NOVEMBER 2014 - Finlantern · LUGANO FUND FORUM – AMICORP MALTA • A new regulatory regime came into force after the introduction of the AIFMD. This regime regulates those funds

LUGANO FUND FORUM – AMICORP MALTA

MALTA: POLE POSITION FOR FUNDS AND FUND MANAGERS LUGANO FUND FORUM

PRESENTED BY: RUDOLPH PSAILA, Managing Director Amicorp Fund Services Malta Limited

NOVEMBER

2014


Agenda

•  Malta – At a glance •  Malta’s Funds regime

•  Professional Investor Funds (PIFs) •  Alternative Investment Funds (AIFs)

•  Fund management companies •  Taxation

•  Malta Funds •  Fund management company


•  Onshore EU domicile and part of the Eurozone;

•  Laws and Regulations based on EU Directives;

•  Single Regulator – Malta Financial Services Authority (MFSA) – highly

approachable and communicative – member of EU Regulatory Bodies;

•  Low operational costs in terms of salaries, office space etc than other EU

States;

•  Stable political environment;

•  Efficient fiscal regime

Malta – At a Glance (I)


Contribution to GDP 13%

Malta Sovereign Credit Ratings A3 (Moody’s)

Rate of Inflation 0.70% (October 2014)

Domiciled Funds 560

Official Languages English & Maltese

Banks 26

Fund Managers approx. 70

Corporate Tax Rate 35% with an effective tax rate in the range of 0% to 10%

Malta – At a Glance (II)


1.  Fund categories in Malta

2.  Professional Investor Funds

3.  Alternative Investment Funds - Key Features - Custodian / Depositary

4.  Setting-Up a Fund

5.  Funds Service Providers

6.  Funds’ Authorisation and Licensing Process

Malta’s Fund Regime


Retail Funds

Professional Investor Funds

UCITS Non-UCITS Experienced Investor

Qualifying Investor

Extraordinary Investor

FUNDS

Fund categories in Malta

Alterna)ve Investments Funds


Experienced Investor Funds Qualifying Investor Funds Extraordinary Investor Funds

Minimum Investment

€10,000/US$10,000 (or currency equivalent)



Investment Restrictions

Various investment restrictions to reflect quasi-retail nature of this category

No investment restrictions – as a general rule unwritten diversification requirement

No investment restrictions – as a general rule unwritten diversification requirement

Annual Report

Must be submitted with a custodian report

Must be submitted. No custodian report is required

Must be submitted. No custodian report is required

Investment manager

Optional. Self-managed PIFs are allowed



Custodian Required. Must be independent from the investment manager

Recommended. Must be independent from the investment manager

Recommended. Must be independent from the investment manager

Borrowing restrictions

100% of NAV in respect of borrowings used for investment purposes and leverage through derivatives

None other than those specified in the offering document

None other than those specified in the offering document

Professional Investor Funds – a Comparison


•  A new regulatory regime came into force after the introduction of the AIFMD. This regime regulates those funds which are either managed by AIFMs or are self-managed funds and which exceed the de minimis threshold of EUR 100 million. If the de minimis is exceeded, the AIFM or the self-managed fund must comply with the AIFMD framework. The de minimis threshold must also include the leveraged amount and not only the Net Asset Value of the fund.

•  Substance of the fund in Malta is a very important consideration. Having a risk manager or a portfolio manager as a full-time employee of the fund is considered a pre-requisite.

•  Increased reporting requirements for AIFs when compared to PIFs in particular on the fund’s assets and its exposure to leverage.

•  As a result of the cost of setting up, managing and administering an AIF is higher than that of a PIF.

Alternative Investment Funds: Key Features


Under a self-managed structure: •  Single custodian/depositary shall be appointed for each AIF

•  Custodian/Depositary should be independent from AIFM

•  In case of a Maltese AIF, the custodian must be licensed in Malta whilst for a non EU AIF, the custodian/depository shall be established in the third-country where the AIF is licensed or in the home Member State of the AIF.

•  However, there is a transition period until July 2017 where the custodian can be licensed in any recognized jurisdiction.

•  In the case of a PIF, the custodian need not be in Malta and can also be licensed in a foreign, reputable jurisdiction.

Alternative Investment Funds:Custodian/depository


Setting-Up a Fund

There are two solutions to structure a fund in Malta: 1.  Set-up an own SICAV with its sub-funds; or 2.  Set-up a sub-fund in an already existing SICAV.

Set-up Own SICAV Set-up a sub-fund in a SICAV

You get to choose the service providers of your choice, including directors, investment committee members, administrator, etc

Will have to use the existing service providers of the SICAV already in existence, although you can appoint a portfolio manager or investment committee member of your choice

Licensing process takes around 12-14 weeks

Licensing process takes around 8 weeks, since the structure is already known to the Authority

Set-up and on-going costs are higher Set-up costs are relatively cheaper than setting up an own SICAV

The fund is completely yours

Sharing the scheme with other promoters who own the other sub funds


ABC Fund SICAV p.l.c.

Sub-‐Fund 1

Board of Directors

Sub-‐Fund 2

Ini)al capital requirement: Self-‐managed AIF: EUR 300,000 Self-‐managed PIF: EUR 125,000

Third-‐party managed AIF/PIF: EUR 125,000

Investments Investments

Third-‐party Manager / Investment

CommiPee incl. PorQolio Manager

Auditors

Depositary

Risk Manager (only for AIFs)

Fund Administrator

Prime Broker

Compliance / MLRO

Fund service providers


Preparatory Phase Pre-licensing Phase Post-licensing Phase

Fund Promoters meet MFSA to discuss proposal giving

guidance on the license for a more efficient process

application

Fund Promoters submit a draft application form together with supporting documents to be

reviewed by MFSA

MFSA may ask for further documentation to the Promoter

(now applicant), and sets the Standard License Conditions

applying to the Scheme

Once all key points noted in the draft application have been

resolved, the MFSA will issue the ‘in principal’ approval for the

license.

Promoter finalizes pending issues and submits final application together with supporting documents

MFSA issues license

MFSA determines whether the promoter needs to satisfy any

post-licensing conditions

Fund can formally start business

Funds’ Authorisation and licensing process (I)


•  Key Features

•  Passporting opportunities

•  Scope of the AIFMD Directive

•  Investment Manager – Malta: Structure

•  Licensing Process

Fund Management Companies


•  Fund manager must: −  Hold an investment services license; −  Be authorized to provide fund management services;

•  Must ensure ongoing compliance with the investment objectives and policies of the Offering Memorandum / fund specific Offering Supplement of the Fund;

•  Manager must be independent from the Custodian;

•  May delegate management functions to sub-managers – retains ultimate responsibility for the action of the such entities.

Fund Manager – Key Features


•  Fund managers licensed in Malta benefit from the possibility of passporting their services to other EU and EEA states.

•  Essentially, passporting rights are of two types: −  Freedom to provide services on a remote basis; −  Freedom to set up a branch which can provide fund management services

in that country. •  Passporting will give management companies eligibility for cross-border

management, thus performing its activities that were authorized in its home EU Member State in Malta without the requirement for further authorisation.

Investment Manager – Passporting


Fund Manager – Structure

Management Company

Investment Committee 3 members

(can be members of the Board)

Office Space

Board of Directors (3 members)

Compliance & MLRO

Employee/s

Founder Shareholders (min of 2)

Risk Manager


Fund Manager - Licensing Process (I) In the licensing process, the MFSA will take into consideration the reputation and suitability of the management company. A license will only be issued if the MFSA is satisfied that the company’s directors and officers are fit and proper persons to carry out their responsibilities, focusing mostly on the following:

•  The protection of the investors and general public;

•  The protection of Malta’s reputation;

•  The promotion of competition and choice;

•  The experience and track record of the company; and

•  The reputation and stability of the company.


Investment Manager - Licensing Process (II)

Preparatory Phase Pre-licensing Phase Post-licensing Phase

The Company meets the MFSA to discuss proposal

giving guidance on the license for a more efficient

process application

The Company submit a draft application form together with supporting documents to be

reviewed by MFSA

MFSA may ask for further documentation to the

Company (now applicant), and sets the Standard

License Conditions applying to the Scheme

After any important points in the draft application are

resolved, MFSA issues an ‘in-principle’ approval for a

license

Applicant finalizes pending issues and submits final application together with supporting documents

MFSA issues licence

MFSA determines whether the Company needs to

satisfy any post-licensing conditions

Management Company can formally start business


•  Malta Funds;

•  Fund Management Company

Taxation


A Malta domiciled fund enjoys certain taxation benefits which can be listed below: •  an exemption from income tax and capital gains tax at both the fund level and

at a non-resident investor level as long as more than 85% of the value of its assets is situated outside Malta;

•  investment income received by the Fund is not subject to any withholding tax; •  no withholding tax is due on dividends paid out to non-residents; •  no tax is payable by non-resident investors when they dispose of their

investment; •  no stamp duty charged on share issues or transfers; and •  no tax on the net asset value of the scheme.

Taxation – Malta Funds


Investors

Investments Investments

Malta SPV

Malta Fund Managers

Malta Co

Shareholder Shareholder

Malta Fund

Fees

Malta Tax @ 35%

6/7ths Refund – 5% Tax Leakage

6/7ths Refund – 5% Tax Leakage

Dividends / Interest / Gains / Discounts etc.

No WHT

Exempt from Malta Income Tax

No Malta Tax upon Red.

No WHT

No WHT

No WHT

Taxation – Investment Management company (I)


6/7ths refund explained: Assuming that Maltco 2 profit for the year was

€1,000, tax would be suffered as follows:

Foreign Share holder

Maltco 1 (holding

company)

Maltco 2 (Investment Manager)

Taxation of Maltco 2

Chargeable income €1,000

Tax @ 35% (€ 350)

Profit after tax available for distribution € 650

Maltco 1 received 6/7ths refund of tax paid by Maltco 2 € 300

Effective tax paid in Malta € 50

Key points: Tax is paid by Maltco 2 and refund claimed by Maltco 1; Refund is not taxable in Malta.

Taxation – Investment Management company (II)


Thank you

Copyright No)ce: ©2010 Amicorp Group. All rights reserved. The contents of this presenta)on have been prepared by the Amicorp Group for informa)onal purposes only. The informa)on contained in this presenta)on does not cons)tute or contain any type of advice, and neither our presenta)on of such informa)on nor your receipt of it will create a commercial or legal rela)onship. Consequently, you should not act or rely upon the informa)on contained in this presenta)on without seeking professional counsel. This presenta)on does not cons)tute tax, legal or professional advice. Amicorp Group is the owner of all copyright and other rights in and to all copyrightable text and graphics on this presenta)on. Your company or its representa)ves may lawfully use this presenta)on for its own, non-‐commercial purposes, by displaying this copyright no)ce. Any other reproduc)on, copying, distribu)on, retransmission or modifica)on of all or any parts of this presenta)on is strictly prohibited without the express prior wriPen permission of the Amicorp Group. Trademark No)ce: The Amicorp word and device are trademarks of Amicorp Holding Limited. All rights reserved.

Amicorp Fund Services Malta Limited Rudolph Psaila Level 1, Blue Harbour Business Centre Ta' Xbiex Yacht Marina Ta' Xbiex, XBX 1027, Malta Telephone: +356 -22 -58 47 00 Facsimile: +356 22 58 47 01

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NOVEMBER 2014 - Finlantern · LUGANO FUND FORUM – AMICORP MALTA • A new regulatory regime came into force after the introduction of the AIFMD. This regime regulates those funds