Workforce Payments Guide Malta
Last updated: Dec 27, 2023
Papaya Global Fully supports workforce payments in Malta.
Papaya Global supports payments to contractors in Malta. The payout currency may vary based on the receiver bank account setup when receiving foreign currencies. Contractors are advised to reach out to their bank to confirm how foreign currencies are handled
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The Know Your Customer (KYC) process in Malta involves several steps in accordance with the country’s Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regulations. Initially, financial institutions, businesses, and service providers like Crypto Asset Service Providers (CASPs) and Virtual Asset Service Providers (VASPs) inform the potential customer about the onboarding process and request the necessary KYC documentation.
The KYC process includes verifying customer’s identity using government-issued IDs, utility bills, and other proofs of address. In some cases, especially in higher risk industries like banking and crypto, biometric and facial verification through technology such as Passive Liveness are used. The verification of customers’ credit/debit cards, and next-generation facial recognition for real-time remote authentication are also employed.
Apart from identification, the legal status of the customer and/or company principals directors needs to be verified, and the beneficial and ultimate beneficial owners (UBOs) of business customers must be identified. Financial institutions and businesses are required to conduct customer due diligence (CDD) through a risk-based approach. This includes collecting and verifying information such as the source of funds, and the purpose of the business relationship.
Based on the risk associated with the customer, adequate enhanced due diligence (EDD) processes are applied. Continuous monitoring of customer transactions and behavior is necessary, and any unusual or suspicious activities should be reported to the Financial Intelligence Analysis Unit (FIAU) promptly.
Companies are required to maintain accurate and up-to-date records of customer due diligence documentation for at least five years after the end of the business relationship. Employee training and awareness programs are also crucial for compliance with KYC regulations.
In the final step, the company decides whether to onboard the prospective customer or otherwise. For customers that are onboarded, the KYC documentation is kept up-to-date and ongoing monitoring services are provided in line with local regulations.
The entire KYC process is overseen by regulatory frameworks such as the Prevention of Money Laundering Act (PMLA), and institutions like the Financial Intelligence Analysis Unit (FIAU) and the Malta Financial Services Authority (MFSA).
In Malta, cross-border workforce payments are impacted by several regulations:
Cross-Border Payments Regulation (CBPR): The European Parliament issued Regulation (EC) No 924/2009 in September 2009, with the aim of facilitating cross-border transactions within the European Union. This regulation ensures that charges for cross-border payments in euro between Member States of the Euro area are equal to charges for domestic payments in euro.
However, non-euro area Member States did not enjoy the same benefits of this Regulation and euro payments in such Member States remained costly. This has been amended by Regulation (EU) 2019/518, which equalizes charges between cross-border payments in euro and the corresponding national payments in the national currency. These provisions became applicable as from 15 December 2019.
Directive 2019/2121/EU: Malta has implemented and transposed the Mobility Directive (Directive 2019/2121/EU of the European Parliament and of the Council of 27 November 2019) as regards cross-border conversions, mergers and divisions into its law. This directive is aimed at further enhancing the freedom of establishment of companies by creating a harmonized legal framework applicable to all Member States in the sphere of cross-border movement of limited liability companies.
Banking in Malta: Currently, Maltese banks comply with European banking regulations and that means that if an account is held by an EU national, all interest is reported to tax authorities.
Opening a Bank Account
To open a company bank account in Malta, the following requirements need to be fulfilled:
Payment of business registration fees with local authorities.
Opening a Maltese business bank account, clearly stating the capital share that will be used for the business.
Registration and payment for virtual office space, or physical office space.
Setup of the business shareholder and authorized capital for the company. Two shareholders of the business should be authorized to share capital.
The directors and shareholders must be able to provide a valid ID, proof of address and proof of identity.
The directors must be able to prove their identity, address and legal residence in Malta.
If there have been issues with debts in the past, the bank may require you to obtain a tax residence in Malta for a certain period of time.
Several documents such as the “Know Your Customer t” form (KYC), an application for opening a bank account, copies of the company’s articles of association and the organization’s statute, a certified copy of the registration certificate in the Maltese company register, a certified copy of the company’s activities along with current and anticipated turnover, identity documents with authentication for all directors, signatories, beneficiaries, and secretaries, and references from the country of origin should be provided.
If the company’s headquarters are outside of Malta, a translation of the company’s articles of association, statutes, documents regarding company operations, or identity documents of decision-makers may be required.
The process of opening a corporate bank account takes 5-10 days depending on the bank’s due diligence procedure. However, for companies involved with cryptocurrencies, it may take up to 6 months to open a bank account.
The major foreign banks operating in Malta are:
- FIMBank plc (Bahrain)
- HSBC Bank Malta p.l.c. (United Kingdom)
- MeDirect Bank (Malta) plc (Belgium)
- Sparkasse Bank Malta plc (Austria)
- Lidion Bank PLC (United Kingdom)
- MERKANTI BANK LIMITED (United States)
- EUROPEAN DEPOSITARY BANK SA – MALTA BRANCH (Luxembourg)
- IIG Bank (Malta) Ltd.
- Akbank T.A.S. (Turkey)
- AgriBank PLC
- BNF Bank plc (Banif Bank)
- FCM Bank Ltd.
Major Local Banks
The major local banks operating in Malta are:
- HSBC Bank Malta plc
- Bank of Valletta plc (BOV)
- APS Bank plc
- BNF Bank plc
- Lombard Bank Malta Plc
- NBG Bank Malta Ltd
- Credorax Bank Ltd
The B2C payment tools available in Malta include:
- credit and debit cards
- instant bank transfer
- mobile solutions
- contactless EPOS terminals
- internet and mobile banking
- mobile to mobile payments
It is possible to pay employees with cryptocurrencies in Malta. According to the Income Tax Act, if a company accepts cryptocurrency coins as a form of payment, the transaction is treated as if the payment had been made in any other (fiat) currency.
Payments of remuneration, such as salaries or wages, which are made in cryptocurrency are considered taxable income under general principles. The tax treatment of transactions involving distributed ledger technology (DLT) assets, which include cryptocurrencies, depends on their use and context and is evaluated with reference to their market value for income tax purposes.
The regulations of these transactions are under the guidance of the Commissioner for Revenue. It should be noted that, from a VAT point of view, payment by way of Bitcoin is exempt from VAT, with the actual service provision or supply of goods falling within the parameters of the traditional VAT laws.
However, profits made from day trading in cryptocurrencies are deemed to be an income arising from a trade or business and must be reported in the tax return and taxed at the applicable tax rates. Currently, cryptocurrencies are unregulated under Maltese law and exchanges of cryptocurrencies are seen as equivalent to commodity trading.
Therefore, companies or individuals who wish to use cryptocurrencies do not need to seek any authorisation from the Malta Financial Services Authority (MFSA), unless they qualify as a collective investment scheme, a financial institution, or a payment service provider.