Collective Investment Schemes licensed under the Investment Services Act (“the Act”) are not obliged to appoint an administrator and in the absence of an administrator, the administration function is undertaken by the appointed investment manager.
However, the Act does provide for a regulatory framework for the provision of Fund Administrator Services, and over the past years, Malta has seen a marked increase in the number of Fund Administrators who have sought recognition from the Malta Financial Services Authority (the “MFSA”).
The services provided by Fund Administrators may be divided two fold. On the one hand, core services performed by Fund Administrators would include but are not limited to:-
- Preparation of Net Asset Value;
- Pricing the Investment Portfolio;
- Fund Accounting;
- Preparation of Contract Notes; and
- Transfer Agency;
On the other hand, ancillary services which may also be provided for by Fund Administrators would typically include:
- Payment of Bills;
- Preparation of Financial Statements;
- Performance Reporting;
- Compliance Reporting;
Notification to the MFSA
The provision of Fund Administration Services in or from Malta to any licensed Collective Investment Scheme requires a formal recognition from the MFSA, after assessment that the applicant is fit and proper to provide fund administration services.
Although there are no minimum presence requirements, the MFSA does not permit the creation of brass-plate operations and the Fund Administrator is expected to conduct business in and from Malta. Nevertheless, the MFSA is receptive to allowing a grace-period for small set-up and shall allow reliance on outsourcing arrangements (even to parent undertakings, groups or affiliated undertakings), until the business of the Fund Administrator has reached a critical mass.
However, any outsourcing arrangements shall not be such as to hinder and/or dilute the controls of the Fund Administrator of the ability of the MFSA to monitor adherence to statutory obligations. Any outsourcing requirements has to be pre-approved by the MFSA, and generally conditional to the satisfaction of the following minimum staffing arrangements:
- one Maltese resident Director;
- one full time employee with appropriate experience responsible for Compliance, Anti-Money Laundering and monitoring the activities of the delegated entity.
The Board of Directors of the Fund Administrator is generally expected to be made up of at least two members (one of whom should be resident in Malta) and the majority of board meetings should be held in Malta.
Furthermore, the Fund Administrator will generally be required by the MFSA to have office space (own or shared) dedicated to its activities in Malta, equipped with an independent telephone line, a facsimile machine connected to a direct telephone line, an internet connection and filing space.
Provided a properly documented application form together with all other supporting documentation is submitted to MFSA, the time to recognition will usually be between six (6) to eight (8) weeks. The process for recognition may be concisely summarised as follows-
- Preparatory: preliminary meeting and discussions with MFSA regarding the proposal. Submission of draft application form and supporting documentation and review thereof by the MFSA;
- Pre-Recognition: when the review of the draft application and supporting documents has been completed, the MFSA shall, upon a favourable evaluation of the application, issue its ‘in principle’ approval for the recognition of the applicant. The applicant will be recognised once the outstanding matters are resolved, including the incorporation of the company (or registration of the partnership), submission of signed copies of final application and final supporting documents and any other issues raised during the Application process;
- Post-Recognition/Pre-Commencement of Business: the MFSA may require the applicant to meet certain post-recognition requirements prior to formal commencement of business.
The request for Recognition shall be processed by the MFSA, upon receipt of an application fee of €3,000, together with the following documents:
- the completed form – Application for Recognition as a Fund Administrator of a Collective Investment Scheme;
- template covering letter;
- template confirmation letter by recipient/s of the proposed administration services;
- auditor’s declaration (template included in the Application Form);
- business plan, including a description of the Fund Administration Services to be provided and details as to whom such services will be provided;
- Memorandum & Articles of Association, deed of partnership or equivalent constitutive document depending on the legal structure of the applicant;
- a copy of the most recent audited accounts of the applicant. Where the applicant is a new entity, three year financial projection;
- a duly completed Personal Questionnaire (PQ) in relation to each Director and Qualifying Shareholder(s) of the applicant as well as the applicant’s proposed Compliance Officer and Money Laundering Reporting Officer. In the case of qualifying corporate shareholders, the Memorandum and Articles of Association and most recent audited accounts of the corporate shareholder shall also be required;
- resolution of the Directors/ General Partners of the applicant;
- address of the premises in Malta from where the Fund Administration Services will be rendered including the relevant contact details;
- a chart which illustrates the internal operational structure of the applicant with respect to its proposed fund administration business (this should show names, reporting lines and roles);
- where the applicant forms part of a group: a diagram showing the relationships between the applicant and other members of the group.
Upon obtaining recognition and annually thereafter, a supervisory fee of €1,200 is payable to the MFSA.
Fund administrators based in foreign jurisdictions as corporate entities can transfer their operations to Malta without the need to wind up their operations, by re-domiciliating the company to Malta, through the procedure set forth in the Continuation of Companies Regulations. Re-domiciliation allows the corporate entity to retain its legal personality and corporate existence (as well as its rights and liabilities under contracts and at law) without having to start afresh.
Taxation of Fund Administration Companies
Like all companies resident in Malta, a fund administration company would be subject to income tax on company profits at a rate of 35%. However, this is subject to Malta’s full imputation tax system, wherein tax paid by a company in Malta is, on the distribution of a final dividends, imputed to the shareholder as a tax credit against the shareholders’ tax liability. Therefore, a shareholder will, upon a distribution of the dividend, be entitled to a refund in part or in full of any advance tax levied on the distributing company.
The full imputation tax credit thereby renders Maltese companies highly efficient tax vehicles, with a number of applicable refunds to shareholders possible. The default refund applicable to a fund administrator company in respect of active trading income, is a refund of 6/7ths.
Furthermore, foreign tax paid can be taken into account for purposes of the refund calculation, subject to the maximum refund not exceeding Malta tax paid. Effectively, it is possible to envisage situations where no Maltese tax leakage would be suffered by the fund administrator company in the manner set forth below:
|Maltese Company||No Foreign Tax||With Foreign Tax|
|Net Foreign Income||2000||2000|
|Grossing up with Foreign Tax||0||105|
|Tax at 35%||700||737|
|Credit- Double Tax Relief||0||105|
|Malta Tax Payable
(tax at 35% less tax credit)
|Shareholder of Maltese Company|
|Refund on distribution
(6/7 of Malta Tax Payable)
|Effective Tax Paid in Malta||100||0|
|Effective Tax leakage in Malta on Net Income||5%||0%|
*632 (6/7ths of 737)
Contact one of our officers to initiate the recognition process for a Maltese Fund Administrator and start reaping full benefits of a reputable, low-tax EU jurisdiction. Simply fill in the contact box below or contact us by email on firstname.lastname@example.org or by calling at +356 2338 1500