Professional Investor Funds (PIFs) – Today’s Trend

Benjamin Griscti  -  1/February/2013

Malta is increasingly becoming an attractive jurisdiction for setting up investment funds, especially professional investor funds - PIFs (which include hedge funds in Malta). Being an EU member state, Malta inevitably follows EU directives regarding the regulation of funds which henceforth guarantees high standard levels. In addition, this also means that collective investment schemes (funds) can operate freely throughout the EU on the basis of a single authorisation from one member state.

Why Malta?

There are several reasons that have made Malta the number one jurisdiction for setting up Professional Investor Funds (PIFs):

  • Malta is a full EU onshore jurisdiction, equipped with a highly reputable regulator (the MFSA);
  • Malta offers the possibility of tax refunds which generally lower the effective corporate tax to only 5%, which is the lowest in Europe;
  • Malta’s network of double taxation treaties is already highly dense, with many others in the pipeline; and
  • Malta offers very competitive prices for setting up Funds structures.

Malta’s Tax Treatment specific to Funds

  • Maltese licensed funds enjoy a 100% tax exemption on income other than income derived from immovable property situated in Malta as long as less than 85% of the fund’s total assets value is made up of assets situated in Malta;
  • If the value of assets situated in Malta exceeds 85% of the value of the fund’s total assets, the fund will incur a withholding tax on certain investment income at either 10% or 15%.
  • No further tax is withheld on the distribution of dividends from a Maltese PIF to a non-resident investor;
  • No tax is levied on any gains derived by a non-resident investor from transferring, cancelling or liquidating his units in the fund;
  • No stamp duty on share issues or transfers is levied; and
  • Activities pursuant to funds such as subscriptions to units and fund management/administration services are also exempt from VAT.

What is a PIF?

A PIF is the type of non-retail fund under which hedge funds are licensed in Malta. Such funds are generally designed to attract high net worth investors as they offer absolute returns with minimal regulations and supervision.
PIFs are generally established as investment companies which could be open-ended (SICAVs) or close-ended (INVCOs). It is also possible for funds to be established as limited partnerships or unit trusts.

Categories of Maltese PIFs
PIFs may be of three types:

  • PIFs promoted to experienced investors;
  • PIFs promoted to qualifying investors; and
  • PIFs promoted to extraordinary investors.

All three types of categories need to adhere to minimum subscription (entry) thresholds, and unlike PIFs targeting experienced investors, PIFs targeting qualifying and extraordinary investors are restricted to maintain a minimum net asset value. In addition, unlike PIFs targeting experienced investors, PIFs targeting qualifying and extraordinary investors face no borrowing limits.

Parties involved in a Fund

  • Investment Manager → A PIF must be managed by third parties or self-managers;
  • Administrator → Fund administration services may only be given by third parties who are duly licensed with the MFSA;
  • Custodian → A third-party custodian is necessary for the adequate safekeeping of the funds.

Umbrella Fund or a Multi-Class Fund

PIFs may be constituted as an umbrella fund or a multi-class fund. An umbrella fund is a structure which includes sub-funds whereby the assets and liabilities of each sub-fund can be structured as a patrimony separate from the assets and liabilities of each other sub-fund.
Multi-Class structures would have multiple sub-funds, each having different characteristics but not a separate patrimony.

How we can help you?

In collaboration with our fully licensed partners, we can offer you with the following services:

  1. Offer you a plug-in ready Umbrella Platform, which is a fast, costly, independent and highly reliable PIF structure;
  2. Assist you in setting-up your very own PIF Company;
  3. Offer you investment management services;
  4. Offer you Administration Services;
  5. Put in you contact with highly reputable Custodians;
  6. Act as PIF Auditors;
  7. Offer you tax compliance and advisory services.
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