COLLECTIVE INVESTMENT SCHEMES (INVESTMENT INCOME) REGULATIONS (investmentincome)

SUBSIDIARY LEGISLATION 123.51

COLLECTIVE INVESTMENT SCHEMES

(INVESTMENT INCOME) REGULATIONS

1st March, 2001

LEGAL NOTICE 55 of 2001, as amended by Legal Notices 111 of 2002,

188 of 2003, 307 of 2004, 313 of 2006, 409 of 2007, 257 of 2008 and 426 of

2012.

The title of these regulations is the Collective Investment

Schemes (Investment Income) Regulations.

L.N. 111 of 2002;

(Regulation 14(4))

L.N. 426 of 2012.

PART ONE

Information to be supplied by authorised financial intermediaries on every payment

certificate

Sequential number of certificate

Name and address of the authorised financial intermediary

Description of the fund

Name and a legally valid identification document number of the investor

In the case of a disposal of units or shares

a) The date of the disposal

b) The number of units or shares disposed of

c) The price for which the units or shares were disposed of

d) The amount subject to tax

e) The net amount paid or reinvested

In the case of a distribution of profits

a) The profits distributed before withholding tax

b) The tax withheld

c) The net payment

Date of the certificate

Signature of the authorised financial intermediary

PART TWO

Monthly account to be rendered to the Commissioner by financial intermediaries

Name and address of the authorised financial intermediary

Period covered

Total tax withheld

First and last sequential numbers of the corresponding payment certificates

A breakdown giving

a) The description of each fund

b) The tax withheld on the payments from each fund

c) The total number of payment certificates corresponding to payments

from each fund

The date of the return

Signature of the authorised financial intermediary

For a period during which no tax was withheld a nil return must be

submitted.

In these regulations, unless the context otherwise requires

"Act" means the Income Tax Act;

"fund" means a collective investment scheme or, in the case of a

collective investment scheme divided into sub-funds, a sub-fund of

that scheme;

"Malta based scheme" means a collective investment scheme

formed in accordance with the laws of Malta;

"overseas based scheme" means a collective investment scheme

that is not a Malta based scheme;

and other terms shall have the meaning assigned to them in articles

33 to 42, both inclusive, of the Act or, when not defined in the said

articles, the meaning assigned to them under the other provisions of

the Act.

For the purpose of the definition of "prescribed fund" in

paragraph (b ) of article 41A of the Act, and subject to the

provisions of that paragraph and to the other provisions of these

regulations, a fund shall be treated as a prescribed fund if it has

been so classified by the Commissioner by means of a notice in

writing.

The Commissioner shall classify a fund as a prescribed

fund if it is a fund of a Malta based scheme that has declared in the

manner provided for in these regulations that -

(a) the value of the assets situated in Malta allocated to

that fund is on the 1st March 2001 at least eighty-five

per cent of the value of the total assets so allocated; or

(b) in the case of a fund that has been granted a collective

investment scheme licence on or after the 1st March

2001 the value of the assets situated in Malta that will

be allocated to that fund for the purpose of its

operations is expected to be at least eighty-five per

cent of the value of the total assets that will be so

allocated.

(1) A fund in an overseas-based scheme shall be treated as

a non-prescribed fund.

(2) When a Malta based scheme declares in the manner

provided for in these regulations that a fund does not satisfy the

conditions set out in regulation 4(a) or (b), as the case may be, the

Commissioner shall classify that fund as a non-prescribed fund.

For the purposes of these regulations the value of assets

allocated to a fund on any given day shall be the value determined

on the close of business of the last preceding working day and the

basis of valuation of such assets shall comply in all relevant

respects with that adopted in any reports or statements submitted by

o r w it h r e s p e c t t o t ha t f u n d f o r a n y o f t he pu r p o s e s o f t he

Investment Services Act.

(1) When a collective investment scheme declares in the

manner provided for in these regulations that the average daily

value of the assets situated in Malta allocated to a prescribed fund

has been, throughout any period of thirty consecutive days, less

than eighty-five per cent of the average daily value of the total

assets so allocated the Commissioner may, in his discretion,

classify that fund as a non-prescribed fund and that fund shall as

from the date of such new classification be treated as a non-

prescribed fund.

(2) When a Malta based scheme declares in the manner

provided for in these regulations that the average daily value of the

assets situated in Malta allocated to a non-prescribed fund has

been, throughout any period of thirty consecutive days, at least

eighty-five per cent of the average daily value of the total assets so

allocated the Commissioner may, in his discretion, classify that

fund as a prescribed fund and that fund shall, subject to the

provisions of regulation 8, be treated as a prescribed fund with

effect from the date specified in the said classification.

(3) For the purpose of these regulations the average daily

value of assets allocated to a fund on any day (hereinafter in this

paragraph referred to as "the particular day") shall be determined

by reference to the value of assets situated in Malta and the value of

the total assets allocated to that fund on each day over a period of

ninety days ending on the particular day

Provided that if that fund had been classified as a

prescribed or a non-prescribed fund less than ninety days before the

particular day the said period shall be a period commencing on the

date of the last classification and ending on the particular day.

(4) The Commissioner may, as a condition for a classification

in terms of subregulation (1) or (2), impose such conditions as he

may deem appropriate in the circumstances to ensure the proper

application of the investment income provisions and of these

regulations.

(1) When a fund is classified as a prescribed fund in terms

of regulation 7(2) any securities held in that fund on the date of that

classification shall continue to be treated as securities in a non-

prescribed fund: provided that when such securities are disposed of

they shall, if they are listed on a stock exchange recognised under

the Financial Markets Act, be deemed to be disposed of for the

of the said classification.

(2) When a person holds securities that are treated as securities

in a non-prescribed fund in terms of subregulation (1) and other

securities in the same fund that are not so treated, any disposals of

securities in that fund by that person shall be treated as disposals of

securities in a non-prescribed fund until all the securities which

that person held on the date on which that fund was classified as a

prescribed fund have been disposed of.

For the purpose of determining the capital gains derived by

a person from the disposal of securities that are listed on the

recognised stock exchange and held in a non-prescribed fund the

cost of acquisition of each unit or share of the same class as those

disposed of shall be deemed to be the average cost obtained by

dividing the total cost of acquisition of all such units or shares held

by that person on the date of the disposal by the total number of the

said units or shares

Provided that -

(a) if the disposal is the first disposal of such units or shares

by that person after the 28th February, 2001, the cost of

acquisition of such units or shares held by him, if any, on

the 1st March, 2001 shall be the price at which such units

or shares were quoted on a recognised stock exchange on

the date when they were acquired or the price at which

they were last quoted on a recognised stock exchange

before the 1st March, 2001, whichever price is the higher;

and;

(b) when the average cost of units or shares has been

determined on the occasion of a disposal, the units or

shares of the same class that are not disposed of on

that occasion shall be deemed to have been acquired at

the average cost determined on that occasion.

For the purpose of determining the capital gains arising on

the surrender or maturity of units and such like instruments relating

to linked long term business of insurance where the relative

contract of insurance was concluded before the 1st March 2001 and

where the benefits are wholly determined by reference to the value

of units or shares held in a collective investment scheme, the cost

of acquisition of the said linked units or such like instruments shall,

to the extent that they correspond to units or shares in a non-

prescribed fund that were listed on a recognised stock exchange on

the said date, be deemed to be equal to the price of the said units or

shares as last quoted on a recognised stock exchange before that date,

or to the price of the said units or shares as quoted on a recognised stock

exchange on the date the said contract of insurance was concluded,

whichever price is the higher.

A payor shall withhold tax on investment income paid to a

collective investment scheme at the following rates

(a) when the investment income in question is income to

which article 41(a)(i) of the Act refers, at the rate of at

the rate of fifteen cents (0.15) on every euro of such

payment;

(b) in every other case, at the rate of ten cents (0.10) on

every euro of such payment.

(1) Every Malta based scheme that holds a collective

investment scheme licence issued before the 1st March 2001 shall

make a declaration to the Commissioner stating if the value of the

assets situated in Malta allocated to each of its funds on that date is

at least eighty five per cent of the value of the total assets so

allocated.

(2) When a collective investment scheme licence is issued on

or after the 1st March 2001 to a fund in a Malta based scheme that

scheme shall make a declaration to the Commissioner stating if the

value of the assets situated in Malta that will be allocated to that

fund for the purpose of its operations is expected to be at least

equal to eighty-five per cent of the value of the total assets that will

be so allocated.

(3) When the average daily value of the assets situated in

Malta allocated to a prescribed fund of a collective investment

scheme has been, throughout any period of thirty consecutive days,

less than eighty-five per cent of the average daily value of the total

assets so allocated that collective investment scheme shall make a

declaration to that effect to the Commissioner.

(4) When the average daily value of the assets situated in

Malta allocated to a non-prescribed fund of a Malta based scheme

has been, throughout any period of thirty consecutive days, at least

eighty-five per cent of the average daily value of the total assets so

allocated that collective investment scheme shall make a

declaration to that effect to the Commissioner.

(5) Any declaration required in accordance with the foregoing

provisions of this regulation shall be given without delay and

without the need of any request being made therefor by the

Commissioner.

(6) Every collective investment scheme shall make such other

declarations and give such other details as the Commissioner may

reasonably require for any of the purposes of these regulations

within such time as the Commissioner may specify.

(1) When the Commissioner classifies a fund in a Malta

based scheme as a prescribed or a non-prescribed fund, that scheme

shall as soon as may be notify that status to any person who is

liable to pay any income referred to in article 41(a) of the Act that

falls to be allocated to that fund.

(2) When any person who makes a payment of income referred

in subregulation (1) to a Malta based scheme has not been notified,

before that payment is made, that that income falls to be allocated

to a non-prescribed fund that payment shall be deemed for all the

purposes of the Act to be a payment of investment income that falls

to be allocated to a prescribed fund and that person shall

accordingly withhold tax and comply with the provisions of the Act

relating to payors.

(1) An authorised financial intermediary is a person

resident in Malta who has been registered as such by the

Commissioner.

(2) A person shall not be eligible for registration as an

authorised financial intermediary unless he applies for registration

to the Commissioner for the purposes of these regulations and is, at

the time of such application -

(a) a person who holds a Category 2 or Category 3

investment services licence issued in terms of the

Investment Services Act, or

(b) a person who holds a Category 1 investment services

licence issued in terms of the Investment Services Act

provided he declares to the Commissioner that he has

given a commitment to the Malta Financial Services

Authority that he will apply for a licence referred to in

paragraph (a) and provided moreover that such person

shall not remain an authorised financial intermediary

after the 28th February 2002 unless he holds, on that

date, a licence referred to in the said paragraph.

(3)

(a) Where a recipient utilises the services of an authorised

financial intermediary in connection with the payment

of investment income, the said authorised financial

intermediary shall, unless an election in terms of

article 35 of the Act has been made, collect tax, by

deduction or otherwise, amounting to fifteen percent of

such income and shall be bound by all the obligations

imposed on payors under the investment income

provisions

Provided that notwithstanding the provisions of

article 33(3) of the Act -

(i)

where the investment income is income referred

to in article 41(a)(v) of the Act, the tax so

collected shall be payable not later than the

ninetieth day following the day of the contract

note in relation to the disposal of the relevant

units or shares; and

(ii) where the investment income is income referred

to in article 41(a)(vi) of the Act, the tax so

collected shall be payable not later than the

thirtieth day of April following the year in which

the payment was made.

(b) For the purposes of this regulation, a recipient utilises

the services of an authorised financial intermediary in

connection with the payment of investment income

where

(i)

the payment of investment income is made to the

authorised financial intermediary who is the

registered holder of the relevant units or shares

and who holds such units or shares for the

benefit of the said recipient;

(ii) the said recipient is the registered holder of the

relevant units or shares, who receives the

investment income directly in his own name and

who requires that an authorised financial

intermediary collects an amount of tax equal to

fifteen percent of such investment income for

onward payment to the Commissioner;

(iii)

the payment of investment income is effected

through an arrangement approved by the

Commissioner, which arrangement enables the

collection of tax on such investment income through

an authorised financial intermediary.

(4) Where a recipient has utilised the services of an authorised

financial intermediary in connection with the payment of investment

income, the said authorised financial intermediary shall furnish the

recipient with a certificate in accordance with article 33(3) of the

Act, which certificate shall bear a sequential number in a series

applied to all certificates issued by that intermediary for payments

of investment income and shall contain the information specified in

Part One of the Schedule to these regulations.

(5) An authorised financial intermediary shall every month

render an account to the Commissioner in accordance with article

33(2) of the Act which shall include the information specified in

Part Two of the schedule to these regulations: provided that for any

month in which he does not make any payment of investment

income he shall furnish a nil return.

(1) For the purposes of this regulation

''chain of consecutive switches'' means a series of consecutive

switches (which for the purposes of this regulation may constitute a

single switch) commencing by a switch, immediately prior to which

there was not a switch, and terminating with a switch following

which there was a transfer of securities which was not a switch;

''final securities'' means those securities in a sub-fund last

acquired in a chain of consecutive switches;

''initial securities'' means those securities in a sub-fund the

switch of which was the first switch in a chain of consecutive

switches;

' ' p r e s c r ib e d s w i tc h ' ' m e a n s a s w i t c h o f s e c u r i t i e s f r om a

prescribed fund;

''sub-fund'' includes a class, part or other similar section of the

same collective investment scheme;

''switch'' means a transaction, whereby securities in a subfund of

a collective investment scheme are switched to, or transferred to, or

re-invested in, or exchanged for, or otherwise transformed into,

securities of

(a) another sub-fund of the same collective investment

scheme provided that

(i)

the holder of the last mentioned securities is the

same person as the holder of the first mentioned

securities; and

(INVESTMENT INCOME)

(ii) the holding in the last mentioned sub-fund

follows immediately the holding in the first

mentioned sub-fund; or

(b) a sub-fund of another collective investment scheme,

provided that

(i)

this transaction follows directly the approval of

the relevant competent authority for the closure

of a sub-fund or winding up proceedings in

terms of provisions of Title II of Part V of the

Companies Act or amalgamation proceedings in

terms of the provisions of Part VIII of the

Companies Act in the case of a Malta based

scheme and in no circumstance such transaction

was initiated or instigated by the holder of the

first mentioned securities; and

(ii) the holder of the last mentioned securities is the

same person as the holder of the first mentioned

securities; and

(iii) the holding in the last mentioned sub-fund

follows immediately the holding in the first

mentioned sub-fund; provided further that the

Commissioner is satisfied that

(1) the sub-fund of such other collective

investment

scheme

has

investment

objectives which are identical to those of

the first mentioned subfund; and

(2) the sub-fund of such other collective

investment scheme succeeds to all the

rights and obligations of the first

mentioned sub-fund; and

(3) the sub-fund of such other collective

investment scheme has the same

investment manager and the same

custodian as the first mentioned sub-fund,

provided that the requirement to have the

same custodian shall be waived where an

investor is required to carry out a forced

switch in cases where an investment

manager decides to close a sub-fund of a

collective investment scheme and to offer

the opportunity to investors to transfer the

relevant investment to a sub-fund of

another collective investment scheme; and

(4) the transaction does not involve a

substantial departure from the terms

relating to the holding in the first

mentioned sub-fund.

For the purposes of this proviso, the relevant

investment manager shall seek the Commissioner’s

approval that all such transactions from the first

mentioned sub-fund to the last mentioned sub-fund

will be considered as switches for the purposes of this

COLLECTIVE INVESTMENT SCHEMES

(INVESTMENT INCOME)

regulation. The Commissioner may, prior to giving

such approval, request such information and

documents that he may deem necessary.

(2) A switch constitutes a transfer of securities for the purposes

of article 5 of the Act

Provided that it shall be deemed that no loss or gain arises

upon a switch.

(3)

(a) Capital gains arising at the time of disposal of final

securities shall be computed by aggregating those

chargeable capital gains and allowable capital losses

which would have arisen during the chain of

consecutive switches and transfer of final securities

had the provisions of the proviso to subregulation (2)

not been enacted

Provided that in the case of a disposal of final

securities held in a non-prescribed fund and where the

relevant chain of consecutive switches does not include

a prescribed switch, such capital gains may be

calculated by deducting from the proceeds of the

disposal of the relevant final securities, the cost of

acquisition of the relevant initial securities.

(b) In calculating the capital gains as provided for in

paragraph (a) -

(i)

the conversion of foreign currencies, where

required, are to be made at the rates of exchange

used in the acquisition or transfer of the

securities relevant to the calculation of the

capital gains. Where proof is not available as to

the rates of exchange used in the acquisition or

transfer of the relevant securities, conversion of

currencies is to be made at the rate of exchange

(middle rate of the Central Bank) prevailing at

the end of the calendar year in which the

acquisition or transfer, as the case may be, was

made

Provided that if the acquisition and transfer

are made in the same calendar year, the

conversion rate to be used is the rate of

exchange (middle rate of the Central Bank)

prevailing on the date of the acquisition and the

rate of exchange (middle rate of the Central

Bank) prevailing on the date of the transfer;

(ii) where the aggregation of capital gains and

capital losses as provided for in paragraph (a)

involves different currencies, such gains or

losses may be converted into euros at the rates of

exchange (middle rate of the Central Bank)

prevailing on the dates of the relevant switches

or disposal of final securities;

(iii) the cost of acquisition is to be calculated in the

same manner provided for in regulation 9, or in

such other manner which may be approved by

the Commissioner.

For the purposes of the investment income provisions of

the Act and of any regulations made thereunder, "collective

invest ment scheme" includ es an un dertaking for coll ecti ve

investment in transferable securities authorised in accordance with

Council Directive 85/611/EEC of 20 December 1985 on the co-

ordination of laws, regulations and administrative provisions

relating to undertakings for collective investment in transferable

securities (UCITS) as amended up to and in force on the 1 st May,

2004 and as may be amended from time to time.

Amended by