Following the last round of guidelines published by the Malta Financial Services Authority (MFSA) regarding the domiciliation of offshore funds to Malta in 2010, the island is now firmly established as a widely respected and highly attractive business environment for the funds industry. Legal and accounting expertise in Malta is well developed, all the major international accounting practices have a presence on the island and the labour force is generally regarded as one of the most skilled and versatile in Europe, offering well-trained, multilingual specialised and administrative staff. In addition, Malta is an established onshore jurisdiction forming an integral part of the EU single market in financial services, having been a member of the EU since 2004. It is also a member of the eurozone.
Malta has an enviable reputation which combines low-cost operation with a fast turnaround of applications and high quality of regulation and control.
Malta's regulatory framework is considered to be one of the strongest in the EU, with the country sharing honours with Denmark for the highest implementation rate of internal market directives. Malta has reinforced its image as a well-regulated, high-quality jurisdictional choice, yet still being able to offer operators the freedom to compete and innovate.
The island's industry is overseen by a single regulator, the MFSA, which was set up in 2002 to consolidate the work previously carried out by several agencies. The MFSA has a good reputation both as a regulator and also as being responsive to finance industry needs.
Other advantages include an internationally accepted tax regime with an extensive network of bilateral treaties, a unique legal system that combines the continental civil law system with Anglo Saxon commercial law principles, an excellent IT and communications infrastructure and good air links with other financial centres and surrounding markets.
"Malta is an established onshore jurisdiction Forming an integral part Of the eu single market In financial services, Having been a member of The eu since 2004"
Malta is therefore a viable and realistic competitor to other well-established jurisdictions such as Cayman, Luxembourg and Jersey for fund domiciliation business. Its strong infrastructure and high regulatory reputation were among the reasons why Vistra Group opened an office there, with Vistra's specialist subsidiary company, Vistra Fund Services, established to offer centralised administration of funds and providing bespoke administration solutions to fund managers. Vistra Group is a leading global provider of corporate, fund administration and outsourcing services with 27 offices spread across 20 jurisdictions. Specialist funds teams are based in Jersey, Luxembourg, Hong Kong and Singapore and are on hand to fully service the most critical aspects of their client's funds which may be domiciled in a range of locations, including Malta.
Malta's Investment Services Act provides the statutory framework for the licensing and supervision of collective investment schemes (CISs). A CIS requires a licence under the Act. There are, however, a number of exemptions from the need for a CIS licence which are applicable in particular circumstances. The applicant for a Maltese CIS must be 'fit and proper' and willing and capable to act in accordance to the laws of Malta, as well as any standard licence conditions attached to the licence issued. The test requires that senior staff demonstrate competence, integrity and solvency in their dealings. These requirements are required at the licensing stage and on an on-going basis thereafter.
Professional investor funds
A professional investor fund (Pif) is a type of CIS that can be set up as open- or closed-ended companies (Sicav or Invco) or as limited partnerships or unit trusts. The Sicav is the most widely used vehicle, particularly in the non-retail sector, and it can be structured to include master-feeder funds and umbrella funds with segregated sub-funds. The Pif consists of three categories, namely those promoted to qualified investors, extraordinary investors or experienced investors. Certain conditions must be satisfied in order to qualify under one of these three categories and hence to be able to invest in a Pif.
It is possible to redomicile existing funds from other jurisdictions to Malta. A Pif, provided that it is not a private company, may apply to a regulated market for a listing. A Pif which is established abroad, marketed exclusively abroad, and obtains a licence from the MFSA solely for the purposes of obtaining a listing on a regulated market must appoint a judicial representative in Malta.
Once established, Pifs are governed by the MFSA Investment Services Rules and benefit from a lighter form of regulation through exemptions from certain provisions. The Pif framework is used by hedge funds and for other forms of alternative investment.
Private collective investment scheme
A CIS which has a minimum of 15 participants is deemed to be 'private'. The participants must be close friends or relatives of the promoters and the scheme must be private in nature and must not qualify as a Pif. In such a case no licence is required but shall be subject to recognition in writing by the MFSA. Recognition is granted upon conclusion that the Maltese fund directors and other officers and participants are fit and proper persons. The identity of the ultimate beneficial owners must be disclosed to the MFSA. An external manager is not required and such funds cannot be listed on the Malta Stock Exchange.
These schemes target special sectors such as Malta venture capital or development funds, Malta money market funds, futures and options funds as well as Maltese property investment funds. There are many variations of the property investment type of fund such as funds which mainly invest in property management or property financing companies as well as foreign-based property funds which mainly invest in property and are promoted to Maltese investors.
"For fund managers Who require a european Domicile which will Allow them to market Their fund to private Investors through The eu area, a maltese Domiciled fund offers many advantages"
financing companies as well as foreign-based property funds which mainly invest in property and are promoted to Maltese investors.
Funds set up in Malta that have more than 15% of their assets situated outside Malta are not subject to tax on income and capital gains in Malta, other than on income from immoveable property situated in Malta. Fund managers and administrators, like any other company, can benefit from Malta's full imputation system. While the fund managers pay tax at the normal rate of 35%, the shareholders therein are entitled to claim a tax refund when the company distributes a dividend. This reduces the effective tax rate significantly.
For fund managers who require a European domicile which will allow them to market their funds to private investors through the EU area, Maltese-domiciled funds offer many advantages. Vistra Fund Services can help clients establish Maltese companies and provides a full range of fund administration services to obtain the desired objective from a tax, legal and commercial perspective.
As well as the full suite of administration services needed to establish a fund, Vistra Fund Services can also provide accounting, bookkeeping and trustee services, offering clients a tried and tested route to market.
Vistra Fund Services was also established to provide consultancy services alongside administration and its team of specialists are equipped to work closely with clients and their advisers to develop fund structure and its processes. As an independent service provider, they are free from many potential conflicts of interest: Vistra Fund Services do not manage proprietary funds, nor do they provide legal advice, tax advice, banking or investment services. Vistra Fund Services is focused solely on the core tasks of providing clients with 'virtual' middle- and back-offices and infrastructure.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.