73967 Economy Profile: Malta Doing Business 2013 Malta 2 © 2013 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org All rights reserved. 1 2 3 4 15 14 13 12 A copublication of The World Bank and the International Finance Corporation. This work is a product of the staff of The World Bank with external contributions. Note that The World Bank does not necessarily own each component of the content included in the work. The World Bank therefore does not warrant that the use of the content contained in the work will not infringe on the rights of third parties. The risk of claims resulting from such infringement rests solely with you. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. 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Doing Business 2013 Malta 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 5 Starting a business ..................................................................................................................... 13 Dealing with construction permits ........................................................................................... 23 Getting electricity ....................................................................................................................... 35 Registering property .................................................................................................................. 43 Getting credit .............................................................................................................................. 53 Protecting investors ................................................................................................................... 60 Paying taxes ................................................................................................................................ 69 Trading across borders .............................................................................................................. 77 Enforcing contracts .................................................................................................................... 86 Resolving insolvency .................................................................................................................. 96 Employing workers .................................................................................................................. 102 Data notes ................................................................................................................................. 109 Resources on the Doing Business website ............................................................................ 114 Doing Business 2013 Malta 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is the paying taxes indicators, which cover the period for a local entrepreneur to open and run a small to January–December 2011). medium-size business when complying with relevant The Doing Business methodology has limitations. Other regulations. It measures and tracks changes in areas important to business—such as an economy‘s regulations affecting 11 areas in the life cycle of a proximity to large markets, the quality of its business: starting a business, dealing with construction infrastructure services (other than those related to permits, getting electricity, registering property, trading across borders and getting electricity), the getting credit, protecting investors, paying taxes, security of property from theft and looting, the trading across borders, enforcing contracts, resolving transparency of government procurement, insolvency and employing workers. macroeconomic conditions or the underlying strength In a series of annual reports Doing Business presents of institutions—are not directly studied by Doing quantitative indicators on business regulations and the Business. The indicators refer to a specific type of protection of property rights that can be compared business, generally a local limited liability company across 185 economies, from Afghanistan to Zimbabwe, operating in the largest business city. Because over time. The data set covers 46 economies in Sub- standard assumptions are used in the data collection, Saharan Africa, 33 in Latin America and the Caribbean, comparisons and benchmarks are valid across 24 in East Asia and the Pacific, 24 in Eastern Europe economies. The data not only highlight the extent of and Central Asia, 19 in the Middle East and North obstacles to doing business; they also help identify the Africa and 8 in South Asia, as well as 31 OECD high- source of those obstacles, supporting policy makers in income economies. The indicators are used to analyze designing regulatory reform. economic outcomes and identify what reforms have More information is available in the full report. Doing worked, where and why. Business 2013 presents the indicators, analyzes their This economy profile presents the Doing Business relationship with economic outcomes and presents indicators for Malta. To allow useful comparison, it also business regulatory reforms. The data, along with provides data for other selected economies information on ordering Doing Business 2013, are (comparator economies) for each indicator. The data in available on the Doing Business website at this report are current as of June 1, 2012 (except for http://www.doingbusiness.org. Doing Business 2013 Malta 5 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy‘s regulatory environment for business, a good place to ECONOMY OVERVIEW start is to find out how it compares with the regulatory environment in other economies. Doing Business provides an aggregate ranking on the ease of doing Region: Middle East & North Africa business based on indicator sets that measure and benchmark regulations applying to domestic small to Income category: High income medium-size businesses through their life cycle. Economies are ranked from 1 to 185 by the ease of Population: 419,000 doing business index. For each economy the index is calculated as the ranking on the simple average of its GNI per capita (US$): 21,028 percentile rankings on each of the 10 topics included in the index in Doing Business 2013: starting a business, DB2013 rank: 102 dealing with construction permits, getting electricity, registering property, getting credit, protecting DB2012 rank: 102* investors, paying taxes, trading across borders, Change in rank: 0 enforcing contracts and resolving insolvency. The ranking on each topic is the simple average of the percentile rankings on its component indicators (see * DB2012 ranking shown is not last year‘s published the data notes for more details). The employing workers ranking but a comparable ranking for DB2012 that indicators are not included in this year‘s aggregate ease captures the effects of such factors as data of doing business ranking, but the data are presented corrections and the addition of 2 economies in this year‘s economy profile. (Barbados and Malta) to the sample this year. See the data notes for sources and definitions. The aggregate ranking on the ease of doing business benchmarks each economy‘s performance on the indicators against that of all other economies in the Doing Business sample (figure 1.1). While this ranking tells much about the business environment in an economy, it does not tell the whole story. The ranking on the ease of doing business, and the underlying indicators, do not measure all aspects of the business environment that matter to firms and investors or that affect the competitiveness of the economy. Still, a high ranking does mean that the government has created a regulatory environment conducive to operating a business. Doing Business 2013 Malta 6 THE BUSINESS ENVIRONMENT Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2013 Malta 7 THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy relative to the regional average (figure 1.2). The stands in the aggregate ranking on the ease of economy‘s rankings on the topics included in the doing business is useful. Also useful is to know how ease of doing business index provide another it ranks relative to comparator economies and perspective (figure 1.3). Figure 1.2 How Malta and comparator economies rank on the ease of doing business Source: Doing Business database. Doing Business 2013 Malta 8 THE BUSINESS ENVIRONMENT Figure 1.3 How Malta ranks on Doing Business topics Source: Doing Business database. Doing Business 2013 Malta 9 THE BUSINESS ENVIRONMENT The absolute values of the indicators tell another part business regulation—such as a regulatory process that of the story (table 1.1). The indicators, on their own or can be completed with a small number of procedures in comparison with the indicators of a good practice in a few days and at a low cost. Comparison of the economy or those of comparator economies in the economy‘s indicators today with those in the previous region, may reveal bottlenecks reflected in large year may show where substantial bottlenecks persist — numbers of procedures, long delays or high costs. Or and where they are diminishing. they may reveal unexpected strengths in an area of Table 1.1 Summary of Doing Business indicators for Malta Best performer globally Portugal DB2013 Cyprus DB2013 Greece DB2013 Indicator Malta DB2013 Malta DB2012 Spain DB2013 Italy DB2013 DB2013 Starting a Business (rank) 150 146 37 146 84 31 136 New Zealand (1) Procedures (number) 11 11 6 11 6 5 10 New Zealand (1)* Time (days) 40 40 8 11 6 5 28 New Zealand (1) Cost (% of income per 8.9 9.1 12.4 20.5 16.5 2.3 4.7 Slovenia (0.0) capita) Paid-in Min. Capital (% of 1.5 1.6 0.0 24.4 9.7 0.0 13.2 91 Economies (0.0)* income per capita) Dealing with Construction Hong Kong SAR, China 167 162 80 31 103 78 38 Permits (rank) (1) Hong Kong SAR, China Procedures (number) 18 18 9 15 11 13 8 (6)* Time (days) 237 237 677 89 234 108 182 Singapore (26) Cost (% of income per 243.9 252.6 51.1 27.5 184.2 370.0 51.8 Qatar (1.1) capita) Doing Business 2013 Malta 10 Best performer globally Portugal DB2013 Cyprus DB2013 Greece DB2013 Indicator Malta DB2013 Malta DB2012 Spain DB2013 Italy DB2013 DB2013 Getting Electricity (rank) 111 103 98 59 107 35 70 Iceland (1) Procedures (number) 5 5 5 6 5 5 5 Germany (3)* Time (days) 136 136 247 62 155 64 101 Germany (17) Cost (% of income per 463.6 480.2 86.5 62.4 319.2 52.7 232.1 Japan (0.0) capita) Registering Property 80 77 99 150 39 30 57 Georgia (1) (rank) Procedures (number) 7 7 6 11 3 1 5 Georgia (1)* Time (days) 15 15 28 18 24 1 13 Portugal (1) Cost (% of property value) 5.2 5.1 9.7 11.8 4.5 7.3 7.1 Belarus (0.0)* Getting Credit (rank) 176 176 53 83 104 104 53 United Kingdom (1)* Strength of legal rights 3 3 9 4 3 3 6 Malaysia (10)* index (0-10) Depth of credit 0 0 2 5 5 5 5 United Kingdom (6)* information index (0-6) Public registry coverage 0.0 0.0 0.0 0.0 24.1 90.7 53.3 Portugal (90.7) (% of adults) Private bureau coverage United Kingdom 0.0 0.0 6.5 84.0 100.0 22.9 13.2 (% of adults) (100.0)* Protecting Investors 70 66 32 117 49 49 100 New Zealand (1) (rank) Extent of disclosure index Hong Kong SAR, China 3 3 8 5 7 6 5 (0-10) (10)* Doing Business 2013 Malta 11 Best performer globally Portugal DB2013 Cyprus DB2013 Greece DB2013 Indicator Malta DB2013 Malta DB2012 Spain DB2013 Italy DB2013 DB2013 Extent of director liability 6 6 4 4 4 5 6 Singapore (9)* index (0-10) Ease of shareholder suits 8 8 7 5 7 7 4 New Zealand (10)* index (0-10) Strength of investor 5.7 5.7 6.3 4.7 6.0 6.0 5.0 New Zealand (9.7) protection index (0-10) United Arab Emirates Paying Taxes (rank) 27 27 31 56 131 77 34 (1) Payments (number per Hong Kong SAR, China 6 6 28 8 15 8 8 year) (3)* United Arab Emirates Time (hours per year) 139 139 147 202 269 275 167 (12) Trading Across Borders 34 35 18 62 55 17 39 Singapore (1) (rank) Documents to export 6 6 5 5 4 4 5 France (2) (number) Time to export (days) 11 11 7 19 19 13 9 Singapore (5)* Cost to export (US$ per 855 835 790 1,115 1,145 685 1,260 Malaysia (435) container) Documents to import 7 7 7 6 4 5 6 France (2) (number) Time to import (days) 9 9 5 15 18 12 9 Singapore (4) Cost to import (US$ per 970 950 900 1,135 1,145 899 1,350 Malaysia (420) container) Enforcing Contracts (rank) 121 122 108 87 160 22 64 Luxembourg (1) Doing Business 2013 Malta 12 Best performer globally Portugal DB2013 Cyprus DB2013 Greece DB2013 Indicator Malta DB2013 Malta DB2012 Spain DB2013 Italy DB2013 DB2013 Time (days) 505 505 735 819 1,210 547 510 Singapore (150) Cost (% of claim) 35.9 35.9 16.4 14.4 29.9 13.0 17.2 Bhutan (0.1) Procedures (number) 40 40 43 39 41 32 40 Ireland (21)* Resolving Insolvency 67 69 25 50 31 23 20 Japan (1) (rank) Time (years) 3.0 3.0 1.5 2.0 1.8 2.0 1.5 Ireland (0.4) Cost (% of estate) 10 10 15 9 22 9 11 Singapore (1)* Outcome (0 as piecemeal sale and 1 as going 0 1 0 1 1 1 concern) Recovery rate (cents on 39.2 39.2 70.7 44.5 63.4 74.6 76.5 Japan (92.8) the dollar) Note: DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. The ranking methodology for the paying taxes indicators changed in Doing Business 2013; see the data notes for details. For more information on “no practice� marks, see the data notes. Data for the outcome of the resolving insolvency indicator are not available for DB2012. * Two or more economies share the top ranking on this indicator. A number shown in place of an economy‘s name indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Source: Doing Business database. Doing Business 2013 Malta 13 STARTING A BUSINESS Formal registration of companies has many WHAT THE STARTING A BUSINESS immediate benefits for the companies and for business owners and employees. Legal entities can INDICATORS MEASURE outlive their founders. Resources are pooled as several shareholders join forces to start a company. Procedures to legally start and operate a Formally registered companies have access to company (number) services and institutions from courts to banks as Preregistration (for example, name well as to new markets. And their employees can verification or reservation, notarization) benefit from protections provided by the law. An additional benefit comes with limited liability Registration in the economy‘s largest companies. These limit the financial liability of business city company owners to their investments, so personal Postregistration (for example, social security assets of the owners are not put at risk. Where registration, company seal) governments make registration easy, more entrepreneurs start businesses in the formal sector, Time required to complete each procedure creating more good jobs and generating more (calendar days) revenue for the government. Does not include time spent gathering What do the indicators cover? information Doing Business measures the ease of starting a Each procedure starts on a separate day business in an economy by recording all Procedure completed once final document is procedures officially required or commonly done in received practice by an entrepreneur to start up and formally operate an industrial or commercial No prior contact with officials business—as well as the time and cost required to Cost required to complete each procedure complete these procedures. It also records the (% of income per capita) paid-in minimum capital that companies must deposit before registration (or within 3 months). Official costs only, no bribes The ranking on the ease of starting a business is No professional fees unless services required the simple average of the percentile rankings on by law the 4 component indicators: procedures, time, cost and paid-in minimum capital requirement. Paid-in minimum capital (% of income per capita) To make the data comparable across economies, Doing Business uses several assumptions about the Deposited in a bank or with a notary before business and the procedures. It assumes that all registration (or within 3 months) information is readily available to the entrepreneur  Has a start-up capital of 10 times income per and that there has been no prior contact with capita. officials. It also assumes that the entrepreneur will  Has a turnover of at least 100 times income per pay no bribes. And it assumes that the business: capita.  Is a limited liability company, located in the  Does not qualify for any special benefits. largest business city.  Does not own real estate.  Has between 10 and 50 employees.  Is 100% domestically owned.  Conducts general commercial or industrial activities. Doing Business 2013 Malta 14 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Malta? costs 8.9% of income per capita and requires paid-in According to data collected by Doing Business, starting minimum capital of 1.5% of income per capita (figure a business there requires 11 procedures, takes 40 days, 2.1). Figure 2.1 What it takes to start a business in Malta Paid-in minimum capital (% of income per capita): 1.5 Note: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the starting a business indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2013 Malta 15 STARTING A BUSINESS Globally, Malta stands at 150 in the ranking of 185 regional average ranking provide other useful economies on the ease of starting a business (figure information for assessing how easy it is for an 2.2). The rankings for comparator economies and the entrepreneur in Malta to start a business. Figure 2.2 How Malta and comparator economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2013 Malta 16 STARTING A BUSINESS What are the changes over time? While the most recent Doing Business data reflect how changed—and which have not (table 2.1). That can easy (or difficult) it is to start a business in Malta today, help identify where the potential for improvement is data over time show which aspects of the process have greatest. Table 2.1 The ease of starting a business in Malta over time By Doing Business report year Indicator DB2004 DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. .. .. 146 150 Procedures n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 11 11 (number) Time (days) n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 40 40 Cost (% of income per n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 9.1 8.9 capita) Paid-in Min. Capital (% of n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 1.6 1.5 income per capita) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. Source: Doing Business database. Doing Business 2013 Malta 17 STARTING A BUSINESS Equally helpful may be the benchmarks provided by a business (figure 2.3). These benchmarks help show the economies that over time have had the best what is possible in making it easier to start a business. performance regionally or globally on the procedures, And changes in regional averages can show where time, cost or paid-in minimum capital required to start Malta is keeping up—and where it is falling behind. Figure 2.3 Has starting a business become easier over time? Procedures (number) Time (days) Doing Business 2013 Malta 18 STARTING A BUSINESS Cost (% of income per capita) Paid-in minimum capital (% of income per capita) Note: Ninety-one economies globally have no paid-in minimum capital requirement. Source: Doing Business database. Doing Business 2013 Malta 19 STARTING A BUSINESS Economies around the world have taken steps making greater firm satisfaction and savings and more it easier to start a business—streamlining procedures registered businesses, financial resources and job by setting up a one-stop shop, making procedures opportunities. simpler or faster by introducing technology and What business registration reforms has Doing Business reducing or eliminating minimum capital requirements. recorded in Malta (table 2.2)? Many have undertaken business registration reforms in stages—and they often are part of a larger regulatory reform program. Among the benefits have been Table 2.2 How has Malta made starting a business easier—or not? By Doing Business report year DB year Reform DB2008 No reform as measured by Doing Business. DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2013 Malta 20 STARTING A BUSINESS What are the details? Underlying the indicators shown in this chapter for STANDARDIZED COMPANY Malta is a set of specific procedures—the bureaucratic and legal steps that an entrepreneur must complete to incorporate and register a new City: Valletta firm. These are identified by Doing Business through collaboration with relevant local Legal Form: Private Limited Liability company professionals and the study of laws, regulations and Paid in Minimum Capital Requirement: EUR 233 publicly available information on business entry in that economy. Following is a detailed summary of Start-up Capital: 10 times GNI per capita those procedures, along with the associated time and cost. These procedures are those that apply to a company matching the standard assumptions (the ―standardized company‖) used by Doing Business in collecting the data (see the section in this chapter on what the indicators measure). Summary of procedures for starting a business in Malta—and the time and cost Time to No. Procedure Cost to complete complete Check availabilty of company name 1 1 day EUR 8 It can be made online through the website of the Registry of Companies or in person. The answer is received by email. Draft memorandum and articles of association with a lawyer Between EUR 500 and 2 1 day EUR 1000. Cost can vary depending on the notary Open a bank account and deposit paid-in minimum capital Open a bank account and deposit the paid-in minimum capital Agency: Private bank • Time: 2 days according to Zammit, 1 day according to Registry (it takes longer for foreign entities because of anti money laundering check but for local it is faster), 2 days according to the information published on the website Recommendation: 2 days 1 day EUR 20 3 • Cost: 20 euros (cost to certification of M&A), according to Zammit : The fee for certifications would vary between €10 - €30 per document • Comments: Bank will open a bank account once they are in receipt of the bank reference letters from the signatories' respective banks. A minimum of two working days is needed from the submission of all corporate documents and authorities to the bank The following documents are necessary to open a bank account: 1. A duly filled in Know-Your-Client (‗KYC‘) form. Doing Business 2013 Malta 21 Time to No. Procedure Cost to complete complete 2. A completed request to open an account specifying the type of account, the currency and the preferred mode of payment of tax. 3. A Copy of the Memorandum and Articles of Association together with a certified copy of the Certificate of Registration issued by the Registry of Companies once the company is registered . The bank may also require a description of the activities of the company and the past and anticipated turnover thereof. 4. A Confirmation of the permanent address of the Directors through a completed identification statement certified by a Prime bank or Maltese Embassy in the country of residence. The bank also requires the authenticated identification documents for all the directors, signatories, beneficial owners and secretaries. An original copy of a utility bill to be certified by the bank may also be required. 5. Where the shareholder is a trustee or other fiduciary, the bank will require the disclosure of the identity of the beneficial owners accompanied by an authenticated copy of the beneficiary‘s passport. 6. Where the ultimate beneficial owner is a listed company, the bank will require a declaration to this effect from the company secretary. 7. A completed form signed by the directors of the company appointing the bankers. Registration with the Registry of Companies The lawyer brings the MoA, the proof of deposit from the bank and 4 identification proofs of member of the company. He received a 2-3 days EUR 490 registration number. Once the incorporation document is ready, the Registry calls the lawyer to inform him. Usually people come in person to pick it up. Obtain trade license All businesses need to apply for a Trade License from the Trade Licensing Directorate. There are 2 types of Trading Licence depending on whether you will require commercial premises or not. Fill out the form relevant to your activity. • If commercial premises are required: Form C • If no commercial premises are required: Form A1 Documents required: 10 days EUR 58.23 5 1. ETC Engagement Form. One of the 3 following: 2. Copy of the development permit to open a commercial premises issued by MEPA. 3. A declaration from the architect specifying the site where the commercial activity will take place, if not specified in the MEPA permit. 4. A declaration from the architect specifying that changes or added activities to the commercial activity do not require MEPA permits since these fall under the same MEPA class. 5. Floor plan of the commercial activity signed by an architect, indicating the floor area in meters squared of the commercial activity. Doing Business 2013 Malta 22 Time to No. Procedure Cost to complete complete 7. If the application is on behalf of a company, a Board Resolution signed by the Company Secretary authorising the applicant to represent the company; or a list of the Company Directors from the MFSA; or a letter signed by the Directors authorising the applicant to represent the company. Legal basis: Trading Licences Act (Chapter 441 of 2002) and its subsidiary legislation Obtain Tax Identification Number 6 7 days no charge The Company‘s certificate of incorporation is needed in order to obtain the TIN number Open a permanent bank account 7 1 day no charge Register for VAT 8 7 days no charge the tax ID number is required to apply for VAT Obtain a PE number (employer identification number) and register employees Both the VAT number and the Income Tax number are required to obtain the PE number For PE number: the registration form is available you have to print it 9 and send it to IRD. An entrepreneur has to give: 3 days no charge • The tax ID number • The number of employees • Details of the business • Date of first employment Register the employees with Employing Training Center (ETC) 10 1 day no charge An entrepreneur has to declare to the ETC the future employees. The PE number is required. * Register for Data Protection Such registration must be done before the company carries out any 11 data processing operations . Since 2002, with the introduction of the 1 day EUR 23.29 Data Protection Act it is a European directive. VAT and registration number are required according to the form. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2013 Malta 23 DEALING WITH CONSTRUCTION PERMITS Regulation of construction is critical to protect the WHAT THE DEALING WITH CONSTRUCTION public. But it needs to be efficient, to avoid PERMITS INDICATORS MEASURE excessive constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in Procedures to legally build a warehouse time and money, many builders opt out. They may (number) pay bribes to pass inspections or simply build Submitting all relevant documents and illegally, leading to hazardous construction that obtaining all necessary clearances, licenses, puts public safety at risk. Where compliance is permits and certificates simple, straightforward and inexpensive, everyone Completing all required notifications and is better off. receiving all necessary inspections What do the indicators cover? Obtaining utility connections for water, Doing Business records the procedures, time and sewerage and a fixed telephone line cost for a business to obtain all the necessary Registering the warehouse after its approvals to build a simple commercial warehouse completion (if required for use as collateral or in the economy‘s largest business city, connect it to for transfer of the warehouse) basic utilities and register the property so that it Time required to complete each procedure can be used as collateral or transferred to another (calendar days) entity. Does not include time spent gathering The ranking on the ease of dealing with information construction permits is the simple average of the Each procedure starts on a separate day percentile rankings on its component indicators: procedures, time and cost. Procedure completed once final document is received To make the data comparable across economies, Doing Business uses several assumptions about the No prior contact with officials business and the warehouse, including the utility Cost required to complete each procedure (% connections. of income per capita) The business: Official costs only, no bribes  Is a limited liability company operating in  Will be connected to water, sewerage the construction business and located in (sewage system, septic tank or their the largest business city. equivalent) and a fixed telephone line. The  Is domestically owned and operated. connection to each utility network will be 10 meters (32 feet, 10 inches) long.  Has 60 builders and other employees.  Will be used for general storage, such as of The warehouse: books or stationery (not for goods requiring  Is a new construction (there was no special conditions). previous construction on the land).  Will take 30 weeks to construct (excluding all  Has complete architectural and technical delays due to administrative and regulatory plans prepared by a licensed architect. requirements). Doing Business 2013 Malta 24 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to permits there requires 18 procedures, takes 237 days build a warehouse in Malta? According to data and costs 243.9% of income per capita (figure 3.1). collected by Doing Business, dealing with construction Figure 3.1 What it takes to comply with formalities to build a warehouse in Malta Note: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the dealing with construction permits indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2013 Malta 25 DEALING WITH CONSTRUCTION PERMITS Globally, Malta stands at 167 in the ranking of 185 economies and the regional average ranking provide economies on the ease of dealing with construction other useful information for assessing how easy it is for permits (figure 3.2). The rankings for comparator an entrepreneur in Malta to legally build a warehouse. Figure 3.2 How Malta and comparator economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2013 Malta 26 DEALING WITH CONSTRUCTION PERMITS What are the changes over time? While the most recent Doing Business data reflect how the process have changed—and which have not (table easy (or difficult) it is to deal with construction permits 3.1). That can help identify where the potential for in Malta today, data over time show which aspects of improvement is greatest. Table 3.1 The ease of dealing with construction permits in Malta over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. 162 167 Procedures (number) n.a. n.a. n.a. n.a. n.a. n.a. 18 18 Time (days) n.a. n.a. n.a. n.a. n.a. n.a. 237 237 Cost (% of income n.a. n.a. n.a. n.a. n.a. n.a. 252.6 243.9 per capita) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. For more information on ―no practice‖ marks, see the data notes. Source: Doing Business database. Doing Business 2013 Malta 27 DEALING WITH CONSTRUCTION PERMITS Equally helpful may be the benchmarks provided by possible in making it easier to deal with construction the economies that over time have had the best permits. And changes in regional averages can show performance regionally or globally on the procedures, where Malta is keeping up—and where it is falling time or cost required to deal with construction permits behind. (figure 3.3). These benchmarks help show what is Figure 3.3 Has dealing with construction permits become easier over time? Procedures (number) Time (days) Doing Business 2013 Malta 28 DEALING WITH CONSTRUCTION PERMITS Cost (% of income per capita) Source: Doing Business database. Doing Business 2013 Malta 29 DEALING WITH CONSTRUCTION PERMITS Smart regulation ensures that standards are met while building safety while keeping compliance costs making compliance easy and accessible to all. reasonable, governments around the world have Coherent and transparent rules, efficient processes and worked on consolidating permitting requirements. adequate allocation of resources are especially What construction permitting reforms has Doing important in sectors where safety is at stake. Business recorded in Malta (table 3.2)? Construction is one of them. In an effort to ensure Table 3.2 How has Malta made dealing with construction permits easier—or not? By Doing Business report year DB year Reform DB2008 No reform as measured by Doing Business. DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2013 Malta 30 DEALING WITH CONSTRUCTION PERMITS What are the details? The indicators reported here for Malta are based BUILDING A WAREHOUSE on a set of specific procedures—the steps that a company must complete to legally build a warehouse—identified by Doing Business through City : Valletta information collected from experts in construction licensing, including architects, construction Estimated lawyers, construction firms, utility service providers EUR 520,240 Warehouse Value : and public officials who deal with building regulations. These procedures are those that apply The procedures, along with the associated time and to a company and structure matching the standard cost, are summarized below. assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). Summary of procedures for dealing with construction permits in Malta —and the time and cost Time to No. Procedure Cost to complete complete Apply for building permit and wait for the screening letter The architect applies for the building permit online by completing the application form and uploads the plans and basic information about the site. The architect receives a tracking number by email and the client receives it by post. No proof of ownership is required to apply for 21 days EUR 50 1 a building permit, the applicant just declare that he is the owner of the land. The processing fee is EUR 50.00 that are paid when the application is uploaded. * Obtain fire and safety report for the plans of the building 2 An Engineer's report dealing with Fire Safety & Ventilation is required. 7 days EUR 450 A mechanical and electrical engineer is hired to deliver this report and it must be obtained prior to receiving the screening letter. Receive and respond to the screening letter MEPA will send a screening letter to the architect. This screening letter is very important as it provides information on several aspects: • What is needed for the permit application • What process will MEPA undertake, such as the agencies that will be 53 days EUR 33,959 3 contacted and why. Each consultancy takes a maximum of 30 calendar days as silent is consent. For a warehouse, MEPA will consult the following agencies: (i) Civil protection department, Transport authority, Civil protection and also the authority for people with disabilities. (ii) Enemalta to check if enough power is available. (iii) The sanitary office of the Health department Doing Business 2013 Malta 31 Time to No. Procedure Cost to complete complete • Includes some comments regarding the rules of urbanism: for instance, comments might concern the height of the building, the parking space and so on. It is possible to challenge MEPA and upload new plans to the application • Includes the fee (based on square meter of the warehouse and determined by the Planning laws) to be paid to MEPA to obtain the building permit • What type of report you need to attached to your application. For the type of warehouse of the case study, only fire report and accessibility report is required. The accessibility report is a statement done by the architect that the design has been done according to accessibility standards The architect must answer the screening letter and if necessary, upload new plans. The screening letter indicates that the client has 6 months to pay the fee and upload the plans. The client pays the fees by check or at any post office in Malta. Once the screening letter is answered, MEPA publishes a note in the newspaper regarding the application for building permit, advises the local council, notify by letter the neighbors and put a board on the site. The public has 20 days to submit comments. The plans of the project are accessible online for everybody. People can follow the application as 'interested party' and will receive notification at every stage of the permit process. If there are no contest after the publication, the architect receives a DPAR: Development Permit Application Report or 'Case Officer Report'. A notification is sent to the National Statistics Office, for information only. Obtain a Permit Application Report (DPAR) and awaits the hearing for the Environmental Planning Commission (EPC) The DPAR gives a favorable or unfavorable opinion regarding the permit. If it is favorable opinion, a draft building permit is already attached to the DPAR. The DPAR also specifies the bank guarantees that would be later required to obtain the permit like a bank guarantee for road, 4 archeological or environmentally sensitive site etc… 28 days no charge The DPAR gives the date for the hearing in front of the EPC (environmental commission) which is 4 weeks after the receipt of the letter. The architect has 21 days to respond to any objection raised in the DPAR. Attend the hearing in front of the Environment Planning 5 Commission and obtain physical building permit 14 days no charge Doing Business 2013 Malta 32 Time to No. Procedure Cost to complete complete The Commission is the Environment Planning Commission (EPC). There are 2 commissions: one for urban conservation and outside development zones and one for other cases within scheme. The architect appears in front of the commission on the day indicated in the DPAR. The EPC reviews the application for the building permit. The commission can request other changes to the application. In that case the architect has 10 days to provide the required information and a final hearing is planned 4 weeks after the date of the first hearing. If the last hearing is negative, the architect can appeal against refusal but he can only use planning argument (based on construction plans etc.) not legal arguments. For bigger projects the architect passes directly in front of the MEPA board not EPC. After the hearing, MEPA checks that all the required documents are in the application, that the plans are the latest update and delivers the physical building permit after 2 weeks. The client is asked to produce bank guarantees to make sure he can pay if the roads or water pipes are damaged during the construction. The bank guarantee is released when the compliance certificate is issued after an inspection by MEPA or the local council. A bank guarantee is also required if the site is close to an archeological site or if there are chances that archeological remains can be found around. The same apply if the site is located close to an ecologically sensitive area. The bank guarantee will be use to pay an archeological or environmental specialist to supervise the construction works. A bank guarantee for the road is required if the warehouse is in an industrial area with existing pavement or main road. It is a requirement from the local council. The bank guarantee is released once the local council has inspected the construction site. There is no technical report required before the construction works. The architect simply submits photos. The client submits the letter from the bank after the hearing. No bank guarantee for archeological site is required in the case of a warehouse. Submit online commencement of work notice The architect receives the building permit with a board notice and a commencement notice to fill in. Each permit is valid for 5 years. 14 days no charge 6 The architect has to submit the ‗commencement notice‘ online - usually 15 days in advance - indicating both the name of the contractor and the site manager (with their contact details and a phone number where Doing Business 2013 Malta 33 Time to No. Procedure Cost to complete complete they can be reached 24h a day). There is no legal notice for this process but it is the standard practice. When sending the commencement notice, the architect also asks MEPA to come and give the alignments of the roads. Normally MEPA will visit the construction site within 10 days. Inspection by MEPA for road alignments and levels 7 10 days no charge Once the building permit is delivered, MEPA comes to the site to give road alignments and levels. Hire an agency specialized in safety A specialized agency in health and safety is usually hired to be in charge of safety issues to ensure that everything is done according to 8 regulations on the construction site. The reason for this is that the legal 1 day EUR 1,500 responsibility in case of an accident lies with the owner and the contractor. The state will start a lawsuit against both. Having hired a specialized agency decreases the risk for the client to be condemned in case of an accident. Advise OHSA and receive inspection during the construction works The architect advises the Organization of Health and Safety Authority with basic information regarding the construction works (if there are 1 day no charge 9 scaffoldings or cranes etc. as well as specific additional details if there is some particularities about the site : close to a road etc.) OHSA carries out inspections during the works. Receive random inspection by MEPA_I 10 MEPA will inspect the construction of the warehouse randomly because 1 day no charge it is a straightforward project. Not all cases are monitored during the construction works. It depends a lot on complains received. Receive random inspection by MEPA_II 11 MEPA will inspect the construction of the warehouse randomly because 1 day no charge it is a straightforward project. Not all cases are monitored during the construction works. It depends a lot on complains received. Receive Inspection by the Environmental office of the Ministry of Infrastructure The Environmental office of the Ministry of Infrastructure will also 1 day no charge 12 inspect the construction site. They go around the country and look at construction sites. They are mostly concerned about public protection and dust. There has been a raise in awareness regarding site management and safety. Request and obtain Inspection by the local council to release bank guarantee on roads 13 1 day no charge The local council inspects that the roads are not damaged. It is done the same day. Doing Business 2013 Malta 34 Time to No. Procedure Cost to complete complete Apply for a compliance certificate from MEPA Once the construction is completed, the architect applies for a compliance certificate to MEPA. It is just a declaration by the architect. The form can be downloaded online but the client has to submit it on 1 day EUR 60 14 paper because it is a legal declaration from the architect. The MEPA needs a certificate from local council in charge of inspection of the road. Receive inspection by MEPA for the compliance certificate 15 14 days no charge An inspector from MEPA visits the construction to check that the construction is in accordance to approved plans. Obtain the compliance certificate Once the client received the compliance certificate, the bank guarantees are released. 16 14 days no charge The compliance certificate is necessary to apply for electricity, water and sewage (not phone). * Apply and obtain telephone connection 17 The compliance certificate is not required to apply for a land line. The 30 days no charge installation is made when a technician is available, and it takes between 3 -- 6 weeks on average. Apply and Obtain water and sewage connection The owner of the building must provide the following documents to make a request for water and sewage connection: • The compliance certificate • A recent site plan obtained from MEPA • Color picture showing premises face and adjacent premises (both 45 days EUR 842 18 sides) • Copy of identity card • Company board resolution letter authorizing the application for a connection • Proof of ownership • Completed form for Application for a Public Sewer Discharge Permit * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2013 Malta 35 GETTING ELECTRICITY Access to reliable and affordable electricity is vital WHAT THE GETTING ELECTRICITY for businesses. To counter weak electricity supply, many firms in developing economies have to rely INDICATORS MEASURE on self-supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the Procedures to obtain an electricity first step for a customer is always to gain access by connection (number) obtaining a connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for Completing all required notifications and a local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized warehouse, as well as the time and cost to Obtaining external installation works and complete them. These procedures include possibly purchasing material for these works applications and contracts with electricity utilities, Concluding any necessary supply contract and clearances from other agencies and the external obtaining final supply and final connection works. The ranking on the ease of getting electricity is the simple average of Time required to complete each procedure the percentile rankings on its component (calendar days) indicators: procedures, time and cost. To make the Is at least 1 calendar day data comparable across economies, several assumptions are used. Each procedure starts on a separate day The warehouse: Does not include time spent gathering information  Is located in the economy‘s largest business city, in an area where other Reflects the time spent in practice, with little warehouses are located. follow-up and no prior contact with officials  Is not in a special economic zone where Cost required to complete each procedure the connection would be eligible for (% of income per capita) subsidization or faster service. Official costs only, no bribes  Has road access. The connection works Excludes value added tax involve the crossing of a road or roads but are carried out on public land.  Is 150 meters long.  Is a new construction being connected to  Is to either the low-voltage or the medium- electricity for the first time. voltage distribution network and either overhead  Has 2 stories, both above ground, with a or underground, whichever is more common in total surface of about 1,300.6 square the economy and in the area where the meters (14,000 square feet), and is built on warehouse is located. The length of any a plot of 929 square meters (10,000 square connection in the customer‘s private domain is feet). negligible. The electricity connection:  Involves installing one electricity meter. The monthly electricity consumption will be 0.07  Is a 3-phase, 4-wire Y, 140-kilovolt-ampere gigawatt-hour (GWh). The internal electrical (kVA) (subscribed capacity) connection. wiring has been completed. Doing Business 2013 Malta 36 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity procedures, takes 136 days and costs 463.6% of connection in Malta? According to data collected by income per capita (figure 4.1). Doing Business, getting electricity there requires 5 Figure 4.1 What it takes to obtain an electricity connection in Malta Note: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the getting electricity indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2013 Malta 37 GETTING ELECTRICITY Globally, Malta stands at 111 in the ranking of 185 regional average ranking provide another perspective economies on the ease of getting electricity (figure in assessing how easy it is for an entrepreneur in Malta 4.2). The rankings for comparator economies and the to connect a warehouse to electricity. Figure 4.2 How Malta and comparator economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2013 Malta 38 GETTING ELECTRICITY Even more helpful than rankings on the ease of getting performers on these indicators may provide useful electricity may be the indicators underlying those benchmarks. rankings (table 4.1). And regional and global best Table 4.1 The ease of getting electricity in Malta Best performer in Best performer Indicator Malta DB2013 Malta DB2012 Middle East & North globally DB2013 Africa DB2013 Rank United Arab Emirates 111 103 Iceland (1) (7) Procedures United Arab Emirates (number) 5 5 Germany (3)* (4) Time (days) United Arab Emirates 136 136 Germany (17) (40) Cost (% of income per capita) 463.6 480.2 Qatar (3.9) Japan (0.0) Note: DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. * Two or more economies share the top ranking on this indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Source: Doing Business database. Doing Business 2013 Malta 39 GETTING ELECTRICITY Obtaining an electricity connection is essential to safety in the connection process while keeping enable a business to conduct its most basic operations. connection costs reasonable, governments around the In many economies the connection process is world have worked to consolidate requirements for complicated by the multiple laws and regulations obtaining an electricity connection. What reforms in involved—covering service quality, general safety, getting electricity has Doing Business recorded in technical standards, procurement practices and Malta (table 4.2)? internal wiring installations. In an effort to ensure Table 4.2 How has Malta made getting electricity easier—or not? By Doing Business report year DB year Reform DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. Source: Doing Business database. Doing Business 2013 Malta 40 GETTING ELECTRICITY What are the details? The indicators reported here for Malta are based on a OBTAINING AN ELECTRICITY CONNECTION set of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity by the local distribution City: Valletta utility—identified by Doing Business. Data are collected from the distribution utility, then completed and Name of Utility: Enemalta Corporation verified by electricity regulatory agencies and independent professionals such as electrical engineers, The procedures are those that apply to a warehouse electrical contractors and construction companies. The and electricity connection matching the standard electricity distribution utility surveyed is the one assumptions used by Doing Business in collecting the serving the area (or areas) in which warehouses are data (see the section in this chapter on what the located. If there is a choice of distribution utilities, the indicators cover). The procedures, along with the one serving the largest number of customers is associated time and cost, are summarized below. selected. Summary of procedures for getting electricity in Malta —and the time and cost Time to No. Procedure Cost to complete complete The client’s engineer sends a letter to the Chairman of Enemalta to inform about the requirements of the new connection 1 35 calendar days no charge The client‘s engineer sends a letter to the Chairman of Enemalta or to Customer care with the requirement of the new connection. * Enemalta inspects the site with the client Enemalta meets with the client or his engineer on the site to determine exactly the cable route from the closest suitable source. This route must pass through public rights of way, which in Malta are almost exclusively public roads. The route distance given by the client may differ from the final determination, because (a) either short cuts through undeveloped land or third party property are chosen by the client, (b) the source, effectively the transformer chosen by the client may not be suitable as it may be a dedicated transformer or a fully loaded one, or (c) the location on the client property of the connection point (usually meter/switch 2 room) is unsuitable. 14 calendar days no charge Once the route is determined the client discusses with Enemalta on the actual load required and future business plans. In the case study, as the required load is at the threshold between LV and MV connection in Malta, a client is likely to choose to install a substation to have a security in case the power load of the warehouse increases. Once the basic parameters are finalized a formal quotation is prepared. This includes permitting, trenching and road re-instatement for the cable route. These may also be carried out directly by the client to Enemalta‘s specifications but most of the time for the connection of a small warehouse Enemalta is in charge of the trenching and subcontracts it. Doing Business 2013 Malta 41 Time to No. Procedure Cost to complete complete The clients receives and signs the quote and Enemalta carry out the external connection works Before the works starts Enemalta needs to obtain a trenching permit and find a contractor to carry out the works. The agency delivering the trenching permit is Transport Malta who consults with all involved stakeholders including MEPA, heritage, local councils, various roads departments, all utility companies including telecom, preparation and approval of work plan, traffic management plan etc. The contractor has to be engaged following a ‗call off‘ procedure (similar to a restricted tender) amongst the contractors authorised to carry out such works. In most cases Enemalta provides the transformer. The client has the option to purchase it through private company, in which case Enemalta gives the specifications of the required transformer. There are various contractual forms for the property of the transformer. 90 calendar days EUR 69,100.0 3 If the transformer is to remain dedicated to the client, Enemalta only requires a title permitting access and use. It is not necessary to transfer the property of the transformer. In the case of a substation which is shared between the client and Enemalta (for general use) then Enemalta requires title on the property and there is a legal mechanism establishing the costs. Fast track procedures are also available. There is a formal procedure through Malta Enterprise (which has recently been repackaged as ‗Business First‘) and an ad hoc procedure where the client explains and justifies the urgency and Enemalta takes whatever steps are possible to accelerate the process from their side. This may be used both at quote stage and for execution of works and may involve carrying out works on overtime and week-ends to shorten the total duration. * MEPA inspects the premises of the warehouse to deliver the compliance certificate The compliance certificate is necessary to apply for electricity. The architect applies for a compliance certificate to MEPA. It is just a declaration by the architect. The form can be downloaded online but it 28 calendar days EUR 60.0 4 has to submit it on paper because it is a legal declaration from the architect. The compliance certificate is only required for the formal application with ARMS. An inspector from MEPA comes to inspect the finished building in 50% of the cases. The client sends a formal application to ARMS and Enemalta comes to install the meter and do the final connection. A formal form needs to be filled and can be submitted to ARMS during 5 the external connection works. ARMS Ltd is a private limited liability 11 calendar days EUR 900.0 company, set up as a joint venture between the Enemalta Corporation and the Water Services Corporation. ARMS is in charge of the billing of electricity. Doing Business 2013 Malta 42 Time to No. Procedure Cost to complete complete The form to request a new electrical connection is available online. It is filled by the electrical engineer of the client and submits on paper to ARMS. The engineer responsible of the internal wiring has to certify that it has been done according to standards. Enemalta sometimes does an inspection of the internal wiring but it is occasionally. The electricians are licensed by Malta Resources Authority (MRA). MRA is the regulator for water, electricity and oil exploration and falls under the Ministry of Resources and rural affairs. The MRA regulates electricity tariffs The documents required for the new connection are: A copy of the front elevation and the site plan signed by the architect as well as a photo of the façade A copy of the client electrician‘s license The compliance certificate from MEPA A copy of identification as well as the company resolution authorizing the applicant to apply on behalf of the company A document proving ownership of the premise or a guarantee deposit of €466 will be required. Enemalta installs the meter once the formal application is processed by ARMs and a notification sent by ARMs to Enemalta through the integrated back office software used by Enemalta and ARMs and WSC. Once work is completed, a completion notification is sent by Enemalta to ARMs in the same way through the integrated system. Smart meters are being installed in Malta. The objective is to have a full coverage of the country by mid 2013. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2013 Malta 43 REGISTERING PROPERTY Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY Effective administration of land is part of that. If INDICATORS MEASURE formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly Procedures to legally transfer title on administered, it has little chance of being immovable property (number) accepted as collateral for loans—limiting access to Preregistration (for example, checking for liens, finance. notarizing sales agreement, paying property transfer taxes) What do the indicators cover? Registration in the economy‘s largest business Doing Business records the full sequence of city procedures necessary for a business to purchase property from another business and transfer the Postregistration (for example, filing title with the municipality) property title to the buyer‘s name. The transaction is considered complete when it is opposable to Time required to complete each procedure third parties and when the buyer can use the (calendar days) property, use it as collateral for a bank loan or Does not include time spent gathering resell it. The ranking on the ease of registering information property is the simple average of the percentile rankings on its component indicators: procedures, Each procedure starts on a separate day time and cost. Procedure completed once final document is received To make the data comparable across economies, several assumptions about the parties to the No prior contact with officials transaction, the property and the procedures are Cost required to complete each procedure used. (% of property value) The parties (buyer and seller): Official costs only, no bribes  Are limited liability companies, 100% No value added or capital gains taxes included domestically and privately owned.  Are located in the periurban area of the economy‘s largest business city.  Has no mortgages attached and has been under the same ownership for the past 10  Have 50 employees each, all of whom are years. nationals.  Consists of 557.4 square meters (6,000 square  Perform general commercial activities. feet) of land and a 10-year-old, 2-story The property (fully owned by the seller): warehouse of 929 square meters (10,000  Has a value of 50 times income per capita. square feet). The warehouse is in good The sale price equals the value. condition and complies with all safety standards, building codes and legal  Is registered in the land registry or requirements. The property will be transferred cadastre, or both, and is free of title in its entirety. disputes.  Is located in a periurban commercial zone, and no rezoning is required. Doing Business 2013 Malta 44 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in 15 days and costs 5.2% of the property value (figure Malta? According to data collected by Doing Business, 5.1). registering property there requires 7 procedures, takes Figure 5.1 What it takes to register property in Malta Note: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the registering property indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2013 Malta 45 REGISTERING PROPERTY Globally, Malta stands at 80 in the ranking of 185 regional average ranking provide other useful economies on the ease of registering property (figure information for assessing how easy it is for an 5.2). The rankings for comparator economies and the entrepreneur in Malta to transfer property. Figure 5.2 How Malta and comparator economies rank on the ease of registering property Source: Doing Business database. Doing Business 2013 Malta 46 REGISTERING PROPERTY What are the changes over time? While the most recent Doing Business data reflect how process have changed—and which have not (table 5.1). easy (or difficult) it is to register property in Malta That can help identify where the potential for today, data over time show which aspects of the improvement is greatest. Table 5.1 The ease of registering property in Malta over time By Doing Business report year Indicator DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. .. 77 80 Procedures (number) n.a. n.a. n.a. n.a. n.a. n.a. n.a. 7 7 Time (days) n.a. n.a. n.a. n.a. n.a. n.a. n.a. 15 15 Cost (% of property value) n.a. n.a. n.a. n.a. n.a. n.a. n.a. 5.1 5.2 Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. For more information on ―no practice‖ marks, see the data notes. Source: Doing Business database. Doing Business 2013 Malta 47 REGISTERING PROPERTY Equally helpful may be the benchmarks provided by (figure 5.3). These benchmarks help show what is the economies that over time have had the best possible in making it easier to register property. And performance regionally or globally on the procedures, changes in regional averages can show where Malta is time or cost required to complete a property transfer keeping up—and where it is falling behind. Figure 5.3 Has registering property become easier over time? Procedures (number) Time (days) Doing Business 2013 Malta 48 REGISTERING PROPERTY Cost (% of property value) Source: Doing Business database. Doing Business 2013 Malta 49 REGISTERING PROPERTY Economies worldwide have been making it easier for have cut the time required substantially—enabling entrepreneurs to register and transfer property—such buyers to use or mortgage their property earlier. What as by computerizing land registries, introducing time property registration reforms has Doing Business limits for procedures and setting low fixed fees. Many recorded in Malta (table 5.2)? Table 5.2 How has Malta made registering property easier —or not? By Doing Business report year DB year Reform DB2008 No reform as measured by Doing Business. DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2013 Malta 50 REGISTERING PROPERTY What are the details? The indicators reported here are based on a set of STANDARD PROPERTY TRANSFER specific procedures—the steps that a buyer and seller must complete to transfer the property to the buyer‘s name—identified by Doing Business City: Valletta through information collected from local property Property Value: EUR 755,640 lawyers, notaries and property registries. These procedures are those that apply to a transaction The procedures, along with the associated time and matching the standard assumptions used by Doing cost, are summarized below. Business in collecting the data (see the section in this chapter on what the indicators cover). Summary of procedures for registering property in Malta—and the time and cost Time to No. Procedure Cost to complete complete Notary registers the promise of sales with Inland Revenue Pre-paid stamp duty Department paid by the buyer: 1 1% of property value * Notary orders a search of title at Land Registry It is in this transitory time between signing of promise of sale and the final contract that the Notary is engaged with all necessary verifications 10 days EUR 4.66 2 and preparations that will in turn enable the final contract to be made. The Notary orders searches to ascertain that the Seller has good title and can proceed with the sale without being impeded by legal niceties. * Notary orders a search on people and companies from Public Registry 3 days (fast track at EUR 14.40 (regular) 3 double fee) or 14 or EUR 28.80 (fast The Notary orders searches of transfers and liabilities on persons and days (regular) track) companies and publis wills from Public Registry. Parties sign a final deed of sale at Notary To sign the final deed of sale the parties must provide the following: • Identity card, passport, or any other official document for personal identification for both parties • In the case of a company, a copy of the Memorandum and Articles of Notary fee: 1% of 4 1 day association or resolution of the board of directors authorising such property value person to represent the company • Copy of last receipts of payment due in view of ground rent, electricity/water bills etc. • Any other document (such as plans, permits, cancellation of hypothecs, etc.) asked for by the Notary • If for some reason the parties appearing on the promise of sale cannot Doing Business 2013 Malta 51 Time to No. Procedure Cost to complete complete all be present for the final contract, a power of attorney is required • All keys of the property being sold • Buyer brings cheque book in order to pay the balance on the final consideration, the duty on documents, as well as the dues for the act and notarial fees * Notary pays the taxes collected on the transaction After the final contract has been duly signed, the Notary has 15 days within which to pay the tax collected on such contract. 4% of purchase 1 day, within 15 12% CGT paid by price for the balance of stamp duty paid by Buyer; Seller has two options days from signing Seller (not counted) for the capital gains tax: (1) to pay 12% of purchase price; or (2) to pay of final deed of sale Stamp duty: 3% of 5 7% of purchase price as preliminary capital gains tax and include the (simultaneous with purchase price for sales profit in Seller's ordinary income. The highest ordinary income tax procedures 9 and the balance of stamp bracket is 35%, i.e. the sales profit can be subject to as high as 35% of tax 10) duty paid by Buyer in addition to the 7% preliminary tax. Therefore, most Seller opts for the first option of a 12% flat tax. Fee schedule according to Subsidiary Legislation 296.01, specifically under the Second Schedule: • up to EUR 11,646.87: EUR 13.98 • over EUR 11,646.87 to EUR 23,293.73: * Notary registers the final deed of sale with Land Registry 1 day, within 15 EUR 18.63 days from signing • over EUR 23,293.73 After the final contract has been duly signed, the Notary has 15 days of final deed of sale to EUR 46,587.47: 6 within which to enroll the deed in the Malta Public Registry or the Gozo (simultaneous with EUR 27.95 Public Registry, or in the Land Registry, where applicable. procedures 8 and • over EUR 46,587.47 10) to EUR 69,881.20: EUR 37.27 • over EUR 69,881.20 to EUR 93,174.94: EUR 46.59 • for every additional EUR 23,293.73 or part thereof: EUR 9.32 * Notary registers the final deed of sale with Public Registry 1 day, within 15 days from signing EUR 3.75 7 After the final contract has been duly signed, the Notary has 15 days of final deed of sale within which to enroll the deed in the Malta Public Registry or the Gozo (simultaneous with Doing Business 2013 Malta 52 Time to No. Procedure Cost to complete complete Public Registry, where applicable. procedures 8 and 9) * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2013 Malta 53 GETTING CREDIT Two types of frameworks can facilitate access to WHAT THE GETTING CREDIT INDICATORS credit and improve its allocation: credit information MEASURE systems and the legal rights of borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable lenders to view a Strength of legal rights index (0–10) potential borrower‘s financial history (positive or Protection of rights of borrowers and lenders negative)—valuable information to consider when through collateral laws assessing risk. And they permit borrowers to Protection of secured creditors‘ rights through establish a good credit history that will allow easier bankruptcy laws access to credit. Sound collateral laws enable businesses to use their assets, especially movable Depth of credit information index (0–6) property, as security to generate capital—while Scope and accessibility of credit information strong creditors‘ rights have been associated with distributed by public credit registries and higher ratios of private sector credit to GDP. private credit bureaus What do the indicators cover? Public credit registry coverage (% of adults) Doing Business assesses the sharing of credit Number of individuals and firms listed in information and the legal rights of borrowers and public credit registry as percentage of adult lenders with respect to secured transactions population through 2 sets of indicators. The depth of credit Private credit bureau coverage (% of adults) information index measures rules and practices Number of individuals and firms listed in affecting the coverage, scope and accessibility of largest private credit bureau as percentage of credit information available through a public credit adult population registry or a private credit bureau. The strength of legal rights index measures whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses case scenarios to determine the scope of the  Has 100 employees. secured transactions system, involving a secured  Is 100% domestically owned, as is the lender. borrower and a secured lender and examining legal The ranking on the ease of getting credit is based on restrictions on the use of movable collateral. These the percentile rankings on the sum of its component scenarios assume that the borrower: indicators: the depth of credit information index and  Is a private, limited liability company. the strength of legal rights index.  Has its headquarters and only base of operations in the largest business city. Doing Business 2013 Malta 54 GETTING CREDIT Where does the economy stand today? How well do the credit information system and Globally, Malta stands at 176 in the ranking of 185 collateral and bankruptcy laws in Malta facilitate access economies on the ease of getting credit (figure 6.1). to credit? The economy has a score of 0 on the depth The rankings for comparator economies and the of credit information index and a score of 3 on the regional average ranking provide other useful strength of legal rights index (see the summary of information for assessing how well regulations and scoring at the end of this chapter for details). Higher institutions in Malta support lending and borrowing. scores indicate more credit information and stronger legal rights for borrowers and lenders. Figure 6.1 How Malta and comparator economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2013 Malta 55 GETTING CREDIT What are the changes over time? While the most recent Doing Business data reflect how institutions and regulations have been strengthened— well the credit information system and collateral and and where they have not (table 6.1). That can help bankruptcy laws in Malta support lending and identify where the potential for improvement is borrowing today, data over time can help show where greatest. Table 6.1 The ease of getting credit in Malta over time By Doing Business report year Indicator DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. .. 176 176 Strength of legal rights n.a. n.a. n.a. n.a. n.a. n.a. n.a. 3 3 index (0-10) Depth of credit n.a. n.a. n.a. n.a. n.a. n.a. n.a. 0 0 information index (0-6) Public registry n.a. n.a. n.a. n.a. n.a. n.a. n.a. 0.0 0.0 coverage (% of adults) Private bureau n.a. n.a. n.a. n.a. n.a. n.a. n.a. 0.0 0.0 coverage (% of adults) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. Source: Doing Business database. Doing Business 2013 Malta 56 GETTING CREDIT One way to put an economy‘s score on the getting shows the number of economies with this score in credit indicators into context is to see where the 2012 as well as the regional average score. Figure 6.3 economy stands in the distribution of scores across shows the same thing for the depth of credit economies. Figure 6.2 highlights the score on the information index. strength of legal rights index for Malta in 2012 and Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How much credit information is shared— and lenders? and how widely? Number of economies with each score on strength of legal Number of economies with each score on depth of credit rights index (0–10), 2012 information index (0–6), 2012 Note: Higher scores indicate that collateral and bankruptcy Note: Higher scores indicate the availability of more credit laws are better designed to facilitate access to credit. information, from either a public credit registry or a private Source: Doing Business database. credit bureau, to facilitate lending decisions. Regional averages for the depth of credit information index exclude economies with no public registry or private bureau. Source: Doing Business database. Doing Business 2013 Malta 57 GETTING CREDIT When economies strengthen the legal rights of lenders credit information, they can increase entrepreneurs‘ and borrowers under collateral and bankruptcy laws, access to credit. What credit reforms has Doing and increase the scope, coverage and accessibility of Business recorded in Malta (table 6.2)? Table 6.2 How has Malta made getting credit easier—or not? By Doing Business report year DB year Reform DB2008 No reform as measured by Doing Business. DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2013 Malta 58 GETTING CREDIT What are the details? The getting credit indicators reported here for Malta The data on the legal rights of borrowers and lenders are based on detailed information collected in that are gathered through a survey of financial lawyers and economy. The data on credit information sharing are verified through analysis of laws and regulations as collected through a survey of a public credit registry or well as public sources of information on collateral and private credit bureau (if one exists). To construct the bankruptcy laws. For the strength of legal rights index, depth of credit information index, a score of 1 is a score of 1 is assigned for each of 8 aspects related to assigned for each of 6 features of the public credit legal rights in collateral law and 2 aspects in registry or private credit bureau (see summary of bankruptcy law. scoring below). Summary of scoring for the getting credit indicators in Malta Middle East & OECD high income Indicator Malta North Africa average average Strength of legal rights index (0-10) 3 3 7 Depth of credit information index (0-6) 0 4 5 Public registry coverage (% of adults) 0.0 12.6 31.5 Private bureau coverage (% of adults) 0.0 26.4 74.6 Note: In cases where an economy‘s regional classification is ―OECD high income,‖ regional averages above are only displayed once. Regional averages for the depth of credit information index exclude economies with no public registry or private bureau. Regional averages for the public registry coverage exclude economies with no public registry. Regional averages for the private bureau coverage exclude economies with no private bureau. Strength of legal rights index (0–10) Index score: 3 Can any business use movable assets as collateral while keeping possession of the assets; Yes and any financial institution accept such assets as collateral ? Does the law allow businesses to grant a non possessory security right in a single category No of movable assets, without requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of Yes its assets, without requiring a specific description of collateral? May a security right extend to future or after-acquired assets, and may it extend No automatically to the products, proceeds or replacements of the original assets ? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; and can the collateral agreement Yes include a maximum amount for which the assets are encumbered? Is a collateral registry in operation, that is unified geographically and by asset type, with an No electronic database indexed by debtor's names? Doing Business 2013 Malta 59 Strength of legal rights index (0–10) Index score: 3 Are secured creditors paid first (i.e. before general tax claims and employee claims) when a No debtor defaults outside an insolvency procedure? Are secured creditors paid first (i.e. before general tax claims and employee claims) when a No business is liquidated? Are secured creditors either not subject to an automatic stay or moratorium on enforcement procedures when a debtor enters a court-supervised reorganization procedure, or the law No provides secured creditors with grounds for relief from an automatic stay or Does the law allow parties to agree in a collateral agreement that the lender may enforce its No security right out of court, at the time a security interest is created? Private credit Public credit Depth of credit information index (0–6) Index score: 0 bureau registry Are data on both firms and individuals distributed? No No 0 Are both positive and negative data distributed? No No 0 Does the registry distribute credit information from retailers, trade creditors or utility companies as well No No 0 as financial institutions? Are more than 2 years of historical credit information No No 0 distributed? Is data on all loans below 1% of income per capita No No 0 distributed? Is it guaranteed by law that borrowers can inspect No No 0 their data in the largest credit registry? Note: An economy receives a score of 1 if there is a "yes" to either private bureau or public registry. Coverage Private credit bureau Public credit registry Number of firms 0 0 Number of individuals 0 0 Source: Doing Business database. Doing Business 2013 Malta 60 PROTECTING INVESTORS Investor protections matter for the ability of WHAT THE PROTECTING INVESTORS companies to raise the capital they need to grow, INDICATORS MEASURE innovate, diversify and compete. If the laws do not provide such protections, investors may be reluctant to invest unless they become the controlling Extent of disclosure index (0–10) shareholders. Strong regulations clearly define Who can approve related-party transactions related-party transactions, promote clear and efficient Disclosure requirements in case of related- disclosure requirements, require shareholder party transactions participation in major decisions of the company and set clear standards of accountability for company Extent of director liability index (0–10) insiders. Ability of shareholders to hold interested What do the indicators cover? parties and members of the approving body liable in case of related-party transactions Doing Business measures the strength of minority Available legal remedies (damages, repayment shareholder protections against directors‘ use of of profits, fines, imprisonment and rescission corporate assets for personal gain—or self-dealing. of the transaction) The indicators distinguish 3 dimensions of investor protections: transparency of related-party Ability of shareholders to sue directly or transactions (extent of disclosure index), liability for derivatively self-dealing (extent of director liability index) and Ease of shareholder suits index (0–10) shareholders‘ ability to sue officers and directors for Access to internal corporate documents misconduct (ease of shareholder suits index). The (directly or through a government inspector) ranking on the strength of investor protection index is the simple average of the percentile rankings on Documents and information available during these 3 indices. To make the data comparable across trial economies, a case study uses several assumptions Strength of investor protection index (0–10) about the business and the transaction. Simple average of the extent of disclosure, The business (Buyer): extent of director liability and ease of shareholder suits indices  Is a publicly traded corporation listed on the economy‘s most important stock exchange (or at least a large private company with multiple the company purchase used trucks from another shareholders). company he owns.  Has a board of directors and a chief executive  The price is higher than the going price for used officer (CEO) who may legally act on behalf of trucks, but the transaction goes forward. Buyer where permitted, even if this is not specifically required by law.  All required approvals are obtained, and all required disclosures made, though the transaction The transaction involves the following details: is prejudicial to Buyer.  Mr. James, a director and the majority  Shareholders sue the interested parties and the shareholder of the company, proposes that members of the board of directors. Doing Business 2013 Malta 61 PROTECTING INVESTORS Where does the economy stand today? How strong are investor protections in Malta? The index (figure 7.1). While the indicator does not economy has a score of 5.7 on the strength of investor measure all aspects related to the protection of protection index, with a higher score indicating minority investors, a higher ranking does indicate that stronger protections (see the summary of scoring at an economy‘s regulations offer stronger investor the end of this chapter for details). protections against self-dealing in the areas measured. Globally, Malta stands at 70 in the ranking of 185 economies on the strength of investor protection Figure 7.1 How Malta and comparator economies rank on the strength of investor protection index Source: Doing Business database. Doing Business 2013 Malta 62 PROTECTING INVESTORS What are the changes over time? While the most recent Doing Business data reflect how ranking on the strength of investor protection index well regulations in Malta protect minority investors over time shows whether the economy is slipping today, data over time show whether the protections behind other economies in investor protections—or have been strengthened (table 7.1). And the global surpassing them. Table 7.1 The strength of investor protections in Malta over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. 66 70 Extent of disclosure n.a. n.a. n.a. n.a. n.a. n.a. 3 3 index (0-10) Extent of director liability index (0- n.a. n.a. n.a. n.a. n.a. n.a. 6 6 10) Ease of shareholder n.a. n.a. n.a. n.a. n.a. n.a. 8 8 suits index (0-10) Strength of investor protection n.a. n.a. n.a. n.a. n.a. n.a. 5.7 5.7 index (0-10) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. Source: Doing Business database. Doing Business 2013 Malta 63 PROTECTING INVESTORS One way to put an economy‘s scores on the protecting the number of economies with this score in 2012 as investors indicators into context is to see where the well as the regional average score. Figure 7.3 shows economy stands in the distribution of scores across the same thing for the extent of director liability index, economies. Figure 7.2 highlights the score on the and figure 7.4 for the ease of shareholder suits index. extent of disclosure index for Malta in 2012 and shows Figure 7.2 How strong are disclosure requirements? Figure 7.3 How strong is the liability regime for directors? Number of economies with each score on extent of Number of economies with each score on extent of director liability index (0–10), 2012 disclosure index (0–10), 2012 Note: Higher scores indicate greater liability of directors. Note: Higher scores indicate greater disclosure. No economy receives a score of 10 on the extent of Source: Doing Business database. director liability index. Source: Doing Business database. Doing Business 2013 Malta 64 PROTECTING INVESTORS Figure 7.4 How easy is access to internal corporate documents? Number of economies with each score on ease of shareholder suits index (0–10), 2012 Note: Higher scores indicate greater powers of shareholders to challenge the transaction. Source: Doing Business database. Doing Business 2013 Malta 65 PROTECTING INVESTORS The scores recorded over time for Malta on the changes over time in the regional average score on strength of investor protection index may also be this index. revealing (figure 7.5). Equally interesting may be the Figure 7.5 Have investor protections become stronger over time? Strength of investor protection index (0–10) Note: The higher the score, the stronger the investor protections. Source: Doing Business database. Doing Business 2013 Malta 66 PROTECTING INVESTORS Economies with the strongest protections of minority time. So reforms to strengthen investor protections investors from self-dealing require more disclosure may move ahead on different fronts—such as through and define clear duties for directors. They also have new or amended company laws or civil procedure well-functioning courts and up-to-date procedural rules. What investor protection reforms has Doing rules that give minority investors the means to prove Business recorded in Malta (table 7.2)? their case and obtain a judgment within a reasonable Table 7.2 How has Malta strengthened investor protections —or not? By Doing Business report year DB year Reform DB2008 No reform as measured by Doing Business. DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2013 Malta 67 PROTECTING INVESTORS What are the details? The protecting investors indicators reported here for shareholder suits indices, a score is assigned for each Malta are based on detailed information collected of a range of conditions relating to disclosure, director through a survey of corporate and securities lawyers as liability and shareholder suits in a standard case study well as on securities regulations, company laws and transaction (see the notes at the end of this chapter). court rules of evidence. To construct the extent of The summary below shows the details underlying the disclosure, extent of director liability and ease of scores for Malta. Summary of scoring for the protecting investors indicators in Malta Middle East & OECD high income Indicator Malta North Africa average average Extent of disclosure index (0-10) 3 6 6 Extent of director liability index (0-10) 6 5 5 Ease of shareholder suits index (0-10) 8 4 7 Strength of investor protection index (0-10) 5.7 5.0 6.1 Note: In cases where an economy‘s regional classification is ―OECD high income,‖ regional averages above are only displayed once. Score Score description Extent of disclosure index (0-10) 3 What corporate body provides legally sufficient Board of directors and Mr. James is 2 approval for the transaction? not allowed to vote Whether disclosure of the conflict of interest by Mr. Existence of a conflict without any 1 James to the board of directors is required? specifics Whether immediate disclosure of the transaction to 0 No disclosure obligation the public and/or shareholders is required? Whether disclosure of the transaction in published 0 No disclosure obligation periodic filings (annual reports) is required? Whether an external body must review the terms of 0 No the transaction before it takes place? Extent of director liability index (0-10) 6 Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller transaction 1 Yes causes to the company? Doing Business 2013 Malta 68 Score Score description Whether shareholders can hold Mr. James liable for Liable for unfair/oppressive the damage that the Buyer-Seller transaction causes 2 transaction or prejudicial to minority to the company? shareholders Whether shareholders can hold members of the Liable for unfair/oppressive approving body liable for the damage that the Buyer- 2 transaction or prejudicial to minority Seller transaction causes to the company? shareholders Whether a court can void the transaction upon a Not possible or only in case of Seller's 0 successful claim by a shareholder plaintiff? fraud or bad faith Whether Mr. James pays damages for the harm caused to the company upon a successful claim by 1 Yes the shareholder plaintiff? Whether Mr. James repays profits made from the transaction upon a successful claim by the 0 No shareholder plaintiff? Whether fines and imprisonment can be applied 0 No against Mr. James? Ease of shareholder suits index (0-10) 8 Whether shareholders owning 10% or less of Buyer's shares can inspect transaction documents before 0 No filing suit? Whether shareholders owning 10% or less of Buyer's shares can request an inspector to investigate the 1 Yes transaction? Whether the plaintiff can obtain any documents from Any information that is relevant to the 3 the defendant and witnesses during trial? subject matter of the claim Whether the plaintiff can request categories of documents from the defendant without identifying 1 Yes specific ones? Whether the plaintiff can directly question the 2 Yes, without approval from the judge defendant and witnesses during trial? Whether the level of proof required for civil suits is 1 Yes lower than that of criminal cases? Strength of investor protection index (0-10) 5.7 Source: Doing Business database. Doing Business 2013 Malta 69 PAYING TAXES Taxes are essential. They fund the public amenities, WHAT THE PAYING TAXES INDICATORS infrastructure and services that are crucial for a MEASURE properly functioning economy. But the level of tax rates needs to be carefully chosen—and needless Tax payments for a manufacturing company complexity in tax rules avoided. According to in 2011 (number per year adjusted for Doing Business data, in economies where it is more electronic or joint filing and payment) difficult and costly to pay taxes, larger shares of economic activity end up in the informal sector— Total number of taxes and contributions paid, where businesses pay no taxes at all. including consumption taxes (value added tax, sales tax or goods and service tax) What do the indicators cover? Method and frequency of filing and payment Using a case scenario, Doing Business measures Time required to comply with 3 major taxes the taxes and mandatory contributions that a (hours per year) medium-size company must pay in a given year as well as the administrative burden of paying taxes Collecting information and computing the tax and contributions. This case scenario uses a set of payable financial statements and assumptions about Completing tax return forms, filing with transactions made over the year. Information is proper agencies also compiled on the frequency of filing and Arranging payment or withholding payments as well as time taken to comply with tax laws. The ranking on the ease of paying taxes is Preparing separate tax accounting books, if the simple average of the percentile rankings on required its component indicators: number of annual Total tax rate (% of profit before all taxes) payments, time and total tax rate, with a threshold 1 Profit or corporate income tax being applied to the total tax rate. To make the data comparable across economies, several Social contributions and labor taxes paid by assumptions about the business and the taxes and the employer contributions are used. Property and property transfer taxes  TaxpayerCo is a medium-size business that Dividend, capital gains and financial started operations on January 1, 2010. transactions taxes  The business starts from the same financial Waste collection, vehicle, road and other taxes position in each economy. All the taxes  Taxes and mandatory contributions include and mandatory contributions paid during corporate income tax, turnover tax and all the second year of operation are recorded. labor taxes and contributions paid by the  Taxes and mandatory contributions are company. measured at all levels of government.  A range of standard deductions and exemptions are also recorded. 1 The threshold is defined as the highest total tax rate among the top 15% of economies in the ranking on the total tax rate. It is calculated and adjusted on a yearly basis. The threshold is not based on any economic theory of an ―optimal tax rate‖ that minimizes distortions or maximizes efficiency in the tax system of an economy overall. Instead, it is mainly empirical in nature, set at the lower end of the distribution of tax rates levied on medium-size enterprises in the manufacturing sector as observed through the paying taxes indicators. This reduces the bias in the indicators toward economies that do not need to levy significant taxes on companies like the Doing Business standardized case study company because they raise public revenue in other ways—for example, through taxes on foreign companies, through taxes on sectors other than manufacturing or from natural resources (all of which are outside the scope of the methodology). This year‘s threshold is 25.7%. Doing Business 2013 Malta 70 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with Globally, Malta stands at 27 in the ranking of 185 taxes in Malta—and how much do firms pay in taxes? economies on the ease of paying taxes (figure 8.1). The On average, firms make 6 tax payments a year, spend rankings for comparator economies and the regional 139 hours a year filing, preparing and paying taxes and average ranking provide other useful information for pay total taxes amounting to 41.6% of profit (see the assessing the tax compliance burden for businesses in summary at the end of this chapter for details). Malta. Figure 8.1 How Malta and comparator economies rank on the ease of paying taxes Note: DB2013 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 25.7% applied in DB2013, the total tax rate is set at 25.7% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2013 Malta 71 PAYING TAXES What are the changes over time? While the most recent Doing Business data reflect how process have changed — and which have not (table easy (or difficult) it is to comply with tax rules in Malta 8.1). That can help identify where the potential for today, data over time show which aspects of the easing tax compliance is greatest. Table 8.1 The ease of paying taxes in Malta over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. 27 27 Payments (number per n.a. n.a. n.a. n.a. n.a. n.a. 6 6 year) Time (hours per year) n.a. n.a. n.a. n.a. n.a. n.a. 139 139 Total tax rate (% profit) n.a. n.a. n.a. n.a. n.a. n.a. 41.6 41.6 Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. DB2013 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 25.7% applied in DB2013, the total tax rate is set at 25.7% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2013 Malta 72 PAYING TAXES Equally helpful may be the benchmarks provided by possible in easing the administrative burden of tax the economies that over time have had the best compliance. And changes in regional averages can performance regionally or globally on the number of show where Malta is keeping up—and where it is payments or the time required to prepare and file falling behind. taxes (figure 8.2). These benchmarks help show what is Figure 8.2 Has paying taxes become easier over time? Payments (number per year) Time (hours per year) Doing Business 2013 Malta 73 PAYING TAXES Total tax rate (% of profit) Source: Doing Business database. Doing Business 2013 Malta 74 PAYING TAXES Economies around the world have made paying taxes concrete results. Some economies simplifying tax faster and easier for businesses—such as by payment and reducing rates have seen tax revenue consolidating filings, reducing the frequency of rise. What tax reforms has Doing Business recorded in payments or offering electronic filing and payment. Malta (table 8.2)? Many have lowered tax rates. Changes have brought Table 8.2 How has Malta made paying taxes easier—or not? By Doing Business report year DB year Reform DB2008 No reform as measured by Doing Business. DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2013 Malta 75 PAYING TAXES What are the details? The indicators reported here for Malta are based on LOCATION OF STANDARDIZED COMPANY a standard set of taxes and contributions that would be paid by the case study company used by Doing Business in collecting the data (see the City: Valletta section in this chapter on what the indicators cover). Tax practitioners are asked to review standard financial statements as well as a standard list of transactions that the company completed The taxes and contributions paid are listed in the during the year. Respondents are asked how much summary below, along with the associated number of in taxes and mandatory contributions the business payments, time and tax rate. must pay and what the process is for doing so. Summary of tax rates and administrative burden in Malta Middle East & OECD high income Indicator Malta North Africa average average Payments (number per year) 6 19 12 Time (hours per year) 139 184 176 Profit tax (%) 29.2 11.9 15.2 Labor tax and contributions (%) 11.3 16.5 23.8 Other taxes (%) 1.2 3.9 3.7 Total tax rate (% profit) 41.6 32.3 42.7 Note: In cases where an economy‘s regional classification is ―OECD high income,‖ regional averages above are only displayed once. Total tax Tax or mandatory Payments Notes on Time Statutory Notes on Tax base rate (% of contribution (number) payments (hours) tax rate total tax rate profit) taxable Corporate income tax 1 online filing 23 35% 29.2 profit Employer paid - Social security gross 1 online filing 92 10% 11.3 contributions salaries 7% (provisional included in Capital gains tax 0 paid jointly 0 sales price 4.2 tax) or 12% other taxes (final tax) Doing Business 2013 Malta 76 Total tax Tax or mandatory Payments Notes on Time Statutory Notes on Tax base rate (% of contribution (number) payments (hours) tax rate total tax rate profit) fuel Fuel tax 1 0 various rates consumptio 1 n authorized Annual registration fee 1 online filing 0 various rates share 0.1 capital # of axles, maximum Annual circulation fee 1 0 various rates authorized 0 mass and age Value added tax (VAT) 1 online filing 24 18% value added 0 not included Totals 6 139 41.6 Source: Doing Business database. Doing Business 2013 Malta 77 TRADING ACROSS BORDERS In today‘s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE business. Excessive document requirements, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead to Documents required to export and import extra costs and delays for exporters and importers, (number) stifling trade potential. Research shows that Bank documents exporters in developing countries gain more from Customs clearance documents a 10% drop in their trading costs than from a similar reduction in the tariffs applied to their Port and terminal handling documents products in global markets. Transport documents What do the indicators cover? Time required to export and import (days) Doing Business measures the time and cost Obtaining, filling out and submitting all the (excluding tariffs and the time and cost for sea documents transport) associated with exporting and importing Inland transport and handling a standard shipment of goods by sea transport, and the number of documents necessary to Customs clearance and inspections complete the transaction. The indicators cover Port and terminal handling procedural requirements such as documentation Does not include sea transport time requirements and procedures at customs and other regulatory agencies as well as at the port. They also Cost required to export and import (US$ per cover trade logistics, including the time and cost of container) inland transport to the largest business city. The All documentation ranking on the ease of trading across borders is the simple average of the percentile rankings on its Inland transport and handling component indicators: documents, time and cost Customs clearance and inspections to export and import. Port and terminal handling To make the data comparable across economies, Official costs only, no bribes Doing Business uses several assumptions about the business and the traded goods. The business:  Is of medium size and employs 60 people.  Do not require refrigeration or any other special environment.  Is located in the periurban area of the economy‘s largest business city.  Do not require any special phytosanitary or environmental safety standards other than  Is a private, limited liability company, accepted international standards. domestically owned, formally registered and operating under commercial laws and  Are one of the economy‘s leading export or regulations of the economy. import products. The traded goods:  Are transported in a dry-cargo, 20-foot full container load.  Are not hazardous nor do they include military items. Doing Business 2013 Malta 78 TRADING ACROSS BORDERS Where does the economy stand today? What does it take to export or import in Malta? Globally, Malta stands at 34 in the ranking of 185 According to data collected by Doing Business, economies on the ease of trading across borders exporting a standard container of goods requires 6 (figure 9.1). The rankings for comparator economies documents, takes 11 days and costs $855. Importing and the regional average ranking provide other useful the same container of goods requires 7 documents, information for assessing how easy it is for a business takes 9 days and costs $970 (see the summary of in Malta to export and import goods. procedures and documents at the end of this chapter for details). Figure 9.1 How Malta and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2013 Malta 79 TRADING ACROSS BORDERS What are the changes over time? While the most recent Doing Business data reflect how process have changed—and which have not (table 9.1). easy (or difficult) it is to export or import in Malta That can help identify where the potential for today, data over time show which aspects of the improvement is greatest. Table 9.1 The ease of trading across borders in Malta over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. 35 34 Documents to export n.a. n.a. n.a. n.a. n.a. n.a. 6 6 (number) Time to export (days) n.a. n.a. n.a. n.a. n.a. n.a. 11 11 Cost to export (US$ per n.a. n.a. n.a. n.a. n.a. n.a. 835 855 container) Documents to import n.a. n.a. n.a. n.a. n.a. n.a. 7 7 (number) Time to import (days) n.a. n.a. n.a. n.a. n.a. n.a. 9 9 Cost to import (US$ per n.a. n.a. n.a. n.a. n.a. n.a. 950 970 container) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. Source: Doing Business database. Doing Business 2013 Malta 80 TRADING ACROSS BORDERS Equally helpful may be the benchmarks provided by These benchmarks help show what is possible in the economies that over time have had the best making it easier to trade across borders. And changes performance regionally or globally on the documents, in regional averages can show where Malta is keeping time or cost required to export or import (figure 9.2). up—and where it is falling behind. Figure 9.2 Has trading across borders become easier over time? Documents to export (number) Time to export (days) Doing Business 2013 Malta 81 TRADING ACROSS BORDERS Cost to export (US$ per container) Documents to import (number) Doing Business 2013 Malta 82 TRADING ACROSS BORDERS Time to import (days) Cost to import (US$ per container) Source: Doing Business database. Doing Business 2013 Malta 83 TRADING ACROSS BORDERS In economies around the world, trading across borders systems. These changes help improve the trading as measured by Doing Business has become faster and environment and boost firms‘ international easier over the years. Governments have introduced competitiveness. What trade reforms has Doing tools to facilitate trade—including single windows, Business recorded in Malta (table 9.2)? risk-based inspections and electronic data interchange Table 9.2 How has Malta made trading across borders easier—or not? By Doing Business report year DB year Reform DB2008 No reform as measured by Doing Business. DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2013 Malta 84 TRADING ACROSS BORDERS What are the details? The indicators reported here for Malta are based on LOCATION OF STANDARDIZED COMPANY a set of specific procedural requirements for trading a standard shipment of goods by ocean transport (see the section in this chapter on what City: Valletta the indicators cover). Information on the procedures as well as the required documents and the time and cost to complete each procedure is The procedural requirements, and the associated time collected from local freight forwarders, shipping and cost, for exporting and importing a standard lines, customs brokers, port officials and banks. shipment of goods are listed in the summary below, along with the required documents. Summary of procedures and documents for trading across borders in Malta Middle East & OECD high income Indicator Malta North Africa average average Documents to export (number) 6 6 4 Time to export (days) 11 19 10 Cost to export (US$ per container) 855 1,083 1,028 Documents to import (number) 7 8 5 Time to import (days) 9 22 10 Cost to import (US$ per container) 970 1,275 1,080 Note: In cases where an economy‘s regional classification is ―OECD high income,‖ regional averages above are only displayed once. Procedures to export Time (days) Cost (US$) Documents preparation 6 280 Customs clearance and technical control 1 50 Ports and terminal handling 2 275 Inland transportation and handling 2 250 Totals 11 855 Procedures to import Time (days) Cost (US$) Documents preparation 4 260 Doing Business 2013 Malta 85 Procedures to import Time (days) Cost (US$) Customs clearance and technical control 2 50 Ports and terminal handling 2 410 Inland transportation and handling 1 250 Totals 9 970 Documents to export Documents to import Bill of lading Bill of lading Certificate of Origin Certificate of origin Commercial invoice Commercial invoice Customs export declaration Customs import declaration Packing list Delivery order Port and terminal handling receipt Packing list Source: Doing Business database. Port and terminal handling receipts Doing Business 2013 Malta 86 ENFORCING CONTRACTS Well-functioning courts help businesses expand WHAT THE ENFORCING CONTRACTS their network and markets. Without effective INDICATORS MEASURE contract enforcement, people might well do business only with family, friends and others with whom they have established relationships. Where Procedures to enforce a contract through contract enforcement is efficient, firms are more the courts (number) likely to engage with new borrowers or customers, Any interaction between the parties in a and they have greater access to credit. commercial dispute, or between them and the judge or court officer What do the indicators cover? Steps to file and serve the case Doing Business measures the efficiency of the judicial system in resolving a commercial dispute Steps for trial and judgment before local courts. Following the step-by-step Steps to enforce the judgment evolution of a standardized case study, it collects Time required to complete procedures data relating to the time, cost and procedural (calendar days) complexity of resolving a commercial lawsuit. The ranking on the ease of enforcing contracts is the Time to file and serve the case simple average of the percentile rankings on its Time for trial and obtaining judgment component indicators: procedures, time and cost. Time to enforce the judgment The dispute in the case study involves the breach of a sales contract between 2 domestic businesses. Cost required to complete procedures (% of The case study assumes that the court hears an claim) expert on the quality of the goods in dispute. This No bribes distinguishes the case from simple debt Average attorney fees enforcement. To make the data comparable across economies, Doing Business uses several Court costs assumptions about the case: Enforcement costs  The seller and buyer are located in the economy‘s largest business city.  The buyer orders custom-made goods,  The dispute on the quality of the goods then fails to pay. requires an expert opinion.  The seller sues the buyer before a  The judge decides in favor of the seller; there competent court. is no appeal.  The value of the claim is 200% of income  The seller enforces the judgment through a per capita. public sale of the buyer‘s movable assets.  The seller requests a pretrial attachment to secure the claim. Doing Business 2013 Malta 87 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial Globally, Malta stands at 121 in the ranking of 185 dispute through the courts in Malta? According to data economies on the ease of enforcing contracts (figure collected by Doing Business, enforcing a contract takes 10.1). The rankings for comparator economies and the 505 days, costs 35.9% of the value of the claim and regional average ranking provide other useful requires 40 procedures (see the summary at the end of benchmarks for assessing the efficiency of contract this chapter for details). enforcement in Malta. Figure 10.1 How Malta and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2013 Malta 88 ENFORCING CONTRACTS What are the changes over time? While the most recent Doing Business data reflect how identify which areas have changed and where the easy (or difficult) it is to enforce a contract in Malta potential for improvement is greatest (table 10.1). today, data on the underlying indicators over time help Table 10.1 The ease of enforcing contracts in Malta over time By Doing Business report year Indicator DB2004 DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. .. .. 122 121 Time (days) n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 505 505 Cost (% of claim) n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 35.9 35.9 Procedures (number) n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 40 40 Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. Source: Doing Business database. Doing Business 2013 Malta 89 ENFORCING CONTRACTS Equally helpful may be the benchmarks provided by help show what is possible in improving the efficiency the economies that over time have had the best of contract enforcement. And changes in regional performance regionally or globally on the number of averages can show where Malta is keeping up —and steps, time or cost required to enforce a contract where it is falling behind. through the courts (figure 10.2). These benchmarks Figure 10.2 Has enforcing contracts become easier over time? Time (days) Cost (% of claim) Doing Business 2013 Malta 90 ENFORCING CONTRACTS Procedures (number) Source: Doing Business database. Doing Business 2013 Malta 91 ENFORCING CONTRACTS Economies in all regions have improved contract often work on reducing backlogs by introducing enforcement in recent years. A judiciary can be periodic reviews to clear inactive cases from the docket improved in different ways. Higher-income economies and by making procedures faster. What reforms tend to look for ways to enhance efficiency by making it easier (or more difficult) to enforce contracts introducing new technology. Lower-income economies has Doing Business recorded in Malta (table 10.2)? Table 10.2 How has Malta made enforcing contracts easier —or not? By Doing Business report year DB year Reform DB2008 No reform as measured by Doing Business. DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2013 Malta 92 ENFORCING CONTRACTS What are the details? The indicators reported here for Malta are based COMPETENT COURT on a set of specific procedural steps required to resolve a standardized commercial dispute through the courts (see the section in this chapter City: Valletta on what the indicators cover). These procedures, and the time and cost of completing them, are First Hall of the Civil identified through study of the codes of civil Court Name: Court procedure and other court regulations, as well as through surveys completed by local litigation The procedures for resolving a commercial lawsuit, and lawyers (and, in a quarter of the economies the associated time and cost, are listed in the summary covered by Doing Business, by judges as well). below. Summary of procedures for enforcing a contract in Malta—and the time and cost Middle East & OECD high income Indicator Malta North Africa average average Time (days) 505 652 510 Filing and service 15 Trial and judgment 365 Enforcement of judgment 125 Cost (% of claim) 35.9 23.9 20.1 Attorney cost (% of claim) 31.6 Court cost (% of claim) 3.0 Enforcement Cost (% of claim) 1.3 Procedures (number) 40 44 31 Note: In cases where an economy‘s regional classification is ―OECD high income,‖ regional averages above are only displayed once. Doing Business 2013 Malta 93 ENFORCING CONTRACTS No. Procedure Filing and service: 1 Plaintiff requests payment: Plaintiff or his lawyer asks Defendant orally or in writing to comply with the contract. 2 Plaintiff’s hiring of lawyer: Plaintiff hires a lawyer to represent him before the court. Plaintiff’s filing of summons and complaint: Plaintiff files his summons and complaint with the court, orally or in * writing. * Plaintiff’s payment of court fees: Plaintiff pays court duties, stamp duties, or any other type of court fee. Registration of court case: The court administration registers the lawsuit or court case. This includes assigning a 3 reference number to the lawsuit or court case. Assignment of court case to a judge: The court case is assigned to a specific judge through a random procedure, * automated system, ruling of an administrative judge, court officer, etc. 4 Court order for service: Upon Plaintiff‘s request, judge orders process be served on Defendant. Delivery of summons and complaint to person authorized to perform service of process on Defendant: The 5 judge or a court officer delivers the summons to a summoning office, officer, or authorized person (including Plaintiff), for service of process on Defendant. First attempt at physical delivery: A first attempt to physically deliver summons and complaint to Defendant is 6 successful in the majority of cases. Second attempt at physical delivery: If a first attempt was not successful, a second attempt to physically deliver 7 the summons and complaint to Defendant is required by law or standard practice. Application for substituted service: Because physical delivery is not successful in the majority of cases, Plaintiff 8 applies for substituted service. Substituted service can include, but is not limited to, service by publication in newspapers or affixing of a notice in court or on public bul Court order regarding substituted service: The judge in a court order defines acceptable means for substituted 9 service. Substituted service: Substituted service is accomplished by publication in newspapers, by affixing a notice in court 10 or on public bulletin boards, etc. * Proof of service: Plaintiff submits proof of service to court. Application for pre-judgment attachment: Plaintiff submits an application in writing for the attachment of * Defendant's property prior to judgment. (see assumption 5) Decision on pre-judgment attachment: The judge decides whether to grant Plaintiff‘s request for pre-judgment * attachment of Defendant‘s property and notifies Plaintiff and Defendant of the decision. This step may include requesting that Plaintiff submit guarantees or bonds to secure Defendant Pre-judgment attachment.: Defendant's property is attached prior to judgment. Attachment is either physical or 11 achieved by registering, marking, debiting or separating assets. (see assumption 5) Doing Business 2013 Malta 94 No. Procedure Custody of assets attached prior to judgment: Defendant's attached assets are put under enforcement officer's or 12 (private) bailiff's care. (see assumption 5) Report on pre-judgment attachment: Court enforcement officer or (private) bailiff issues and delivers a report on 13 the attachment of Defendant‘s property to the judge. (see assumption 5) Trial and judgment: Defendant’s filing of defense or answer to Plaintiff’s claim: Defendant files a written pleading which includes his 14 defense or answer on the merits of the case. Defendant's written answer may or may not include witness statements, expert statements, the documents Defendant relies on as evidence and the legal authori Court appointment of independent expert: Judge appoints, either at the parties' request or at his own initiative, * an independent expert to decide whether the quality of the goods Plaintiff delivered to Defendant is adequate. (see assumption 6-b of this case) Notification of court-appointment of independent expert: The court notifies both parties that the court is 15 appointing an independent expert. (see assumption 6-b of this case) Delivery of expert report by court-appointed expert: The independent expert appointed by the court delivers his * or her expert report to the court. (see assumption 6-b of this case) * Request for interlocutory order: Defendant raises preliminary issues, such as jurisdiction, statute of limitation, etc. Court’s issuance of interlocutory order: Court decides the preliminary issues the Defendant raised by issuing an * interlocutory order. * Setting of date(s) for oral hearing or trial: The judge sets the date(s) for the oral hearing or trial. * List of (expert) witnesses: The parties file a list of (expert) witnesses with the court. (see assumption 6-a) Summoning of (expert) witnesses: The court summons (expert) witnesses to appear in court for the oral hearing 16 or trial. (see assumption 6-a) Adjournments: Court proceedings are delayed because one or both parties request and obtain an adjournment to 17 prepare for the oral hearing or trial. Oral hearing (prevalent in civil law): The parties argue the merits of the case at an oral hearing before the judge. 18 Witnesses and a court-appointed independent expert may be heard and questioned at the oral hearing. Adjournments: Court proceedings are delayed because one or both parties request and obtain an adjournment 19 during the oral hearing or trial, resulting in an additional or later trial or hearing date. * Request for closing of the evidence period: Plaintiff or Defendant requests the judge to close the evidence period. 20 Closing of the evidence period: The court makes the formal decision to close the evidence period. Order for submission of final arguments: The judge sets the deadline for the submission of final factual and legal 21 arguments. Final arguments: The parties present their final factual and legal arguments to the court either by oral presentation * or by a written submission. 22 Judgment date: The judge sets a date for delivery of the judgment. 23 Notification of judgment in court: The parties are notified of the judgment at a court hearing. Doing Business 2013 Malta 95 No. Procedure 24 Writing of judgment: The judge produces a written copy of the judgment. 25 Registration of judgment: The court office registers the judgment after receiving a written copy of the judgment. Appeal period: By law, Defendant has the opportunity to appeal the judgment during a period specified in the law. 26 Defendant decides not to appeal. Judgment becomes final the day the appeal period ends. Reimbursement by Defendant of Plaintiff's court fees: The judgment obliges Defendant to reimburse Plaintiff for 27 the court fees Plaintiff has advanced, because Defendant has lost the case. Enforcement of judgment: Plaintiff’s hiring of lawyer: Plaintiff hires a lawyer to enforce the judgment or continues to be represented by a * lawyer during the enforcement of judgment phase. 28 Publication of judgment: The judgment must be published in an official journal, gazette or local newspaper. Plaintiff’s request for enforcement order: Plaintiff applies to the court to obtain the enforcement order ('seal' on * judgment). 29 Plaintiff’s advancement of enforcement fees: Plaintiff pays the fees related to the enforcement of the judgment. Delivery of enforcement order: The court's enforcement order is delivered to a court enforcement officer or a * (private) bailiff. Request to Defendant to comply voluntarily with judgment: Plaintiff, a court enforcement officer or a (private) 30 bailiff requests Defendant to voluntarily comply with the judgment, giving Defendant a last chance to comply voluntarily with the judgment. Identification of Defendant's assets for attachment by court official or Defendant: Judge, a court enforcement 31 officer, a (private) bailiff or the Defendant himself identifies Defendant's movable assets for attachment. 32 Attachment: Defendant‘s movable goods are attached (physically or by registering, marking or separating assets). Report on execution of attachment: A court enforcement officer or private process server delivers a report on the 33 attachment of Defendant's movable goods to the judge. Enforcement disputes before court: The enforcement of the judgment is delayed because Defendant opposes 34 aspects of the enforcement process before the judge. Call for public auction: The judge calls a public auction by, for example, advertising or publication in the 35 newspapers. 36 Sale through public auction: The Defendant‘s movable property is sold at public auction. 37 Judge's decision on bids: The judge determines the adequacy of the bids presented at public auction. Distribution of proceeds: The proceeds of the public auction are distributed to various creditors (including 38 Plaintiff), according to the rules of priority. Reimbursement of Plaintiff’s enforcement fees: Defendant reimburses Plaintiff's enforcement fees which Plaintiff 39 had advanced previously. 40 Payment: Court orders that the proceeds of the public auction or the direct sale be delivered to Plaintiff. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2013 Malta 96 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient companies and reallocating the resources of INDICATORS MEASURE inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of Time required to recover debt (years) businesses to normal operation and increase Measured in calendar years returns to creditors. By improving the expectations of creditors and debtors about the outcome of Appeals and requests for extension are insolvency proceedings, well-functioning included insolvency systems can facilitate access to finance, Cost required to recover debt (% of debtor’s save more viable businesses and thereby improve estate) growth and sustainability in the economy overall. Measured as percentage of estate value What do the indicators cover? Court fees Doing Business studies the time, cost and outcome Fees of insolvency administrators of insolvency proceedings involving domestic entities. It does not measure insolvency Lawyers‘ fees proceedings of individuals and financial Assessors‘ and auctioneers‘ fees institutions. The data are derived from survey Other related fees responses by local insolvency practitioners and verified through a study of laws and regulations as Recovery rate for creditors (cents on the well as public information on bankruptcy systems. dollar) The ranking on the ease of resolving insolvency is Measures the cents on the dollar recovered based on the recovery rate, which is recorded as by creditors cents on the dollar recouped by creditors through Present value of debt recovered reorganization, liquidation or debt enforcement Official costs of the insolvency proceedings (foreclosure) proceedings. The recovery rate is a are deducted function of time, cost and other factors, such as lending rate and the likelihood of the company Depreciation of furniture is taken into continuing to operate. account To make the data comparable across economies, Outcome for the business (survival or not) Doing Business uses several assumptions about the affects the maximum value that can be recovered business and the case. It assumes that the company:  Is a domestically owned, limited liability company operating a hotel.  Has 201 employees, 1 main secured creditor  Operates in the economy‘s largest business and 50 unsecured creditors. city.  Has a higher value as a going concern—and the efficient outcome is either reorganization or sale as a going concern, not piecemeal liquidation. Doing Business 2013 Malta 97 RESOLVING INSOLVENCY Where does the economy stand today? Speed, low costs and continuation of viable businesses piecemeal sale. The average recovery rate is 39.2 cents characterize the top-performing economies. How on the dollar. efficient are insolvency proceedings in Malta? Globally, Malta stands at 67 in the ranking of 185 According to data collected by Doing Business, economies on the ease of resolving insolvency (figure resolving insolvency takes 3.0 years on average and 11.1). The rankings for comparator economies and the costs 10% of the debtor‘s estate, with the most likely regional average ranking provide other useful outcome being that the company will be sold as benchmarks for assessing the efficiency of insolvency proceedings in Malta. Figure 11.1 How Malta and comparator economies rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2013 Malta 98 RESOLVING INSOLVENCY What are the changes over time? While the most recent Doing Business data reflect the changed—and where it has not (table 11.1). That can efficiency of insolvency proceedings in Malta today, help identify where the potential for improvement is data over time show where the efficiency has greatest. Table 11.1 The ease of resolving insolvency in Malta over time By Doing Business report year Indicator DB2004 DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. .. .. 69 67 Time (years) n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 3.0 3.0 Cost (% of estate) n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 10 10 Recovery rate (cents on the n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 39.2 39.2 dollar) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. ―No practice‖ indicates that in each of the previous 5 years the economy had no cases involving a judicial reorganization, judicial liquidation or debt enforcement procedure (foreclosure). This means that creditors are unlikely to recover their money through a formal legal process (in or out of court). The recovery rate for ―no practice‖ economies is 0. Source: Doing Business database. Doing Business 2013 Malta 99 RESOLVING INSOLVENCY Equally helpful may be the benchmarks provided by possible in improving the efficiency of insolvency the economies that over time have had the best proceedings. And changes in regional averages can performance regionally or globally on the time or cost show where Malta is keeping up—and where it is of insolvency proceedings or on the recovery rate falling behind. (figure 11.2). These benchmarks help show what is Figure 11.2 Has resolving insolvency become easier over time? Time (years) Cost (% of estate) Doing Business 2013 Malta 100 RESOLVING INSOLVENCY Recovery rate (cents on the dollar) Note: Regional averages on time and cost exclude economies with a “no practice� mark. Source: Doing Business database. Doing Business 2013 Malta 101 RESOLVING INSOLVENCY A well-balanced bankruptcy system distinguishes change. Many recent reforms of bankruptcy laws have companies that are financially distressed but been aimed at helping more of the viable businesses economically viable from inefficient companies that survive. What insolvency reforms has Doing Business should be liquidated. But in some insolvency systems recorded in Malta (table 11.2)? even viable businesses are liquidated. This is starting to Table 11.2 How has Malta made resolving insolvency easier—or not? By Doing Business report year DB year Reform DB2008 No reform as measured by Doing Business. DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2013 Malta 102 EMPLOYING WORKERS Doing Business measures flexibility in the regulation of Particular data for Malta are presented here without employment, specifically as it affects the hiring and scoring. redundancy of workers and the rigidity of working hours. From 2007 to 2011 improvements were made to To make the data on employing workers comparable align the methodology for the employing workers across economies, several assumptions about the indicators with the letter and spirit of the International worker and the business are used. Labour Organization (ILO) conventions. Only 4 of the 188 ILO conventions cover areas measured by Doing The worker: Business: employee termination, weekend work, holiday with pay and night work. The Doing Business  Earns a salary plus benefits equal to the methodology is fully consistent with these 4 economy‘s average wage during the entire conventions. The ILO conventions covering areas period of his employment. related to the employing workers indicators do not  Has a pay period that is the most common for include the ILO core labor standards—8 conventions workers in the economy. covering the right to collective bargaining, the  Is a lawful citizen who belongs to the same elimination of forced labor, the abolition of child labor race and religion as the majority of the and equitable treatment in employment practices. economy‘s population.  Resides in the economy‘s largest business city. Between 2009 and 2011 the World Bank Group worked  Is not a member of a labor union, unless with a consultative group—including labor lawyers, membership is mandatory. employer and employee representatives, and experts from the ILO, the Organisation for Economic Co- The business: operation and Development, civil society and the private sector—to review the employing workers  Is a limited liability company. methodology and explore future areas of research.  Operates in the economy‘s largest business city. A full report with the conclusions of the consultative  Is 100% domestically owned. group is available at http://www.doingbusiness.org/  Operates in the manufacturing sector. methodology/employing-workers.  Has 60 employees.  Is subject to collective bargaining agreements Doing Business 2013 does not present rankings of in economies where such agreements cover economies on the employing workers indicators or more than half the manufacturing sector and include the topic in the aggregate ranking on the ease apply even to firms not party to them. of doing business. The report does present the data on  Abides by every law and regulation but does the employing workers indicators in an annex. Detailed not grant workers more benefits than data collected on labor regulations are available on the mandated by law, regulation or (if applicable) Doing Business website (http://www.doing business.org). collective bargaining agreement. Doing Business 2013 Malta 103 EMPLOYING WORKERS What do some of the data show? One of the employing workers indicators is the worker in his or her first job. Doing Business data show difficulty of hiring index. This measure assesses, among the trend in the minimum wage applied by Malta other things, the minimum wage for a 19-year-old (figure 12.1). Figure 12.1 Has the minimum wage for a 19-year-old worker or an apprentice increased over time? Minimum wage (US$ per month) Note: A horizontal line along the x-axis of the figure indicates that the economy has no minimum wage. Source: Doing Business database. Doing Business 2013 Malta 104 EMPLOYING WORKERS Employment laws are needed to protect workers from past 4 years did so in ways that increased labor market arbitrary or unfair treatment and to ensure efficient flexibility. What changes did Malta adopt that affected contracting between employers and workers. Many the Doing Business indicators on employing workers economies that changed their labor regulations in the (table 12.1)? Table 12.1 What changes did Malta make in employing workers in 2012? Reform No reform as measured by Doing Business. Source: Doing Business database. Doing Business 2013 Malta 105 EMPLOYING WORKERS What are the details? The data on employing workers reported here for public officials. Employment laws and regulations as Malta are based on a detailed survey of employment well as secondary sources are reviewed to ensure regulations that is completed by local lawyers and accuracy. Rigidity of employment index The rigidity of employment index measures 3 areas of labor regulation: difficulty of hiring, rigidity of hours and difficulty of redundancy. Difficulty of hiring index The difficulty of hiring index measures whether fixed- worker. (The average value added per worker is the term contracts are prohibited for permanent tasks; the ratio of an economy‘s gross national income per capita maximum cumulative duration of fixed-term contracts; to the working-age population as a percentage of the and the ratio of the minimum wage for a trainee or total population.) first-time employee to the average value added per Difficulty of hiring index Data Fixed-term contracts prohibited for permanent tasks? No No limit. However, the law states that a temporary worker shall be considered permanent if (i) the employee has been Maximum length of a single fixed-term contract (months) continuously employed under one or several fixed-term contracts for more than 4 years, and (ii) if the employer cannot provide objective r Maximum length of fixed-term contracts, including renewals (months) 48 Minimum wage for a 19-year old worker or an apprentice (US$/month) 953.3 Ratio of minimum wage to value added per worker 0.39 Source: Doing Business database. Doing Business 2013 Malta 106 EMPLOYING WORKERS Rigidity of hours index The rigidity of hours index has 5 components: whether respond to a seasonal increase in production; and there are restrictions on night work; whether there are whether the average paid annual leave for a worker restrictions on weekly holiday work; whether the with 1 year of tenure, a worker with 5 years and a workweek can consist of 5.5 days or is more than 6 worker with 10 years is more than 26 working days or days; whether the workweek can extend to 50 hours or fewer than 15 working days. more (including overtime) for 2 months a year to Rigidity of hours index Data Standard workday in manufacturing (hours) 8 hours 50-hour workweek allowed for 2 months a year in case of a seasonal No increase in production? Maximum working days per week 6.0 Premium for night work (% of hourly pay) in case of continuous 0% operations Premium for work on weekly rest day (% of hourly pay) in case of 0% continuous operations Major restrictions on night work in case of continuous operations? No Major restrictions on weekly holiday in case of continuous operations? No Paid annual leave for a worker with 1 year of tenure (in working days) 24.0 Paid annual leave for a worker with 5 years of tenure (in working days) 24.0 Paid annual leave for a worker with 10 years of tenure (in working days) 24.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in 24.0 working days) Source: Doing Business database. Doing Business 2013 Malta 107 EMPLOYING WORKERS Difficulty of redundancy index The difficulty of redundancy index has 8 components: worker; whether the employer needs approval from a whether redundancy is disallowed as a basis for third party to terminate a group of 9 redundant terminating workers; whether the employer needs to workers; whether the law requires the employer to notify a third party (such as a government agency) to reassign or retrain a worker before making the worker terminate 1 redundant worker; whether the employer redundant; whether priority rules apply for needs to notify a third party to terminate a group of 9 redundancies; and whether priority rules apply for redundant workers; whether the employer needs reemployment. approval from a third party to terminate 1 redundant Difficulty of redundancy index Data Dismissal due to redundancy allowed by law? Yes Third-party notification if 1 worker is dismissed? No Third-party approval if 1 worker is dismissed? No Third-party notification if 9 workers are dismissed? No Third-party approval if 9 workers are dismissed? No Retraining or reassignment obligation before redundancy? No Priority rules for redundancies? Yes Priority rules for reemployment? Yes Source: Doing Business database. Doing Business 2013 Malta 108 EMPLOYING WORKERS Redundancy cost The redundancy cost indicator measures the cost of notice requirements and severance payments advance notice requirements, severance payments and applicable to a worker with 1 year of tenure, a worker penalties due when terminating a redundant worker, with 5 years and a worker with 10 years is used to expressed in weeks of salary. The average value of assign the score. Redundancy cost indicator Data Notice period for redundancy dismissal (for a worker with 1 year of tenure, in salary 2.0 weeks) Notice period for redundancy dismissal (for a worker with 5 years of tenure, in 8.0 salary weeks) Notice period for redundancy dismissal (for a worker with 10 years of tenure, in 12.0 salary weeks) Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years 7.3 of tenure, in salary weeks) Severance pay for redundancy dismissal (for a worker with 1 year of tenure, in 0.0 salary weeks) Severance pay for redundancy dismissal (for a worker with 5 years of tenure, in 0.0 salary weeks) Severance pay for redundancy dismissal (for a worker with 10 years of tenure, in 0.0 salary weeks) Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years 0.0 of tenure, in salary weeks) Source: Doing Business database. Doing Business 2013 Malta 109 DATA NOTES The indicators presented and analyzed in Doing Business measure business regulation and the ECONOMY CHARACTERISTICS protection of property rights—and their effect on businesses, especially small and medium-size domestic firms. First, the indicators document the complexity of Gross national income per capita regulation, such as the number of procedures to start a business or to register and transfer commercial Doing Business 2013 reports 2011 income per capita property. Second, they gauge the time and cost of as published in the World Bank‘s World Development achieving a regulatory goal or complying with Indicators 2012. Income is calculated using the Atlas method (current US$). For cost indicators expressed regulation, such as the time and cost to enforce a as a percentage of income per capita, 2011 gross contract, go through bankruptcy or trade across national income (GNI) in U.S. dollars is used as the borders. Third, they measure the extent of legal denominator. GNI data were not available from the protections of property, for example, the protections World Bank for Afghanistan; Australia; The Bahamas; of investors against looting by company directors or Bahrain; Barbados; Brunei Darussalam; Cyprus; the range of assets that can be used as collateral Djibouti; Guyana; the Islamic Republic of Iran; according to secured transactions laws. Fourth, a set of Kuwait; Malta; New Zealand; Oman; Puerto Rico indicators documents the tax burden on businesses. (territory of the United States); Sudan; Suriname; the Finally, a set of data covers different aspects of Syrian Arab Republic; Timor-Leste; West Bank and employment regulation. Gaza; and the Republic of Yemen. In these cases GDP or GNP per capita data and growth rates from The data for all sets of indicators in Doing Business the International Monetary Fund‘s World Economi c 2 2013 are for June 2012. Outlook database and the Economist Intelligence Unit were used. Region and income group Methodology Doing Business uses the World Bank regional and The Doing Business data are collected in a income group classifications, available at standardized way. To start, the Doing Business team, http://data.worldbank.org/about/country- with academic advisers, designs a questionnaire. The classifications. The World Bank does not assign questionnaire uses a simple business case to ensure regional classifications to high-income economies. comparability across economies and over time —with For the purpose of the Doing Business report, high- assumptions about the legal form of the business, its income OECD economies are assigned the ―regional‖ size, its location and the nature of its operations. classification OECD high income. Figures and tables Questionnaires are administered through more than presenting regional averages include economies 9,600 local experts, including lawyers, business from all income groups (low, lower middle, upper consultants, accountants, freight forwarders, middle and high income). government officials and other professionals routinely Population administering or advising on legal and regulatory Doing Business 2013 reports midyear 2011 requirements. These experts have several rounds of population statistics as published in World interaction with the Doing Business team, involving Development Indicators 2012. conference calls, written correspondence and visits by the team. For Doing Business 2013 team members visited 24 economies to verify data and recruit The Doing Business methodology offers several respondents. The data from questionnaires are advantages. It is transparent, using factual information subjected to numerous rounds of verification, leading about what laws and regulations say and allowing to revisions or expansions of the information collected. multiple interactions with local respondents to clarify potential misinterpretations of questions. Having 2 The data for paying taxes refer to January – December 2011. Doing Business 2013 Malta 110 representative samples of respondents is not an issue; 2013 would differ from the recollection of Doing Business is not a statistical survey, and the texts entrepreneurs reported in the World Bank Enterprise of the relevant laws and regulations are collected and Surveys or other perception surveys. answers checked for accuracy. The methodology is inexpensive and easily replicable, so data can be collected in a large sample of economies. Because Subnational Doing Business indicators standard assumptions are used in the data collection, This year Doing Business completed subnational comparisons and benchmarks are valid across studies for Indonesia, Kenya, Mexico, the Russian economies. Finally, the data not only highlight the Federation and the United Arab Emirates. Each of extent of specific regulatory obstacles to business but these countries had already asked to have subnational also identify their source and point to what might be data in the past, and this year Doing Business updated reformed. the indicators, measured improvements over time and Information on the methodology for each Doing expanded geographic coverage to additional cities or Business topic can be found on the Doing Business added additional indicators. Doing Business also website at http://www.doingbusiness.org/methodology/. published regional studies for the Arab world, the East African Community and member states of the Organization for the Harmonization of Business Law in Limits to what is measured Africa (OHADA). The Doing Business methodology has 5 limitations that The subnational studies point to differences in should be considered when interpreting the data. First, business regulation and its implementation—as well as the collected data refer to businesses in the economy‘s in the pace of regulatory reform—across cities in the largest business city (which in some economies differs same economy. For several economies subnational from the capital) and may not be representative of studies are now periodically updated to measure regulation in other parts of the economy. To address change over time or to expand geographic coverage this limitation, subnational Doing Business indicators to additional cities. This year that is the case for all the were created (see the section on subnational Doing subnational studies published. Business indicators). Second, the data often focus on a specific business form—generally a limited liability company (or its legal equivalent) of a specified size— Changes in what is measured and may not be representative of the regulation on The ranking methodology for paying taxes was other businesses, for example, sole proprietorships. updated this year. The threshold for the total tax rate Third, transactions described in a standardized case introduced last year for the purpose of calculating the scenario refer to a specific set of issues and may not ranking on the ease of paying taxes was updated. All represent the full set of issues a business encounters. economies with a total tax rate below the threshold Fourth, the measures of time involve an element of (which is calculated and adjusted on a yearly basis) judgment by the expert respondents. When sources receive the same ranking on the total tax rate indicate different estimates, the time indicators indicator. The threshold is not based on any economic reported in Doing Business represent the median theory of an ―optimal tax rate‖ that minimizes values of several responses given under the distortions or maximizes efficiency in the tax system of assumptions of the standardized case. an economy overall. Instead, it is mainly empirical in Finally, the methodology assumes that a business has nature, set at the lower end of the distribution of tax full information on what is required and does not rates levied on medium-size enterprises in the waste time when completing procedures. In practice, manufacturing sector as observed through the paying completing a procedure may take longer if the taxes indicators. This reduces the bias in the indicators business lacks information or is unable to follow up toward economies that do not need to levy significant promptly. Alternatively, the business may choose to taxes on companies like the Doing Business disregard some burdensome procedures. For both standardized case study company because they raise reasons the time delays reported in Doing Business public revenue in other ways—for example, through Doing Business 2013 Malta 111 taxes on foreign companies, through taxes on sectors investors, paying taxes, trading across borders, other than manufacturing or from natural resources enforcing contracts, and resolving insolvency. The (all of which are outside the scope of the employing workers indicators are not included in this methodology). Giving the same ranking to all year‘s aggregate ease of doing business ranking. In economies whose total tax rate is below the threshold addition to this year‘s ranking, Doing Business presents avoids awarding economies in the scoring for having a comparable ranking for the previous year, adjusted an unusually low total tax rate, often for reasons for any changes in methodology as well as additions of 3 unrelated to government policies toward enterprises. economies or topics. For example, economies that are very small or that are Construction of the ease of doing business index rich in natural resources do not need to levy broad- based taxes. Here is one example of how the ease of doing business index is constructed. In Finland it takes 3 procedures, 14 days and 4% of annual income per capita in fees to Data challenges and revisions register a property. On these 3 indicators Finland ranks in the 6th, 16th and 39th percentiles. So on average Most laws and regulations underlying the Doing Finland ranks in the 20th percentile on the ease of Business data are available on the Doing Business registering property. It ranks in the 30th percentile on website at http://www.doingbusiness.org. All the th starting a business, 28 percentile on getting credit, sample questionnaires and the details underlying the 24th percentile on paying taxes, 13th percentile on indicators are also published on the website. Questions enforcing contracts, 5th percentile on trading across on the methodology and challenges to data can be borders and so on. Higher rankings indicate simpler submitted through the website‘s ―Ask a Question‖ regulation and stronger protection of property rights. function at http://www.doingbusiness.org. The simple average of Finland‘s percentile rankings on all topics is 21st. When all economies are ordered by Ease of doing business and distance to their average percentile rankings, Finland stands at 11 frontier in the aggregate ranking on the ease of doing business. Doing Business 2013 presents results for 2 aggregate measures: the aggregate ranking on the ease of doing More complex aggregation methods—such as business and the distance to frontier measure. The principal components and unobserved components— ease of doing business ranking compares economies yield a ranking nearly identical to the simple average 4 with one another, while the distance to frontier used by Doing Business. Thus, Doing Business uses measure benchmarks economies to the frontier in the simplest method: weighting all topics equally and, regulatory practice, measuring the absolute distance to the best performance on each indicator. Both measures can be used for comparisons over time. 3 In case of revisions to the methodology or corrections to the underlying data, the data are back-calculated to provide a When compared across years, the distance to frontier comparable time series since the year the relevant economy or topic measure shows how much the regulatory environment was first included in the data set. The time series is available on the for local entrepreneurs in each economy has changed Doing Business website (http://www.doingbusiness.org). Six topics over time in absolute terms, while the ease of doing and more than 50 economies have been added since the inception business ranking can show only relative change. of the project. Earlier rankings on the ease of doing business are therefore not comparable. Ease of doing business 4 See Simeon Djankov, Darshini Manraj, Caralee McLiesh and Rita Ramalho, ―Doing Business Indicators: Why Aggregate, and How to The ease of doing business index ranks economies Do It‖ (World Bank, Washington, DC, 2005). Principal components from 1 to 185. For each economy the ranking is and unobserved components methods yield a ranking nearly calculated as the simple average of the percentile identical to that from the simple average method because both rankings on each of the 10 topics included in the index these methods assign roughly equal weights to the topics, since the pairwise correlations among indicators do not differ much. An in Doing Business 2013: starting a business, dealing alternative to the simple average method is to give different weights with construction permits, getting electricity, to the topics, depending on which are considered of more or less registering property, getting credit, protecting importance in the context of a specific economy. Doing Business 2013 Malta 112 within each topic, giving equal weight to each of the ability of different government agencies to deliver 5 topic components. tangible results in their area of responsibility. If an economy has no laws or regulations covering a Economies that improved the most across 3 or more specific area—for example, insolvency—it receives a Doing Business topics in 2011/12 ―no practice‖ mark. Similarly, an economy receives a Doing Business 2013 uses a simple method to calculate ―no practice‖ or ―not possible‖ mark if regulation exists which economies improved the most in the ease of but is never used in practice or if a competing doing business. First, it selects the economies that in regulation prohibits such practice. Either way, a ―no 2011/12 implemented regulatory reforms making it practice‖ mark puts the economy at the bottom of the easier to do business in 3 or more of the 10 topics ranking on the relevant indicator. 6 included in this year‘s ease of doing business ranking. The ease of doing business index is limited in scope. It Twenty-three economies meet this criterion: Benin, does not account for an economy‘s proximity to large Burundi, Costa Rica, the Czech Republic, Georgia, markets, the quality of its infrastructure services (other Greece, Guinea, Kazakhstan, Korea, the Lao People‘s than services related to trading across borders and Democratic Republic, Liberia, Mongolia, the getting electricity), the strength of its financial system, Netherlands, Panama, Poland, Portugal, Serbia, the the security of property from theft and looting, Slovak Republic, Slovenia, Sri Lanka, Ukraine, the macroeconomic conditions or the strength of United Arab Emirates and Uzbekistan. Second, Doing underlying institutions. Business ranks these economies on the increase in their ranking on the ease of doing business from the Variability of economies‘ rankings across topics previous year using comparable rankings. Each indicator set measures a different aspect of the Selecting the economies that implemented regulatory business regulatory environment. The rankings of an reforms in at least 3 topics and improved the most in economy can vary, sometimes significantly, across the aggregate ranking is intended to highlight indicator sets. The average correlation coefficient economies with ongoing, broad-based reform between the 10 indicator sets included in the programs. aggregate ranking is 0.37, and the coefficients between any 2 sets of indicators range from 0.19 Distance to frontier measure (between dealing with construction permits and A drawback of the ease of doing business ranking is getting credit) to 0.60 (between starting a business that it can measure the regulatory performance of and protecting investors). These correlations suggest economies only relative to the performance of others. that economies rarely score universally well or It does not provide information on how the absolute universally badly on the indicators. quality of the regulatory environment is improving Consider the example of Canada. It stands at 17 in the over time. Nor does it provide information on how aggregate ranking on the ease of doing business. Its large the gaps are between economies at a single ranking is 3 on starting a business, and 4 on both point in time. resolving insolvency and protecting investors. But its The distance to frontier measure is designed to ranking is only 62 on enforcing contracts, 69 on address both shortcomings, complementing the ease dealing with construction permits and 152 on getting of doing business ranking. This measure illustrates the electricity. distance of an economy to the ―frontier,‖ and the Variation in performance across the indicator sets is change in the measure over time shows the extent to not at all unusual. It reflects differences in the degree which the economy has closed this gap. The frontier is of priority that government authorities give to a score derived from the most efficient practice or particular areas of business regulation reform and the highest score achieved on each of the component indicators in 9 Doing Business indicator sets (excluding 5 6 A technical note on the different aggregation and weighting Doing Business reforms making it more difficult to do business are methods is available on the Doing Business website subtracted from the total number of those making it easier to do (http://www.doingbusiness.org). business. Doing Business 2013 Malta 113 the employing workers and getting electricity The maximum (max) and minimum (min) observed indicators) by any economy since 2005. In starting a values are computed for the 174 economies included business, for example, New Zealand has achieved the in the Doing Business sample since 2005 and for all highest performance on the time (1 day), Canada and years (from 2005 to 2012). The year 2005 was chosen New Zealand on the number of procedures required as the baseline for the economy sample because it was (1), Slovenia on the cost (0% of income per capita) and the first year in which data were available for the Australia and 90 other economies on the paid-in majority of economies (a total of 174) and for all 9 minimum capital requirement (0% of income per indicator sets included in the measure. To mitigate the capita). Calculating the distance to frontier for each effects of extreme outliers in the distributions of the economy involves 2 main steps. First, individual rescaled data (very few economies need 694 days to indicator scores are normalized to a common unit: complete the procedures to start a business, but many th except for the total tax rate. To do so, each of the 28 need 9 days), the maximum (max) is defined as the 95 component indicators y is rescaled to (max − y)/(max percentile of the pooled data for all economies and all − min), with the minimum value (min) representing the years for each indicator. The exceptions are the getting frontier—the highest performance on that indicator credit, protecting investors and resolving insolvency across all economies since 2005. For the total tax rate, indicators, whose construction precludes outliers. consistent with the calculation of the rankings, the Take Ghana, which has a score of 67 on the distance to frontier is defined as the total tax rate corresponding th frontier measure for 2012. This score indicates that the to the 15 percentile based on the overall distribution economy is 33 percentage points away from the of total tax rates for all years. Second, for each frontier constructed from the best performances economy the scores obtained for individual indicators across all economies and all years. Ghana was further are aggregated through simple averaging into one from the frontier in 2005, with a score of 54. The distance to frontier score. An economy‘s distance to difference between the scores shows an improvement frontier is indicated on a scale from 0 to 100, where 0 over time. represents the lowest performance and 100 the frontier. The distance to frontier measure can also be used for comparisons across economies in the same year, The difference between an economy‘s distance to complementing the ease of doing business ranking. frontier score in 2005 and its score in 2012 illustrates For example, Ghana stands at 64 this year in the ease the extent to which the economy has closed the gap to of doing business ranking, while Peru, which is 29 the frontier over time. And in any given year the score percentage points from the frontier, stands at 43. measures how far an economy is from the highest performance at that time. Doing Business 2013 Malta 114 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Doing Business reforms News on the Doing Business project Short summaries of DB2013 business regulation http://www.doingbusiness.org reforms, lists of reforms since DB2008 and a ranking simulation tool Rankings http://www.doingbusiness.org/reforms/ How economies rank—from 1 to 185 http://www.doingbusiness.org/rankings/ Historical data Customized data sets since DB2004 Data http://www.doingbusiness.org/custom-query/ All the data for 185 economies—topic rankings, indicator values, lists of regulatory procedures and Law library details underlying indicators Online collection of business laws and regulations http://www.doingbusiness.org/data/ relating to business and gender issues http://www.doingbusiness.org/law-library/ Reports http://wbl.worldbank.org/ Access to Doing Business reports as well as subnational and regional reports, reform case Contributors studies and customized economy and regional More than 9,600 specialists in 185 economies who profiles participate in Doing Business http://www.doingbusiness.org/reports/ http://www.doingbusiness.org/contributors/doing- business/ Methodology The methodologies and research papers NEW! Entrepreneurship data underlying Doing Business Data on business density for 130 economies http://www.doingbusiness.org/methodology/ http://www.doingbusiness.org/data/exploretopics/e ntrepreneurship Research Abstracts of papers on Doing Business topics and More to come related policy issues Coming soon—information on good practices and http://www.doingbusiness.org/research/ data on transparency and on the distance to frontier Doing Business 2013 Malta 115