Malta Private Fund

A Malta Private Collective Investment Scheme is not subject to a PIF licence but only needs recognition by the MFSA.

The main requirements for a Malta Private Scheme are:

a) the directors and other officers and participants of the fund are fit and proper persons to carry out the functions required of them in connection with the Scheme;

b) the fund must limit the total number of participants to 15 persons;

c) the participants must be close friends or relatives of the promoters;

d) the Authority must be satisfied that the scheme is essentially private in nature and purpose;

e) the scheme must not qualify as a PIF.

Advantages and Disadvantages of a private scheme:

The main advantages of a private scheme as opposed to a licensed PIF:

a) MFSA will limit its due diligence procedures to determining the integrity of the persons concerned and will not assess the competence of the persons responsible for managing the Scheme,

b) no investment or borrowing restrictions or other conditions other than those which may be specified in the recognition certificate issued by the Authority,

c) a recognised private scheme need not appoint an external manager,

d) faster and cheaper application process and cheaper annual fees.

The main disadvantages of a private scheme are:

a) recognition shall not be deemed to be a licence for the purpose of the Income Tax Act, meaning that the special income tax rules applicable to other types of schemes do not apply. Therefore Private Schemes do not enjoy complete exemption from tax applicable in respect of the income of a collective investment scheme. The fund will therefore be subject to normal tax rules as any company registered in Malta, having access to participation exemption regime, tax refunds and also double tax treaty network. Generally, income of a private scheme will suffer tax in the region of 0-6.25%, depending on different factors.