[e.g. Maltese]

Regulation, transparency and good governance: Malta offers the key advantages that today’s investors are looking for. At the same time, the country provides a less costly domicile for the establishment of funds investing in emerging and established markets, for fund administration and for global custody services provided to these funds.

EU membership in 2004 and the subsequent adoption of the euro in January 2008 provided the crucial catalyst for the development of Malta’s fund industry in the first place. The Finance Centre’s regulatory framework was approved by the EU and passporting rights for funds introduced.

Choice of fund structures

Malta’s legislation, the Investment Services Act and subsidiary legislation, provides for the setting up of UCITS and no-UCITS retail funds as well as Professional Investor Funds (PIFs). However most funds are either set up as UCITS or as PIFs.rycerz3

Maltese UCITS schemes are retail funds marketed to the general public. They must comply with obligations relating to the diversity of investments and the liquidity of the scheme and are also subject to restrictions on eligibility of assets.

PIFs are non-retail funds for financially literate, high-net-worth investors. They are not regulated as tightly as UCITS. Hedge funds, probate equity funds and property funds usually take the form of PIFs. The PIF regime caters for three classes of funds targeting experienced investors, qualifying investors and extraordinary investors.

Innovative vehicles

Maltese registered funds can be formed in a number of possible vehicles, including open-ended and closed-ended corporate entities, contractual funds and limited partnerships. The investment company with variable share capital (SICAV) is to date 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. Earlier in 2011, Malta also enacted new regulations which make it possible for a fund to be constituted as an Incorporated Cell Company (ICC).

Asset management companies in Malta have already launched fund platforms exclusively open to family offices and third-party mangers to provide them with an efficient and cost-effective solution to enter the market. The platforms are usually registered as PIFs, while clients can choose their own service provider fot the management of their segregated sub-funds.

Tax-efficient environment

Funds set up in Malta that have more than 15 per cent of their assets invested abroad are not subject to tax on income and capital gains in Malta. Fund managers and administrators, like any other company, can benefit from Malta’s full imputation system. While they will have to pay at the normal rate of 35 per cent, shareholders are entitled to a tax refund when the company distributes a dividend which reduces the effective tax rate  significantly. This makes Malta one of the most attractive jurisdictions for retail and non-retail investment funds and their promoters.