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Malta registered Securitisation Vehicles obtain important VAT clearance
Following the publishing of Legal Notice No. 383 of 2016, Securitisation Vehicles will now also fall under the exemptions of investment scheme management services as provided by item 3(6), Part Two of the Fifth Schedule of the Malta VAT Act. This will mean that securitisation vehicles established or operating from within Malta will not need to be registered for VAT purposes and will not be charging any VAT on their services.
As defined under Chapter 484, Securitisation Vehicles may take the form of a company, a trust created by a written instrument or any other allowed legal structure. The term securitisation is defined by the same chapter as a transaction where assets are acquired, risks are assumed or secured loans are granted whereby these are financed through the issue of financial instruments/securities. Any type of asset may be securitised, be it moveable or immoveable, tangible or intangible, current or future. Securitisation brings about a number of advantages namely the closing in of financial and capital markets by converting financial assets into capital market commodities. Securitization allows for the reduction of funding costs, risks as well as the changing of illiquid portfolios into liquid stocks, which can be sold to many individual investors.
Securitisation Vehicles are generally not licensable in Malta, however there is the need for registration with the Malta Financial Services Authority. Such a vehicle is still subject to the provisions of Chapter 484 Securitisation Act. Public securitisation vehicles, i.e. securitisation vehicles which issue or plan to issue financial instruments to the public on a continuous basis, do however need to apply for a licence before commencing any activities.
The change in the VAT treatment will mean that, going forward, Securitisation Vehicles will benefit from a reduction in irrecoverable VAT costs associated with the function they provide.
