Launching a hedge fund in Malta 101: what you need to know

In talks with our hedge fund clients, Malta comes up often as a good jurisdiction to launch a hedge fund. So today, we will look at the basics of setting up a hedge fund in Malta and share what you need to know before you begin.

Registering and getting licenced

Malta is part of the European Union, so before launching a hedge fund and offering financial services to clients within or outside of the EU, you must obtain a licence and comply with the local regulator – Financial Services Authority (MFSA). The Investment Services Act (ISA) offers the legal framework that Maltese hedge funds follow.

Tip: If you are only starting in the hedge fund world, you might be tempted to choose an offshore location to enjoy more straightforward regulatory and licencing requirements. Although it might work in some cases, more often than not, it will limit your business potential and create unnecessary obstacles, such as the inability to work with clients in certain countries and failure to open bank accounts. So, we’d recommend choosing between Malta and other regulated jurisdictions and treating it as an investment into your hedge fund’s long-term future.

Before you can apply for a licence, though, you need to register a business entity. Your lawyer will help you with that, but the general recommendation is to use the open-type investment company legal form.

The total time required to finish all of the paperwork differs from case to case, but the average is six months.

Perks of registering a hedge fund in Malta

There are many benefits of having your hedge fund registered in Malta, including:

• Access to the European Union market and clients.
• Tax exemption for several hedge fund taxes.
• Flexible and transparent regulatory system that is easy to navigate.
• High concentration of talent in resources in the region.

Taxes for hedge funds in Malta

As mentioned above, Malta does not impose several standard taxes, but some of those exemptions have special conditions that we recommend you check with your lawyer.

Taxes that are not applied for hedge funds based in Malta:

• Capital gain tax on the sale of shares
• Stamp duty
• Net asset value tax
• Withholding tax on dividends

In addition to that, hedge funds will not be taxed on their income if 85% of the fund’s assets are permanently located outside of Malta.

Final thoughts

Malta might be a small country, but the opportunities it provides to hedge funds are substantial. Although the initial registration will take time and require upfront investments, in return, you will have an EU licence and all the benefits that entails.

If you are considering launching a hedge fund and need a trusted technology partner to get you started, Tools for Brokers is here for you. Our technical specialists have worked with many hedge funds, and we will be happy to help you build an environment that will support your hedge fund and enhance its performance. For more information, please email us at sales@t4b.com.