Malta UCITS Funds
Introduction
Malta is an emerging fund jurisdiction that offers a favourable European onshore location for structuring and servicing retail and non-retail funds. The Malta Financial Services Authority (MFSA) is the single regulator of the financial services industry and has a reputation as a strong, efficient and approachable regulator. The MFSA is responsible for the licensing, regulating and supervision of all collective investment schemes. Malta‘s reputation has comparably cheaper set-up and listing costs, together with a beneficial tax treatment.
Malta has a favourable tax regime and a comprehensive Double Tax Treaty network. English is the official business language and all laws and regulations are published in English. The Maltese islands are situated in the heart of the Mediterranean and are easily accessible.
A Maltese registered Collective Investment Schemes (CIS) may be formed in a number of possible vehicles such as an open ended or closed ended corporate entity, a trust, and even a partnership. Apart from the locally oriented CISs Malta offers a good jurisdiction for UCITS schemes. EU membership in 2004 brought the European stamp of approval to Malta‘s financial legislation and it enabled passporting rights for Undertakings for Collective Investments in Transferrable Securities (UCITS) certified funds. Appropriately certified funds can be freely distributed and marketed in Malta and other EU jurisdictions.
The favoured vehicle for Maltese UCITS is the corporate entity with a variable share capital, known as SICAV. The setting up of such entity may be done through the appointment of a Maltese domiciled fund manager or else, to be able to have a designated management company in another state Malta offers the possibility of having self-managed funds combined with delegation arrangements. Self-managed funds must be formed as corporate entities and management would be the responsibility of the Board of Directors, which can in turn delegate a number of management functions to an external management company which is authorised in any EU Member State and recognised in Malta.
The original UCITS Directive applied only to the product, i.e. the fund, and not to the management company. The second Directive, the Management Directive is intended to bring management companies of UCITS into line with other investment firms which have had the benefit of the single passport under the Investment Services Directive. The Management Directive also provides a simplified marketing regime for UCITS which includes the introduction of a short form prospectus.
For tax purposes, a fund or a sub-fund of a collective investment scheme may be classified as a prescribed or a non-prescribed fund. Essentially a fund in a locally based scheme is classified as a prescribed fund if the value of the assets situated in Malta is at least 85% of the value of the total assets. Other licensed funds, including all funds in overseas based schemes, are classified as non-prescribed funds. All income of collective investment schemes is exempt from tax in Malta except for a withholding tax applicable to local investment income in the case of prescribed funds.
Local investment income (excluding dividends) derived by prescribed funds is subject to a final withholding tax being of 15% in the case of bank interest and 10% in the case of other investment income. Furthermore no tax is payable by the investors when they dispose of their investment or when they receive a dividend out of such profits.
On the other hand no tax is withheld on investment income received by non-prescribed funds. However, tax is payable by the Maltese resident investors in such funds when they dispose of their investment or when they receive a dividend.
This tax qualifies, subject in certain conditions, for a 15% rate under the final withholding tax system. Non-residents receiving dividends out of a locally based, non-prescribed scheme suffer no withholding tax on such income.
Fides Corporate Services offers assistance in the planning the setting up process and licence application submission.
Our input may be necessary in relation to the formation of the vehicle itself and the eventual drafting of all necessary applications, offering document, Personal Questionnaires, Offering Memorandum, etc.
Fides Corporate Services may help the promoters in their selection of and dealings with local Fund Managers and/or Administrators and Custodians. Alternatively the Board of Directors may assume the Management function of the fund according to the terms of the licence. In such a scenario Fides Corporate Services can offer qualified personnel to aid the Board in assuming such a Management function.