Malta: An Investor’s Paradise


In this article, which shall be split into two parts, we shall explore the characteristics of Malta as a highly attractive jurisdiction for inbound investment.

In doing so, we shall be analysing the growth of financial services as a key industry in Malta, along with looking at the impact that this industry has within a broader European context, with particular reference made to Brexit and the principle of ‘passporting’.

Further to this, we shall be discussing how Malta – with a well-educated, English-speaking workforce, a proactive and business efficient climate, a stable regulatory environment, a robust and sophisticated legal system, stable banks, good governance, a relatively low-cost environment, excellent infrastructure and logistics and a central-Mediterranean location – is enjoying a strong and sustained period of economic growth.

Since 1990 Malta has seen a gradual increase in the foreign direct investment (“FDI”) inbound inflows. FDI into Malta shot up from US$ 80.8 million to US$ 267 million in a period of one year from 1997-98. In the year 2000, the FDI inflows of Malta stood at US$ 652 million. Malta is now considered as one of the front runners in terms of attracting investment based on its potential and performance. The World Investment Report of 2008 ranked Malta as the 3rd most-favoured destination in attracting inward investment.

Robust financial services legislation and regulation in the funds industry

Malta is growing year-on-year as a financial centre of excellence, with the fund industry being one of the financial centre’s main engines for growth. Malta hosts over 580 investment funds which have a combined net asset value of almost Euro 9.7 billion. The country is a welcoming place for high-net-worth individuals due to its mixture of innovative products, experienced professionals and strong regulatory framework. It offers all the regularly sought investment vehicles available to wealthy clients, while allowing investors to protect their assets.

The jurisdiction is a centre of excellence for the asset management industry and an attractive base from both a cost and a tax efficiency perspective. In fact, Malta has witnessed an increasing number of third-party service providers offering services such as administration, management and investment advisory services. Malta is a signatory to over 70 double-taxation treaties, covering most of the world’s high-growth markets, thus facilitating international business.

The most common legal form to set up an investment fund in Malta as a Collective Investment Scheme (“CIS”), is an ‘investment company with variable capital (“SICAV”). Nevertheless, other legal entities may be used such as Incorporated Cells, Contractual Funds, Limited Liability Partnership and Unit Trusts.

The special classes of Collective Investment Schemes (“CIS”) will be mentioned hereunder. These may all be promoted to Qualifying Investors if they invest a minimum of Euro 100,000 or its company equivalent, which investment may not be reduced below this minimum amount at any time, by way of partial redemption.

Professional Investor Funds (“PIFs”)

A PIF may be promoted to Qualifying Investors and may be used as an investment vehicle for non-traditional investments, as well as specialist instruments, including, by way of example, private equity, derivatives, immovable property/real estate and traded endowment plans.

A PIF may be self-managed, without the need to appoint a third party manager. In this manner, the promoters do not need to have a presence in Malta. The management and the assets of the fund would be undertaken by an investment committee, a portfolio manager and a board of directors.

Non-retail Alternative Investment Funds (“AIFs”)

AIFs raise capital from a number of investors, with a view of investing therein in accordance with a defined investment strategy, and which do not require authorisation under the UCITS Directive.

AIFs may either be retail AIFs or professional AIFs. These can be marketed to Professional Investors as defined in Markets in Financial Instruments Directive II (“MiFID II”) and/or to Qualifying Investors having a minimum investment requirement of Euro 100,000.

This category of funds may be self-managed. Therefore, albeit an option, the appointment of an Alternative Investment Fund Manager (“AIFM”) is not mandatory.

The fund must have an initial capital of at least Euro 300,000, in order to have sufficient financial resources at its disposal to conduct its business effectively, to meet its liabilities, and to be prepared to cope with the risks to which it is exposed.

The AIF may be marketed with a passport in jurisdictions outside of Malta.

Notified Alternative Investment Funds (“NAIFs”)

The NAIF framework is a clear sign of a shift from the concept of AIFs being regulated and supervised products. The MFSA aims to provide AIFMs with a solution to market AIFs within the EU in the shortest possible timeframe, indicating the time frame of 10 business days from the date of filing of a duly completed notification pack, for the AIF to be included in the NAIF list. The new framework will be applicable to AIFs that are set up and not licensed. Thus, a NAIF will not require licensing by the MFSA and will not be subject to on-going MFSA supervision.

The NAIF may be set up in any structure under Maltese legislation, and may target professional and qualifying investors, as set out by the rules issued by the MFSA. Any EU/EEA full-scope AIFMs, licensed by the MFSA or in possession of the management passport in terms of the AIFMD, may request that the MFSA includes an AIF on the list of NAIFs. The NAIF framework will only be available to full scope EU/EEA AIFMs, which will mean a reliance on the EU/EEA AIFM regulatory status, rather than regulating the AIF itself.

An NAIF may be open or closed ended and is passportable. Interestingly, third country AIFMs may also submit requests for a notification of an AIF, if passporting rights have been granted to the country where the AIFM has been established.

The NAIF regime is not available to self-managed AIFs, loan funds, non-AIFs, AIFs managed in a third country (non-EU jurisdiction), AIFMs (until/unless the passport is extended to incorporate non-EU jurisdictions) and AIFs investing in non-financial assets.

Retail Funds: Retail AIFs & UCITS

Collective Investment Schemes may be licensed as UCITS schemes. UCITS are harmonised European retail fund products that can operate throughout the EU on the basis of a single authorisation from one Member State, provided that it follows certain notification procedures. The schemes may be offered in any EU and EEA states. UCITS are subject to prescriptive restrictions on the type of eligible assets that they may invest in – however this does not preclude UCITS from adopting different investment fund structures.

The ISA provides the statutory basis for regulating investment funds constituted in, or from, Malta. UCITS are a special class of investment funds which fall within the provisions of the ISA. Maltese UCITS funds may take advantage of the UCITS brand, which is recognised globally as a liquid, transparent and regulated product, which are able to be freely marketed across Europe and distribute their units cross-border by following the notification procedures set out in the UCITS Directive.

The UCITS schemes which fulfill the requirements prescribed by the pertinent legislation can, by virtue of the European passport, be freely marketed throughout the European Union. Other advantages of such schemes include cost efficiency in terms of set up and annual maintenance and a tax exemption on income and capital gains.

UCITS may either be self-managed or managed by a company approved by the MFSA, which holds a Category 2 Investment Services License. The minimum share capital required by a UCITS fund is Euro 125,000 if it is third-party managed, or Euro 300,000 if it is self-managed. The scheme may also be listed on the Malta Stock Exchange.

Management Company Passport (“MCP”)

Under the UCITS IV Directive, the MCP ended the requirement that a management company needs to be established in the same country in which the UCITS is established. A Malta–based UCITS can now be managed by a UCITS Management Company established in another EU member state.

The provisions of the UCITS IV Directive also enable the setup of master-feeder UCITS structures, by which one UCITS invests at least 85% of its Net Asset Value (“NAV”) in another UCITS. The advantage of this type of structuring means that the management and administration of the master fund may be centralised in one jurisdiction –  allowing promoters to rationalise their platforms, build up economies of scale and potentially reduce costs to the investor.

Re-Domiciliation of Funds

Maltese law permits the re-domiciliation of companies into and out of Malta. This adds to the jurisdiction’s attraction to fund promoters and has prompted a number of offshore companies, which provide fund management services and offshore investment funds, to move to a reputable onshore jurisdiction, such as Malta. In terms of Maltese law, it is possible to re-domicile closed-ended or open-ended SICAVs, as well as limited liability partnerships into Malta.

Tax advantages for Collective Investment Schemes and fund managers

There are also various tax advantages and fiscal measures useful for Collective Investment Schemes and fund managers in Malta as laid out under Maltese tax legislation. These include the following:

  • an exemption from income tax and capital gains at both the fund level and at a non-resident investor level, provided more than 85% of the value of its assets is situated outside of Malta;
  • investment income received by the fund is not subject to any withholding tax, if more than 85% of the value of the fund’s assets is situated outside of Malta;
  • no tax is payable by non-resident investors when they dispose of their investment;
  • no stamp duty is charged on share issues or transfers;
  • no tax is imposed on the NAV of the scheme;
  • Malta-licensed fund managers can avail themselves of a low effective tax burden in Malta, amounting to 5% per annum, through a system of tax refunds available to shareholders of such companies;
  • upon subscription to shares/units in the fund, no Malta VAT is chargeable by the fund to investors. Fund management and administration services are VAT exempt in Malta.

Malta as an alternative base following Brexit

With the triggering of Article 50 on 29th March 2017, the long-held concerns of many UK businesses and firms, especially those located within the City of London, have been brought into sharper focus as senior management weigh up the possible effects that Brexit may have on the functioning of such companies, with particular relevance to the likely effect on access to the Single Market and the ability to ‘passport’ services and products throughout the EU Member States.

Therefore, it is clearly prudent for affected companies to evaluate their options and find an alternative route through which to conduct their business. This is especially important considering the time-frame for Brexit, with negotiations between the UK and the EU on a new agreement that would regulate relations between the parties likely to be lengthy, with it having been suggested that such negotiations shall be delayed until after the negotiations on the ‘divorce’ have first been concluded.

Notwithstanding this, with astute planning and a good strategy in preparation for Brexit, UK-licensed companies, banks and funds should find this transition to be manageable.

Malta’s stable financial services sector is certainly a promising option, as it would be possible for UK companies as well as the various Collective Investment Schemes (“CIS”) carrying EU passporting rights mentioned above – namely AIFs, NAIFs and UCITS – to enjoy the advantages associated in retaining their UK operations whilst creating a ‘lean mirror’ operation offering free access in Europe through the establishment of a Malta-based centre of operations.

Innovative Legislation

Malta has recently produced innovative and ground-breaking legislation which has surely and positively affected the business environment in Malta. Hereunder are a few of the advances made to Maltese legislation.

The Family Business Act

By virtue of ACT No. XLVIII of 2016, the Parliament of Malta enacted a pioneering act in the EU – the Family Business Act – with the following aims in mind:

  • to encourage the regulation of family businesses and their governance;
  • to assist in the transfer of family businesses from one generation to the next;
  • to assist family businesses to operate their business in an efficient way and work towards a successful transfer of the business;
  • to grant various incentives to family businesses to successfully transfer their business from one generation to the next.

Minister Chris Cardona, who during a Business Breakfast at the Grand Hotel Excelsior stated that “Malta will be the first European country to enact legislation for Family Business”, described this piece of legislation as exciting since family businesses are precious and important, deserving the support of the government.

Legislative Amendments to the Trusts and Trustees Act

A number of amendments have also been made to the Trusts and Trustees Act by means of Act No.XI of 25 April 2014. The concept of family trusts was in fact introduced into the Maltese trust regulatory framework. This regime was specifically created for companies acting as trustees for family trusts, as defined in the Trusts and Trustees Act and in these rules, to mirror the private trustee regime applicable to individuals under the same Act.

Trustee companies which satisfy the requirements set out in the law are not required to obtain authorisation, although they are subject to a registration requirement. Furthermore, the Authority is empowered to issue rules and regulate trustees which are subject to a registration procedure. Upon being registered, such trustee is only permitted to act as a trustee in relation to a specific settlor or settlors of family trusts and in any case for not more than five settlors at a time. He/She may only provide administrative services in respect of a specific family trust or trusts.

Malta is said to be a very practical location for setting up a family trust, owing to its pleasant Mediterranean climate, excellent quality of life and highly competitive cost of living which attract a vast number of foreign residents. In practice, the individual wishing to create the “family trust” (i.e. the settlor) sets up a company, which will act as trustee of the family estate transferred to it under trust, for the benefit of the family members.


Although Malta has a long tradition of gaming, the Remote Gaming Regulations of 2004 which is the first regulation of online gaming by an EU Member State, has helped lead the development of this key sector. These regulations have helped promote the development of such companies while providing vital protection of players, anti-money laundering support and the safeguarding of public interest. These Regulations propose a gaming tax which varies depending on the type of license held. There is a tax capping mechanism which limits the gaming tax payable annually in respect of each license held to a maximum of €466,000. Combined with an attractive tax regime, Malta continues to be the first port of call for companies looking to set up and develop gaming businesses.

WDM International, through WDM Lex Advisory’s Dr. Jonathan De Giovanni, Partner at the Firm, and Mr. Charles Ingham, Manager of Corporate Services and Private Clients, would happily provide potential investors with further information in this regard. Alternatively, such persons may also wish to visit WDM International’s website on


Read next: WDM International’s DR. Jonathan De Giovanni wins at the Best Entrepreneur of the Year awards 2016


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