Malta is rapidly developing into an efficient and attractive hedge fund jurisdiction with the number of funds being managed from Malta growing year after year. The robust financial services sector, Malta's efficient and approachable regulator, the several tax benefits, and the general flexibility offered by the legislation have all contributed to this success.
Malta has adopted the UCITS directive and hence offers the possibility of retail funds which can be sold cross-border within the EU.
Furthermore, the biggest growth has been in the non-UCITS funds since Malta one of the first European jurisdictions to introduce a specialised regime for professional investor funds (PIFs). Low set-up costs, efficient regulation, a beneficial tax treatment and Malta’s specialised professionals give the Maltese domicile a competitive edge.
Professional Investor Funds (PIFs)
A Prospectus is not needed as long as the fund issues an Offering Document.
The PIF regime provides for three types of funds:
- Experienced Investor Funds.
- Qualifying Investor Funds
- Extraordinary Investor Funds
Extraordinary Investor Funds are suitable vehicles for hedge funds, with no investment or borrowing restrictions and a minimum entry level of €750,000 or equivalent (for each fund member or joint fund members).
Qualifying Investors Funds similarly have a minimum initial investment of €75,000 or equivalent. A benefit of both these types of funds is that there is no requirement to appoint a Custodian/Prime Broker as long as the Directors ensure that there are adequate safekeeping arrangements which must be described in the Offering Document.
Experienced Investor Funds must appoint a custodian and the minimum investment (per member) is of €15,000 or equivalent .
Since professional investor funds are not intended for the general public, they are not burdened with the kind of restrictions usually imposed on retail funds thus offering greater flexibility.
Favourable tax treatment - A Malta domiciled fund enjoys an exemption from income tax and capital gains tax at both the fund level and at a non-resident investor level. No tax is withheld on investment income received by non-prescribed funds (meaning a fund which invests predominantly out of Malta). Furthermore, non-residents receiving dividends out of a locally based, non-prescribed fund suffer no withholding tax on such income and do not pay any capital gains upon a dispose of their investment.
No stamp duty: There is also no stamp duty charged on share issues or transfers and no tax on the net asset value of the scheme.
Mobility: Funds may also be re-domiciled or migrated from other jurisdictions to Malta ensuring the continuity of the fund and its investments.
Various forms: A number of vehicles may be used to set up a Malta registered fund such as open-ended and closed-ended corporate entities, trusts and limited partnerships. Furthermore funds may be set up as multi class protected cell companies or umbrella funds. A corporate entity is usually preferred due to the separate legal personality and the flexibility it offers.
Flexibility: There are no residence requirements for any of the fund’s service providers other than the need for a local judicial representative. So the manager, investment advisor, prime broker, administrator or custodian may be based outside Malta.
Self Managed option: Promoters of a fund have the option to utilise a self-managed corporate fund wherein there would be no need for the Fund Manager to have actual presence in Malta. A self-managed fund also offers the benefit of retaining full control (through the Board), whilst appointing skilled individuals to the advisory committee according to the particular array of underlying assets.
Flexibility of underlying Assets: The Fund may hold a variety of assets such as securities, bonds, derivatives, money instruments, debt instruments, other funds, tangible movables and immovable property.
Requirements for the different classes of Investors
‘Extraordinary investors’ include corporate or non-corporate entities, groups, trusts or individuals having net assets in excess of € 7.5 million (or equivalent). Senior employees or Directors of the fund are also recognised as Extraordinary investors. Other Extraordinary PIFs are deemed to be Extraordinary investors, as are Special Purpose Vehicles owned by persons qualifying themselves as ‘Extraordinary investors’.
'Qualifying investors’ include corporate or non-corporate entities, groups, trusts or individuals having net assets in excess of € 750,000 (or equivalent); or persons who have reasonable experience in the acquisition and/or disposal of funds of a similar nature or risk profile or property similar to the underlying assets of the PIF in question. Relatives and close friends of the promoters (up to ten), and senior employees or directors of the fund, are also recognised as Qualifying investors. Furthermore entities having more than € 3.75 million under their discretionary management, other PIFs promoted to Qualifying or Extraordinary investors and any Special Purpose Vehicle owned by person qualifying themselves, all qualify as ‘Qualifying investors’.
‘Experienced investors’ are persons who have the expertise, experience and knowledge to be in a position to make their own investment decisions and understand the risks involved. These include persons who have at least one year relevant work experience in a professional position in the financial sector; persons who have reasonable experience in the acquisition and/or disposal of funds of a similar nature or risk profile as the assets to which the PIF in question is related, or persons who have in the past years carried out investment transactions of a significant size and frequency (for example, a person who within the past 2 years carried out transactions amounting to at least €50,000 at an average frequency of 3 per quarter).
How we can help
Advocates Primei offers assistance in the planning (especially in devising a flexible yet secure structure), the setting up process and obtaining a licence.
The planning includes assistance in the decisions as to the appointment or otherwise of a custodian, manager, administrator and the appointment of the advisory committee. The role of these functionaries must be identified and included in the offering document submitted with the application.
We can help in the formation of the vehicle itself and the eventual drafting of all necessary applications, offering document, Personal Questionnaires, delegation agreements etc.
Advocates Primei may propose suitable personnel to act as local Directors and local representatives of corporate funds. We can also provide the necessary registered office and company secretary for the company.
We can also help the promoters identify suitable service providers.
Kindly Contact Us now for further information and advice.