TerraLex Guide to Foreign Direct Investment - NEW

FDI is regulated in Malta both on a national and supranational level. The National Foreign Direct Investment Office Screening Act (Chapter 620, Laws of Malta) (the “Act”) is the primary source of law regulating FDI in Malta and establishes the domestic legal framework and procedures relating to FDI notifications, screening, review timelines, consequences of non-notification and rights of redress, among other items.

The Act is in turn largely based on the provisions of the EU FDI regime as set out in Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union, which was amended by Regulation (EU) 2026/1386 of the European Parliament and of the Council of 17 June 2026 on the screening of foreign investments in the Union and repealing Regulation (EU) 2019/452.

Regulation (EU) 2026/1386 is a binding legal act of the European Union and is thus directly enforceable as law in all member states, including Malta.

The National Foreign Direct Investment Screening Office (“NFDISO”) is the competent Maltese authority overseeing FDI in Malta. The onus on determining whether a notification is required lies on the foreign investor and the target undertaking in which the investment is contemplated.

While the NFDISO encourages an open dialogue and will sometimes guide foreign investors on whether a filing is required, the obligation to carry out the analysis, and the repercussions for non-notification among others, will ultimately rest on the foreign investor and the target undertaking.

The Act applies to certain FDIs made or planned to be made in Malta. An FDI is defined as “an investment of any kind by a foreign investor aimed at establishing or maintaining lasting and direct links to carry on an economic activity in Malta, including investments enabling effective participation in the management or control of a company carrying out an economic activity [in Malta] and any investments made pursuant to a public procurement process”. It applies to greenfield investments, direct and indirect acquisitions. Internal reorganisations may also fall within the remit of the Act if the relevant criteria are met. Portfolio investments are however exempt.

A “foreign investor” is defined as a natural person or an undertaking of a third (non-EU) country intending to make, or having made, an FDI in Malta.

Where a foreign investor plans an investment that affects any of the factors or activities listed in the Schedule to the Act, a notification will be required. Notification is also required where, following a prior (non-notifiable) investment having been made in Malta, the business activity of the foreign investor changes so as to affect any of those factors or activities.

Notification is further required where: (i) following an investment affecting the scheduled factors or activities by a non-foreign investor having previously been made, the ownership structure of the investor changes such that at least 10% becomes owned or controlled (directly or indirectly) by a foreign investor; and (ii) where the direct or indirect controlling interest of a company or group changes and passes to a foreign investor.

The Act defines “management or control” as the possibility of exercising decisive influence on an undertaking, in particular: (i) through ownership or the right to use all or part of the assets of an undertaking; or (ii) through rights or contracts which confer decisive influence on the composition, voting or decisions of the organs of an undertaking; provided that even persons or undertakings not holding such rights or entitled to such rights under the contract concerned are deemed to have acquired control if they have the power to exercise the rights deriving therefrom.

The Act does not specify a precise point at which notification must occur, specifying only that it must be made “prior to carrying out the investment”. In practice, notification is commonly made once it is sufficiently determined that an investment will be made, such as immediately following execution of a share purchase agreement or similar transaction documents.

It is increasingly common to include the NFDISO approval as a condition precedent to completion in the relevant transaction documents.

The NFDISO requires notification to be made through the submission of a notification form that is accessible here: https://nfdis.mt/notification-form/. The form substantially reflects the “Request for information from the investor for the purposes of notifications pursuant to Article 6 of Regulation (EU) 2019/452” form issued by the European Commission, as updated from time to time.

The information to be provided includes the ownership structure and ultimate beneficial ownership of the investor, the value of the investment, the products, services and business operations of the foreign investor, and the source of funds for the investment. In addition, the NFDISO may request any other information it reasonably requires to determine whether a transaction will affect Malta’s security or public order.

The Act puts the onus of notification on “foreign investors and all persons involved in a foreign direct investment”. The notification is thus a joint effort, since information needs to be provided by both the investor and the target group. In practice, the initiative is typically led by the incoming investor (through its counsel). 

Yes. Where any of the persons involved in a foreign direct investment fail to notify the NFDISO, the investment shall automatically be considered to be in violation of the provisions of the Act and the NFDISO may, at its own discretion, take all necessary measures to unwind the said investment.

The NFDISO may also impose administrative penalties ranging from not less than €5,000 to not more than €50,000 for failure to notify.

Yes. Where notifiable, the parties are not allowed to complete the transaction until the investment has been notified to the NFDISO, it has been duly reviewed and the NFDISO has provided its clearance (whether subject to conditions or unconditional).

Should the parties proceed with the transaction prior to having obtained clearance, the NFDISO may, at its own discretion, take all necessary measures to unwind the said investment and also impose administrative penalties as described above.

The Act sets out the instances where mandatory notification is required. However the Act also allows the NFDISO to commence its own ex officio investigations where it deems necessary to ascertain compliance with the provisions of the Act. 

Following notification, the NFDISO will review the transaction and will either: (i) determine that the investment will not be subject to screening, in which case the parties may proceed with the transaction; (ii) determine that the investment will be subject to screening, in which case it will also trigger the EU cooperation mechanism under Regulation (EU) 2026/1386.

At the end of the screening procedure, the NFDISO will either: (i) approve the investment unconditionally; (ii) approve the investment subject to certain conditions that it may impose; (iii) prohibit or unwind the investment on the grounds that it could negatively impact Malta’s security or public order.

The conditions that the NFDISO might impose vary widely and depend on the specifics of the investment. Such conditions might include the imposition of regular reporting requirements, prohibition of certain future divestments, prohibiting the investor or target entity from engaging in certain business sectors etc.

Where the NFDISO decides to authorise an FDI subject to one or more conditions, it will issue a decision and allow “reasonable time for the foreign investor to take all necessary measures in order to satisfy the said conditions”. Should the foreign investor fail to satisfy the conditions imposed by the NFDISO within the prescribed time, the NFDISO shall prohibit or unwind the FDI. The wording in this proviso (shall, not may) is noteworthy. It appears that in such cases the NFDISO does not have discretion whether or not to prohibit or unwind the investment. The wording categorically indicates that the NFDISO must prohibit or unwind.

Further, should the foreign investor fail to satisfy the conditions imposed by the NFDISO within the prescribed time, the investor shall be liable to an administrative penalty of five hundred euro (€500) for every day that elapses from the date stipulated by the NFDISO.

Yes. Article 18 of the Act provides a check and balance to such power by granting a foreign investor the right to appeal the NFDISO’s decision before the Administrative Review Tribunal. The Tribunal would then be expected to examine whether the NFDISO’s conditions or prohibition were justified and proportionate in the circumstances. As an additional safeguard, both the foreign investor and the NFDISO may also appeal the decision of the Administrative Review Tribunal (on points of law) by filing proceedings before the Court of Appeal (Inferior Jurisdiction).

The NFDISO must determine within 5 days of notification whether the investment will be subject to screening. In doing so it assesses whether the investment may affect Malta’s security or public order based on the relevant activities and factors. The NFDISO may also request additional information, clarifications or explanations as necessary.

Where the NFDISO determines that an FDI is not subject to screening, it must notify the foreign investor within 5 business days of its decision. Where it determines that an FDI should be screened, it must notify the investor within 5 business days and trigger the cooperation mechanism under the EU FDI Regulation. 

Within 60 calendar days, the NFDISO must determine whether the FDI could affect Malta’s security or public order. This period is however paused when the NFDISO makes a request for further information (a stop-the-clock event). The period may also be extended (indefinitely) by the NFDISO if it deems this necessary. Any such extension must however be justified on the basis that this is in the interest of preserving the security and public order of Malta.

Information and documents disclosed pursuant to an FDI procedure remain fully confidential. Indeed, the Act obliges every person having an official duty or being employed by the NFDISO to treat all documents and information received pursuant to the FDI procedure as secret and confidential. 

The only proviso to the above is that such documents or information may be disclosed in the course of a prosecution for any offence committed in relation to the Act, or where ordered by the Maltese Courts of Justice.

There are no other regimes governing foreign direct investment in Malta. However it should be noted that, as an EU member state, Malta is subject to the provisions of Regulation (EU) 2022/2560 of the European Parliament and of the Council of 14 December 2022 on foreign subsidies distorting the internal market (the Foreign Subsidies Regulation).