Mr. Michael Bianchi
Director in Audit and Assurance

Michael is specialised in Investment Management Services working within Deloitte’s Financial Services Practice. During this time Michael worked for two years with Deloitte in London, managing a number of multi-national companies in the Insurance and Investments Management Practice prior to returning to Deloitte Malta in 2009.

Michael services a broad client base both locally and internationally and is responsible for the statutory and non-statutory audits of a number of clients, including Collective Investment Schemes, Investment Management Companies and Fund Administrators as well as other regulated and non-regulated entities.

Michael coordinates various international engagements where he has developed numerous connections within the Deloitte Network. Michael also Chaired the FSI sub- Committee at the Malta Institute of Accountants for two years and is now Chairing the Sustainable Finance sub- Committee at the Institute. Michael is also Deloitte Malta’s Sustainability Leader.

Mr. Craig Schembri
Leader Tax – Mergers & Acquisitions

Craig joined Deloitte Malta’s tax function in 2003 after graduating with a Bachelors Degree in Accountancy (Hons) from the University of Malta.

Craig leads the firm’s Tax – Mergers and Acquisitions function and is also heavily involved in advising a portfolio of local and international corporate clients operating in various industries on Maltese direct tax matters, mainly relating to corporate groups’ shareholding and operational restructuring, vendor/buyer tax due diligence services, and transaction advisory/tax structuring projects.

Craig is currently the chairperson of the Malta Institute of Accountants Direct Tax Committee

Ms. Emma Bartolo
Senior Manager in Audit & Assurance

Emma joined Deloitte Malta in 2010 as a senior auditor, after graduating with a Bachelor of Accountancy (Hons.) from the University of Malta.

She has been involved in both local and international audits predominately within the financial services sector, involving mainly alternative investment funds, investment management companies and other institutions such as licensed stockbrokers. At the end of 2014, Emma took over the role as a regulatory specialist within the financial services industry, with particular focus on the asset management sector.

Emma is also a member of the Financial Services Committee set up by the Malta Institute of Accountants.

A Jurisdiction of Choice for Funds and Asset Management

Jurisdiction highlights

Malta has established itself as one of Europe’s domiciles for investment funds, asset managers and asset servicing providers generally. The jurisdiction offers a versatile range of investment structures that can be tailored to meet the various demands of fund promoters and boasts a financial services regulator which has a reputation of being approachable and receptive.

All in all, its robust and efficient regulatory infrastructure, access to the EU single market, educated English-speaking workforce and promising economic outlook, make Malta an attractive jurisdiction for the funds and asset management sector.

Corporate vehicles for funds

Malta’s legislation provides for the establishment of a wide variety of fund vehicles, as follows:

• Unit Trust;
• Recognised Incorporated Cell Company (RICC);
• Limited Partnership;
• Contractual Fund;
• Investment Company with Fixed Share Capital (INVCO); and
• Investment Company with Variable Share Capital (SICAV).

The SICAV is the most commonly used fund vehicle in Malta due to its unique corporate features, as well as certain additional advantageous features which facilitate the issuance and redemption of units without lengthy corporate processes; particularly its flexible share capital structure which, by definition, is equivalent to the net asset value of the scheme.

A SICAV may also be set up as an ‘umbrella’ or multi-fund company whereby the share capital may be divided into different classes of shares, where one class or group of classes of shares constitute a distinct sub-fund of the company. In this way, the scheme may operate a number of separate sub-funds having different investment objectives, whereby one may elect to have the assets and liabilities of each sub-fund constituting a patrimony separate from the assets and liabilities of each other sub-fund of the same multi-fund company. In addition, a SICAV may also be established as a cell company, enabling each sub-fund to be set up as a separate incorporated cell having separate legal and juridical personality from the other sub-funds.

Regulatory frameworks for non-retail funds

Frameworks for full-scope Alternative Investment Fund Managers (AIFMs)

As an EU jurisdiction having fully transposed the Alternative Investment Fund Managers Directive¹Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 (AIFMD) into its regulatory framework, Malta offers fund managers the ability to set-up fully compliant AIFMD fund structures, in the form of a standard Alternative Investment Fund (AIF) that is licensed by the Malta Financial Services Authority (MFSA).

In addition, for AIFMD-compliant fund managers, Malta also offers a more efficient route to market in the form of its Notified Alternative Investment Fund (NAIF) Framework. NAIFs in Malta are exempted from licensing with the MFSA, being subject to a short notification process and certain limited regulatory restrictions. The introduction of the NAIF regime in 2016 was met with an encouraging take-up by fund promoters and with the statistics showing a continued and sustained increase in NAIF registrations year-on-year, the NAIF product has clearly addressed the needs of the market.

Frameworks for out-of-scope or de minimis AIFMs

In the context of fund managers operating outside the scope of the AIFMD, Malta also offers a homegrown product in the form of the Professional Investor Fund (PIF), which was introduced to tremendous success in the early 2000s. The PIF framework is designed to offer a fully regulated, non-retail fund which is subject to a lighter touch regime than that applicable to funds managed by full-scope AIFMs. PIFs require the appointment of a fund manager that is below the AIFMD de minimis threshold (those whose assets under management do not exceed Eur100 million, or Eur500 million when the assets under management are unleveraged and have no redemption rights exercisable during the first five years), that is also authorised or registered to provide fund management services in any EU or EEA Member State or approved third country equivalent.

Following the initial success of the PIF, the jurisdiction saw a general decline in PIF registrations over the past few years, a trend which was primarily attributed to the licensing process and two-tier regulated nature of the product. However, following lengthy discussions and collaboration with industry professionals, the MFSA introduced, in 2023, a new product in the form of the Notified Professional Investor Fund (NPIF), that looks to replicate the notification process applied so successfully with the NAIF to funds promoted by fund managers considered to be out-of-scope or below the de minimis thresholds set out in the AIFMD.

Similar to the NAIF, the NPIF framework contemplates a manager-oriented regulatory regime involving a fund structure that is only subject to a notification requirement with the MFSA (rather than a full licensing process) and which, as a result, should allow fund managers managing such funds to benefit from a quick time-to-market, comparatively lower setup fees and lower ongoing compliance costs. The MFSA has committed to deliver an acknowledgement of the NPIF notification within ten (10) days from the receipt of a complete notification pack.

As the name suggests, NPIFs must be non-retail schemes and are only available to certain qualifying or professional investors.

Some of the other key features of the NPIF include that it should:

• not be required to have its offering memorandum vetted by the MFSA;
• be subject to minimal ongoing regulation and supervision by the MFSA on an rolling basis in view of the fact that regulatory oversight is focused on the fund manager;
• not be required to appoint a custodian; and
• not be subject to restrictions around investment strategies (with the exception of carrying out lending activities).

Taxation

General tax treatment for fund managers

Fund managers incorporated in Malta are subject to Malta’s general system of taxation on world-wide income, including chargeable capital gains, at the standard corporate tax rate of 35%.

A pivotal feature of Malta’s general tax framework is the full imputation regime, which entails a tax payment and refund system. This regime eliminates economic double taxation of company profits upon distribution. Shareholders, regardless of their residence, in receipt of dividends from a Maltese company, are entitled to a tax credit equal to the tax borne by the distributing company on the profits out of which dividends are paid. Given that the tax rate of 35% applicable to companies is the highest tax rate in Malta, shareholders are relieved from any additional tax upon the receipt of dividends.

Furthermore, upon a dividend distribution of taxed profits, the shareholders of a company registered in Malta (either a Maltese company or a foreign company with a branch in Malta) are eligible to claim a partial tax refund of the Malta tax charge of the distributing company, excluding tax suffered on income derived from Maltese immovable property. The applicable tax refund for shareholders of fund management companies is, in general, 6/7_ths of the 35% tax, leading to an effective rate of tax on distributed taxable profits of a maximum of 5%.

The processing of tax refunds is typically rather efficient, which in practice addresses taxpayer concerns around cash flow. That being said, in 2019, Malta’s tax system was supplemented by the introduction of an election for a group of companies to be treated as a single tax group. Instead of the partial shareholder tax refund as explained above, upon a dividend distribution, the tax group is directly taxed at the effective tax rate. The introduction of a fiscal consolidation regime has largely been hailed as a success story as it provides a more efficient and effective route to taxation on corporate profits at the appropriate effective rate. In addition, such companies may avail of a notional interest deduction (NID), a deemed interest deduction against their chargeable income based on risk capital, which may decrease the effective tax rate by a certain percentage.

General tax treatment of funds

The income of a fund (referred to for income tax purposes in Malta as a collective investment scheme) licensed in Malta is generally exempt from tax in Malta unless such income derives from immovable property situated in Malta and unless such income qualifies as ‘investment income’ derived by a ‘prescribed fund’.

A prescribed fund is generally defined as a Malta-based scheme that:

• holds at least 85% of the value of its total declared assets in Malta; and
• is classified as a ‘prescribed fund’ by the Commissioner for Tax and Customs (CfTC) by notice in writing.

All other funds not meeting the above definition should generally qualify as ‘non-prescribed’ funds and their income should be exempt from tax in Malta to the extent it is not derived from immovable property in Malta. In all cases, income from immovable property situated in Malta is subject to the standard corporate rate of taxation applicable in the circumstances.

Distributions of fund income to non-resident unitholders are typically not liable to any additional taxation in Malta, regardless of the characterisation of the fund. Furthermore, transfers of fund units by non-resident persons are typically exempt from income tax in Malta.

Conversions (Re-domiciliations)

Another feature of the Maltese legal system is the framework surrounding the re-domiciliation (or conversion) of companies in and out of Malta, subject to certain prerequisites being satisfied. The framework can be used effectively both for fund managers as well as for fund entities themselves and is an especially powerful tool for those non-EU incorporated entities looking to transfer their legal seat to an EU jurisdiction without having to dissolve and re-incorporate the entity, which would have resulted in losing their historical performance. Via these re-domiciliation features, the entity can maintain its historical performance.

Further to the implementation of the Mobility Directive²Directive (EU) 2019/2121 amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions in Malta, the local procedure as regards to cross-border conversions (as well as mergers and divisions) between EU member states has been harmonised. The aim of the Directive is to facilitate cross-border conversions ensuring a seamless procedure across Member States and to strengthen the protection afforded to stakeholders such as employees, creditors and shareholders.

In this regard, the process for continuations into Malta from non-EU jurisdictions is still effective and generally (depending on the responsiveness of the outgoing company registry/authority) efficient.

Malta does not impose any taxation by reference to merely an entity’s continuation in Malta, though such entity would naturally be subject to ongoing tax obligations. Although Malta does generally impose an exit tax regime on entities that migrate in line with EU legislation, the scope of such exit tax may be limited, depending largely on whether the deemed gains triggered upon exit would otherwise have been exempt from tax in Malta upon actual disposal.

In all cases, the process will involve notifications and filings with the Malta Business Registry and of course, in the context of entities subject to regulation, (funds and fund managers being no exception), regulatory licensing or registration implications should be considered. Depending on the activities of the entity in question, some form of notification or authorisation process with the MFSA would typically be required.

Looking forward

In 2023, further to initiatives from the Ministry of Finance and the formation of the so-called Malta Financial Services Advisory Council (MFSAC), a body composed of various industry professionals and Regulators, the MFSAC National Strategy for Financial Services was launched. The strategy looks to build on an already strong foundation and to enable Malta to continue to develop as a reputable and successful international financial services jurisdiction that excels in innovation and responsiveness. In addition to various initiatives in niche areas such as Fintech and Sustainable Finance, of particular note is the proposition to develop a fit-for-purpose legal platform for Family Offices.

The regulatory platform will be supported by specific legislation governing aspects specific to Family Offices with a view to addressing any existing inefficiencies or limitations. One such area would be express legislation for the regulation of the execution, amendment and enforcement of family charters. The proposals look to recognise the particular nature of family charters as a personalised and unique contractual arrangement and establish a framework which ensures predictability and certainty of outcomes.

All in all, it can be said that Malta has a vibrant financial services industry with a robust and yet flexible regulatory regime. The presence of various service providers operating in the financial services industry, including international audit firms and fund administrators, coupled with the fact that Malta is relatively more cost competitive when compared to the traditional financial services hubs, all contribute to a making the jurisdiction a top choice.