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Key Data About Malta
- Malta became a member state of the EU in May 2004 and joined
the Euro Zone in 2008. - English is widely spoken and written in Malta and is the
principal language for business.
Factors Contributing to Malta’s Competitive
Advantage
- Robust legal and regulatory environment with a legislative
framework in line with EU Directives. Malta incorporates both
jurisdictional systems: civil law and common law, as business
legislation is based on English law principles. - Malta boasts a high level of education with graduates
representing a cross-section of the various disciplines related to
financial services. Specific training in financial services is
offered at various post-secondary and tertiary education levels.
The accounting profession is well-established on the island.
Accountants are either university graduates or in possession of a
certified accountant qualification (ACA/ ACCA). - A proactive regulator that is very approachable and business
minded. - An ever-growing supply of high-quality office space for rent at
prices cheaper than in Western Europe. - Malta’s development as an international financial centre
is reflected in the range of financial services available.
Complementing the traditional retail functions, banks are
increasingly offering; private and investment banking, project
finance, syndicated loans, treasury, custody, and depositary
services. Malta also hosts several institutions specialising in
trade-related products, such as structured trade finance, and
factoring. - Maltese standard time is one hour ahead of Greenwich Mean Time
(GMT) and six hours ahead of US Eastern Standard Time (EST).
International business can therefore be managed smoothly. - International Financial Reporting Standards, as adopted by the
EU, are entrenched in company legislation and applicable since
1997, so there are no local GAAP requirements to deal with. - A very competitive tax regime, also for expatriates, and an
extensive and growing double taxation treaty network. - No restrictions on the granting of work permits for non-EU
nationals.
Malta Hedge Funds: Professional Investor Funds (PIF)
Maltese legislation does not directly refer to hedge funds.
However, Malta hedge funds are licensed as Professional Investor
Funds (PIFs), a collective investment scheme. Hedge funds in Malta
are usually set up as open or closed-ended investment companies
(SICAV or INVCO).
The Malta Professional Investor Funds (PIFs) regime consists of
three categories: (a) those promoted to Qualifying Investors, (b)
those promoted to Extraordinary Investors, and (c) those promoted
to Experienced Investors.
Certain conditions need to be satisfied to qualify under one of
these three categories and therefore to be able to invest in a PIF.
PIFs are collective investment schemes designed for professional
and high-net-worth investors with a certain degree of expertise and
knowledge in their respective positions.
Definition of a Qualifying Investor
A “Qualifying Investor” is an investor who fulfils
the following criteria:
- Invests a minimum of EUR 100,000 or its currency equivalent in
the PIF. This investment may not be reduced below this minimum
amount at any time by way of a partial
redemption; and - Declares in writing to the fund manager and the PIF that said
investor is aware of, and accepts the risks associated with the
proposed investment; and - Satisfies at least one of the following:
- A body corporate that has net assets in excess of EUR 750,000
or part of a group that has net assets in excess of EUR 750,000 or,
in each case, the currency equivalent
thereof; or - An unincorporated body of persons or associations with net
assets in excess of EUR 750,000 or the currency
equivalent; or - A trust where the net value of the trust’s assets is more
than EUR 750,000 or the currency
equivalent; or - An individual whose net worth or joint net worth combined with
his/her spouse exceeds EUR 750,000 or the currency
equivalent; or - A senior employee or director of a service provider to the
PIF.
What are Malta PIFs Used for and What are their Benefits?
PIFs are often used for hedge fund structures with underlying
assets ranging from transferable securities, private equity,
immovable property, and infrastructure. They are also commonly used
by funds engaging in cryptocurrency trading.
PIFs offer many benefits, including:
- PIFs are intended for professional or high-worth investors and
do not therefore have the restrictions usually imposed on retail
funds. - There are no investment or leverage restrictions and PIFs can
be set up to hold just one asset. - There is no requirement to appoint a Custodian.
- A fast-track licensing option available, with approval within
2-3 months. - Can be self-managed.
- May appoint administrators, managers, or service providers in
any recognised jurisdictions, members of the EU, EEA, and
OECD. - Can be used to set up for virtual currency funds.
There is also the possibility of re-domiciling existing hedge
funds from other jurisdictions to Malta. In this way, the
fund’s continuity, investments, and contractual arrangements
are continued.
Malta Alternative Investment Funds (AIF)
AIFs are collective investment funds that raise capital from
investors and have a defined investment strategy. They do not
require authorisation under the Undertakings for the Collective
Investment in Transferable Securities (UCITS) regime.
The recent transposition of the Alternative Investment Fund
Directive (AIFMD), through amendments to the Investment Services
Act and the Investment Services Rules and the introduction of
subsidiary legislation has created a framework for the management
and marketing of non-UCITS funds in Malta.
The scope of the AIFMD is broad and covers the management,
administration, and marketing of AIFs. However, it mainly covers
the authorisation, operating conditions, and transparency
obligations of AIFMs and the management and marketing of AIFs to
professional investors throughout the EU on a cross-border basis.
These types of funds include hedge funds, private equity funds,
real estate funds, and venture capital funds.
The AIFMD framework provides a lighter or de minimis regime for
small AIFMs. De minimis AIFMs are managers who, whether directly or
indirectly, manage portfolios of AIFs whose assets under management
collectively do not exceed the following amounts:
1) €100 million; or
2) €500 million for AIFMs managing only unleveraged AIFs,
with no redemption rights exercisable within five years from the
initial investment in each AIF.
A de minimis AIFM cannot use the EU passporting rights deriving
from the AIFMD regime.
However, any AIFM whose assets under management fall below the
above thresholds, may still opt into the AIFMD framework. This
would render it subject to all of the obligations applicable to
full-scope AIFMs and enable it to use the EU passporting rights
deriving from the AIFMD.
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.
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