Collective Investment Scheme (CIS)

 

Under Maltese Law a Collective Investment Scheme is defined as, any scheme or arrangement which has as its object or as one of its objects the collective investment of capital acquired by means of an offer of units for subscription, sale or exchange and which has the following characteristics:

 

·         The scheme or arrangement operates according to the principle of risk spreading; and either

 

·         The contributions of the participants and the profits or income out of which payments are to be made to them are pooled; or

 

·         At the request of the holders, units are or are to be re-purchased or redeemed out of the assets of the scheme or arrangement, continuously or in blocks at short intervals;

 

·         Units are, or have been, or will be issued continuously or in blocks at short intervals.

 

For tax purposes the classification between prescribed and non-prescribed funds is crucial.

Prescribed Fund

This is a resident fund that has declared that the value of its assets situated in Malta at a particular date equals at least 85% of the value of its total assets. Investment income (other than investment income paid by another CIS) received by a prescribed fund is subject to a withholding tax such as on:

 

·         Interest paid by a bank licensed in Malta on bank deposits

 

·         Interest, premiums or discounts paid

o   by the Government of Malta

o   by a corporation or authority established by law

o   through a public issue by a company or other legal entity wherever constituted

o   through a private issue by a company or other legal entity resident in Malta to a CIS

o   foreign bank interest paid through an authorized financial intermediary

 

·         Capital gains arising on the redemption of securities not being shares in a CIS / investment in an LLTCI nor shares in a company

 

The rate of withholding tax is 15% on local bank interest and 10% on other investment income as listed above. Where a prescribed fund has income from immovable property situated in Malta, such income would be subject to tax at the standard corporate rate of tax at 35%.

 

Non-Prescribed Fund

Whether resident or not, this is a fund which is not a prescribed fund. Therefore funds in overseas based schemes are automatically classified as non-prescribed funds.

 

 

A blanket tax exemption applies on gains or profits accruing to a non-prescribed fund except from any income derived from immovable property situated in Malta.

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