INTEREST RATE (EXEMPTION) REGULATIONS

SUBSIDIARY LEGISLATION 16.06

INTEREST RATE (EXEMPTION) REGULATIONS

24th March, 2009

LEGAL NOTICE 142 of 2009, as amended by Legal Notice 107 of 2013

and Act LII of 2016 and Legal Notice 196 of 2019.

The title of these regulations is the Interest Rate

(Exemption) Regulations.

For the purposes of these regulations, unless the context

otherwise requires

"company" includes any commercial partnership registered

under the Companies Act and any equivalent partnership or similar

entity established under foreign law;

"financial transactions" means -

(a) contracts for differences, derivative contracts

including options, forwards, swaps, foreign currency

exchange contracts and similar agreements;

(b) securities lending transactions, sale and buy back

agreements, repurchase and reverse repurchase

agreements and similar agreements;

(c) obligations linked to the performance of any asset, a

basket of assets, a currency, an index, a right or an

obligation, any price, value, formula or other market

recognised value reference;

(d) prime brokerage agreements and other agreements

entered into by collective investment schemes, in

relation to the administration, management or custody

of the assets of collective investments;

(e) loans, overdrafts and other financial agreements or

facilities which are entered into for the purpose of, or

in connection with, any of the transactions specified in

paragraphs (a) to (d) of this definition;

(f)

guarantee, suretyship, indemnity, insurance and other

similar undertakings which are entered into for the

purpose of, or in connection with, any of the

transactions specified in paragraphs (a) to (d) of this

definition; and

(g) pledges, hypothecs, mortgages and other charges and

any other collateral agreements, whether by way of

title transfer or otherwise, which are entered into for

the purpose of, or in connection with, any of the

transactions specified in paragraphs (a) to (d) of this

definition;

"designated entity" means -

(a) the Central Bank of Malta, the European Central Bank,

INTEREST RATE (EXEMPTION)

the Bank for International Settlement, a multilateral

development bank, the International Monetary Fund

and the European Investment Bank;

(b) a bank or credit institution licensed under the Banking

Act, or otherwise licensed or authorised by a foreign

authority in a recognised jurisdiction or a credit

institution within the meaning of Article 4 of Directive

2006/48/EC;

(c) an investment services licence holder under the

Investment Services Act, or otherwise licensed or

authorised by a foreign authority in a recognised

jurisdiction or an investment firm within the meaning

of Article 4 of Council Directive 2004/39/EC

including a management company within the meaning

of Article 1a (2) of Directive 85/611/EEC as amended

by Directive 2001/107/EC;

(d) an undertaking for collective investments in

transferable securities (UCITS) as defined in Article

1(2) of Council Directive 85/611/EEC of the 20th

December, 1985 on the coordination of laws,

regulations and administrative provisions relating to

undertakings for collective investments in transferable

securities (UCITS) whether licensed in terms of the

Investment Services Act or authorised in a Member

State or EEA State;

(e) any other collective investment scheme which is

licensed, recognised or otherwise exempt in terms of

the Investment Services Act or otherwise licensed or

authorised by a foreign authority in a recognised

jurisdiction;

(f)

a financial institution licensed in terms of the

Financial Institutions Act or a financial institution

within the meaning of Article 4 of Directive 2006/48/

EC;

(g) a company authorised under the Insurance Business

Act or an insurance undertaking as defined in Article 1

(a) of Council Directive 92/49/EEC of the 18th June,

1992 on the coordination of laws, regulations and

administrative provisions relating to direct insurance

other than life assurance and a life assurance

undertaking as defined in Article 1 of Directive 2002/

83/EC of the European Parliament and of the Council

of 5 November 2002 concerning life assurance or a

reinsurance undertaking or captive reinsurance

undertaking as defined in Article 2 of Directive 2005/

68/EC of the European Parliament and of the Council

of 16 November 2005 on reinsurance and amending

Council Directives 73/239/EEC, 92/49/EEC as well as

Directives 98/78/EC and 2002/83/EC;

(h) a listed company within the meaning of the Financial

Markets Act or an issuer of a financial instrument

listed on a regulated market within the meaning of

Directive 2004/39/EC;

(i)

a central counterparty, settlement agent or clearing

house; or

(j)

a person, other than a natural person, who acts in a

trust or representative capacity on behalf of any entity

as defined in paragraphs (a) to (i) of this definition or

on behalf of any bondholders or holders of other forms

of securitised debt;

" M e m b e r St a t e " m e a n s a M e m b e r St a t e o f t h e E u r o p e a n

Community;

"EEA State" means any State which is a contracting party to the

agreement on the European Economic Area signed at Oporto on the

2nd May, 1992 as adjusted by the Protocol signed at Brussels on

17th March, 1993 and as amended by any subsequent acts;

"OECD country" means any country that is a member of the

Organi sation for Econom ic Co-operation and Developm ent

established in 1961;

"recognised jurisdiction" means a Member State or an EEA State

or any OECD country.

(1) The provisions of Title IV and Title XVII of Part II of

Book Second of the Civil Code or of any other part of the Civil

Code or of any other law in so far as they limit or restrict the

charging of interest and the compounding of interest shall not apply

to any

(a) debts and other obligations which may arise from

financial transactions where one of the parties is a

designated entity

Provided that no party to the financial transaction may

be a natural person;

(b) debts and other obligations which are (i) secured by a

mortgage over, or (ii) due under a lease of a ship or

aircraft, including an aircraft engine, whether registered

in Malta or otherwise and whether governed by Maltese

law or otherwise;

(c) debts and other obligations where -

(i)

such obligations arise under a contract governed

or otherwise regulated by the law of a country

other than Malta; and

(ii) the agreed rate of interest and, or compounding

of interests are in accordance with international

market conditions prevailing at the time that the

debt or the obligation has been contracted; and

(iii) the payor of interest is not a natural person;

(d) security

(including

guarantees,

suretyships,

indemnities and other similar undertakings, pledges,

privileges, hypothecs, mortgages and any other

collateral arrangements, whether by way of title

transfer or otherwise) which is governed by Maltese

law and which is entered for the purpose of, or in

connection with, any transaction specified in

paragraph (c);

(e) debts and obligations arising from the offer of

financial instruments within the meaning of the

Financial Markets Act where the issuer of such

instruments is a body corporate or similar entity and

the total consideration of the financial instruments

offered is at least two million Euro;

(f)

debts and obligations arising from transactions entered

into between companies or undertakings forming part

of the same group of companies and, or undertakings;

or where a debt or other obligation arises from a

transaction entered into by a natural person and a

company in which he has a controlling interest and the

obligation to pay interest is an obligation undertaken

by the company towards the natural person. The

reference to "group" and "undertaking" shall have the

same meaning as in article 2 of the Companies Act;

(g) profit participating loans or profit participating notes

and other similar obligations or instruments where the

return on the obligation or instrument is variable and is

linked to the performance of the business of the

borrower or issuer or the performance of an asset or a

basket of assets

Provided that the aggregate principal sum of the loans

or notes and other similar obligations or instruments is

at least two million euro, and that the issuer or the

borrower, as the case may be, of the said loan, notes,

obligations or instruments is not a natural person;

(h) equity release financial products as regulated by the

Equity Release Financial Products Regulations

Provided that interest fallen due may bear other

interest if such interest be due for a period not less

than one (1) year.

(2) In this regulation "controlling interest" refers to the right at

least to exercise majority of voting rights at general meetings or to

appoint a majority of the directors.

It shall be lawful for the amount of interest due in respect

of any debt or other obligation listed in regulation 3 to exceed the

amount of capital due.

Notwithstanding anything else contained in any other law,

credit and financial institutions within the meaning of regulation 2

may determine the rate of interest payable on deposits held by

credit institutions, and the rate of interest that they may charge on

loans, advances and any other credit facility as well as in the issue

of debentures or debenture stock or other instruments creating or

acknowledging indebtedness.

Where any contract, arrangement, scheme, transaction or

any provision thereof which purports to benefit from any of the

exemptions set out in these regulations is artificial, fictitious or

s i m u l a t e d , i t s ha l l t o t h a t e xt e n t b e w i t h o u t eff e c t a n d t h e

provisions of these regulations shall not apply thereto and any such

contract, arrangement or scheme shall not be binding unless the

contract, arrangement or scheme is capable of continuing in

existence without such provision.

These regulations shall apply without prejudice to the

instances where by law or commercial custom the prohibition

against the charging of interest exceeding the amount of the capital

did not apply.

For the purposes of regulation 3(c)(iii) of the Interest Rate

(Financial Transactions) Order, 2005, revoked by this Order, any

amount denominated and payable in Euro, at any time prior to the

entering into force of these regulations, shall be deemed to satisfy

the requirement that the amount be denominated and payable in a

foreign currency.