Wealth Management

A 360-Degree Approach to Wealth Management

As high-net-worth individuals express a demand for robust alternatives in the wake of the financial crisis, Malta is emerging as a leading wealth management centre in Europe. Orchestrating a symphony of innovative products, experienced professionals as well as personal and cost-effective services, Malta believes it can fulfil today’s demands of affluent clients and their advisors. It offers all the favourite investment vehicles of high-net-worth individuals and families, while the EU member state allows investors to protect their assets through the establishment of trusts and foundations. The country’s mission is simple: after having won respect for the excellence and resilience of its financial services industry throughout the financial crisis, it now aims to emulate the success of wealth management centres such as Geneva, London and Hong Kong.

Strong Fundamentals

Malta’s strengths as a wealth management centre lie in the wide range of investment vehicles available, among them investment funds, companies, trusts and foundations, all of which have been designed to provide asset planners the security of an EU jurisdiction coupled with flexible business entities that can accommodate the most complex structures. In structuring the right portfolio mix, Malta’s tax regime provides investors with the possibility of minimal tax leakage on a corporate and a personal level. Equally important, the country has an excellent physical and legal infrastructure, which is supported by experienced professionals to marry these separate strands into a unified and comprehensive wealth management offering.

Attracting Family Offices

Malta’s proposition has already attracted a number of family offices which are finding it a compelling alternative to traditional wealth management centres and have transferred all or part of their operations to the island. The sector is rapidly evolving and local service providers are extending their offerings, too. The island’s law firms are providing an array of family office services to their wealthiest clients, while the country’s larger accounting firms offer services that enable families to outsource many family office activities. With their relationship-driven business culture, Malta’s service providers have built up a reputation for personalised services and tailored solutions that integrate every aspect of a client’s wealth management needs.

Strong Banking Infrastructure

Serving clients from across the world, Malta’s private bankers and asset managers cater to all levels of wealth from the mass affluent to the ultra-high-net-worth individual. Having been ranked as the 12th soundest banking sector in the world by the World Economic Forum’s Competitiveness Index 2011-2012, Malta’s banks are well capitalised and have emerged from the recent turmoil in the financial markets relatively unscathed. Over the past years, Malta has been experiencing a steady influx of banks specifically established to offer investment banking, private banking and wealth management services to their wealthiest clients. Specialist wealth managers such as Mediterranean Bank are offering Swiss-style private wealth management, while foreign banks such as AkbankT.A.S., Sparkasse, Volksbank, BAWAG and Raiffeisen all offer management solutions. In addition, retail banks such as Bank of Valletta, Banif Bank and HSBC also provide professional financial advice and products to high-net-worth, corporate and institutional clients. A number of investment services firms also provide wealth management services and access to global investment banking firms, offering even broader investment choices, portfolio diversification and the provision of tailor-made management services.

The Right Tools & the Right Expertise

A key instrument for wealth managers is Malta’s legislation on trusts and foundations. Malta is one of the few jurisdictions that cater for both trusts and foundations. Both structures allow the creation of customised solutions that will fit the most diverse personal and business needs, ranging from succession planning to estate management. While trusts usually appeal to clients from common law jurisdictions, the availability of foundations particularly attracts clients from countries in Asia that are not familiar with the concept of a trust. The country’s prudential regulatory and supervisory system, under which trustees and other investment services providers have to be licensed, gives comfort to families by ensuring certain standards are met.  With more than 550 funds already established in Malta, the country’s fund administrators and managers have a track record in setting up and managing different investment vehicles for institutional and individual investors. Malta’s framework for alternative funds, referred to as Professional Investor Funds (PIFs), is designed to attract high-net-worth investors. Hedge funds, private equity funds and property funds are normally structured as PIFs. Asset management companies in Malta have already launched fund platforms exclusively open to family offices and third party managers to provide them with an efficient and cost-effective solution to enter the market.

Tax Planning & Alternative Investments

Setting up a company in Malta through which to structure family office business can also prove highly advantageous. As a company domicile, Malta offers fully EU-compliant, highly effective corporate tax rates. The country operates a full imputation system on taxation through which shareholders can claim a tax credit for the tax paid by the company. There are many reasons why an individual may wish to establish such an entity in Malta ranging from the simple creation of a company to own, for example, a holiday residence, a yacht or a private aircraft, to the more complex set-ups required in the structuring of Islamic Finance transactions. Already a strategic port of call for super yachts crossing the Mediterranean, there has been growing demand from international families for private yacht and aircraft solutions. The introduction of extensive VAT incentives for the registration of yachts under the country’s flag and the excellent Infrastructure of the Maltese islands’ marinas makes Malta a logical choice to base a yacht. The country also offers tax efficient ways o how to manage aircraft and has developed a strong legislative framework that paved the way for the easy registration of private jets.

A Residence in the Sun

While wealth planners and advisors will find Malta the ideal location for the structuring, holding and managing of family assets, Malta is also a good place to live for high-net worth individuals. Endowed with a pleasant Mediterranean climate, excellent quality of life and highly competitive cost of living, Malta is attracting growing numbers of foreign residents. In addition, the country has a very low crime rate, and the country’s service providers are committed to protect their clients’ privacy. Affluent families can also benefit from
significant tax advantages if they move their residence to Malta. The country has recently introduced a new scheme for high-net worth individuals, offering a flat tax rate of 15 per cent on foreign income if they purchase property in Malta.

Winning on Reputation

After the financial crisis, wealth management has entered a new era. Client expectations grew more sophisticated and competition intensified. With a sound banking system, innovative investment vehicles and a pool of legal and financial advisors, Malta offers the right conditions for family wealth planning, whether serving as a base for family offices, a residency option for the family itself or as a location offering services to multiple family offices worldwide. While London, Geneva and Hong Kong are so far the most favoured locations for wealth management and family offices, Malta is rapidly winning on reputation and is proving to be a safe, well-regarded portal for global investment.

Yachts and Pleasure Boats

Malta is also an attractive base for the registration of commercial and pleasure yachts, as well as super yachts. The owners of almost 300 super yachts (vessels over 24 metres in length) have already chosen Malta as a base for their yachts in order to take advantage of the location of the country and the cost-effective services provided by marinas and ancillary companies, as well as the regime for boat ownership which offers two specific incentives to yacht owners. Under the Commercial Yacht Code, yachts which do not carry cargo and do not carry more than 12 passengers, can be registered as commercial yachts. If such a Maltese registered vessel is owned, chartered or managed, no income tax is due in Malta on or in relation to the ownership, operation or management of the yacht. Instead, the owner, charterer or manager has to pay an annual tonnage tax that is calculated according to the size of the vessel. As far as yachts which are not commercially registered are concerned, the Maltese VAT guidelines address scenarios where a Maltese company purchases a pleasure yacht and enters into a ’lease-sale’ of the yacht with a third party. The aim of this structure is to enable yacht owners to pay VAT on their yachts calculated on the percentage of the time that the vessel is deemed to sail in EU waters – based on the assumption that the larger the yacht, the less time it stays there. For example, a 24- metre sailing boat or motor yacht is presumed to spend only 30 per cent of its time in EU waters and thus VAT (at 18 per cent) should only be calculated at 30 per cent of the lease fee paid. Since it is virtually impossible to track the movements of the yacht and thus calculate the deemed usage in EU waters, the VAT department in Malta has issued guidelines which contemplate the deemed usage percentage in EU waters and reduces the effective VAT rate up to 5.4 per cent.

A Success Story

Malta’s flourishing international shipping centre is regarded as an efficient jurisdiction in which to establish ship management operations. The country provides a convenient base for shipping companies that take advantage of the low costs involved in operations from Malta and from the beneficial financial structures which exist. The country’s maritime lawyers, accountants and banks have received international recognition for their services, making Malta an attractive choice for ship owners and ship managers. Building on its geographic location and a package of financial and operational advantages, Malta has established itself as the leading shipping register in Europe and one of largest worldwide.

Flying High: Malta’s Itinerary for Growth in aviation

Revamped legislation has breathed new life into Malta’s aviation industry, and the country has started to work on its ambitious goal to establish one of the largest aircraft registers in the world. While the new Aircraft Registration Act was not expected to be an overnight success, by mid-January 2012, 104 aircraft were listed on Malta’s register, which is an increase of 18 aircraft over the previous year. Steadily building up a cluster of aviation services related to the management, maintenance, financing and leasing of aircraft, Malta aims to develop into a fully-fledged aviation centre that supports operators, financiers and managers.