Archive for November, 2010

Survey shows Malta is best-known fund domicile in the Mediterranean, Article in The Times of Malta, 03 November 2010

November 5, 2010


Malta’s visibility as an international financial services centre is gaining in strength. Photo: Darrin Zammit Lupi

 A survey conducted by International Fund Investment has shown that 76 per cent of those interviewed are aware of the fact that Malta can be used as a base for their funds or to open an office locally, or both.

The survey was highlighted during a presentation by International Fund Investment attended by FinanceMalta on “Manager Migration, Fund Servicing and Domiciliation in the Mediterranean: The alternative to Ireland and Luxembourg?”in London recently.

As one interviewee put it, Malta is “another option” for those looking for a base in the EU. One manager said: “Two years ago I wouldn’t have considered it but it now appears to be gaining momentum.” Another interviewee stated: “We are setting up an office there right now. We like the fact that there are other managers already there.”

The IFI survey stated that 62 per cent of alternative fund managers interviewed are re-domiciling or are launching funds in the EU. When asked what views investors have on existing domiciles like Gibraltar, Ireland, Luxembourg and Malta, the overwhelming response was that the domiciles in question are well known.

Those interviewees stated that they prefer well-known domiciles that are used substantially by other investors and managers. As one interviewee put it: “We don’t like surprises.” Ireland and Luxembourg are known to all respondents and therefore liked for this reason. But the majority of investors (83 per cent) are aware that Malta is becoming a commonly used alternative to Ireland and Luxembourg.

Of the 10 major domiciles available to investors, Switzerland was considered to be the most popular followed by Malta and Guernsey. Hong Kong, Jersey, Gibraltar and the Isle of Man followed in that order. When asked in which jurisdiction investors were likely to domicile their EU-based funds, Ireland was a major preference followed by Luxembourg and Malta.

When asked if they would consider relocating funds to Malta or Gibraltar as an alternative to Luxembourg or Ireland, 18 per cent said they are looking at moving funds to Malta or Gibraltar while a further 26 per cent are open to the idea, particularly if these locations continue to offer fund servicing on the same level as Ireland or Luxembourg but at lower costs.

When questioned about their views on the regulatory environment in the Mediterranean domiciles, all those respondents who visited the MFSA had positive comments to make about the proactive approach that the Maltese regulator has taken. One manager said that this was “Malta’s biggest selling point”. When asked if investors have any views on the quality of fund service provision in the Mediterranean domiciles, one interviewee said that he was aware of the fact that several international fund administrators had recently launched offices in Malta and regarded this as a positive step for this domicile.

Kenneth Farrugia, chairman of FinanceMalta, stated: “The results of this survey clearly show that Malta’s visibility as an international financial services centre is gaining traction. In fact, Malta was easily recognised as a fund domicile with 76 per cernt of those interviewed aware that it is an alternative jurisdiction for those looking for a base in the EU. Managers are looking to use Malta as a base for their funds or to open an office. It was interesting to note that the majority of investors interviewed in this survey are aware that Malta is becoming a commonly used domicile and is considered as one of the European options alongside established players like Ireland and Luxembourg.”

This survey supports the growing position that Malta is taking in the international financial services market. The country is ranked 50th among139 economies in a World Competitiveness Report issued by the World Economic Forum for 2010-2011. Twenty-five licensed credit institutions have already established operations in Malta up to 2009 of which 20 are EU-country based.

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Obama signs Malta-US double taxation agreement – Article by Anthony Manduca in The Times of Malta, 4th November 2010

November 4, 2010

The double taxation agreement between the United States and  Malta  was signed on Tuesday 02nd November 2010, by President Barack Obama, American Ambassador Douglas Kmiec told The Times Business.

Secretary of State Hilary Clinton will now countersign the agreement, which is a required formality, and the agreement will take effect on January 1, 2011.

The agreement, which was ratified by the US Senate last July, is intended to eliminate barriers to cross border trade and investment while preventing offshore tax evasion. It is designed to ensure that US and Maltese citizens are taxed only once on their profits and income, and to limit withholding payments on dividends, royalties and other unearned income.

As a result of this agreement, the US and Maltese authorities have agreed not to tax business income derived from sources within their countries by residents of the other country unless business activities by the foreign person or business are substantial enough to constitute a permanent establishment.

Residents of one country providing services in the other also are not subject to tax in that country as long as their activities do not exceed specific minimums.

Under the agreement pensions and similar payments are taxable only by the country which pays them, even if the person is resident in the other country. Some payments, such as dividends and royalties, are taxable by either country, but there is a maximum withholding of 10 per cent. However, a tax credit must be allowed in the other country if, for example, the county which is the sources of a dividend assesses tax at the times it is paid.

The double taxation agreement cannot be applied in a way which will deny any taxpayer of either country any benefits he would have been entitled to under the domestic law of his country or under any other treaty between Malta and the US.

The agreement stipulates that countries cannot discriminate, i.e. they cannot tax a resident of the other country at a higher rate than they would have taxed their own citizens under the same circumstances.

It also contains strong provisions to prevent businesses or individuals from third countries from setting up a “shell” entity in either Malta or the US which is used to pass income through – thereby avoiding taxation – but does not have any other substantial business or activity in the country.

The double taxation agreement replaces an earlier agreement which was terminated in 1997 by the US. The US Embassy said the new agreement recognised the “significant” changes to Maltese domestic tax law which provides transparency and protection.

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