Malta Real-Estate Funds

Malta Real-Estate Funds

Types of Real-Estate Funds

As part of the Investment Services Rulebooks, the MFSA has in place a “Property Funds Policy” which, together with the Immovable Property (Immovable by non-Residents) Act, Cap 246 of the Laws of Malta lay down the below strategies:

  1. Funds whose main objective is investing in immovable property and targeting Malta investors,
  2. Funds whose main objective is investing in immovable property and targeting investors who are not Malta residents,
  3. Funds with a limited exposure of direct, or indirect, investment in immovable property and who target investors who are Malta, or non-Malta, resident,
  4. Funds Investing in Property Management and/or Property Financing Companies

Funds investing in immovable property

The “Property Funds Policy” as issued by the MFSA distinguishes between Real-Estate Funds targeting Malta resident investors as well as non-Malta resident investors, the key features of which are set out below.

FEATURES Malta-Resident Investors Non-Malta Resident Investors
FUND TYPE PIFs targeting Qualifying Investors

AIFs targeting Qualifying and/or Professional Investors

PIFs targeting Qualifying Investors

AIFs targeting Qualifying and/or Professional Investors

 BORROWING RESTRICTIONS Unrestricted Unrestricted
 LEVERAGE: Open-Ended Funds Up to 50% of NAV at Fund level and 100% of NAV at SPV level,

OR

150% of NAV at SPV level with no leverage at Fund level.

Up to 50% of NAV at Fund level and 100% of NAV at SPV level,

OR

150% of NAV at SPV level with no leverage at Fund level.

LEVERAGE: Closed-Ended No restrictions No restrictions

Funds with a limited exposure of direct, or indirect, investment in immovable property

The “Property Funds Policy” as issued by the MFSA lays down the key features for Funds with limited exposure into immovable property, as outlined below:

  • Permitted for
  • Exposure to immovable property should range between 10 to 20% of NAV;
  • Subject to interim and annual reporting to MFSA to ensure exposure limit is satisfied;
  • Investment & Borrowing restrictions apply as addressed in the previous categories.

Funds Investing in property management and/or property financing companies

The “Property Funds Policy” as issued by the MFSA lays down the key features for Funds investing in property management and/or property financing companies, as outlined below:

  • May be promoted to retail investors. Retail Funds may not invest directly in immovable property or in any companies, including collective investment schemes, whose objective is to own or invest in immovable property except to a maximum of 10% of NAV;
  • Such Funds may invest in any combination of shares or bonds issued by property management companies or property financing companies. This is subject to a 10% of NAV maximum exposure for unlisted securities

Interpretation of Terms

Property Management Companies: companies whose business involves providing a range of services primarily for property owners, including: advertising property, checking references of prospective buyers and tenants, arranging for the sale or lease of property, collection of rent, etc.

Property Financing Companies: companies involved in providing bridging or other finance arrangements to borrowers engaged in property development and investment.

Taxation

Malta offers a highly efficient fiscal regime which adopts double taxation on a taxed company profits distributed as dividends.  Malta companies are taxed at a rate of 35%.  However, a full imputation system applies to the taxation of dividends whereby the tax paid by the company is imputed as a credit to the shareholder receiving the dividend to as low as 5% (or full refund in the case of participating holding).

As a general rule, Malta domiciled Funds are exempt from Maltese income and capital gains tax as long as they do not have more than 85% of their assets situated in Malta, i.e. non-prescribed.  Additionally, when properly structured, such schemes could benefit from the following tax advantages:

  • No Tax on the Net Asset Value of the scheme
  • No withholding tax on dividends paid to non-residents
  • No tax on capital gains on the sale of units by non-residents
  • No taxation on capital gains on the sale of shares or units by residents provided these are listed on the Malta Stock Exchange

Kindly download the FUND ESTABLISHMENT FORM and send it to [email protected]. A representative of our team will get in touch to discuss and assist with your hedge fund needs.

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