Company Structure in Malta
Malta has amongst the lowest tax rates in the EU. Malta has attractive tax system, with the lowest tax rates.
• Malta had accession to the EU in 2004
• Maltese companies qualify as onshore in professional jargon; they are no longer seen as offshore companies and foreign investors or entities with foreign tax residence can benefit a lot from the Maltese tax system.
• Foreign investors can enjoy the benefits of an extremely favorable tax regime, which is accepted by the EU.
6/7 reimbursement system
The greatest tax benefit in Malta is that shareholders can claim back most of the money paid out as dividend from the corporate tax paid, so they can recover nearly all the corporate tax they have paid.
In practice, a company in Malta pays the official 35% corporate tax. However, if the owners of a company registered in Malta are not tax residents in Malta, i.e. they are foreigners or not domiciled in Malta, they can generally recover 6/7 of this tax.
This means that the actual tax rate is only 5%.
The law states that the refund is to be made within 14 days of the end of the month when the tax was paid.
The dividend received from a company registered in Malta and the entire profit coming from the sales of its subsidiary are fully exempt from corporate tax provided that it is paid out to the shareholders as dividend. Under certain circumstances, there is no tax liability for income generated thus, i.e. tax reimbursement is not necessary either.
Not only small companies that are present in the Maltese market. Malta is well-known for offering tax benefits to companies involved in the betting and online gaming business as well.
Trusts are recognized as one of the most flexible and diverse solution for holding and managing assets and also make easier the task of administering a conditional or revocable gift.
Significant scale of the independent wealth in the world is held through one form of trust structure or another.
Through a trust, the beneficial interest of assets is handed over to the beneficiaries while the legal ownership is assigned to the trustees. The trustees have the obligation to preserve the trust assets, whilst at the same time ensuring that the beneficiaries are in receipt of that to which they are entitled. In accomplishing their duties, the trustees are guided by the provisions of the trust deed and the law.
The Trusts and Trustees Act, which regulates the creation and administration of trusts, recognizes the main types of trusts which are provided for in traditional Anglo-Saxon jurisdictions.
A Maltese trust may be created verbally, in writing (including testamentary trusts), by operation of law or by a judicial decision.
An individual can create a trust to ensure that in the event of death or incapable or unable to properly administer wealth due to ill health, disability or age, the assets accumulated during lifetime will not be dissipated carelessly and both needs and the family or heirs will still be catered for.
These needs could relate to, for example, medical treatment, accommodation, care subsistence or education. A trust may also be set up for the advantage of the settlor himself, such as for tax planning or asset protection purposes.
Various forms of trusts exist, we seek to advise our clients on the most appropriate form of trust applicable to their situation, depending on the underlying motive for the creation of the trust.
Your Start-up Solutions
Once you have determined your chosen fund type, the next question is whether you will opt for a stand-alone structure or use a platform set-up. Platform structures are popular with start-up managers as they can offer an easier and faster route to market.
However over the longer term platform structures may be more expensive and many managers look to graduate to a standalone structure within 3 – 5 years after launch. A comparison chart is provided below1:
|Management||Direct (Management Agreement or Self-Management)||Sub-advisor / Sub-manager|
|Investment strategy||Independent choice||Platform provider will exercise supervision and may have certain restrictions|
|Legal Structure||Standalone umbrella SICAV||Typically a sub-fund of a pre-existing SICAV|
|Time frame||12 – 24 weeks||6 – 12 weeks|
|Fund Administrator||Independent choice||Typically pre-selected by platform|
|Custodian||Independent choice||Typically pre-selected by platform|
|Board of Directors||Independent choice||Typically pre-selected by platform|
|Auditor||Independent choice||Typically pre-selected by platform|
|Legal Counsel||Independent choice||Independent choice|
|Fees & Costs|
|Legal Advisory||Approx. EUR 20,000||Approx. EUR 10,000|
|Platform||N/A||Approx. EUR 30,000 p.a|
|Auditor||EUR 3,000 – 5,000||EUR 3,000 – 5,000|
|Regulatory||EUR 3,000 (scheme plus one sub-fund)||EUR 600|
1 All third party costs indicated are merely indicative and may vary significantly depending on the fund type.
Legal, Regulatory and Tax Overview
Definition of CIS under Maltese Law
Under Maltese law PIFs and AIFs are types of Collective Investment Scheme (“CIS”). The ISA defines CISs as:
any scheme or arrangement which has as its object or as one of its objects the collective investment of capital acquired by means of an offer of units for subscription, sale or exchange and which has the following characteristics:
(a) the scheme or arrangement operates according to the principle of risk spreading; and either
(b) the contributions of the participants and the profits or income out of which payments are to be made to them are pooled; or
(c) at the request of the holders, units are or are to be repurchased or redeemed out of the assets of the scheme or arrangement, continuously or in blocks at short intervals; or
(d) units are, or have been, or will be issued continuously or in blocks at short intervals
As stated above, PIFs & AIFs are one kind of CIS.
The SICAV and other Legal Vehicles
Malta strives to be flexible and to accommodate the needs of various management styles and strategies. The local legal regime therefore allows funds to be established using a variety of legal forms, each having characteristics suited for particular needs. In fact a Maltese PIF may be set up as:
• A limited partnership or partnership en commandite;
• A unit trust – constituted by a trust deed between a management company and a trustee;
• A mutual fund;
• An investment company with variable share capital (SICAV);
• An investment company with fixed share capital (INVCO).
The most popular structure is the SICAV, usually established as an open-ended fund. SICAVs can also be established as umbrella funds.
In this type of vehicle, the investor is in principle entitled at all times to request the redemption of his units and payment of the redemption amount in cash. The size typically expands and contracts as investors buy and sell units in it.
The Companies Act (CA) regulates SICAVs, excluding the application of some rules applicable to normal companies in the case of a SICAV structure, and rendering such rules more appropriate for investment vehicles.
The objects of a SICAV are limited to the collective investment of its funds in movable or immovable property with the aim of spreading risk and giving the shareholders the benefit of management of its funds. The variability of the SICAV’s capital allows for significant flexibility in shareholder operations.
The CA allows SICAVs to issue fractional shares and provides for full flexibility in relation to the redemption of units by the holders thereof so long as the redemption procedure is provided for in the Articles of Association of the SICAV.
SICAVs may be incorporated in the form of umbrella schemes or multi-class companies where each sub-fund will be represented by a distinct class or classes of shares in the company. Each sub-fund may also be designated in a different currency. This allows further differentiation of investment strategies and can also be beneficial to investors since the minimum investment threshold (see below) can be split between the different sub-funds in a multi-class scheme.
The SICAV’s memorandum and articles of association will be kept on the public file maintained by the Registrar of Companies.
This section is of particular relevance to managers looking for standalone set-ups. Managers looking for platform set-ups should know that the typical structure is that of a
The Licensing Process
The Maltese regulatory authorities are open to innovative ideas and welcome smaller startups, however a Maltese financial services license is a European license and rigorous standards need to be observed. You will be allocated a team of lawyers, accountants and other professionals who will guide you throughout the whole process and be at your disposal to answer questions, review documents, provide valuable insight and generally ease you through the application procedures. A chief relationship officer (an experienced lawyer) will be allocated, who will have full visibility of your project and to whom you will be able to refer all queries.
On engagement, your chief relationship officer will contact you and indicate the information that is required from you so as to allow us to build the application. We will typically send an email first, but we can build up the documentation over a number of conference calls or meetings if practical. Once the documentation is close to completion, we will organize a meeting with the MFSA for you, as well as meetings with any local service providers. Afterwards the application is submitted in draft. There are usually one or two rounds of clarifications that are requested by the regulator. It is normal for MFSA feedback to be fairly extensive (10 pages or so). When these have been addressed, the MFSA will issue its ‘in principle approval’; a document stating that once a number of (usually fairly simple) conditions are fulfilled (e.g. submission of signed documents) then the license will be issued. At this stage the corporate vehicles are formed, the MFSA is notified of the fulfilment of the in principle conditions, and the license is issued. In short the process with the MFSA is the following:
- Preparatory Phase: During this phase meetings are arranged with the MFSA in order to discuss the promoters’ proposal. A comprehensive description of the proposed activity is provided. Draft application forms are submitted and reviewed, and ‘fit and proper checks’ are initiated.
- Pre-Licensing: Once the review of the above-mentioned documents is complete the MFSA will issue its ‘in principle approval’. A licence is issued as soon as all pre-licensing issues are resolved.
- Post-Licensing: The applicant may be required to satisfy certain post-licensing criteria prior to commencing business.
Tax Treatment of Maltese Funds
Maltese tax law differentiates between ‘Prescribed’ and ‘Non-Prescribed’ funds. A ‘Malta Fund’ which is ‘Prescribed’ is subject to tax in Malta on its profits. On the other hand, a Malta fund which is ‘Non-Prescribed’ is not subject to tax its profits. Note that non-prescribed funds are subject to tax on gains they have made from immovable property/real estate situated in Malta.
A ‘Prescribed Fund’ is a fund which:
• holds at least 85% of the value of its total declared assets in Malta; and
• is subsequently classified as a prescribed fund by the Commissioner for Revenue by a notice in writing;
A Malta fund which does not satisfy one or more of the above 2 characteristics, or a fund which is established outside Malta is classified considered to be a non-prescribed fund. It is generally the case that a fund would be deemed to be a ‘Non-Prescribed’ Fund. A non-prescribed generally gives rise to no Maltese taxes at the fund and investor level.
How we can help you
Our financial services regulatory team has extensive experience guiding applicants through Maltese regulatory processes. We have advised funds, investment advisors, portfolio managers, insurance businesses, forex brokers, market makers and many other businesses with respect to all aspects of their Malta set-up. Post-licensing, we assist our clients with all compliance and corporate maintenance matters.
Our services include:
• Comprehensive project management solution for the obtainment of the license, including:
•• Assistance with the drafting of all regulatory documentation (including offering memorandum);
••Management of all relations and communications with regulatory authorities;
••Introduction to relevant local service providers;
••Negotiation and/or drafting of agreements with service providers.
• Company formation and maintenance;
• Bank relations;
• Hosting and co-location of servers;
• Property rental / purchase and local office set-up.
Our Fees & MFSA Costs
Our steps of payment for the set-up of your fund start-up, by arrangement
Standalone Fund (covering a maximum of 135 hours of legal time)
Payable on engagement. Covers all assistance with the submission of a preliminary proposal, all documents connected to the draft Application for a License and the relative draft Personal Questionnaires and consultancy connected thereto.
Stage 2: Payable on submission of application file. Covers all correspondence with the MFSA for the finalization of outstanding matters, such as, submission of signed copies of the revised Application Form together with supporting documents in their final format, and any other issue raised during the Application process; liaising with service providers and other experts in the area in the compilation of documentation (this is not inclusive of any costs which such third party service providers / experts may deem appropriate to assist in the compilation of documentation)
Stage 3: Payable on obtainment of In Principle Approval. Covers assistance with all legal matters identified in the in principle approval, leading up to the issuing of the license.
Platform Solution (covering a maximum of 67 hours of legal time)
Payable at start-up all aspects of the set-up including the preparation of the offering supplement, negotiations with the platform and other service providers, and representation with the MFSA.
MFSA Fees (Scheme Fees only payable for Standalone Funds) by arrangement
|Application Fee (EUR)||Annual Supervisory Fee (EUR)|
|Additional Sub-Funds (per sub-funds|
Official fees may change from time to time
Our Key Terms of Service
1. Fees are payable in the manner indicated above and are non-refundable. Fees are exclusive of government application costs and taxes and any other expenses and are also exclusive of any other legal matter arising in the process which is not strictly connected to the attainment of a license in Malta. The services not included in the above listed fees include but are not limited to the registration of trademarks or other intellectual property rights as well as the drafting of any agreement required by the Licensee and are therefore. Should the above legal services be required, client is requested to ask for a quote.
2. Our standard charge our rates for matters not covered in this proposal are the below:
a. EUR 250/hr – Partner, Manager
b. EUR 180/hr – Senior Associate
c. EUR 150/hr – Associate
The hourly fee may not always be applicable in relation to some professional services which are provided at a flat rate. Please feel free to contact us for a quote relating to any post-licensing services you would require from us.
3. The fees indicated cover a maximum of 45 hours per stage, being the amount of hours normally employed for the attainment of such a license.
4. Value Added Tax (VAT) on our services may or may not be applicable and therefore this schedule of fees is exclusive of VAT. You are advised to discuss the matter with us in order to plan billing procedures and VAT in advance to avoid unnecessary payments of VAT on our fees.
5. Our company exercises complete discretion in its offering of any, or all of the above services and it reserves its right to refuse to offer all or any of the above services after assessing each project on a case-by-case basis.
6. This schedule shall apply independently but should be construed in accordance with a Letter of Engagement.