Malta has established itself as a leading jurisdiction for investment funds, offering a variety of structures suited for different types of investors. As of June 2022, Malta’s investment fund industry managed a total net asset value (NAV) of approximately €21.2 billion across 483 licensed investment funds.
Malta offers significant tax advantages for foreign investors establishing funds. Investment funds structured as SICAVs or other recognised collective investment schemes can benefit from tax neutrality, meaning that non-resident investors are not subject to capital gains tax on profits earned within the fund. Additionally, dividend distributions to non-resident investors are generally exempt from withholding tax, making Malta a tax-efficient jurisdiction for international fund managers.
SICAV or an InvCo?
When setting up an investment vehicle in Malta, fund promoters and investors often consider whether a SICAV or an InvCo is the right structure for their needs. The choice depends on factors such as investor type, investment strategy, liquidity requirements, and regulatory obligations.
A SICAV is typically chosen for open-ended funds where investors can freely subscribe and redeem shares, making it ideal for funds investing in liquid assets such as publicly traded securities or diversified investment portfolios. It also provides access to EU passporting rights if structured as a UCITS or AIF, making it suitable for cross-border distribution.
On the other hand, an InvCo is a closed-ended structure, designed for investments requiring a longer-term commitment, such as private equity, venture capital, and real estate. Its fixed capital structure reduces liquidity risk, but it comes with regulatory constraints, including a provision all but forcing it to only hold investments in other companies with fixed share capital, and the absence of automatic EU passporting. For this reason, they are the least used option between the two.
Understanding these differences is essential to selecting the most appropriate structure based on your investment funds objectives, regulatory obligations, and investor expectations. Overall, SICAVs are preferable for liquid, diversified investment strategies with an international investor base, while InvCos are better suited for long-term, illiquid investments such as private equity, where a stable capital structure is needed.
Collective Investment Schemes
While SICAVs and InvCos provide a broad framework for structuring investment funds, more specific investment vehicles cater to different investor needs and regulatory requirements. Below is an overview of these fund structures and their advantages and disadvantages.
1. Professional Investor Funds (PIFs)
Target Investors: Professional and high-net-worth individuals
Regulation: Light regulatory framework until AUM thresholds are exceeded
✅ Advantages: Lighter regulatory requirements than AIFs; Greater flexibility in structuring investments; Higher AUM threshold (EUR 500 million) if no leverage is used and redemptions are restricted
❌ Disadvantages: Must transition to an AIF if AUM exceeds EUR 100 million (or EUR 500 million under specific conditions); No EU passporting rights
2. Notified Professional Investor Funds (NPIFs)
Target Investors: Professional investors
Regulation: No MFSA licensing required but subject to due diligence
✅ Advantages: Faster setup process; No direct MFSA approval needed; Can invest in a wide range of assets, including cryptocurrencies
❌ Disadvantages: No EU passporting rights (reliance on reverse solicitation or private placement); Still subject to regulatory reporting obligations
3. Alternative Investment Funds (AIFs)
Target Investors: Institutional investors
Regulation: Full compliance with AIFMD
✅ Advantages: Highly regulated, ensuring investor protection; EU passporting rights for cross-border marketing; Broad investment scope, including real estate, private equity, hedge funds, etc.
❌ Disadvantages: Heavier regulatory burden compared to PIFs and NPIFs; Higher compliance costs
4. Notified Alternative Investment Funds (NAIFs)
Target Investors: Professional and qualifying investors
Regulation: No direct MFSA licensing but must be managed by an authorised AIFM
✅ Advantages: Faster setup than fully licensed AIFs; Managed by an authorised AIFM, ensuring compliance with AIFMD; EU passporting rights
❌ Disadvantages: Can only be marketed to professional and qualifying investors; Still requires an authorised AIFM for compliance
5. UCITS Funds
Target Investors: Retail investors
Regulation: Strict regulatory framework ensuring liquidity and diversification
✅ Advantages: EU passporting rights for unrestricted marketing across the EU; High investor protection and transparency; Suitable for publicly traded securities
❌ Disadvantages: Not suitable for alternative assets like private equity, real estate, or cryptocurrencies; Heavy compliance burden and investment restrictions
6. Incorporated Cell Company (ICC)
Target Investors: Fund promoters needing multiple sub-funds
Regulation: MFSA-licensed, with each cell meeting regulatory requirements
✅ Advantages: Each incorporated cell (IC) is legally distinct, ensuring strong asset protection; Ideal for fund managers running multiple strategies under a single entity; Can invest in a wide range of assets
❌ Disadvantages: Requires MFSA approval; Each incorporated cell must meet separate regulatory requirements
7. Recognised Incorporated Cell Company (RICC) & its Incorporated Cells
Target Investors: Fund managers seeking cost efficiency
Regulation: The RICC provides support services, while each IC requires its own regulatory approval
✅ Advantages: Cost-efficient structure for multiple funds under a single platform; Each IC is legally separate, ensuring risk isolation
❌ Disadvantages: The RICC itself cannot engage in investment activities; Each IC still requires regulatory approval
8. Limited Partnership
Target Investors: Private equity and venture capital investors
Regulation: Flexible, with bespoke partnership agreements
✅ Advantages: Tax-efficient structure; Allows customised governance and investment terms; General partners manage the fund, while limited partners have liability protection
❌ Disadvantages: General partners bear unlimited liability; Not suitable for retail investors
Minimum Investment Requirements for Investors
The minimum investment threshold varies depending on the type of fund, ensuring that investors meet the necessary qualification criteria:
- Professional Investor Funds (PIFs): Investors must invest a minimum of EUR 100,000 or its equivalent. This amount must not fall below the threshold due to partial redemptions.
- Notified Professional Investor Funds (NPIFs): The minimum investment requirement is EUR 100,000, which must be maintained throughout the investment lifecycle unless reduced due to market fluctuations.
- Alternative Investment Funds (AIFs): A minimum investment of EUR 100,000 is required, and the fund must adhere to risk diversification rules.
- UCITS Funds: These funds are open to retail investors and do not have a strict minimum investment threshold, though individual fund prospectuses may impose requirements.
✅ Establishing Funds in Malta – STEP BY STEP
✔ Choose the Right Fund Structure – Decide whether a PIF, NPIF, AIF, or UCITS fund best fits your investment strategy and investor base.
✔ Appoint Key Service Providers – Engage a fund manager, custodian, administrator, and compliance officers as required by law.
✔ Prepare Fund Documentation – Draft offering documents, risk disclosures, and governance structures to meet regulatory standards.
✔ Regulatory Submission & Approval – Submit applications to the MFSA (if required) and undergo due diligence checks.
✔ Launch & Investor Onboarding – Once regulatory approval is secured, the fund can begin operations and attract capital.
Cost Considerations
The cost of setting up and maintaining an investment fund in Malta varies significantly depending on the fund structure, regulatory requirements, and service providers involved.
For a Notified Professional Investor Fund (NPIF), the initial setup costs can start from as low as EUR 10,000. However, when factoring in the necessary compliance officers and MFSA-required personnel, annual operational costs typically amount to around EUR 40,000.
Other fund structures, such as AIFs and UCITS, involve higher setup and maintenance costs due to the need for full MFSA licensing, ongoing compliance, and additional reporting obligations. Exact figures depend on the complexity of the fund, the level of regulation required, and third-party service fees. For precise cost estimates, it is advisable to consult with local fund administrators, legal advisors, or the Malta Financial Services Authority (MFSA).
Summary
Beyond taxation, Malta provides a flexible regulatory framework, EU passporting rights, and a well-developed financial infrastructure. With a growing reputation as a fund domicile, Malta has become a preferred jurisdiction for fund managers and institutional investors seeking efficiency, compliance, and global market access. Given these advantages, fund managers looking to establish a tax-efficient and well-regulated structure should explore Malta’s investment landscape and seek professional guidance to maximize the benefits.
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