Changes to Malta’s tax system, a skill shortage in the local market and lingering reputational concerns pose the biggest risks to foreign investors, according to a major annual business survey. 

The EY Malta Attractiveness Survey found that of the companies surveyed 61% were concerned about pending tax reform brought about by changes in international taxation policies.  

This was the top risk for companies, followed by a shortage of skills (48%) and concerns about Malta’s reputation (37%).  

Tax reform topped the list of risks to foreign investors.

Meanwhile, a staggering 86% said they consider Malta’s preparedness for future population growth to be inadequate, with only 6% saying they thought the country is up to the task.  

Despite these concerns, the country’s attractiveness to foreign investors remained largely unchanged since last year, hovering at 59% - an increase of just one percentage point from last year. 

This was a far cry from the high of 87% seen in 2016 and lower than pre-pandemic levels, when it achieved a score of 77% in 2019.  

Malta's attractiveness was rated at a similar level to last year.

The results of the survey were revealed at the Malta Future Realised Conference.

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EY Malta Country Managing Partner Ronald Attard said although the results “affirm the island’s appeal,” investors had highlighted several concerns.  

“While good to see that the majority of investors do perceive Malta to be attractive, the immediate question is why the numbers are not as high as those of a few years back,” he said. 

“Beyond the immediate, investors express concerns about the implications of international tax policy changes, skill shortages in the longer term, and the island’s reputation.  

“These concerns emphasize the critical need for strategic and timely action,” he added.  

As expected, Malta's corporate tax system was the biggest draw for foreign companies.

A total of 130 foreign direct investment (FDI) companies responded to the survey, which took place between July and August. 

Malta’s corporate tax system remained the biggest draw to investors at an attractiveness score of 73%, followed by its telecommunications infrastructure (62%) and the stability of its social climate (61%).  

While the popularity of the country’s tax system had increased slightly since last year, telecommunications and social climate both took a hit, reducing in attractiveness by six percentage points and eight percentage points respectively.

Population growth and labour market 

The survey revealed pressing concerns about Malta’s readiness for future population increases, with 86% of respondents saying they were concerned the levels of planning and preparedness were inadequate.  

While 37% rated the country’s readiness as “inadequate”, 49% rated it as “very inadequate”. 

Most companies showed concern in Malta's readiness for future population growth.

Respondents said that while they were confident in their ability to retain skilled workers, they had difficulties sourcing such workers locally in the first place.  

Only 31% said they were able to find workers with the required skills, with 69% saying they struggled to recruit specialised workers from the local labour market.  

Only 31% of companies surveyed found the required skills in the local labour market.

This contrasted strongly with companies’ ability to retain skilled personnel, with 81% saying they were confident in their ability to retain staff.  

Future plans 

Like the country’s overall popularity, the proportion of companies that said they were committed to maintaining a presence in Malta remained largely unchanged since last year.  

Sixty-eight per cent said they would still be in Malta in 10 years' time, just one percentage point lower than last year.  

Companies seemed less confident in expanding their operations in Malta next year, with only 36% saying they would – ten percentage points less than last year.  

Meanwhile, the number of companies that said they wouldn’t be expanding their operations had grown by seven percentage points to 37%.  

Just over two-thirds of respondents said they would maintain a presence in Malta in 10 years' time.

Looking ahead, investors said it was most important for Malta to develop new economic sectors to remain globally competitive. This had jumped ahead from being in third place last year to this year being the most pressing priority.  

Meanwhile, infrastructure, transportation and planning jumped from fifth place last year to second place this year. 

The companies surveyed viewed the built and natural environment as the main factors of infrastructure that require investment for Malta.

Survey respondents ranked the infrastructure priorities needed for Malta to remain attractive to foreign investors.

Education and skills were still an important area of focus for respondents but had slipped from being the biggest priority last year to third place in this year’s survey.