs in the
best possible way and enable its growth and
The primary skill is to set a clear vision. This needs to
be set before the inception of the SME.
Another is to be hands-on and not role specific.
Flexibility is crucial for the success of an SME
Determination and persistence are extremely important,
because it’s so easy to give up when all the obstacles start
crossing your path, you need to persevere to succeed.
You have to accept criticism and be willing to learn.
17. Do you believe there is a winning formula
for running an SME? And what is yours?
No I do not think so. Everyone has their own way
of doing it. The reason why you would succeed is
because in the end you did it your way. Although I
do believe that being passionate about what you do
14 Spring 2018
DIRECTORS AND SMALL COMPANIES
– a discussion paper
The company was an extraordinary invention.
It helps to remember how the notion of the
company started and how it grew. The company
as we know it today evolved over centuries from
the joint stock company which first started being
properly regulated in the early 19th century. The
original company was typically a big, hugely
expensive and risky enterprise. Buying and fitting
out vessels often for cross-oceanic expeditions,
or the building of canals and railroads. The
creation of the company and the benefit of
official incorporation had its critics and caused
controversy. Objections and concerns increased
extensively when the great concession of
shareholder limited liability was added.
That is now history, but it is an instructive and
interesting story. Today, the main legislation on
companies in Malta is the Companies Act 1995.
Companies are legal fictions and the creation of
law; they exist because the Companies Act allows it.
Today the corporate form is used as a vehicle for less
ambitious objectives, even for single transactions or
to hold an asset.
A company is an artificial legal person which enjoys
the rights of human persons without many of the
disadvantages. It has proved extremely flexible and
resilient and can undertake any business whatsoever.
The company can be used for simple as well as
complex transactions and has served business
growth well. It can issue shares to investors who
benefit from limited liability. Unfortunately it has
also protected fraudsters, speculators, tax evaders
and sundry wrongdoers, as well as dodgy directors.
In Maltese economic experience, the company is by
far the most popular and the most important form of
business organization. So it is our business as lawyers
and accountants to understand it well. Today some
85,000 companies exist on the official company
register held at the MFSA which has housed it since
1997. Most are private limited liability companies.
Public companies are fewer in number, possibly
Our first modern company law was the Commercial
Partnerships Ordinance (CPO) which was drawn up in
the late 1950’s by Maltese legal experts and brought
into force in 1965. The Ordinance was a good law
for its time and proved particularly successful in
promoting the private limited liability company. On
the other hand, the Ordinance (CPO) was eventually
found to be very lacking in such areas as the winding
up of companies, the duties of liquidators and the
duties and responsibilities of directors.
An area which has attracted much merited scholarly
and judicial attention during these past twentyfive
years is directors’ duties and personal liability.
Whole books have been written about the subject.
Companies are primarily led and directed by the
directors. The CPO more or less allowed directors to
be largely unregulated and shareholders and directors
were allowed too much power and discretion to
determine the direction and destiny of the company
very often at the expense of third parties. This led to
the abuse of the corporate form and of the benefit of
limited liability given to the shareholders. In fact, this
unregulated situation led to much abuse by directors
and shareholders at the expense of the company’s
creditors, customers and employees. Directors (and
shareholders) felt immune, and in practice, to a large
extent, they probably were.
DAVID FABRI HEADS THE
DEPARTMENT OF COMMERCIAL
LAW AT THE UNIVERSITY OF
MALTA. HIS MAIN AREAS OF
INTEREST AND RESEARCH
ARE REGULATION, FINANCIAL
CONSUMER POLICY AND
LAW, WHISTLE-BLOWING AND
16 Spring 2018
The substantial abuse of the lack of adequate regulation
of directors under the CPO framework was therefore
evidence, if any was needed, that companies and their
operators needed to be adequately regulated and
monitored and provision should also be made to punish
wrongdoers where appropriate. Self-regulation has not
worked and more detailed regulation was necessary to
protect creditors, employees and other third parties. The
law is now clearer and in 1995 the Registrar was assigned
significant powers of intervention and investigation.
Having proper legislation and higher standards should
lead to the added benefit that more people will be
prepared to place their trust into dealing with companies,
small and big.
For many purposes, the Companies Act does not
distinguish between small and big companies. It does
however draw important distinctions between public
and private companies. The distinction between listed
and unlisted public companies is also significant because
listed companies are more strictly regulated. Indeed, the
directors of listed companies have to adhere to a whole
set of additional rules and responsibilities arising under
the Financial Markets Act and the Prevention of Financial
Markets Abuse Act and other rules arising thereunder.
It is probably correct to say that the Companies Act
seems more concerned with the distinction between
private and public companies, than between big and
small companies. This fundamental issue was addressed
when important amendments to the Companies Act
were being considered in 2003. Let us focus on just three
of these provisions. Article 329A which introduced a new
duty on directors was made applicable to all companies
which may find themselves in financial distress, and a
suggestion that it should apply solely to public companies
was discarded. On the other hand, the new Company
Recovery Procedure introduced by article 329B was only
applied to companies which were not “small companies”
as therein defined.
And finally, the very important article 136A which
introduced a general statement of directors’ duties,
even before UK law did, drew no distinctions and was
made applicable to directors of all companies. This
was founded on a clear policy intent to lay down one
common standard of conduct for all directors of all
companies, big or small, private or public. The aim was
to close the hatches and let now one out, with little room
for quibbling or playing with words. If you are a director
then you have the responsibilities of a director. With
such responsibilities come potential liabilities for breach
of those duties as set out in the law, including potential
civil and criminal liabilities. Article 136A tried to put a halt
to the usual half-baked excuses and whinging by directors
trying to escape liability for their dereliction of duties and
wrongdoing. It was no longer possible to plead one’s own
incompetence or ignorance, which was often another
fashionable attempt to escape culpability. The intention
was to simplify matters by having one principle apply
to all companies equally. On the other hand, criticism
predictably was directed against the one-size-fits-all
approach. Some confusion and a race to the bottom
could have arisen had the law opted to differentiate
between different types of directors: directors of small
as against big companies, or of private and public
companies; or between the so-called non-executive and
executive directors, a distinction which today seems to
enjoy a certain unmerited popularity.
Good and ethical corporate governance should be
adhered to irrespective of the size and type of company.
Good governance is not the preserve of public or listed
companies. If it falls upon smaller companies to set
a standard in how they are run or should be run, then
so be it. Companies and their employees, customers
and creditors enjoy a better run in the long term if they
are properly and ethically administered and operated.
Employees would better serve an honest employer and
consumers respond favourably to a company which
takes their concerns seriously and whose directors are
perceived to be fair and honest.
Companies, whatever their size, should not be
set up to cheat one’s spouse, partner, business
associates, customers and creditors, or to break
the law in opaque ways. This has happened and
will probably continue to happen, but companies
big or small should conduct themselves as good
corporate citizens, safeguarding not just the place
of work but the broader environment outside.
Companies should have more ethically defined
objectives based on a culture favouring lawful
and correct behaviour. In this context, the role to
be played by the directors is pivotal and crucial.
As the leading officials of the company, directors
should lead by example setting the ethical tone
which employees will discern and follow.
Getting ready for GDPR
MATINA MASSA IS THE MANAGING
PARTNER OF M2 BUSINESS
FRAMEWORKS, A BOUTIQUE
CONSULTING FIRM BASED
OUT OF MALTA. SHE WORKS
CLOSELY WITH ARQ GROUP
MALTA IN THEIR GDPR PRACTICE
PROVIDING GDPR FRAMEWORKS,
PLANNING AND SUPPORT.
18 Spring 2018
What do Facebook, Uber and Delta Airline all have
in common? All have been impacted by massive
data protection breaches in the past 6 months which
have resulted in millions of personal records being
compromised. The news, when exposed, has resulted in
damaging brand reputation and significant financial loss.
So why is Data Protection important, and what does it
have to do with your business? What do you need to
do to be ready for the May 25th, 2018 GDPR deadline?
This article attempts to answer some of these
Below is a recap of the important points that you need
to be aware of:
• GDPR comes into effect on the 25th May 2018 and
there will be no transitional period as organisations
have already have had over two years to adjust
• The GDPR fines are steep and can range up to 4% of
annual worldwide gross revenue or up to 20 million
euro depending on the category of violation
• Any organisation that conducts business within the
EU that collects or processes personal data needs to
be GDPR compliant. This is regardless of company
location and also applies to any organisation that is
outside of the EU but targets (‘sells to’), monitors or
does business with individuals within the EU. This is
regardless of company size and includes SMEs as well.
• One of the most fundamental aspects of the GDPR is
the need to ensure that you have ‘explicit’ consent.
This means that the individual providing consent
must do an ‘explicit’ action to provide consent,
such as ticking a box. This consent must be given
for a specific purpose and must be presented in a
manner which is clear, accessible, transparent and
in plain language.
• The GDPR now has strict obligations for ‘processors’
of data, even though they may not be the
controllers of the data. In the past, under the EU
Data Protection Directive (95/46/EC), processors
had limited obligations leaving them free from fines
• The GDPR has strengthened the definition of
processing, as well as expanded the definition of
Personally Identifiable Information (personal data)
including what constitutes sensitive or ‘special’
personal data. Under the GDPR, biometric data
is now also considered sensitive personal data,
resulting in new obligations for organisations
that use biometric data for access control and
authentication. If you collect or process any form
of sensitive personal data your obligations are now
stricter, such as the requirement to have a Data
Protection Officer and conducting Data Protection
Impact Assessments on high risk processing.
• GDPR also includes strengthened obligations
around Technical and Organisational measures with
stronger links to IT security practices. While there is
no ‘silver bullet’ on what these measures are, they
do require a more comprehensive view of physical
and data security controls as well as implementing
measures such as pseudonymisation, encryption,
archiving, data deletion and minimization.
• GDPR is not about ‘ticking’ the boxes or a ‘one off’
inventory, it is about embedding strong privacy
management practices across the organisation
including training, awareness, policy and procedural
changes and a clear understanding of process and
risk areas where personal data can be exposed.
• GDPR brings with it a culture change in terms of how
employees handle personal data. Employees need
to think twice when they are processing personal
data in day to day activities, such as the simple
sending of an email with a resume to potential
interviewers. Equally, organisations need to ensure
that processes and controls are in place to protect
all personal data.
As such, GDPR has now become one of the most
significant global data security regulations with far
reaching implications beyond the EU.
Given the above, you may be struggling with ‘how to
start’ and ‘what to do’ to rapidly move up the GDPR
GDPR readiness is best done within the construct of a
Data Protection and Privacy Framework. This will provide
you will the right structures for your GDPR activities and
will enable a strong framework for measuring compliance
and implementation progress. There are 3 core aspects
of a Data Protection and Privacy Framework:
A. What are the measures that need to be put in place?
Measures are those activities that are required
to protect personal data, respect the rights of the
individual and comply with the GDPR obligations.
Over 45 out of the 99 articles within the GDPR
translate to specific measures for compliance for a
standard business. You need to define what activities
need to be implemented to be GDPR compliant and
these become your implementing ‘measures’.
B. What records do you need to keep or evidence do
you need to show to demonstrate compliance? The
‘accountability’ principle of GDPR sets out clearly that
all organisations need to demonstrate compliance,
no matter what size. Smaller organisations (under
250 employees) may have reduced reporting
responsibilities based on their processing, however
are still accountable for compliance. As such, ensuring
that you are capturing, storing and reporting your
‘proof points’ is important. Approximately 40 of
the GDPR measures above require evidence of
compliance, this number changes depending on the
size and nature of your business, however in general
the more you monitor, the stronger your GDPR
practices and maturity will be.
C. It is essential to have clear accountability for GDPR, not
only within the business areas where data is collected
and processed, but also across the organisation. Most
importantly clear accountability is essential at senior
levels, ensuring regular reviews, dialogue, governance
and reporting. Accountability also links to your GDPR
implementation roadmap, outlined in more detail
below, where you need to establish clear ownership
for completion of tasks in the plan.
Once you have established your Data Protection and
Privacy Framework, you will have a good understanding
of what needs to be in place for your organisation - not
only to become compliant but also to demonstrate a long
term sustainable practice.
So where to start?
1. First of all, you will need to baseline your
GDPR compliance. This involves assessing and
documenting the status of your GDPR compliance
across your business processes, reviewing
your policies and procedures, data, customer
communication, consent language, contracts,
governance and reporting. This will define your gaps
and risks and you can then prioritise what needs to
be done to address these gaps.
2. Second, you need to develop a plan and assign
ownership of the plan. You need to define what
needs to be done to mitigate the gaps and risks.
This might require embedding new procedures,
reviewing consent language or mapping out data
flows. These activities will comprise your roadmap,
which should also include activities that ensure
3. Third, you need to keep a steady progress as you
implement the various activities and deliverables.
Put together a team to deliver on the plan with
an engaged and accountable owner. Ensure that
the team has the resources and support to ensure
implementation. Establish how you will measure
progress and report regularly to the senior team
to ensure that roadblocks are addressed, and
deliverables effectively implemented.
4. Finally, you need to maintain and sustain your
efforts to become GDPR compliant. This involves
establishing key roles within your organisation, such
as a Data Protection Officer or compliance roles
matrixed in the lines of business. It also requires
ongoing awareness, training and reporting and
establishing ways of working such as embedding
‘data protection by design and default’, which
means that data protection obligations are taken
into consideration for all new projects and / or
Companies with good data governance and data
management practices, that are proactive can benefit
from increased business, higher levels of consumer
confidence and improved security.
GDPR Readiness is about a structured framework and
its systematic implementation. It is about your ‘ways of
working’ and needs to become an integral part of your
business, it is all about good business practice.
Most importantly, it is about the fundamental rights and
freedoms of individuals, to their protection regarding the
processing of their personal data and your obligations to
respect and protect this fundamental right.
Organisations are social so understanding and managing the people in them is
critical to successful business leadership. As owners or managers we need to know
how to attract, select, develop, reward and retain people. Within organisations
these processes are referred to as Talent Management. The emphasis falls on the
interaction between the people and business, interaction that supports the fulfillment
of its purpose and the achievement of its strategic objectives.
CATHY IS AN EXECUTIVE COACH
AND PARTNER AT MULTIPLEX
PARTNERS, A BOUTIQUE OD
CONSULTANCY THAT FOCUSES
ON ACTIVATING TALENT
THROUGH THE DEVELOPMENT OF
COACHING AND ACCOUNTABILITY
There are many definitions of the term Talent
Management, for instance, should talent
management include all staff or should it be
more exclusive focusing on a select group of high
performers or high potential employees? For the
purposes of this article I refer to an inclusive approach
to talent management as research suggests that
this is a common approach taken by SMEs. In this
approach ‘talent’ refers to the set of knowledge, skills
and behaviours that each employee has.
IT’S ALL ABOUT THE PEOPLE
Paradoxically, as people we are unique and yet we
are the same. Whilst each and every one of us is
different, we have certain common, generic needs
that we strive to satisfy in various areas of our lives.
Being aware of what these needs are within the work
context and understanding how they can be satisfied
gives us insight about how to relate to people as they
enter and then work in organisations – it gives us
insight about how to manage the talent within.
As you read through the needs below, think about
how they relate to your own experience. Certain
needs may be stronger than others however it is
likely some of them will feature to some extent:
• To have clarity of what our role entails and
what is expected of us
• To have clarity of what our role entails and
what is expected of us
• To be given feedback on our progress
• To learn, grow and develop
• To feel aligned with the organisational
purpose and culture
• To contribute to the organisation’s mission
• To be remunerated fairly
• To be acknowledged and recognised
• To have a collegial working environment
• To be treated fairly
When these needs are satisfied people feel engaged
at work and are motivated to give their best and
perform at their highest level.
IT’S ALL ABOUT THE BUSINESS
What about the needs of the organisation? Individual
business needs vary according to factors such as
industry, size and goals. However in general, the
business needs to fulfill its purpose and mission;
it needs to achieve its strategic objectives, be they
financial sustainability or growth focused; it needs to
recruit talented people, it needs its people to be on
board with the organisation’s objectives and to work
together towards achieving them. The organisation
needs its people to be engaged.
Talent management provides a potential win-win
situation for both the business and the individual in
all enterprises, be they large, medium or small. Skillful
talent management offers the possibility of fulfilling
the needs of both the individual and the business.
THE SME CONTEXT - SATISFYING PEOPLE
& BUSINESS NEEDS
We’ve established that we need to know how to attract,
select, develop, reward and retain our people, we need
to know how to satisfy our people’s needs in these areas
and we need to know how to achieve our organisation’s
purpose and objectives through our people. The question
is, how do we do all this within the SME context?
Larger organisations have certain advantages over SMEs
in areas such as brand visibility, professionalised functions
and deeper pockets. However research has shown that
the SME context presents a number of advantages that
could help attract and retain people.
20 Spring 2018
BE THE SOLUTION—BE A CISA ®
In today’s fast-paced and ever-more complex business environment,
information has become the most valuable currency for enterprises
around the globe. Information systems professionals play vital roles in
leveraging the value, and assuring the security and integrity of the massive
volumes of information that drive business. For those professionals and
the enterprises they serve the world over, the CISA®—Certified
Information Systems Auditor®— is recognized as proof of competency
and experience in providing assurance that critical business assets are
secured and available.
With more than 140,000 professionals in over 180 countries, ISACA® is the
trusted source of knowledge, standards, networking, and career development
for information systems audit, control, security, cybersecurity, risk, privacy and
governance professionals. ISACA advances and validates business-critical skills
and knowledge through its globally respected certifications.
“SMEs can provide a creative environment where
new ideas and innovation flourish (Zenger & Lazzarini,
2004). Research highlights a number of advantages
of working in a SME organisation from the employee
perspective including perceptions of better job
quality and less bureaucracy (Storey et al., 2010),
better job satisfaction due to higher flexibility, a
better working atmosphere (Iddson, 1990) and more
informality in the workplace (Dundon & Wilkinson,
2009).” (Krishnan & Scullion, 2017).
How an owner or manager activates each area of talent
management can vary, what is critical is that talent
management is carried out deliberately with a clear
vision of what it hopes to achieve – engaged people
working within the organisation. In July 2014, CIPD,
which is a UK-based professional body for HR and people
development published a research report that examines
the different approaches that SMEs can take to recruit
and develop their people and includes some useful
insights for organisations.
Informality in the workplace however can be
a double-edged sword in all areas of talent
management. Whilst it is one of the advantages, it
can also work against the SME’s need to engage its
people. Informality is great when it comes to the
atmosphere at the office and when it describes
the ease of relating to one another, however it can
become detrimental if we take an informal approach
towards recruitment, development and retention.
Each area of talent management needs thought and
consideration in the planning and follow-through
stages no matter how big or small the organisation is.
The individual needs are present in whatever context.
I can work with the largest organisation in Malta or I
can work with the smallest one, my needs for role
clarity, feedback, connection and fairness; my desire
for professional growth, are present in all contexts.
Two concrete examples of how to make talent
management deliberate are role profiling and taking
a coaching approach with staff. Role profiling provides
clarity about what the role entails and the competencies
needed to fulfill the role and at the same time creates an
accountability structure. These can be updated regularly
to cater for evolving needs of the small and medium
enterprises. You can’t begin to manage your people
unless you clarify in a meaningful way what you expect
of them and this is different from a job description in the
form of a task list. When there isn’t the internal expertise
to set up such structures such as role profiles, SMEs have
the option to turn outside the organisation for support.
Another example of deliberate talent management is
taking a coaching approach with staff. This ticks many
of the boxes for satisfying our people’s needs within
22 Spring 2018
Leave & Attendance
Optimise the payroll process
Automate leave procedures
Engage employees with
self service portal
Work from anywhere
Make the Switch
the work context. It is considered best practice to
have ongoing coaching conversations with staff
and this is one practice that serves people well in
both large and small organisations. Research has
repeatedly found that giving people the opportunity
to learn and grow increases their satisfaction,
motivation and engagement making them more likely
to stay with the organisation and taking a coaching
approach is a key enabler of a person’s growth. It is
a cost-effective way of developing and engaging staff
that has exponential returns.
THE ROLE OF CULTURE, TRUST AND
Any talent management initiative takes place within
the wider context of the culture of the organisation.
Culture is about how people think and act on a daily
basis (Connors & Smith, 2011). The now famous
saying “culture eats strategy for breakfast” sums
it up nicely. Effective talent management is more
than a strategy, it goes deeper into the DNA of the
organisation; it is about culture; it is about values …
and it starts at the top of every organisation. It has
to be recognised though that in order to grapple
with the idea and practice of talent management,
leadership has to believe that its people are good,
motivated and that they have potential. In an
organisation led by an autocrat who believes that
people are essentially driven by their managers rather
than themselves, talent management is doomed to
fail. The leader plays a critical role in embedding a
healthy culture based on trust and accountability
that in turn provides the rich foundation from which
effective talent management can really happen in a
meaningful way that delivers tangible results and a
Talent management in SMEs is valid and valuable.
Are you leveraging the benefits?
• Talent management and dynamic view of talent in
small and medium enterprises. TN Krishnan & Hugh
Scullion, Human Resource Management Review 27
• Recruiting and developing talented people for SME
growth. J Miller, CIPD Research Report (2014)
• Change the culture, change the game by R Connors &
T Smith, (2011)
• The new rules of talent management: HR Goes Agile,
P Cappelli & A Tavis; Co-Creating the Employee
Experience, L Burrell; One Bank’s Agile Team
Experiment, D Barton, D Carey & R Charan, Harvard
Business Review March-April 2018 issue
SMES GOING DIGITAL
the way to transform the business
Small and medium-sized enterprises (SMEs) represent 99% of all businesses in the EU (and Malta). SMEs are
defined (or rather described) in the EU recommendation 2003/361, with the description of what constitutes
to fall under the definition of an SME being mainly quantitative in terms of headcount and, turnover size
and/or balance sheet total.
REUBEN PORTANIER IS THE
OF AFILEXION ALLIANCE,
AN ADVISORY FIRM WITH
A PARTICULAR FOCUS ON
TECHNOLOGY, FINTECH AND
budgets to invest in digital technology, particularly as
they may have easier access to finance. However,
a counter argument, which is equally valid, relates
to the fact that larger enterprises should on paper
provide a high return to SMEs terms of shifting them
to radically change the way SMEs conducted their
business and thus being in a position to keep up with
the pace of the large enterprises.
be less swift than SMEs to change their modus
operandi and become more digital, due to the size
and complexity of their operation and processes,
and thus SMEs should have a higher propensity
to be digital. The truth may be mid-way between
these two schools of thought, both of which may be
rather simplistic arguments. Comparing the 1% of
European enterprises versus the 99%, which involve
SMEs is in reality comparing apples with oranges,
as the nature of micro and small enterprises within
the SME cohort skews the comparative assessment
due to the intrinsic business nature of most micro
enterprises and the majority of small enterprises.
The latter include enterprises based on single
practitioners, (such as notaries, family doctors,
lawyers, hair dressers, etc), which business model is a
traditional, personalised and very localised, together
with micro enterprises based on traditional trades
Addressing the supply chain is key for the survival
of small enterprises in order to avoid the large
enterprises squeezing them out of the market with
their aggressive marketing actions. For instance,
the bedroom furniture manufacturer employing
25 people can compete with the likes of IKEA by
using digital technology in allowing their customers
build their own design, rather than choose from
a preset digital catalogue. In the case of medium
sized firms addressing the supply chain is critical
for their growth strategies, where for instance the
concept of distributed warehousing has taken off,
whereby medium sized retail enterprises with cross
border sales use networked ordering systems in
order to ship orders from warehouses which are
geographically closer to their customer in order to
reduce distribution costs and time.
which the very reason of their existence is not based
on volumes, but on personalised products/services. However, the application of DSC may also apply for
micro enterprises. The cases of UBER and Airbnb
The European Union has since 2003, embarked on
a journey to provide SMEs with more possibilities
to exploit digital technology. In 2003 it founded the
European e-Business Support Network for SMEs,
with the scope to create awareness amongst SMEs
show how even micro enterprises such as selfemployed
chauffeur driven car services and owners
of small tourist rental apartments can exploit DCS
technologies (albeit using the digital platform of a
third party) in order to maximise their orders books.
on the benefits of going digital, together with spearheading
policies that gave life to various co-financing
programmes to allow SMEs join the digital era, by
promoting internet connectivity, the use of ICT and
Although the take up of digital technologies for
SMEs may not yet be what may be expected,
however SMEs with the ambition of EU cross border
supporting SME have a web presence. In 2006, sales can exploit the opportunities presented by
European e-Business Support Network shifted its
attention towards promoting the use of digital supply
chain technologies (DSC) for SMEs as it identified
that DSC would be the digital technology that would
Digital Technology to re-engineer their processes,
and thus be more efficient, whilst for those who
are more bold and innovative potentially become
Five tips for going digital:
1. Before investing in digital technology, re-assess your business objectives and strategy, and align
your planned investment accordingly, and not vice versa
2. Assess which business and operational processes need to change, be swifter or more customer
oriented. Following this assess which processes can be re-designed and which should turn to
3. Assess which areas of your business is too laborious, and refocus that area by using digital
applications and solutions that can allow you to shift resources to other areas of need, such as
supplier relationship management
4. Do not go digital simply because it may be in ‘fashion’ to do so, but do it because you have
assessed how doing so would improve your business situation. Identify the medium to long term
return or savings, then go for it.
5. Keep on the look out for opportunities that could assist you in going digital, in terms of local and
EU assistance schemes – or look out as to how to join upcoming digital platforms that can push
your business outside our shores.
Is Business Planning relevant for SMEs?
2015 report by Barclays Bank
revealed that about 25% of UK
SMEs admitted to not having any
business plan or any strategy in place to
support their business growth. On the
other hand, less than half of the UK’s small
businesses had a formal business plan in
place that was written down or recorded,
while the remaining 25% had an informal,
verbal plan. Furthermore, only one in two
UK small businesses had a succession
plan in place.
CHRIS MEILAK IS A CPA,
ECONOMIST AND ASSOCIATE
PARTNER AT EY MALTA, LEADING
THE VALUATION, BUSINESS
MODELLING AND ECONOMIC
These statistics are shocking, to say the least. As
individuals, we are taught to plan ahead in most life
situations – choosing a career, planning a holiday or
event (think of a wedding and all the trouble a couple
goes through), ensuring we maximise our study time
before an important exam, or making sure our finances
enable us to afford a new car or home mortgage. We plan
our day and week, listing down things to do and priority
tasks, and time needed. So one would expect individuals
to transfer these skills to their workplace – but it seems
this is not always the case.
Developing a business plan is a vital tool for any business,
of any size. Large corporates plan to reorganize or
streamline their enterprise, plan for growth, to be able
to tap new opportunities (from internal expansion to
foreign markets), raising finance for new projects, or
identifying exit strategies such as IPOs.
And SMEs? Actually, one could argue that such a plan is
of greater value in smaller businesses, because they are
exposed to higher risks, which could significantly impact on
the owner of the entity. SMEs often face limited resources,
with few individuals covering more than one function or
role. Hence, there is a need to prioritise on time, in order
to sustain the business, but also the individual. In other
words, time management is key, if the owner of an SME
wants to achieve an acceptable work-life balance.
SMEs might fall in the trap of preparing a business
plan just because it was requested externally (e.g. for
government or EU grants; bank financing), but the actual
truth is that benefits are primarily internal. The plan
formalises the strategy of the owner to try to tap market
opportunities with resources at hand, but also with
resources that need to be acquired, a business plan is in
this respect helpful because it helps to identify such gaps.
Besides there is no such thing as an “internal” plan and an
“external” plan to present to third parties – if there was
such a thing, eventually only the external plan would end
up being executed.
A business plan helps entities to stay on the right
track during its growth and it assists the entity when
approaching investors for funding. A business plan is
what keeps companies focused on their goals and what
moves them through hurdles. Hence it is fundamental
for a small business. It defines what the company wants
to achieve, how it plans to achieve it across a set time
period and is a tool that monitors growth targets and
execution of plans. Plans can make small businesses feel
more confident about their future and ensure they have
the necessary tools in place for growth.
Business plans can be developed internally, but there
is always the option to ask for professional external
expertise. In this regard the Government, through the
Malta Enterprise or other funds administered by the local
EU Managing Authority, offers grant incentives related
to business plans/ feasibility studies. Independently of
who prepares the business plan, it ultimately needs to
be “owned” by the SME Management/ owners – as it
outlines the entity’s strategy, so one would expect the
owners to address any questions on the strategy, not
an external consultant. This is especially the case, since
business plans should be viewed as a dynamic document,
hence they should be revisited and adjusted as the
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The typical steps one undertakes when preparing an
SME business plan include:
a. Identifying the audience/ readers of the plan,
which will include the owner/ management
and possibly external parties (e.g. applications
for finance from a business loan to alternative
forms of finance and investment).
b. Identifying the circumstances and the purpose
for the development of the plan, which could
include growth into new areas, or new markets.
c. Tackling the key components of a business plan,
which could include (but are not necessarily
• The company or founders’ history
• The vision and objectives
• Explanation of the range of product/
services being offering/ the idea/ project
• Identification of the target market and
• Provision of the economic context and an
overview of the competitive environment
(e.g. competitor or competing products)
• Outlining the company strategy and growth
• Drawing up marketing action points
• Delineating the financial projections and
related financial plan/ funding sources
• Assessing the risks and issues related to the
business/ idea/ project
Some of the components above will require additional
research in order to be able to collect the necessary
information to be able to populate the plan. It is also
highly recommended to include a brief (2-3 page)
executive summary highlighting the salient points of
the business plan.
Many local businesses unfortunately do not spend
the time to formalise their business plan. Given the
evolving nature of business and the economy in
which we operate, the absence of a business plan can
itself represent a risk. Regardless of size or age, any
venture should have a clearly delineated plan which
helps guide the company’s strategic focus, sets out its
mission and vision as well as providing the analytical
context by which future performance and changes
can be benchmarked and managed. While you can
still be successful without a business plan, you are
more likely to be successful if a plan is in place – in
fact, business planning is the backbone of most
Diversification and Picking the Right Fund.
JOSEPH PORTELLI IS THE
CHAIRMAN OF THE MALTA STOCK
In Malta it’s common to know someone who’s
had a bad experience investing in the stock
market. As a result many of us have become
averse to investing in anything other than real estate,
government bonds or capital guaranteed products –
investments deemed “safe”.
At first glance investing exclusively in bond and real
estate holdings may seem prudent – but for many
of us it’s not the way to go. An investment portfolio
lacking shares of good quality companies, with
good earnings prospects, is a portfolio lacking the
necessary diversification and “fire power” to assure
good long-term investment returns.
much of it, relative to our net worth. Imagine Investor
A and Investor B, both having an investment portfolio
worth €10,000 and both buying XYZ Ltd. Let’s say,
Investor A foolishly places all his cash into XYZ, yet
Investor B puts just five per cent or €500 into it. Next
day, XYZ announces very bad news and the stock
plunges 50 per cent. Investor A anxiously loses half
his account value, whereas Investor B calmly loses a
meagre 2.5 per cent. Although both investors owned
the same stock, Investor B mitigated the pain of the
selloff by managing risk effectively, and not owning
too much of it. It’s critical we manage the size of all
our bets and invest in a portfolio of perhaps 10 to 20
stocks to diversify our holdings and spread out risk.
Nutritionists often tout the health benefits of eating
a well-balanced diet. A diet full of proteins, with few
carbohydrates, will leave you lethargic. All four of the
major food groups play some part in sustaining us in
a healthy and productive way.
The same can be said of an investment portfolio. A
balanced portfolio including the four major asset
classes – equity, bonds, real-estate and commodities
– is to the investor what a well-balanced diet is to the
competitive athlete: essential.
Just as the grain complex gives the body energy,
owning a broad and diversified portfolio of equities
over time will energise your portfolio towards solid
returns. Few appreciate that equities are the best
performing asset class historically. The S&P500 for
example, a diversified index of 500 of the largest US
stocks has returned about 10 per cent annually, solidly
beating, bond, real-estate and commodity returns. A
portfolio devoid of shares will underperform during
periods of economic expansion and corporate
earnings growth. An underperforming portfolio may
keep you from fulfilling your retirement dreams.
Owning shares of companies implies having a right to
a portion of the companies’ earnings; and of course
as a company’s earnings grow, generally so too does
the value of its shares. Many of us have gotten into
trouble owning shares, not necessarily because we
bought the wrong stock, but because we bought too
Risk management is by far the most essential
element to successful investing! We often buy stocks
at prices which already reflect good news - leaving
them little impetus to rally further. Also we buy
shares after significant rallies, instead of on dips as
prices experience normal corrections. Warren Buffet,
the legendary billionaire US investor, only buys good
quality companies having a competitive advantage,
which are priced at a significant discount to intrinsic
or fair value. An analogy is to buy an excellent product
on sale at a 50 per cent discount to its full price. Savvy
investors always buy good companies on sale!
Investing in shares can be tricky if a disciplined
approach to screening inexpensive companies with
good earnings growth potential isn’t utilised. However,
investing with a long-term horizon, managing the size
of your bets and having a diversified portfolio should
improve the odds of your success significantly.
INVESTING IN FUNDS
When we invest in actively-managed funds few
of us appreciate that less than 10-20 per cent of
a fund manager’s annual performance beats the
underlying index the manager tracks. This is not
necessarily due to the managers’ competence, but
is a function of the fees associated with actively
managing a fund.
A majority of funds are actively managed, meaning
the fund manager actively buys and sells stocks or
bonds, attempting not only to generate profits, but
28 Spring 2018
to outperform an index and competitors. Although
a portfolio manager is typically well trained, the
rude reality is that few managers can consistently
generate enough profits to overcome the expenses
associated with managing a fund.
If you invest with an experienced low-cost fund,
with a track record of managing risk effectively, you
should be in a good position to benefit from investing
in funds. As an example, imagine you invest in a fund
which invests in large capitalisation US corporate
shares. The fund manager will aim to either finish
the year in line or preferably beat the index, which
mirrors the fund he manages. If the underlying index
finishes the year up 15 per cent, and the fund charges
two per cent in total fees, the manager must on a
gross basis return 17 per cent just to match the index.
Besides a fund’s management fees, investors often
have to pay a load (sales commissions), sometimes
as high as five per cent, just to purchase such a fund.
Because so few funds can overcome the high
expenses associated with active fund management,
Wells Fargo Bank established the first index fund in
1971. The index fund concept today popularised by
US fund manager Vanguard suggests that investing
in low-cost passive funds is preferable to expensive
actively-managed funds. Passive funds manage
portfolios which significantly mimic the index they
track, thus lowering the cost of managing assets. As
a result, most index funds will post returns very close
to the underlying index the fund tracks.
Most funds are created as open-ended funds with
shares which are constantly bought or sold, usually at
the day’s closing net asset value (NAV). A fund’s NAV
measures the net worth or value of each share. Openended
funds are continuously open to new investors,
unlike closed-ended funds (CEF), which have a fixed
number of outstanding shares. CEFs trade like shares
on exchanges, and their value is set by the market.
Sometimes their values deviate from the fund’s NAV
and as a result could trade at significant premiums or
discount. Investors should avoid buying CEFs trading
at significant premiums to NAV.
CEFs, like their open-ended counterparts, could use
leverage to magnify returns. It is also common for
CEFs to make periodic distributions to shareholders,
however, they may on occasion have high distribution
yields as they could pay out part of their funds’
principal to meet their distribution goals.
Do the required due diligence prior to investing in
funds. This includes scrutinising all fund fees and
expenses. Also consider the funds’ age and size. A fund
with a long track record is easier to analyse. Ensure
the fund management company is well managed
and regulated in a trusted domicile. Consider a fund
not so large, whereby managing fund assets is too
cumbersome, thus jeopardising returns. On the other
hand smaller funds will have higher expense ratios. If
you invest with an experienced low-cost fund, with a
track record of managing risk effectively, you should be
in a good position to benefit from investing in funds.
REDISCOVERING THE VALUE OF SME AUDIT:
Recent developments in Sweden and Denmark | An information paper by Accountancy Europe
This information paper reports on the current
developments in Sweden and Denmark,
where national authorities are assessing the
consequences of exempting small and mediumsized
enterprises (SMEs) from mandatory audit.
The main findings of the impact assessment
outline numerous downsides of abolishing the SME
audit obligation and show that the companies’
competitiveness and growth have not been enhanced
by the reform:
1. Slower growth
Those companies which opt out of audit do not
have higher growth, rather the opposite. They
report weaker subsequent growth, both in net
sales and staff numbers.
SMEs are the backbone of the EU economy.
They represent 99.8% of all enterprises which
operate in the non-financial sector of the 28 EU
Member States. SMEs account for 66.6% of total
employment and generate 56.8% of value added
in this sector 1 . These figures are comparable with
the contribution of large enterprises. Therefore,
policy instruments that also instil confidence and
trust in this part of the market are indispensable.
An audit of the financial statements (audit) is
one of these policy instruments; it ensures that
financial information is reliable, which is crucial
for the functioning of the economy and its growth.
However, policy-makers seem to focus on audit
of large or listed companies rather than SMEs.
In recent years, the requirement for auditing
SMEs has been increasingly perceived as an
administrative burden. As a result, regulators
in some countries have introduced an audit
exemption for SMEs. At the same time, Sweden
has just evaluated the impact of one such
reform abolishing the SME audit requirement,
concluding that the reform was unsuccessful as
its costs outweigh the benefits.
Swedish impact assessment
In 2010, Sweden abolished a regulatory requirement for
audit of small limited liability companies. In December
2017, the Swedish National Audit Office (NAO), an
independent body of the Swedish Parliament 2 , published
a report Abolition of audit obligation for small limited
companies – a reform where costs outweigh benefits 3 that
put this abolition into question. The report demonstrates
through an impact assessment that audit of small entities
is valuable to both SMEs and the public good.
2. Smaller savings
The cost savings made by the companies that opt
out of audit are small, profitability does not improve.
3. Lack of transparency and control
Without audit, overall transparency is reduced
and authorities have less information to exercise
control and enforcement in various areas.
4. Increased risk of economic crime including
The inclination to opt out of audit is greater in
industries with a high risk of economic crime
and tax evasion. The slowing rate of growth may
indicate that companies that opt out of audit
withhold more tax than before.
5. More mistakes in the accounting
Without audit, the number of errors in the
financial statements increases.
Recommendation and next steps
Based on the conclusion that this reform’s costs
outweigh its benefits, the Swedish NAO recommends
to the Swedish Government to reintroduce the audit
obligation for small limited liability companies. The
Government will respond to the report’s findings at a
plenary meeting in early April 2018.
Denmark follows suit
The Swedish NAO’s report has sparked a debate on
the consequences of the SME audit exemption in
Denmark. The Danish audit exemption threshold
has been raised three times in the last twelve years
- in 2006, 2010 and 2013. The Danish Ministry of
30 Spring 2018
These data relate to micro, small and medium-sized enterprises and are based on the European Commission’s Annual Report on European SMEs 2016-2017; available at
The Swedish National Audit Office is an independent agency charged with the audit of government institutions and the oversight of the state finances through financial
and performance-based audits of state agencies, state-owned companies and the Government of Sweden. It operates directly under the Swedish Parliament (Riksdag) and is
independent of political or other stakeholder interests. More information is available at https://www.riksrevisionen.se/en/Start/About-us/
A summary of the report in English is available at https://www.riksrevisionen.se/PageFiles/27902/RiR_2017_35_REVISIONSPLIKT_SUMMARY.pdf
The full report is available in Swedish at https://www.riksrevisionen.se/PageFiles/27733/RiR_2017_35_REVISIONSPLIKT_ANPASSAD.pdf
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Business has now announced to carry out a study
into the consequences of easing the audit obligation.
Risks of audit exemption for SMEs
Exempting SMEs from audit increases a number
of risks to the economy. The Swedish report has
highlighted in particular the risk of accounting errors,
tax evasion and economic crime.
As demonstrated by the Swedish example, without
audit, SMEs tend to have more errors in their
accounting. This undermines the reliability of their
financial statements and reduces users’ trust in them.
Negative impact on Tax collection
The Swedish assessment indicates that exempting
SMEs from the audit obligation may increase tax
evasion and impair the ability of authorities to detect
such crime. Without being audited, companies run
a smaller risk that tax evasion will be discovered. It
is easier for companies to deliberately report lower
economic activity and so reduce the profit to lower
Fraud, corruption, money laundering and
Audit serves as a deterrent to fraudulent and criminal
behavior. For instance, it helps deter crime such as
fraud, corruption and money laundering in companies.
Given today’s heightened risk of terrorism in Europe,
the deterrence effect of audit is critical in particular
for SMEs as it reduces the risk that they are used for
SMEs have a corporate responsibility to third parties
such as their suppliers, creditors, investors, employees
and the state itself. If a company is not audited, these
stakeholders’ confidence in the financial statements
and accuracy of business performance diminishes.
Subsequently, the lack of confidence makes it more
difficult for SMEs to operate and flourish.
Limitations on access to funding
Access to credit/loans and financing enables SMEs to
grow, which is in every country’s interest. According
to a European Central Bank’s survey 4 , in recent
years, SMEs’ demand for external financing has
been increasing in Europe. However, the availability
of this financing still poses a challenge to SMEs. This
challenge might become even greater if a company
has not had an audit which provides more credibility
to its financial statements.
There are diverging national policies and views
on SME audit. Given this backdrop, it is interesting
to see countries like Sweden and Denmark taking
an empirical facts-based approach to evaluate the
effectiveness of reforms abolishing the SME audit
requirement. Policy-makers will further discuss the
policy implications of the assessment findings.
The Swedish example is a good practice of sound
policy-making. It is important to be pragmatic in policymaking
and to be able to adapt or even revert a policy
if it proves unsuccessful or worse, counterproductive.
In the context of SME audit, we encourage all policymakers
to take informed decisions based on facts and
evidence and to consider the benefits of SME audit,
both for SMEs themselves and for other stakeholders.
Accountancy Europe has formed a group of experts
to enhance the debate at European level on how
best to respond to the challenges of SME audit. We
will also keep analysing national developments in the
area of SME audit policy.
About Accountancy Europe
Accountancy Europe unites 51 professional organisations
from 37 countries that represent 1 million professional
accountants, auditors and advisors. They make numbers
work for people. Accountancy Europe translates their
daily experience to inform the public policy debate in
Europe and beyond.
Accountancy Europe is in the EU Transparency Register
Many SMEs enjoy the privilege and protection of a
‘limited liability’. This poses a risk for creditors in case
a limited liability company cannot pay its debts. Audit
may reduce this risk and provide more security to
creditors and other users of the financial statements.
Without audit, this counterbalance disappears.
Survey on the Access to Finance of Enterprises in the euro area; available at
32 Spring 2018
PREPARED TO GO
We are looking for a CORPORATE SERVICES TEAM LEADER
TIME TO REACH YOUR POTENTIAL
Alter Domus is strengthening its Senior Management team. Do you have what it
We are looking for a talented, experienced, appropriately skilled and qualified
professional to lead a team of employees working on a portfolio of high profile local
clients. Amongst others, your responsibilities will include:
• Acting as a strong team leader by showing sound judgement and organisational
skills to lead a team of 6-10 employees who need guidance and coaching to grow
• Guarantee all operational aspects and accuracy in the administrative, fiscal and
legal maintenance of the client accounts together with quality control
• Manage relationships with other key players in the industry including auditors, law
firms, custodians and prime brokers
• Drive a number of internal strategic projects for our office in Malta
Visit www.alterdomus.jobs to apply online and to know more about these
vacancies or send your CV together with a cover letter to the HR Senior Manager
Amanda Cini on Amanda.Cini@alterDomus.com
YOUR CAREER, OUR PROMISE.
The Start-Up Journey in Malta –
how friendly is the framework for budding entrepreneurs?
CHRIS CACHIA IS A SERVICE
MANAGER AT ALTER DOMUS. HE
IS A LAWYER AND CHARTERED
It is common in literature nowadays to read stories of successful
start-ups. Occasionally this has unfortunately led to the idolisation of
entrepreneurship, giving it a sheen of glamour but glossing over the
hard hours of work and sacrifice. The latter are necessary if the business
is to succeed. Another consequence is that people are induced to
start their own business at the beginning of their career path.
The start-up phase can be as complicated as it is exciting, especially
when one considers the different building blocks, legal requirements
and interactions with different governmental entities to start off the
In a local context, what is the state of play when launching a small
business? Is the environment, business friendly or is it mired by too
many strands of information which entrepreneurs need to grapple
with before seeing their project take off? This article will try to provide
a very brief overview of the landscape faced by an entrepreneur
when launching a start-up in Malta.
WHAT IS A “SMALL BUSINESS” OR “SMALL
A definition of micro, small and medium enterprises
is found in Commission Recommendation 2003/361/
EC of 6 May 2003 . Under the recommendation, “An
enterprise is considered to be any entity engaged in
an economic activity, irrespective of its legal form.
This includes, in particular, self-employed persons
and family businesses engaged in craft or other
activities, and partnerships or associations regularly
engaged in an economic activity.”
The recommendation further applies two
benchmarks to define the category of small and
medium size enterprises, namely, staff headcount
and financial ceilings.
Broadly, enterprises considered to fall under
the grouping of micro, small and medium-sized
enterprises (SMEs) are those employing less than
250 persons, which have an annual turnover of not
more than EUR 50 million, and/or an annual balance
sheet total not exceeding EUR 43 million.
34 Spring 2018
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of experienced traders, determined to
execute your instructions in a prompt,
efficient and effective manner. Place your
trades through our Branch Network,
Investment Centres or 24/7 via our Internet
Aiming to achieve effective goals for your success.
Investment returns can go down as well as up and past performance is not
necessarily a guide to future performance. Changes in the rate of exchange
currencies may also affect the value of your investments.
* Trades in complex financial instruments may only be processed through our
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Issued by Bank of Valletta p.l.c., 58, Triq San Żakkarija, Il-Belt Valletta VLT 1130
Bank of Valletta p.l.c. is a public limited liability company regulated by the MFSA and is licensed to carry out the business of banking and
investment services in terms of the Banking Act (Cap. 371 of the Laws of Malta) and the Investment Services Act (Cap. 370 of the Laws of Malta).
document at this stage is the Memorandum & Articles
of Association, as this contains the basic information
of the company as well as the procedures to follow in
specific circumstances, such as process at meetings
and transfers of shares.
ACCOUNTING AND FINANCIAL REPORTING
Maltese law provides for the General Accounting
Principles for Small and Medium-Sized Entities
(GAPSME) as the default regime for financial
reporting for small or medium-sized entities.
In turn, a small enterprise is an enterprise employing
less than 50 persons and whose annual turnover
and/or annual balance sheet total does not exceed
EUR 10 million. Whereas a microenterprise is an
enterprise which employs fewer than 10 persons and
whose annual turnover and/or annual balance sheet
total does not exceed EUR 2 million.
FINANCING AND INCORPORATION OF THE
Having established the aim of the business, the
next step is to start trading and grow the business.
The selection of the right form of entity for doing
business, the manner in which the entity operates,
and financing considerations need to be determined.
The founders, family members or friends of the
founders usually provide the initial sources of finance.
Other forms of financing at this stage may be hard to
come by. Angel investing or banks may be looking at a
more mature business, and even then would require
detailed business plans and forecasting. Start-ups
may benefit from Government grants and rebates
which will be discussed further in the article.
Furthermore entrepreneurs have to choose the
legal form for operation under Maltese law. One can
select the traditional routes of trading in their own
name, setting up a partnership or incorporating a
company with a separate legal identity. The article
will focus on the latter, specifically the private
limited liability company.
Incorporating a private limited liability company is a
relatively straightforward process once all required
submissions are in hand. The most important
GAPSME allows small enterprises to draw up
accounting records allowing for straightforward
and basic reporting without having to go into the
complexity of the more comprehensive International
Financial Reporting Standards (IFRS) framework.
Directors’ reports are also not required on submission
of a statutory form.
The choice of using IFRS and as a result more detailed
disclosures would become more relevant when the
start-up grows or possibly when trying to attract more
financing, through new investors or via bank loans,
which might require a more granular level of detail.
Several grant schemes are available, aimed at
supporting SME investments in different sectors.
These include but are not limited to the provision
of non-repayable grants for research, development
and innovation actions, part-financing of the
eligible expenditure related to initial productive
investment costs in tangible and intangible assets
when implementing their business growth strategies,
and part-financing of costs for external consultancy
services to assess and evaluate their operations,
processes and systems.
The company would need to compile an application
and adhere to certain conditions to qualify for such
schemes. These applications have to be supported by
backing documentation including business plans and
The incorporation of the company in and of itself is
only the start.
The entrepreneurs would then need to proceed with
the registration of the company for VAT purposes,
36 Spring 2018
We are Recruiting
- Administration and Accounting Executive
- Junior Accountant
- Accounts Clerk
Join our team and explore what the professional
world has to offer by beginning to build a strong
foundation for you and your future.
135, ‘Kyle Building’, Triq il-Mediterran,
St. Julian’s, STJ 1870 Malta
T. (356) 2134 5009/10
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opening of a bank account and registration of a PE
number. Company registration, VAT registration and
application of PE number can nowadays be performed
through Business First. Attention needs to be given
to the registration of the VAT number as this involves
different options depending on the service offered
or product sold. The opening of a bank account is
subject to on-boarding requirements, and can be
require professional help as this can be seen as a
barrier to entry for entrepreneurs with the counter
effect of leading them not to incorporate a business
in Malta in the first place. This could also signal
inefficiencies in the way different government entities
interact with one another, or the total absence
thereof, leading to time wastage, repetition of work,
delays and a general feeling of an uncoordinated
approach to this delicate stage of a business.
ROLE OF PROFESSIONAL ADVISORS AND
Obtaining professional help aids in the launch of a
successful start-up. The environment should not
however be so complicated as to invariably always
Business incubators, whether private or governmentbacked,
are an available option in Malta and can be
critical in providing initial guidance and a support
network to young entrepreneurs. They also provide
training and business support.
Professionals should strive to provide the value added to start-up
businesses in all cases, and one notes that a number of options
are available which create a business friendly environment. There
is however room for more development such as less laws and
regulations, access to financing and education.
Looking beyond the Government Pension -
Some recent tax developments impacting the local pensions' arena
The Maltese pension system has been the subject
of public consultation and debate for a long
number of years. The Government-funded twothirds
pension remains thus far the main source of
future pension income for the vast majority of the
Maltese workforce, and it is no secret that there are
serious doubts about the financial adequacy and
sustainability of the Government pension.
The said legal notices are the Personal Retirement
Scheme Rules, which were introduced in 2014 by
virtue of Legal Notice 468 of 2014 (as subsequently
amended), and the Voluntary Occupational Pension
Scheme Rules, introduced in September 2017 by
virtue of Legal Notice 228 of 2017. The focus of
this article is on the Voluntary Occupational Pension
BERNARD ATTARD IS A TAX
PARTNER AT PWC. HE HAS WIDE
EXPERIENCE IN MALTESE TAX AND
SOCIAL SECURITY MATTERS AND
LECTURES AT THE UNIVERSITY
VICTORIA MUSCAT IS A TAX
SENIOR MANAGER AT PWC. SHE
HAS EXPERIENCE IN PENSIONS
REGULATORY AND TAX MATTERS,
AND HAS ADDRESSED VARIOUS
TECHNICAL SEMINARS AND
Various factors are cited in this respect, amongst
which is the fact that the Maltese population is
an ageing population - people are living longer
while birth rates have fallen. Very broadly, this
means that the number of individuals below
retirement age who are paying contributions
to fund Government pensions is increasingly
becoming lower than the number of individuals
subsisting on such pensions. In addition, the
two-thirds pension (the maximum amount of
which currently stands at just over €12,000) to
which one may eventually be entitled, may not be
considered as sufficient to provide an adequate
standard of living throughout retirement.
Taking these and other factors into consideration,
it is evident that the Maltese pension system can
no longer remain one that is primarily dependent
on the Government pension.
Regulation and fiscal measures go hand in hand
The regulatory framework for the setting up and
administration of occupational and personal pension
schemes has been in existence since 2002 by virtue of
the Special Funds (Regulation) Act, which has since
been repealed and replaced by the Retirement Pensions
Act (“RPA”), and supporting Pension Rules issued by
the MFSA. Yet, the lack of adequate fiscal measures
addressing contributions into such pension schemes and
the taxation of income derived therefrom, has meant
that there was no real impetus for the introduction,
locally, of occupational and personal pension schemes.
Indeed, over the more recent years, we have seen steps
in the right direction with the introduction of two legal
notices and supplementary amendments to Maltese tax
law, in an attempt to provide a workable tax framework
(including certain tax incentives) for occupational and
personal pension schemes.
The Voluntary Occupational Pension Scheme
Rules (“the Rules”)
Main conditions and definitions
The Rules came into force on 1 January 2017 and
introduce a number of tax measures for both
employers and employees contributing towards an
occupational pension scheme.
In order for the provisions to apply, there are
essentially three main conditions to be satisfied:
1. The pension scheme into which contributions
are paid should be a qualifying scheme. Firstly,
as the name of the Rules implies, it needs to
be a scheme established in the context of an
employment relationship. In addition, it can
be in one of two forms: either a retirement
scheme registered under the RPA (or any law
substituting such Act), or a long term contract of
insurance that has certain features and terms for
benefit withdrawal mirroring those applicable to
retirement schemes registered under the RPA.
2. The employer making contributions for the
benefit of its employees should be a qualifying
employer. This essentially requires the employer
to be registered as a payer under the Final
Settlement System Rules. The employer
can be any person, whether corporate or
unincorporate, and whether vested with legal
personality or not, and can include self-occupied
persons i.e. persons who are not employed but
are engaged in an economic activity.
3. The individual for the benefit of whom the
contributions are paid should be a qualifying
employee. The relevant criteria in this respect
are set out in Rule 4 of the Rules and provide
that the individual:
38 Spring 2018
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A. Should be registered for Maltese tax
purposes and should derive chargeable
income in terms of Article 4(1)(b) of the
Income Tax Act, i.e. employment income;
B. Should be employed by a qualifying
C. Should not be a beneficiary of the Highly
Qualified Persons Rules.
Criteria (a) and (b) are important in that they
require the contributions to be paid by or on
behalf of an employee. This implies that selfoccupied
persons can only qualify for the tax
measures provided under the Rules on the
contributions they make for the benefit of their
employees, and not on the contributions paid
for their own benefit. (The latter contributions
could possibly qualify under the rules issued for
Personal Retirement Schemes.) This implied
restriction is intended to avoid the same
contribution qualifying for more than one benefit.
amount paid. The tax credit can be offset against
the tax charge for the year but unlike the tax credit
applicable to employers, any unutilised portion
cannot be carried forward to subsequent years.
Some other provisions in the Rules
1. Payments from the scheme: Whether the
scheme is a retirement scheme registered under
the RPA or a long term contract of insurance,
the withdrawal of income therefrom should
in general constitute pension income for the
recipient and chargeable to tax accordingly.
However, the Rules provides exceptions where
payments received in certain circumstances
may either be exempt from tax, or considered as
other (i.e. not pension) chargeable income.
Fiscal measures for employers
• An annual tax credit amounting to the lower of
15% of the contribution paid for each employee
and €150 per employee per annum, which may
be utilised as a deduction from the tax due on the
employer’s chargeable income for the year. Further
provisions are made for the carrying forward of
unutilised tax credits to subsequent years, and the
tax accounting of such relieved profits in order to
ensure that the benefit is not lost upon distributions
of the relieved profits to shareholders.
• Furthermore, Rule 9 of the Rules provides for
the tax deductibility of qualifying contributions
paid by employers into an occupational pension
scheme. Where the contribution paid for any
employee exceeds €2,000 in a year, the tax
deduction is capped at €2,000.
Fiscal measures for employees
The Rules specify that employer contributions made
for the benefit of employees do not constitute taxable
fringe benefits in the hands of such employees. This
is in clear contrast with salaries, which are taxable for
The Rules also cater for those circumstances where
employees voluntarily and out of post-tax income
make contributions into the scheme. In such cases,
an employee qualifies for an annual tax credit
amounting to the lower of €150 and 15% of the
2. Social security contributions: Employer
contributions into an occupational pension
scheme do not form part of the basic weekly
salary on which social security contributions are
due i.e. such employer contributions are not
subject to social security.
3. Administrative matters, including reporting
and compliance requirements for employers
and service providers (retirement scheme
administrators or insurance providers depending
on the form of qualifying scheme).
Other aspects of occupational pension schemes
The concept of occupational pension schemes in
practice triggers a lot of questions dealing with
different fact circumstances that can exist within one’s
40 Spring 2018
workforce. While the answers to a number of these
questions can be derived from the tax / regulatory laws
(including the Income Tax Act, RPA and Pension Rules),
it is yet to be seen whether the fiscal measures and the
regulatory framework are attractive enough to make
occupational pension schemes successful and ultimately
serve the purpose of making Malta’s pension system
But should one focus only on tax/ regulatory outcomes?
Can other benefits flow to an employer and an employee
as a result of an occupational pension scheme? Today’s
reality is that it is an employees’ market and every
additional staff benefit, no matter how big or small, is likely
to have an impact on employee loyalty and satisfaction,
and the ability of an employer to attract and retain staff.
With this future looking perspective, we leave you
with some open questions which should hopefully
serve as ‘food for thought’, with the prospect of
building further on this step towards the evolvement
of occupational pension schemes in Malta.
• The framework for occupational pension
schemes provides for a voluntary scheme rather
than a mandatory one. This is in keeping with
the ideology of encouraging people to save for
their retirement, rather than obliging them. But
will a voluntary pension system really have the
desired take-up? Perhaps making the system
mandatory (for both employer and employee)
is not a straightforward call but could there
possibly be a middle-of-the-road approach?
For instance, the UK and New Zealand both
have adopted systems whereby employees
are automatically enrolled in their employer’s
pension scheme when they are first employed,
but they can choose to opt out.
Additionally, an occupational pension scheme can have
a corporate social responsibility and public relations
perspective - by introducing an occupational pension
scheme, an employer will be contributing towards a
better standard of living for its employees at a time when
they are no longer part of its workforce.
The introduction of the tax rules for occupational
pension schemes is certainly an important step in the
right direction. Now is really the time to put these rules
in practice and also, from such practical experience,
be bold and nimble enough to identify areas (both tax
and regulatory) which can be further enhanced for the
better use of such schemes. This is what will ultimately
make these occupational pension schemes successful
and ensure that they reach their purpose.
• The local regulatory framework does not
allow the full withdrawal of one’s pension
pot upon retirement. Such a methodology is
understandable since, after all, the pension fund
should be there to provide income for life after
retirement. However, should this apply across
the board? Would this work in the context of a
lower pension value? To make such occupational
pension schemes more wide reaching, should we
therefore consider introducing some flexibility
for withdrawal, such as ‘triviality provisions’,
similar to the UK system, which essentially
allow the cashing in as one lump sum (or over a
shorter number of years) pensions with small or
There are many more points to think about and the
debate over retirement planning and the funding
of pensions in the Maltese economy will certainly
continue. All key stakeholders have a very important
role to play, not only to promote financial literacy
but also to drive important changes. The pension
system cannot remain stagnant but has to evolve
to deal with economic, social and demographic
trends. For many people, the pensions they are
counting on to finance their old-age needs may be
facing serious challenges and we cannot afford to
GETTING IT RIGHT
GETTING IT RIGHT
RELATED PARTY DISCLOSURES FOR SMEs
ROBERTA WEST FALZON
ROBERTA WEST FALZON IS A
CERTIFIED PUBLIC ACCOUNTANT
AND HOLDS A PRACTISING
CERTIFICATE IN AUDITING. SHE
IS AN AUDIT MANAGER AT RSM
MALTA LEADING SEVERAL AUDIT
ASSIGNMENTS FOR NATIONAL
AND INTERNATIONAL CLIENTS
OPERATING IN DIFFERENT FIELDS.
The changes to the Maltese Companies Act as
a result of the transposition of the EU Single
Directive into Maltese law, which came into effect
on 1st January 2016, had an impact on small and
medium-sized entities. The option under Article
185 of the Companies Act for small companies
to prepare abridged accounts has been removed
and consequently a small company must deliver to
the Registrar of Companies its full set of financial
statements including the notes to the accounts.
One note that was not required to be included in
abridged accounts, hence not made public, was with
respect to the disclosure of emoluments granted
to the directors of a company for their services as
directors and for their services in connection with
the management of the affairs of the company. This
included all fees, percentages, gifts, compensation
for loss of office and other similar payments together
with any commitments arising or entered into in
respect of retirement pensions or other similar
commitments for former directors of the company.
This increased level of disclosure to be made public
is encouraging businesses to look into the two
accounting frameworks allowed to be adopted by
Maltese small and medium-sized entities (GAPSME
and IFRSs as adopted by the EU) and assess the
disclosure requirements of the two.
The objective of Section 20 of GAPSME, similarly
to IAS 24, is to ensure that an entity’s financial
statements contain the disclosures necessary to draw
attention to the possibility that its financial position
and profit or loss may have been affected by the
existence of related parties, and by transactions and
outstanding balances, including commitments, with
such parties. Both frameworks define a related party
transaction as “a transfer of resources, services or
obligations between a reporting entity and a related
party, regardless of whether a price is charged”. 1,2
what constitutes a related party, which is in line with
that given by IAS 24. A related party is a person or an
entity that is related to the entity that is preparing its
financial statements. Related parties include:
• Persons with control, joint control or significant
influence over the entity (and close members of
• Parent company
• Fellow subsidiaries
• Associates of the entity and other members of
• Joint ventures of the entity and other members
of the group
• Members of key management personnel of the
entity or of a parent of the entity (and close
members of their families)
• Entities (or any of their group members)
providing key management personnel services
to the entity or its parent
• Post-employment benefit plans
As for GAPSME, the disclosure requirements
distinguish between a small company and a
medium-sized company. However, small and
medium-sized entities opting for IFRS as adopted
by the EU have to disclose the same information
as that required by large entities. Under
GAPSME, small companies have lesser disclosure
requirements as evidenced in Table 1 below. But
it is important to note that small companies (both
those adopting IFRS as adopted by the EU and
those adopting GAPSME) are required to make
disclosures concerning directors’ remuneration.
Small companies under GAPSME are required to
disclose only transactions with specific categories
of related parties and these include the reporting
entity’s board of directors.
GAPSME in comparison to the previous GAPSE
regulations provides more detail in the definition of
One of the major differences in the disclosure
requirements between IFRS and GAPSME is that
42 Spring 2018
GETTING IT RIGHT
IAS 24 requires the disclosure of the identity of the ultimate controlling party. No such disclosure is
required by GAPSME if the ultimate controlling party is an individual.
Table 1 below highlights the disclosure requirements between IFRS and small and medium-sized entities for GAPSME.
Table 1: Disclosure requirements under GAPSME (small and medium-sized entities) and IFRSs as adopted
by the EU (adapted from 1,2 )
Medium - sized
The name and registered office of its immediate parent
The name and registered office of its ultimate parent
company and if neither the parent nor the ultimate parent
prepare consolidated financial statements, the name and
registered office of the entity which draws up the
consolidated financial statements of the largest body of
entities of which it forms part as a subsidiary entity and the
place where copies of these consolidated financial
statements may be obtained, provided they are available.
The name of the ultimate controlling party.
For transactions with related parties to disclose:
• The nature of the related party relationship.
• The amount of transactions in aggregate for each
significant category of transactions.
• The amount of outstanding balances and their terms and
conditions, including whether they are secured, and the
nature of the consideration to be provided in settlement;
and details of any guarantees given or received.
• Provisions for doubtful debts related to the amount of
• The amount charged to profit or loss during the period in
respect of bad or doubtful debts due from related parties.
influence over the
• jointly controlled
entities of the
• directors of the
For all related
For all related
An entity shall also disclose the following in relation to
members of the entity’s board of directors and other
members of its administrative, managerial and supervisory
a. The amount of advances and credits granted with
indications of the interest rates, main conditions and any
amounts repaid or written off or waived; and
b. Any commitments entered into on their behalf by way of
guarantees of any kind.
c. The amount of the emoluments granted in respect of the
financial year by reason of their responsibilities;
d. Any commitments arising or entered into in respect of
retirement pensions of former member of the entity’s board
(As detailed in
An entity shall disclose key
compensation in total and for
each of the following categories:
(a) short-term employee benefits,
(b) post-employment benefits,
(c) other long-term benefits,
(d) termination benefits, and
(e) share-based payment.
# Under GAPSME entities are exempt from disclosing related party transactions with other group companies
provided that such group companies are wholly owned by a member of the group.
Globally there is a greater interest in related party transactions given the need for more transparency in financial
reporting. Hence, management should ensure that they have the necessary tools to collect the information to
meet the disclosure requirements requested by the regulations.
L.N. 289 of 2015. Accountancy Profession Act (CAP. 281) Accountancy Profession (General Accounting Principles for Small and Medium-Sized Entities) Regulations, 2015.
Section 20: Related party disclosures.
International Accounting Standard 24 Related Party Disclosures.
VAT for small business:
existing rules and current development
MATTHEW ZAMPA IS ONE OF
THE FOUNDING PARTNERS OF
ZAMPA DEBATTISTA. HE HAS
BEEN SPECIALISING IN VAT FOR
TEN YEARS AND HAS EXTENSIVE
EXPERIENCE ON VAT MATTERS
APPLICABLE TO DIFFERENT
44 Spring 2018
When it comes to VAT, small and large businesses alike are
generally bound by the same set of rules and regulations.
This implies that the compliance burden derived from the
need to observe such rules and regulations represents
a compliance cost to tax payers, which in view of their
limited resources, is to a certain extent larger in the case
of small businesses.
For the purposes of alleviating this administrative burden,
the VAT Directive 1 allows Member States to adopt a special
scheme for small enterprises, which by and large, provides
for simplified procedures for charging and collecting VAT
and furthermore in certain cases exempt businesses
with an annual turnover below a certain threshold from
charging and deducting input VAT. Such measures are
optional at the level of the Member State and moreover
are optional at the level of the taxpayer. What is pertinent
to note in the case of the small businesses regime, is
that the rules regulating the regime specifically apply to
businesses who are established in a particular Member
State and consequently do not extend to supplies carried
out beyond the territorial boundary within which the
taxable person is established. This implies that taxable
persons registered as small businesses and who carry out
supplies which are treated as taking place in a Member
State other than that in which they are established, may
still have to follow and comply with obligations in that
other Member State, to the extent they are liable for the
payment of the VAT in that Member State.
Malta, has adopted the above mentioned small business
threshold scheme which differentiates between three
broad categories of economic activities, each having
its distinct entry threshold. Taxable persons who opt to
benefit from such a scheme may avail themselves of the
scheme by registering under article 11 of the VAT Act, as
a result of which they would not be required to charge
and collect output VAT on supplies carried out thereby
while at the same time they cannot recover any input VAT
incurred on their expenses.
Economic Activities consisting
principally in the supply of goods
Economic Activities consisting
principally in the supply of services
with a low value added
Other Economic Activities -
High value added
L.N. 14 of 1999 – Subsidiary legislation 406.02
Distributors of products
The other economic activities threshold indicated
above is proposed to be increased to EUR20,000. In
fact, by means of Council Implementing Decision
(EU) 2018/279 of 20 February 2018, the Council of
the European Union has authorised Malta to apply a
special measure derogating from Article 287 of the
VAT Directive consisting in raising the threshold for
supplies of services by small businesses to €20,000.
The implementation thereof would require an
amendment to Item 8 of Part One of the Sixth Schedule
to the VAT Act which would be made by a legal notice.
ANNUAL ACCOUNTING REGIME
In terms of the enabling provision 2 in the VAT Act and
the implementing provisions in the legal notice 3 , small
businesses whose turnover does not exceed certain
specific amounts as prescribed in the Sixth Schedule
to the said Act, and who are registered under Article
10 of the VAT Act, are, unless the Commissioner
decides otherwise, allocated a twelve month tax
period. This measure, of itself is intended to alleviate
the taxpayer (and also the tax administration)
from the administrative burden of preparing and
submitting the VAT return on a quarterly basis as is
typically required by persons registered under Article
10 of the VAT Act.
While not specifically a small business scheme,
accounting for VAT on a cash basis is a scheme which
is applicable to certain categories of persons whose
turnover, does not exceed a predetermined amount
of two million Euro. Such businesses, account for VAT
upon receipt of payment for a supply, irrespective
of the day of delivery of a good or performance of a
service. However, for the purposes of ensuring fiscal
neutrality to such supplies, input VAT incurred on
expenses may only be recovered to the extent it is
paid to the supplier. This implies that businesses who
adopt the cash accounting regime are not faced with
cash flow issues relating to VAT.
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to charge their customers VAT which is different from
that of the Member State in which they are established.
The principle of destination-based taxation requires VAT
to be charged and accounted for in the Member State
where the customer is established (Member State of
‘destination’) rather than in the Member State where the
small business is established (Member State of ‘origin’).
This infers that in principle, small businesses involved
in cross border trade cannot in theory benefit from the
exemption in Member States other than where they are
established. As a result, there is no level playing for small
business to trade and do business within the EU.
SMALL BUSINESSES OPERATING WITHIN A CROSS
While the small undertaking rules apply within a local
context, where the business is established, a lacuna in
the legislation exists where such businesses also operate
within a cross border context. However, what are the
implications in this case? Are small businesses offering
cross border supplies being compliant?
The Malta Vat Act, unlike the VAT Directive 4 excludes
small businesses from the obligation to be identified
for VAT under the standard VAT registration in the
cases where such persons carry out supplies to other
taxable persons established in other Member States and
such transactions fall be to taxed in the country where
the customer is established. Therefore, no additional
obligations are imposed on small undertakings offering
supplies of services falling within the scope of the general
place of supply of services rules to taxable persons
identified for VAT in other jurisdictions, and consequently
it is not possible for such persons to file recapitulative
declarations for such supplies.
Furthermore, the small undertaking thresholds do not
hold water in the context of an electronically supplied
service carried out by a small undertaking established
in Malta to a private consumer established in another
Member state. As a result, given that the transaction
is treated as taking place in the Member State of the
customer, in line with the place of supply rules, and to the
extent that the transaction is taxable in that jurisdiction,
then, the small undertaking has to charge VAT at the
applicable rate in that jurisdiction.
This issue is set to deteriorate with the shift towards
destination-based taxation under the proposed definitive
VAT system whereby many small businesses may have
EU PROPOSAL FOR SMALL BUSINESSES
For the purposes of addressing challenges and limitations
present within the existing small business scheme and in
order to enhance exploitation of the single market, the
EU Commission has submitted a proposal amending
Directive 2006/112/EC on the common system of
value added tax as regards the special scheme for small
enterprises. In particular, the proposal includes measures
which seek to:
(i) reduce VAT compliance costs for small businesses
both domestically and at EU level;
(ii) reduce distortions of competition both domestically
and at EU level;
(iii) reduce the negative impact of the threshold effect;
(iv) facilitate administrative burden on small businesses
and tax administrations.
Essentially, the proposal opens up the exemption for
small enterprises to all EU eligible businesses, whether
or not established in the Member State where the
VAT will apply and the exemption will be available.
Furthermore, it establishes an updated value for the
maximum level of national exemption thresholds and
additionally introduces a transitional period during which
small enterprises that temporarily exceed the exemption
threshold will be able to continue using the exemption.
Salient considerations for small businesses
Do not charge VAT on supplies carried out
Do not recover VAT on purchases made
Rules apply in the country where the small
business is established
From a Malta perspective, not obliged to do anything
in respect of cross border supplies;
May still have VAT obligations in a MS other than
that where they are established
File VAT returns on annual basis
Small Business who opt to be registered under Article 10
of the VAT Act may be granted an annual tax period
Proposal to modernize the existing regime is underway
46 Spring 2018
Art. 214(1)(e) of Directive 2006/112 EC
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The Insurance Distribution Directive (IDD)-
Are you ready?
You name it, you insure it. In today’s world, one can obtain an insurance policy to cover almost everything,
ranging from the compulsory car insurance to a decent health policy. The increase in the use of information
technology made the exchange of information and access for potential policyholders much easier. As a
result, alternative distribution channels started to rise. With insurance policy types designed to protect
one’s life, or the ability to earn income, it is a process where individuals might realise that it is only some
coverage that is actually relevant and meets their needs.
MATTHEW MICALLEF IS AN
ACCOUNT MANAGER AT USA RISK
Variety is the spice of life, but it can also be a
stumbling block. This ‘variety’, in addition to the
comprehensive range of insurance products available
to choose from, makes it difficult for the men in the
street to understand the products, especially when
these include contracts of an investment nature. It
comes as no surprise that prospective policyholders
find both the insurance terminology and the
information itself the most difficult to understand
when compared to other financial sectors, such as
banking. Moreover, the perils of small print continue
to make it challenging for customers to understand
the products they are actually buying.
date of the IDD by seven months to 1 October 2018
and subsequently will repeal the IMD. A review and
evaluation report is expected to be submitted to the
European Parliament by February 2021.
The scope of the IDD
While the IMD regulates insurance intermediaries
only, the new Directive applies to a wider regulation
of insurance distributors. The latter Directive does
not just regulate the distributors, but also sets the
activity of the distribution itself, whether carried out
directly by an insurance underwriter or through an
What is the IDD?
The main focus of the Insurance Distribution Directive
(IDD) is to continue to develop the EU regulation
within the insurance and re-insurance market. It is
intended to establish equal opportunities between
participants when obtaining insurance products
while ensuring an increase in customer protection
and transparency. It is crucial for customers to be
provided with the right information. This ensures
that informed decisions on insurance purchases are
made. It is also designed to strengthen policyholder
protection and make it easier for firms to trade
cross-border. The IDD will eventually bring the
insurance industry in line with customer protection
rules, recently adopted in other financial sectors,
at the same time as improving the consistency
between the regimes operating in different EU
The IDD was published on 22 February 2016, updating
the 2002 Insurance Mediation Directive (IMD) which
regulates EU insurance brokers, agents, and other
intermediaries. Although EU Member States are
still required to transpose IDD into national law by
the original date, 23 February 2018, the European
Commission has proposed to push back the application
Article 2 of the IDD defines ‘insurance distribution’ as:
‘the activities of advising on, proposing, or carrying
out other work preparatory to the conclusion of
contracts of insurance, of concluding such contracts,
or of assisting in the administration and performance
of such contracts, in particular in the event of a claim,
including the provision of information concerning
one or more insurance contracts in accordance with
criteria selected by customers through a website or
other media and the compilation of an insurance
product ranking list, including price and product
comparison, or a discount on the price of an insurance
contract, when the customer is able to directly or
indirectly conclude an insurance contract using a
website or other media’.
The new wording of ‘insurance distribution’ within
the IDD comprises more or less of the same activities
as ‘mediation’ under the IMD, including the assistance
of giving advice, the day-to-day administration and
performance of the insurance contract.
The IDD makes reference and applies its rules to three
types of insurance distributors listed below, all of
which are licensed to operate under their respective
48 Spring 2018
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1. Re/ insurance intermediaries (including tiedinsurance
intermediaries): any person (natural
or legal) who is engaged in the activity of re/
insurance distribution in return for remuneration;
2. Ancillary insurance intermediaries: any person
(natural or legal) whose primary activity is not
insurance distribution but is engaged in the
activity of insurance distribution in return for
remuneration and only distributes insurance
products that are complementary to their goods
3. Re/ insurance undertakings: any direct life or
non-life insurance undertaking authorised and
regulated by the supervisory authority of the
respective Member State. This type of insurance
distributor was not covered under the IMD;
Insurance comparison sites, or insurance introducers,
popular concepts mainly in the UK, are not subject to
the provisions of the IDD, provided that they do not
earn any remuneration of any kind or offer the option
to conclude an insurance contract via a website or
other media which is authorised and regulated by
the supervisory authority.
Professional requirements 1
The IDD lays specified that all customer-facing
employees (of all types of insurance distributors)
require a sound reputation. Each employee
must at least have a clean criminal record as per
police conduct certification and never filed for
bankruptcy. In addition to this, the employee must
attend professional training on a regular basis;
the IDD requires at least 15 hours of training and
development each year. The training must be verified
by a certificate, depending on the type of insurance
products sold, the license of the distributor itself and
the type of insurance activities performed. However,
it not yet clear as to how these hours should be
recorded and the different levels of training.
Also, the IDD requires insurance intermediaries to hold
professional indemnity insurance (or similar guarantee
against liability arising from negligence) for at least
€1.25 million (previously €1 million under the IMD)
per claim and €1.85 million (previously €1.5 million
under the IMD) in aggregate per year for all claims.
Conduct of Business Rules
Article 17 of the new Directive highlights that
insurance distributors must ‘always act honestly,
fairly and professionally in accordance with the best
interests of customers’ and that information, including
any marketing material delivered by the insurance
distributor must be ‘fair, clear and not misleading’.
Other information must be disclosed by the insurance
distributor to the customer depending on the type
of insurance distributors, whether it is an insurance
intermediary, ancillary insurance intermediary or
insurance undertaking. The information which must
be disclosed before the conclusion of an insurance
contract includes, but not limited to the identity and
address of the insurance distributor and whether it
provides any advice on the insurance product sold in
There are specific remuneration disclosure
requirements for insurance intermediaries, which
• The nature of the remuneration received in
relation to the insurance contract; and
• The basis of remuneration (e.g. fee paid by
policyholder, commission included in the
insurance premium or other economic benefit
offered in connection with the insurance
contract. Both fee or commission, whether
included within the premium or as a percentage
of the premium are still to be determined by
means of the IDD Rules).
Any other payments made by the customer in
addition to the above mentioned under the insurance
contract must also be disclosed.
Cross-selling in insurance is the practice of offering a
potential policyholder an insurance product together
with an ancillary product, which is not insurance but
still a complementary product. This is sold as one
package. In a cross-selling scenario, the insurance
distributors must give their customers a detailed and
adequate description of the package, including the
benefits and costs of such package.
When an insurance product is sold together with
an ancillary product as a package to other goods
or services, the insurance distributor must offer
the customers an opportunity to purchase the
products separately. Examples of ancillary products
include the Road Side Assistance, the Motor Vehicle
Licenses and forthcoming services like Transfers
of Vehicles. Moreover, the IDD will introduce a
detailed standardised Insurance Product Information
Document (IPID) for all non-life insurance products.
Details to be determined by means of the IDD Rules
50 Spring 2018
The IDD applies to any person (natural or legal) who
is established within the EU and sells insurance
and reinsurance products. However, Article 1 of
the IDD specifically excludes ancillary insurance
intermediaries if the following conditions are met:
a. The insurance is complimentary to the good
or service supplied by a provider, where such
(i) risk of breakdown, loss of, or damage to,
the good or the non-use of the service
supplied by that provider; or
(ii) damage to, or loss of, baggage and other
risks linked to travel booked with that
b. The amount of the premium paid for the
insurance product does not exceed EUR 600
calculated on a pro-rata annual basis;
c. By way of derogation from point (b), where
the insurance is complementary to a service
referred to in point (a) and the duration of that
service is equal to, or less than, three months,
the amount of the premium paid per person
does not exceed EUR 200.
What do we know so far?
Although it is difficult to calculate the exact amounts
at this stage, the changes brought about by the
new Directive will bring higher costs for insurance
distributors, which eventually will be passed on to
policyholders. Moreover, both governments and
respective regulatory authorities are expected to
incur increased costs as a result of increased checks
The new Directive is expected to bring the following
benefits to the market:
• An improved information distribution which
helps potential policyholders to make better
informed decisions on the insurance products
presented to them;
• Increased transparency on both prices and costs
for insurance products. The aim of the IDD is to
provide the customer with clear information
about whether the insurance distributor has
personal economic incentives to sell one
product from the other; and
• Rules of transparency and the overall business
conduct will prevent customers from obtaining
products that do not meet their needs.
The IDD does not restrict a specific business
model for the sale of insurance products. The new
Directive will bring about new concepts of which the
requirements are not yet clear, both at a local and
EU level. The introduction of these requirements
will probably have a huge impact on the insurance
market, given that significant changes are expected
in the day-to-day business of insurance distributors.
Further discussions are expected in the coming days,
together with additional guidelines and rules to be
released by the European Commission.
52 Spring 2018
THE POWER OF BEING UNDERSTOOD
AUDIT TAX CONSULTING
Transforming Challenges into
Opportunities: Fee Pressure
The recent IFAC Global SMP Survey identified key challenges many small- and medium-sized
practices (SMPs) face. This article is one in a series that breaks down the data from the survey
and provides information, ideas, and tips to help SMPs address these challenges as well as best
practice examples from IFAC SMP Committee members, together with the range of other tools and
CHRISTOPHER ARNOLD IS
THE HEAD OF SME/SMP AND
RESEARCH AT IFAC. HE WAS
PREVIOUSLY AN AUDIT MANAGER
FOR DELOITTE AND QUALIFIED AS
AN ACCOUNTANT IN A MID-TIER
ACCOUNTANCY PRACTICE IN
LONDON (NOW CALLED PKF-
STARTED HIS CAREER AS A SMALL
BUSINESS POLICY ADVISER AT
THE ASSOCIATION OF CHARTERED
CERTIFIED ACCOUNTANTS (ACCA).
MATS OLSSON IS PARTNER AND
ONE OF THE FOUNDERS OF
ADRIAN & PARTNERS AB. ADRIAN
& PARTNERS IS A MEDIUM-SIZED
PRACTICE IN GOTHENBURG,
SWEDEN, THAT WORKS PRIMARILY
WITH SMALL- AND MEDIUM-SIZED
OWNER-LED CLIENT COMPANIES.
HE HAS HIGHER EDUCATION
IN ACCOUNTING AS WELL AS
BUSINESS LAW. MR. OLSSON
IS ALSO THE DEPUTY CHAIR OF
THE IFAC SMPC AND CHAIR OF
ITS TASK FORCE FOR SMALL
Pressure to Lower Fees
The third highest challenge small- and mediumsized
practices face globally is pressure to lower
fees. Practitioners are fully aware of the importance
of providing quality services, but it is clear that
some clients remain reluctant to pay for such
services. Technological advances, globalization, and
outsourcing to less-expensive offshore contractors
may also prompt clients to keep up the heightened
The Guide to Practice Management for Small- and
Medium-Sized Practices includes a section on coping
with pricing pressures.
• Adopt new approaches to pricing.
Instead of billing an hourly rate, set prices for
services such as business advisory services
based on perceived or estimated value to your
client. Also, packaging more desirable services
with services that are essential but less desirable
allows for a broader range of services for a larger
• Stress the value of services offered.
Talk to clients regularly about the benefits of
the services they receive. Communication is an
important part of value pricing.
• Focus efforts on most valuable clients.
Evaluate clients, group them, and offer
different service levels to different groups,
especially for non-audit services such as
business advisory or tax. This technique,
referred to as yield management, is used
in the airline industry to price seats by the
level of service in first class, business class,
or economy sections. Some clients will
appreciate, and pay for, first class service.
Others will prefer the economy rate.
• Leverage technology.
Maximize technology to improve processes and
lower costs in the face of stagnant or declining
fees. Cloud computing solutions deliver the same
services, like payroll and bookkeeping, for less
cost, email costs less than regular postal services,
and Skype is less expensive than telephone or inperson
• Re-examine service offerings.
Consider combining value with additional services
for little extra cost, or provide the same for less
cost. To set your practice apart in the marketplace,
consider specializing in niche markets or services.
• Fee breakdown.
Break invoices into smaller parts. For example,
instead of charging a total amount for “Services
Rendered,” an invoice can show separate
services and each cost, such $X Tax Return, $X
Annual Report, etc. This clearly demonstrates
each individual service and makes it harder for
clients to complain.
• Find less expensive sources of supply.
Review your practice’s suppliers and look for
competitors offering benefits that may warrant
switching. Competitive pricing and choice
of suppliers, from internet service providers
to computer hardware vendors, may have
improved considerably since your practice first
chose its suppliers.
• Tackle overheads.
Seek to minimize waste and make the most
efficient use of human and environmental
resources, including workspace, energy, and
54 Spring 2018
consumables. To optimize expensive office
space, practices may encourage staff to perform
work at clients’ premises or at home and prebook
a desk space when in the office. Similarly,
practices could find staff efficiencies through
improved workload distribution, adequate
planning and supervision of engagements,
and delegating work to the appropriate
levels. Flexible working hours may avoid staff
redundancies, which erode morale and make
it difficult to recruit new staff. Shifting routine
work to more junior staff can also help cut costs,
but staff assignments need to be managed
carefully to maintain quality results and avoid
damage to your practice’s brand.
The Global Knowledge Gateway also includes a number
of articles, videos, and resources on these topics.
• Pricing on Purpose: How to Implement Value
Pricing in Your Firm, Parts I-III
• Tomorrow’s Firm and the Role of Value Pricing
• How to implement value-based billing
• Are Your Fees Too Low?
• How to Negotiate Higher Fees
• Setting Fees When Starting Up in Practice
• Fee Rates: Communicate Your Value
• Advisory Service Fees – The Numbers Do Stack Up...
• How to Manage Audit Fee Increases–and Even
Please see previous articles on attracting new clients
and keeping up with new regulations and standards
for further information and guidance.
This article originally appeared on the IFAC Global Knowledge
Gateway: www.ifac.org/Gateway. Visit the Gateway to
find additional content on a variety of topics related to the
Copyright September 2017 by the International Federation
of Accountants (IFAC). All rights reserved. Used with
permission of IFAC. Contact email@example.com for
permission to reproduce, store, or transmit this document.
• Ethical Considerations Relating to Audit Fee
Setting in the Context of Downward Fee Pressure
56 Spring 2018
BUSTING THE BITCOIN MYTHS
It’s fair to say that Bitcoin and Blockchain
have become mainstream talking points
over the last 12 months. While Blockchain,
the technology that underpins Bitcoin,
has received near universal acclaim, the
cryptocurrency itself continues to be mired
in a debate over its validity as a digital
asset. I find that most of the confusion
surrounding Bitcoin stems from a lack of
understanding the wheels and cogs under
the hood and can be broadly categorised
into five main misconceptions.
HOW AND WHY BITCOIN WAS CREATED
Bitcoin was created by Satoshi Nakamoto, an as yet
unidentified programmer using a pseudonym, as a
result and in the aftermath of the 2007/08 financial
crisis. Satoshi published and deployed the Bitcoin
protocol as open source software. The first two lines
of Satoshi’s whitepaper read as follows:
“A purely peer-to-peer version of electronic cash
would allow online payments to be sent directly
from one party to another without going through
a financial institution.”
In essence Satoshi Nakamoto’s motivation was to
devise a financial system independent and free from
the mismanagement of banks and central banks as well
as the inflationary monetary policies of governments.
Anyone willing to participate in the network simply
needs to download and run the software. The software
itself is being constantly updated. Although Satoshi’s
last recorded involvement was at the end of 2010,
various developers and cryptographers collaborate
full-time to propose and write improvements to the
HOW ARE NEW BITCOINS CREATED AND WHY
THE NETWORK WASTES SO MUCH ENERGY
One of the fundamental monetary policies of Bitcoin
embedded into the protocol software is a fixed supply
of bitcoins which is limited to 21 million coins (coins
are divisible up to 100 millionth of a coin). The number
of coins issued by the software diminishes every four
years until the 21 million coin limit is reached (at
some point in the year 2140). The diminishing supply
together with a forecast growth in user adoption gives
bitcoin its deflationary characteristic.
New coins are issued periodically (every 10
minutes) as a reward to miners for securing the
bitcoin network. Miners are competing with each
other to solve a mathematical puzzle in order to
claim the reward awarded by the software, together
with transaction fees, in exchange for providing
their computing power (mining costs incorporate
hardware and energy consumption). The winning
miner broadcasts their result, known as Proof-of-
Work, to the entire network thereby validating the
new bitcoin supply in circulation and simultaneously
adding a new block to the bitcoin blockchain,
incorporating new transactions to the network.
The transactions are now confirmed and form part
of the chain of blocks, with each successive block
being linked cryptographically to the previous
block, all the way back to the first block created by
Detractors of Bitcoin point to the fact that creating
new bitcoins wastes energy, with estimates of as
much as a medium-sized nation consumes in a year.
This is somewhat of a false statement for two reasons.
The miners’ primary function by virtue of their staked
computational power is to provide security to the
network from malicious hackers. The reward in the
form of new bitcoin is simply a by-product of the
mining process. To elaborate this point further, when
new bitcoin ceases to be issued in the year 2140 the
mining process will carry on. Secondly, the critique
needs to be analysed against the costs to produce,
transact and store other forms of money (traditional
fiat currencies and gold) along with the burdensome
compliance and oversight.
WHO CONTROLS BITCOIN
A common fear with Bitcoin, which contrasts with
traditional banking, surrounds the overall control
of the software and by extension the bitcoins in
circulation. A fundamental aspect of the Bitcoin
protocol is the consensus mechanism which in a
nutshell requires a majority of the network to consent
to any changes to its code. As a result there is no
person or group of persons that can tamper with the
software code without majority consensus. While the
identity of Bitcoin’s creator remains unknown, should
Satoshi Nakamoto resurface he shall have no more
power to amend the protocol than any other single
MICHAEL SCICLUNA IS THE
MANAGING DIRECTOR OF EXCO
SERVICES LIMITED, A CORPORATE
SERVICES PROVIDER AND CFO
OF BITMALTA, A NOT-FOR-PROFIT
ADVOCACY GROUP FOCUSSED
ON CRYPTOCURRENCIES AND
user or contributor. Indeed his exclusion, whether
self-imposed or not, is considered a key feature of
Bitcoin’s decentralisation as there is no figurehead
that weaves significant influence, unlike most if not
all other cryptocurrencies out there.
The economic experiment presented by Bitcoin enables
us to compare the monetary regulation that is set in
code and fully democratised, with that of traditional
central bank policies which have arguably had mixed
results in setting monetary policy with various financial
panics attributed to misplaced oversight, contributory
policy or both. In summary, Bitcoin is controlled by its
code and mathematical rules. The fact that no one
controls Bitcoin provides certainty over the money
supply without any outside interference.
WHAT GIVES BITCOIN ITS VALUE
This is one of the most common questions and is
also one of the most difficult to answer as there
is no central authority that provides backing and
no apparent intrinsic value. It is just code after all
written by an unknown programmer. By comparison
gold itself has very limited industrial use while fiat
currencies have unlimited supply and are therefore
inflationary. One striking example of this effect is
the US Dollar, the world’s primary reserve currency
which has lost as much as 96%, in purchasing power
terms, of its value since 1913.
As with any asset, whether digital or physical, the
price is determined by the value at which it can be
exchanged between a willing buyer and seller.
Bitcoin’s primary features (fixed supply, decentralisation,
security, 24/7 network, speed and lower-cost
transaction fees) have attracted a steady stream of
adopters utilising it as both a medium of exchange
as well as a store of value. Market forces dictated by
growing demand and limited supply have seen the
price rise steadily (save for 1 or 2 speculative price
spikes) over the past 9 years.
Assuming continued adoption over the longer term,
including by institutional investors, the price of Bitcoin
is expected to rise until it reaches an equilibrium. As
both a technology and a monetary asset it is still at a
nascent stage, however confidence in this trajectory
will enable Bitcoin to maintain its value and compete
with gold as a store of value and with flat currencies
as a medium of exchange.
IT’S USED BY CRIMINALS AND MONEY LAUNDERERS
Yes it is. However in no greater percentage than
with cash or traditional methods. In the early days
a significant demand for Bitcoin was likely used in
the illicit drug trade. I would argue that this value
represented a tiny fraction of global illicit trades
and/or money laundering. As adoption has grown
along with a better understanding of blockchain and
the services provided atop the technology, use of
Bitcoin for illicit transactions have reduced as a total
percentage of transactions. Bitcoin is far from an
anonymous currency. Every transaction transmitted
on the network is permanently recorded on a public
blockchain and auditable. Forensic analysis of such
transactions allows intelligence services to identify
the source and destination of a flow of funds and
has been used successfully to apprehend criminal
actors 1 . Recently published research indicated that
less than 1% of bitcoin transactions were used for
the laundering of illicit funds 2 . If you were to argue
that Bitcoin should be made illegal to hinder the
ability of a few users to operate outside traditional
channels, the same argument can also be made of
cash and other payment gateways. I would argue that
the benefits of allowing the technology to flourish far
outweigh the costs of trying to stamp it out.
58 Spring 2018
A Wizsec, Breaking open the MtGox case 27 July, 2017
Bitcoin Laundering: An Analysis of Illicit Flows into Digital Currency Services, 12 January 2018
By Tom Robinson, D.Phil & Yaya Fanusie for Elliptic, Center on Sanctions & Illicit Finance
Recent amendments for SMEs and start-ups
by Malta Enterprise
Malta is rapidly gaining international
recognition as a brand denoting
excellence in a number of sectors,
including the pharmaceuticals,
life sciences, advanced manufacturing, fintech,
aviation and ICT amongst others. In order to help
such enterprises, particularly SMEs to improve
their competitive edge further, Malta Enterprise,
as the country’s economic development agency,
tasked with attracting new foreign direct
investment as well as facilitating the growth
of existing operations, has developed various
incentives for the promotion and expansion of
industry and the development of innovative
enterprises. A series of new schemes have been
launched and a number of other schemes were
a work in progress.
Following the success of the B.Start scheme, through
the Startup Advance scheme, Malta Enterprise will be
now extending its seed funding support to small startup
undertakings that are in the process of consolidating
a business operation that has demonstrated market
potential and is deemed as economically feasible and
innovative. The Corporation may award a maximum
grant of €100,000. Similarly to B.Start, the grant shall
be disbursed at three month intervals. Beneficiaries
are required to submit to the Corporation periodic
reports on the progress achieved highlighting any
changes to the original plan.
In order to be eligible, the applicant must employ a
minimum of two full-time employees at application
stage and must be proposing products and/or services
that have potential to be marketed and distributed
internationally. Moreover, products produced and/
or services offered must be new or substantially
improved compared to the state of the art in the local
industry. The activities of the start-up undertaking
must be linked to the knowledge of the Key Promoters.
It is expected that key persons engaged in the startup
have the academic background required and/
or hands on experience in the relevant sector. The
scheme is open to a number of industries which
include manufacturing, information technology, R&D,
biotechnology, pharmaceuticals, and the creative
industries amongst others.
Deduction for Transportation Cost of Employee
Together with Transport Malta and the Inland
Revenue, Malta Enterprise has collaborated on an
incentive for enterprises providing transport for
their own employees. Any enterprise may claim a
deduction against its income equivalent to 150% of
the employee transportation costs incurred in the
In respect of any year of assessment, the deduction
referred to above may only be claimed on the lower
of: (i) €25,000 of the employee transportation costs
incurred by the undertaking in the year preceding
the year of assessment; or (ii) €300 per employee
whose transportation costs have been incurred by the
undertaking in the year preceding the year of assessment.
Amendments to the Micro Invest Scheme
The Micro Invest scheme is still one of the
most popular schemes to be implemented and
administered by Malta Enterprise Corporation. In
2018, only electronic application forms submitted
through the portal are being accepted.
With companies facing numerous challenges to
maximizing their potential and reducing costs,
the Micro Invest Scheme is a perfect aid to
entrepreneurs. Self-employed persons, companies
and partnerships will be supported through a tax
credit amounting to 45% (65% for undertakings
operating from Gozo) on the eligible expenditure.
However, as from 2018 the maximum assistance has
been increased by €20,000. Enterprises based in
Malta may benefit of up to €50,000 over any period
60 Spring 2018
In an uncertain
world, how do you
see every angle?
Our Global Alumni Survey revealed one of your
concerns is building confidence in a digital
world. Discover how looking at digital from
every angle delivers better business results.
If you want to form part of our dynamic team and
make a serious impact on your career, please visit
© 2018 EYGM Limited. All Rights Reserved. ED None.
of three consecutive fiscal years. This capping shall
also be increased by €20,000 to a total of €70,000
for enterprises operating from Gozo, familybusinesses,
and female-owned enterprises.
Moreover, as from 1st January 2018, all enterprises
that employ up to fifty persons (instead of thirty) on
full time contracts are now eligible for the scheme.
It is important to note that an enterprise with no
employees at application stage however is still not
entitled to the benefit.
Eligible expenses include furbishing, refurbishing and
upgrading of business premises, improvement on
machinery and technologies, increase in wage costs if
in 2017 such an increase exceeded 3% when compared
to the previous two years, investment costs such as
computer hardware, packaged software solutions,
and new or first time used in Malta machinery. As
from 2018, an eligible enterprise may also claim costs
for the purchase of more than one new commercial
vehicle as long as the second vehicle is new, replaces
another vehicle and has the latest European Emission
Standard rating. The list of eligible commercial
vehicles, amongst other terms and conditions, is
outlined within the Incentive Guidelines.
Assistance for the Catering Businesses
In 2017, Malta Enterprise in collaboration with
ITS, started assisting hospitality and catering
establishments interested in engaging a chef to
support in capacity building, innovation, and in the
development the operations. Enterprises (including
self-employed operators) may be supported
through a tax credit of up to €10,000 representing
a percentage of the eligible expenditure and wages
of the international experienced chefs. Moreover, in
the coming weeks, another scheme will be launched
whereby costs related to the renovation of the
restaurant may be eligible for a tax credit.
During 2018, the Certify scheme and the Business
Advisory Services will be revamped and re-launched,
and the Qualifying Employment in Innovation and
Creativity (Personal Tax) has been extended until
the way their role as regional and industry innovation
providers could be improved. This is at the heart of
the Innova Foster project. This project falls under
Interreg Europe which amongst others is seeking to
strengthen the productivity of enterprises, as well
as boost research and innovation. An important part
of the project is to map out and understand the local
start-up and innovation ecosystem to identify strengths
and weaknesses at a national level and subsequently
address such weaknesses by improving local policies and
programmes to foster high-potential start=ups. Malta
Enterprise is participating in this project with European
partners from Spain, Ireland, UK, Poland, Slovenia and
Estonia. The project runs from 2017 to 2020.
Unfortunately the lack of complete applications
prolongs the administrative process so it is important
that the application is compiled properly and carefully
so to avoid any risks of getting a rejection
Here are three important points to remember before
applying for our incentives:
Always go through the Incentive Guidelines to ensure
that you have understood the objective of the scheme.
Also make sure that you are referring to the latest
version of the Incentive Guidelines.
Always use the checklist available on the application
itself. A check list is available to help you confirm that
all the required documents have been attached. Missing
information or uncertified documents will be rejected.
An important document to observe is the de minimis
declaration form which is in line with the parameters
and criteria of the Commission Regulation. The applicant
will be required to complete and sign the de minimis
declaration form that they (and/or their shareholders)
have not received or has not applied for any de minimis
aid which would result in exceeding the de minimis
ceiling of €200K over a period of three fiscal years. Any
de minimis aid received in excess of €200K threshold will
have to be recuperated, with interest, from the single
undertaking receiving the aid.
Participation in EU Funded Projects
The Corporation is also participating in Innova Foster, a
European funded project. This project focuses on the
engagement of start=ups in the innovation process and
Contact Business First on 144 or send an email on
firstname.lastname@example.org for more information
62 Spring 2018
We are a local firm with an
We have excellent career
opportunities at KSi Malta:
• Junior & Senior Accountant
• Junior & Senior Auditor
• Business Development Manager
• Tax Advisor
• Legal Advisor
KSi Malta’s family culture is reflected in the day
to day running of our business through our team
of professionals. We understand that a happy
work place is of essence and productive in turn,
and therefore flexibility plays an important part.
Together with this, competitive compensation
packages are very important when top talent is
hired. Moreover we ensure that not only is training
offered in line with individual career paths but we
also instill a culture of togetherness.
Send your CV and cover letter to email@example.com
KSi Malta offers its clients the benefit of over 40 years of experience
in auditing, accounting, taxation and advisory.
KSi Malta is a member of Morison KSi, a global association
of leading professional service firms, established to meet
the cross-border accounting, auditing, tax and business
consulting needs of clients with members present in more
than 80 countries, generating a turnover in excess of $1
6, Villa Gauci, Mdina Road, Balzan BZN 9031, Malta
T: +356 2122 6176 | F: +356 2122 6019 | www.ksimalta.com
Elaine Marie Debono shares
her volunteering experience in
ELAINE MARIE DEBONO
ELAINE MARIE DEBONO IS AN
FCCA QUALIFIED ACCOUNTANT.
SHE IS A SUPERVISOR WITHIN THE
TAXATION DIVISION AT MAZARS
There is no definite reply about why I decided to embark in this
volunteering journey, but almost a year ago, I felt that I wanted
to do something more. I was skimming through the social media
pages of various voluntary organizations and after seeing some lovely
shots on Reaching Cambodia’s facebook page, I submitted my application
for a two-week placement. I had to commit myself to the dates for this
two week experience, which proved to be quite a challenge considering
the number of tax deadlines during the year and other lecturing
commitments. Consequently I had no other choice than opting for the
Christmas period. This not only meant stepping outside my comfort zone
but also spending the festive season away from my family.
The experience started off with various meetings led
by two very humble yet very inspirational individuals,
the founders Denise and Silvan. These meetings
included sessions with a historian, a teacher, a
doctor and a psychologist, who provided me with
information about our work in Cambodia, and other
useful tips about how to prepare ourselves both
physically and emotionally. This included information
giving details of the fund raising activities supporting
the projects of Reaching Cambodia. Reaching
Cambodia is a residential centre providing shelter
to approximately 60 children living at the orphanage
ranging in age from newly born to 24 years of age, to
enable orphans and vulnerable children to grow up in
a healthy environment and improve their education.
The following days involved several activities. The
children were given lessons in Maths and Science but
were also involved in a number of educational games.
All the children attend free schooling provided by
the local Government starting from the age of six
whereas additional schooling is provided at the
residential centre. Reaching Cambodia also sponsor
the children’s uniforms, stationery, school books,
bags and anything else which could be required.
The first day of placement at Reaching Cambodia was
Christmas Day. I was particularly excited to meet the
children. Slightly emotional too as I did not know what
to expect. Nonetheless it was a Christmas which I will
never forget. After a couple of hours, it was evident
that the children were at ease. All volunteers are
required to wear the turquoise ‘Reaching Cambodia’
T-shirt. This uniform identifies all Maltese volunteers
as family and as soon as we arrived the children called
out to us… “Reaching, reaching!” Our experience
started with a Christmas party for the children at the
64 Spring 2018
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Apart from helping at the Residential Centre, we
were also required to assist in Reaching Cambodia’s
XEMX project. This project’s aim is to help youths
and families to learn the tailoring trade. Items are
designed and produced by hand using materials
from Cambodia. Our work involved giving basic
English lessons to the students to enable them
to communicate with their future potential
The background of some of the children seeking
help is unfortunate. Nonetheless they seemed to be
grateful and happy. Of course, my experience was
a minor insight of the poverty in Cambodia, which
helps you appreciate how fortunate we are.
The last day arrived too quickly. I brought with me a
number of papers with the words “I love you Elaine”,
handmade woollen bracelets and many memories
which I knew I would keep in my heart forever. Most
importantly I learnt a lot of lessons, about myself,
about the world and about life.
Coming back to Malta was not easy, as I missed the
children. However I felt reassured as within two
weeks following our departure, another Reaching
Cambodia Group was on its way. The kids would
once again be getting the love and affection from
their Maltese friends. My two weeks in Cambodia
were only a part of a bigger, long term project. I was
part of the tenth group for 2017 of the Reaching
Cambodia placements. Eight other groups are
planned for 2018, some of which are fully booked.
Another initiative of Reaching Cambodia is the
launch of a medical project in January 2018.
Over three months have passed since my return to
Malta. My minor contribution was minimal compared
to the wealth I received. The children of Cambodia
taught me to appreciate the little things in life, and
sometimes during stressful busy days, I just recall the
resilience of these children.
For more information about Reaching Cambodia and
how you could volunteer or donate, please visit http://
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