Company in Malta

Malta is an EU Member State with
an Exceptionally Advantageous Tax Regime

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Malta company formation package: 345 EURO – arrangement of Malta company formation and bank account (via officially licensed local member / partner firms) including VAT and Tax registration. "FBS KOTSOMITIS", operating since 1998, is a well-known and established international professional services network with officially licensed and regulated local member / partner firms. Contact us to start process by sending an email to enquiries@fbsmalta.com, by using our contact form or by calling at +356 2338 1500.

FOREX

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Malta FOREX Licensing Process

Background

Malta has strongly established itself as a strong financial services centre, attracting a critical mass of fund managers, fund administrators, custodians, investment services firms and now also FOREX investment companies.

The carrying out of investment services in or from Malta is a licensable activity under the Investment Services Act, Chapter 370 of the Laws of Malta.  Applicants shall, subsequent to an assessment of their integrity and competence, be granted an investment services licence from the Malta Financial Services Authority (“MFSA”).

Licensable Activity

There are four (4) categories of Investment Services Licences, as follows:

Category 1a

Licence Holders authorised to receive and transmit orders in relation to one or more financial instruments and, or provide investment advice and, or place instruments without a firm commitment basis but not to hold or control clients’ money or customers’ assets;

Category 1b

Licence Holders authorised to receive and transmit orders, and, or provide investment advice in relation to one or more instruments and, or place instruments without a firm commitment basis solely for professional clients and, or eligible counterparties but not to hold or control clients’ money or customers’ assets;

Category 2

Licence Holders authorised to provide any Investment Service and to hold or control clients’ money or customers’ assets, but not to operate multilateral trading facility or deal for their own account or underwrite or place instruments on a firm commitment basis;

Category 3

Licence Holders authorised to provide any investment service and to hold and control Clients’ Money or Customers’ Assets;

Category 4

Licence Holders authorised to act as trustees or custodians of collective investment schemes.

Forex Companies

Forex Companies dealing on own account require a Category 3 Investment Services Licence, whereas forex traders acting as a riskless principal (a “white label partner”) – which involves the execution of two matching trades (one with the client and one offsetting trade with another principal) entered at the same time and price, with the entity acting as counterparty to both transactions (margin-making), would require a Category 2 licence.

By definition FOREX is restricted solely to the trading of currencies, however a licence holder is able to (i) deal in financials instruments for own account and to provide any other type of investment service covered by the individual licence; (ii) if wanted operate an investment company / market operator that brings together third-party buying and selling interests in financial instruments and currencies in a multilateral trading facility (MTF) – Category 3 licence.

For more detailed information on the reporting and monitoring requirements for MTFs, please contact us.

Passporting Rights and Use of Financial Instruments

Whilst the provision of a FOREX is a licensable activity under the Act, it may not be necessarily so under the Markets in Financial Instruments Directive (“MiFID”), which may mean that passporting rights to EU Member States may not apply. This is because the acquiring and holding of investment services does not fall within the definition of “Instrument” set forth in MiFID.

However, where the provision of FOREX includes the use of financial instruments, such as derivatives, futures, options, swaps in relation to securities, currencies, interest rates or yields and/or the provision of a MiFID ancillary service, then the provision of the FOREX service may be eligible for passporting rights (irrespective of the investment licence category)

Application Process

The application process both for a forex trader dealing on own account and one acting as a riskless principal, is divided into three (3) distinct phases, as follows:

Preparatory

It is strongly advisable that the promoters and/or their representatives set up a meeting with the MFSA to discuss the proposal.  A comprehensive (written) description of the proposed activity should be provided to the MFSA prior to the meeting.

Following the discussion of the proposal, the promoters should submit a draft (rather than a final) application form, together with the supporting documentation, which shall be vetted by the MFSA for the assessment of the promoter.  The ultimate decision regarding the classification of the investment service licence shall lie with the MFSA.

Pre-Licensing

Once the review of the draft application and supporting documents have been completed and the draft licence conditions have been agreed, the MFSA shall issue an “in principal” approval for the issuance of the licence.

The applicant shall finalise all outstanding matters, such as the incorporation of the Company, and the submission of the signed copies of the revised application form together with the supporting documents in their final format.

After all pre-licensing issues have been resolved, then an investment services licence shall be issued.

Post-licensing / Pre-Commencement of Business

The applicant may be asked to satisfy a number of post-licensing matters prior to the commencement of business, and to comply with the ongoing requirements set forth in paragraph below.

Licensing fees

Upon submission of the draft application, an application fee of €2,000 would be payable to the MFSA, and €4,000 upon the issuance of the category 3 licence.

An annual supervisory fee will be payable thereafter, calculated on the basis of the company’s revenue: €4,000 for revenue up to €250,000 and €350 per tranche or part thereof for further tranches of €250,000 up to a maximum of €5,000,000.

In the case of a category 2 licence, the application fee is of  €1,500 would be payable to the MFSA, and €3,000 upon the issuance of the category 2 licence.

An annual supervisory fee will be payable thereafter, calculated on the basis of the company’s revenue: €3,000 for revenue up to €250,000 and €350 per tranche or part thereof for further tranches of €250,000 up to a maximum of €5,000,000

Click here for full summary of fees applicable to investment services

Licensing process

Upon registration of the company, a registration fee would be payable to the Registry of Companies. The amount of such fee is calculated on the basis of the company’s authorised share capital, up to a maximum of €2,250 where the authorised share capital exceeds €2.5 million.

The authorised share capital for a category 3 licence holder shall be calculated in the manner set forth below.

Incorporation Fees

Upon registration of the company, a registration fee would be payable to the Registry of Companies. The amount of such fee is calculated on the basis of the company’s authorised share capital, up to a maximum of €2,250 where the authorised share capital exceeds €2.5 million.

The authorised share capital for a category 3 and a category 2 licence holder shall be calculated in the manner set forth below.

Share Capital Requirements

Category 3 licence holders are subject to Capital Resources Requirement, which is calculated as follows:

  • Initial Capital (€730,000); and
  • the sum of the Non-Trading Book business risk components, the Trading Book risk components, the Commodities Instruments risk component, the Large Exposures risk component, the Foreign Exchange risk component, and the Operational risk component.

Category 2 licence holders are subject to Capital Resources Requirement, which is calculated as follows:

  • Initial Capital (€125,000); and
  • own funds, which are the higher than either(i) the initial capital; (ii) the sum of all the risk components calculated in terms of the rules but excluding the operational risk component; or (iii) fixed overheads requirements.

Taxation

Malta has experienced a robust growth in investment services, and boasts a number of FX companies which have successfully applied for the investment service licence. The investment services market is complemented by the attractive fiscal incentives offered by Maltese tax laws to shareholders of Maltese companies, upon a final distribution of dividends.

Shareholders are entitled to a 6/7ths refund on the standard rate of tax at 35% leaving a tax leakage of just five per cent (5%). 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 Maltese 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
Chargeable Income 2000 2105
Tax at 35% 700 737
Credit- Double Tax Relief 0 105
Malta Tax Payable
(tax at 35% less tax credit)
700 632
Shareholder of Maltese Company
Refund on distribution
(6/7 of Malta Tax Payable)
600 632*
Effective Tax Paid in Malta 100 0
Effective Tax leakage in Malta on Net Income 5% 0%

*632 (6/7ths of 737)

Conclusion

The growth which Malta has experienced in this sector shows that it is very well-placed to offer its services to investment firms interested in obtaining a license to provide services in relation to FOREX.

Contact one of our officers to initiate the licensing process for a Maltese FOREX. Simply fill in the contact box below or contact us by email on enquiries@fbsmalta.com or by calling at +356 2338 1500

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