Malta’s status as a recognised fund domicile was established with the island’s accession to the European Union in May 2004. EU membership positioned Malta on a level playing field with other EU countries and introduced “passporting rights” so that investment services and UCITS schemes may be registered in Malta and passported to any EU country. Prior to EU accession only four hedge funds were domiciled in Malta. Currently, over 400 investment services licences have been issued.
The Malta Financial Services Authority’s (MFSA) regulatory regime for collective investment schemes caters for two principal classes of schemes – retail schemes (Maltese non-UCITS Schemes and Maltese UCITS Schemes) and Professional Investor Funds (PIFs). PIFs are subject to a significantly lighter and more flexible regime than retail funds in respect of set up rules and restrictions on their investment or borrowing powers. Hedge funds, funds of funds, private equity funds and property funds are typically set up as PIFs in Malta.
PIFs can be sold only to investors who satisfy the minimum investment threshold: “experienced investors” are subject to a minimum of €10,000 or currency equivalent; “qualifying investors” to €75,000; and “extraordinary investors” to €750,000. When Malta transposed the EU’s Alternative Investment Fund Managers Directive (AIFMD) in June 2013, the MFSA decided to retain its PIF regime, alongside the AIFMD, providing managers with two fund structures. As a result PIFs managed by EU AIFMs that are in conformity with AIFMD will be able to passport in the EU.
Malta-domiciled PIFs enjoy the benefits of no income tax or capital gains tax at both the fund level and at non-resident investor level, and no stamp duty is charged on share issues or transfers. For non-prescribed funds (funds in which more than 15% of the value of the funds’ assets are situated outside Malta), there is no tax on investment income and no withholding tax for non-resident investors receiving dividends. Non-resident investors are not subject to any taxation on disposal of their investment in the PIF.