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Investment Funds Services
MK Fintech Partners is a leading law firm in the investment Funds industry. We offer comprehensive legal services including licensing, fund formation, and tax optimisation to fund managers, asset managers, and investment firms. Our team of expert lawyers has extensive experience in navigating the complex regulations of this industry and providing tailored solutions to meet our clients' unique needs.
Malta’s booming Investment Services Space
Discover Malta’s Thriving Investment Hub: Flexibility, Regulator Support, & Favourable Taxes
Malta is recognized as one of Europe’s top domiciles for investment service providers, funds, and asset managers. Malta’s strengths lie in the fact that it is an EU Member state and is already home to a large volume of fund managers and administrators.
In fact, Fund service providers recently voted the island as their favored European fund domicile. There are currently approximately 130 AIFs, 55 Notified AIFs, 358 PIFs and 106 UCITS with a total Net Asset Valuation of 16 billion. Investment firms, fund managers and promotors regularly comment on the high level of product flexibility, the beneficial introduction of the Recognised Incorporated Cell Company, and the MFSA (the regulator)’s Open-Door Policy. Furthermore, licensed operators describe the licensing process with the MFSA as being quick but thorough and very efficient.
Firstly, Malta allows for funds to be set up in several possible legal forms. Secondly, one can opt for the self-managed route as an alternative to external third-party management. Malta also gives providers the benefit of choice to appoint a local or foreign administrator. Moreover, Malta’s fiscal environment is another local key success factor which maintains a strong network of double tax treaties, no tax at fund level and for the non-resident investor. Individuals, including asset managers and persons who hold senior positions within MFSA licensed financial operators, will benefit from favourable tax rates on their employment income.
Licensing of PIFs, AIFs and UCITS Funds
Investment Funds Services
UCITS are Undertakings for the Collective Investment in Transferable Securities. This refers to a regulatory framework that allows for the sale of mutual funds across Europe. Since UCITS funds are perceived as safe and well-regulated investments they are popular among many investors looking to invest across Europe. Furthermore, UCITS funds are retail in nature and invest in transferable securities such as shares, bonds and any such transferable securities by subscription or exchange.
Non-retail Collective Investment Schemes (CIS) include Alternative Investment Funds (AIFs) and Professional Investment Funds (PIFs). PIFs are a special class of AIFs, which are however, less regulated than other AIFs. PIFs are considered to be more flexible and have fewer restrictions. For instance, AIFs are mandatorily required to appoint certain officers and service providers, e.g., custodian, but PIFs are not required to do so.
Both, AIFs and PIFs may be externally managed or self-managed, however unlike PIFs, AIFs may benefit from marketing passporting their activities with the EU/EEA. They are both suitable for all investment strategies, including both traditional and alternative, and cover all asset classes, including hedge funds, venture capital, real estate, and private equity funds. AIFs may be marketed to retail investors, professional investors (e.g., credit institutions, investment firms, pension funds, etc.) and high-net-worth investors (i.e., investors with net assets in excess of €750,000), while PIFs may be marketed to only Qualifying investors (high-net-worth investors), and the minimum investment to be made by each investor in a PIF is €100,000.
PIFs, AIFs and UCITS funds may be set up using a variety of fund structures (e.g., SICAV, INVCO, ICC, unit trust, limited partnership), and may be structured as umbrella funds, sub-funds, or multi-class funds.
Under the Investment Services Act 1994 (ISA), PIFs, AIFs and UCITS funds set up in Malta are required to obtain a collective investment scheme licence from the Malta Financial Services Authority (MFSA), Malta’s single regulator for financial services.
| Professional Investor Fund (PIF) | Alternative Investment Fund (AIF) | UCITS Fund | |
|---|---|---|---|
| Applicable Legislation | The Markets in Financial Instruments Directive (the “MIFiD”) – Directive 2014/65/EU The Investment Services Act, Chapter 370 of the Laws of Malta MFSA Rules for Professional Investor Funds targeting Qualifying Investors | The Alternative Investment Fund Management Directive (the “AIFMD”) – Directive 2011/61 The Investment Services Act, Chapter 370 of the Laws of Malta MFSA Rules for Alternative Investment Funds | The Undertakings for the Collective Investment of Transferable Securities (“UCITS”) Directive – Directive 2014/91/EC The Investment Services Act, Chapter 370 of the Laws of Malta MFSA Rules for Malta Retail UCITS Collective Investment Schemes |
| Mandatory Officers and Service Providers to be appointed | - Custodian (Optional but Advised) - Alternative Investment Fund Manager (“AIFM”) (Self-Managed or Externally managed by a European Management company) - Auditor - Administrator (If the fund is externally Managed this function can be undertaken by the BOD) - Compliance Officer & Money Laundering Reporting Officer (“MLRO”) - External Valuer (Independent) | - Custodian - Alternative Investment Fund Manager (“AIFM”) (Self-Managed or Externally managed by a European Management company) - Auditor - Administrator - Compliance Officer & Money Laundering Reporting Officer (“MLRO”) - External Valuer (Independent) | - Custodian - Alternative Investment Fund Manager (“AIFM”) (Self-Managed or Externally managed by a European Management company) - Auditor - Administrator (may not be based in Malta) |
| Eligible Investors | A PIF may target Qualifying Investors. These are investors who meet the following criteria: - Invest a minimum of €100,000 or its currency equivalent to the fund - Declare in writing to the fund manager and the PIF that they are aware of and accept the risks associated with the proposed investment, and are either - Corporate entities, unincorporated bodies, trusts or individuals with net assets in excess of €750,000 or the currency equivalent, or a senior employee or director of service providers to the PIF. | An AIF may target: - Qualifying Investors (see previous column) - Professional Clients, i.e., entities who possess the experience, knowledge, and expertise to make their own investment decision and properly assess the risks incurred, e.g., national and regional governments, central banks, credit institutions, etc. - Retail investors, in the case of retail AIFs | Retail investors investing their own money on a non-professional basis. |
| Minimum Share Capital | €125,000 for self-managed PIFs €1,200 for externally managed PIFs | €300,000 for self-managed AIFs €125,000 for externally managed AIFs | €300,000 for self-managed UCITS funds €125,000 for externally managed UCITS funds |
| License Application Fee | Per scheme/Incorporated Cell (IC) – €2,000 Per sub-fund – €1,000 | Per Scheme (for AIFs licensed pursuant to article 4 of the ISA)/IC – €2,000 Per sub-fund – €1,000 Per Scheme (for European AIFs) – €2,500 Per sub-fund – €450 | Per Scheme/IC - €2,500 Per sub-fund – €450 |
| European Passport | Yes, where the national laws of an EU member state permit | Yes, under the AIFM Directive | Yes, under the AIFM Directive |
| Segregated Sub-Funds | Yes | Yes | Yes |
| Public Offering | Yes | Yes | Yes |
Cryptocurrencies (virtual assets) Funds
Investment Funds Services
A crypto fund is a collective investment scheme that is set up to invest in virtual currencies. A crypto fund may be licensed as either an AIF or a PIF. However, since virtual currencies are usually highly speculative and volatile assets, it is more appropriate for crypto funds to be licensed as a PIF. This is because PIFs are marketable only to high-net-worth investors, who can understand and bear the risk of involving in such assets. The suggested legal structure would be that of a SICAV company which is an investment company with variable share capital. The shares in Maltese SICAC companies do not have nominal values and the share capital must be equal to the value of the company’s issued share capital, which makes this type of company suitable for open-ended funds!
Tax Advantages for Investment Service Providers and Fund Managers
Investment Funds Services
To promote the setting up of funds and fund managers in Malta, Maltese tax laws offer several tax exemptions to funds and fund managers. Some of these exemptions are:
- No withholding tax on dividends paid to non-resident investors,
- No tax on disposal of investments by non-resident investors,
- If more than 85% of the value of the fund’s assets is situated outside of Malta, investment income received by the fund is not subject to withholding tax,
- No stamp duty on share issues or transfers,
- No tax is imposed on the net asset value of the scheme,
- Low tax rate of 5% per annum for Malta-licensed fund managers, through a system of refunds to their shareholders,
- Fund management and administration are VAT-exempt, as such, investors do not pay VAT for these services
How We Can Help You
Investment Funds Services – applying our legal expertise to your projects
- Incorporating a Maltese company.
- Draft a statement of intent and legal opinion.
- Business Plan guidance.
- Preparation and submission of all licence application documents.
- Liaising with the MFSA and accompanying you to all preliminary meetings.
- Filing all fit and proper tests for all key persons for the MFSA’s approval.
- Drafting MFSA response letters as may be required.
- Referrals to competent persons in our network to fill any needed roles (MLRO, compliance officer, systems auditor, etc.).
- Any other legal support required throughout the licence application process.
Licence Application Requirements and Process
Investment Funds Services
- Submission of the application form together with draft versions of the applicant’s Constitutional Documents.
- Submission of the Offering Document.
- Resolution of the governing body of the fund confirming the intention of the fund to apply for a licence, identifying the persons responsible for (i) signing the application, (ii) acting as point of liaison with the MFSA, (iii) the compliance and AML/CFT obligations of the fund on behalf of its governing body, and approving and assuming responsibility for the contents of the offering document.
- Submission of any other supporting documents requested by the MFSA.
- Payment of the application fee.
- Personal questionnaires of the key officers (Directors, MLRO, Compliance Officer, portfolio manager, etc).
- Personal questionnaires of the founder shareholders holding more than 10% of the voting shares.
- Provision of evidence that the applicant and its key officers and service providers are knowledgeable, experienced and have professional expertise in providing the proposed service.
How we can help you
Investment Funds Services
Our experienced team will undertake a review of your proposed activity and advise you of the appropriate class of license you are required to obtain. We will also assist you with:
- Advising on the best structuring options
- Incorporation and maintenance of a Maltese company / structure
- Reviewing your offering document or preparing one for you from scratch
- Preparing the license application and compiling supporting documents
- Liaising with the MFSA and accompanying you to all preliminary meetings
- Filing all fit and proper tests for all key persons for the MFSA’s approval
- Drafting MFSA response letters as may be required
- Referrals to competent persons in our network to fill any needed roles (MLRO, compliance officer, )
- Referrals to competent Service Providers such as Administrator, Custodian and Bank.
- Any other legal support required throughout the license application process
