Malta is becoming increasingly popular as a fund jurisdiction as more funds, notably hedge funds, choose Malta as their domicile. EU membership has positioned Malta on a level playing field with other member states. Through the UCITS directive, membership means the jurisdiction can offer pass porting rights so that investment services and UCITS schemes may be registered in Malta and then offered to any EU country.
The growth in Malta is not only being driven by new fund set-ups but also as a result of funds being re-domiciled from non-EU jurisdictions to Malta, some of which are being converted to UCITS platforms. These achievements are the result of a number of key factors, including the high standards of regulatory oversight, the presence of an accessible regulatory body, the availability of highly qualified and multilingual staff, and the highly competitive set up and ongoing operational costs.
PIFs set up in Malta are required to issue an Offering Document, intended to provide sufficient information to enable a potential professional investor to make an informed investment decision. A Fund Manager and a Custodian need not be appointed.
Current legislation classifies collective investment schemes as Prescribed funds, being funds which consist of more than 85% of the value of their assets situated in Malta; and Non-prescribed sub-funds - all other funds that do not qualify as prescribed funds.
Taxation of Collective Investment Schemes in Malta
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. Any income and capital gains (other than on profits and capital gains relating to immovable property situated in Malta) is exempt from Maltese Income Tax. Capital gains to non-Maltese resident investors and the distribution of profits by these funds to non-Maltese resident investors (provided that such persons are not owned and controlled or else act on behalf of persons who are ordinarily resident and domiciled in Malta) are not subject to withholding tax. Local investment income (excluding dividends) derived by prescribed funds is subject to a final withholding tax of 15% in the case of bank interest and 10% in the case of other investment income. Furthermore, no taxation is charged on capital gains on the sale of shares or units by residents provided such shares/units are listed on the Malta Stock Exchange. From a Value Added Tax (VAT) perspective, the supply of services consisting of the management of collective investment scheme, which are limited to those activities that are specific and essential to the core activity of the Scheme, are exempt from VAT.