Why is Malta a Member of the EU?

Whenever I speak with clients at Dr. Werner & Partners, the same question eventually comes up: Why Malta? Aside from the obvious lifestyle perks, it is usually Malta's EU membership and the associated tax advantages that make the country so attractive. But why exactly is a nation with a population smaller than a medium-sized European city a full member of the EU? I want to explore the reasons behind this.

Malta was tied to Europe long before joining

Even before Malta officially joined the EU in 2004, the country was economically intertwined with the bloc. At the time, 41% of all exports went to the EU, while 63% of imports came from it. Back then, however, few people—even officials here on the island—fully realized the potential lying dormant in this island state (more on that later). These export and import patterns haven't changed drastically since then, and relations with Italy, our most important trading partner, remain excellent.

A bridge to the Arab League and Libya

Malta and Cyprus joined the EU simultaneously. One strategic hope placed in their accession was that these nations would foster better relations with the Arab League. And indeed, this has proven true. Malta, with its unique language—Malti is a blend of Arabic and Italian roots—has always maintained close ties with Libya. In the past, Malta frequently served as a negotiating bridge between the EU and North Africa, particularly regarding oil and diplomatic relations with the former Libyan regime.

A vital geopolitical role—today and in WWII

Geopolitically, Malta has always punched above its weight. While it might seem less critical today than during the Second World War, it remains a key southern outpost. During the war, Malta was an unsinkable aircraft carrier for the British Royal Navy. It played a decisive role in November 1940, helping to neutralize half of the Italian battleship fleet. Although the island came under heavy siege and supply lines were stretched to the breaking point, the British forces held on. This allowed them to severely disrupt supply lines to German and Italian troops in North Africa, eventually turning the tide before the siege was lifted in late 1942.

EU accession and the Single Market: Opening doors for investors

For entrepreneurs in Europe, Malta's EU accession opened up entirely new possibilities. Malta realized early on that it couldn't compete with the heavy industry of larger EU nations. Instead, it leveraged its status as the smallest EU member state to play to its strengths. Through competitive tax structures like the Malta Limited, the island began attracting foreign investors who benefit from an effective tax rate of—in the ideal scenario—5%. It was the EU's free Single Market that made this model possible. So, while Malta has certainly benefited economically from the EU, the island is by no means insignificant to the Union in return.