Collective investment Schemes
Malta is distinguished as a serious and extremely adaptable jurisdiction in the field of financial services. The development of Malta as the jurisdiction of choice for various types of collective investment schemes has been greatly aided by the efforts of the local financial services authority, the MFSA, which adopts a prudent but flexible approach, providing a solid regulatory framework whilst encouraging progress and innovation.
Collective Investment Schemes (CISs) are arrangements having as their object the collective investment of capital acquired by means of an offer of units for subscription, sale or exchange. They operate according to the principle of risk spreading, and the contributions by the participants, and the income payments made to them, are pooled. Units may be re-purchased or redeemed continuously or at short intervals, out of the assets of the Scheme at the request of the unit holder. Units may also be issued continuously or at short intervals.
A Scheme which does not actively spread its risk may still be allowed to operate if its units are offered only to license holders and/or persons who deal in similar investment instruments or property as part of their ordinary business, or who are themselves exempt from an investment services license.
A Maltese CIS can be formed using various legal structures, specifically:
- SICAV: a collective investment company with variable share capital
- INVCO: a collective investment company with fixed share capital
- Unit trust
- Mutual fund: established by means of contractual agreement
- Limited partnership
There are 4 Types of Schemes, namely, the Professional Investor Funds, Private Schemes, Specialist Schemes and Retail Funds.
A Professional Investor Fund (hedge fund) consists of 3 categories, those existing to qualifying investors, to extraordinary investors and to experienced investors. There is the possibility of re-domiciling existing hedge funds from other jurisdictions to Malta. Continuity of the fund and its investment is guaranteed.
Private Schemes are collective schemes whereby the participants are close friends or relatives of the promoters and is private in nature and does not qualify as a Professional Investor Fund. The maximum number of participants is 15.
Specialist Schemes target a special sector such as venture capital and development funds. Retirement Funds and Schemes are also included.
Retail Funds are funds whereby investments are gathered from the public. They can be registered as Single or Umbrella Funds.
They require a low initial capital requirement, have very competitive licensing costs. There is also the possibility of using foreign Custodians and Fund Managers, and the possibility of listing shares on the Malta Stock Exchange.
One can benefit from a number of fiscal incentives applicable to Malta Funds and their investors. Advance revenue rulings may be obtained as to the tax treatment of transactions involving financial instruments and international business. These rulings apply for 5 years and may be renewed for a further 5 years. Such rulings also survive any change in the relevant legislation for a maximum period of 2 years.
Corporate funds and unit trusts are exempt from tax in Malta. In case of SICAV, one may opt to pay tax on its income in Malta. Thus would be chargeable to tax at 25% and is entitled to treaty relief. Capital gains realized by the funds are exempt from tax in Malta.
At Charles Scerri & Associates, we provide assistance throughout the setting up process and on an ongoing basis thereafter. We will also assist you during the MFSA application process and to obtain the relevant licenses and authorisations required and the preparation of all documentation as per laws and regulations in Malta.
It is emphasised that the above is intended only as general information and cannot substitute any professional advice on the matter in respect to particular situations.