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Donald Vella |
Kirsten Cassar |
Securitisation is an essential means of raising finance and Malta's flexible framework creates scope for a wide range of transactions. Maltese law provides for a number of securitisation structures, all of which may benefit from the applicable fiscal treatment. It is pertinent to note however that recently the Maltese legislator has clarified that the regime applicable to Maltese securitisation vehicles has, in some aspects, limited application to reinsurance special purpose vehicles established in Malta, to which specific regulations apply. The flexibility of the securitisation regime finds its ground in the extensive range of assets which may be securitised through a Maltese vehicle. Any asset may be securitised, whether existing or future, movable or immovable, tangible or intangible, and where the context so allows, risks. This implies that both traditional assets, such as trade receivables, mortgage loans, life insurance policies, tangible and intangible assets as well as risks relating to obligations or liabilities assumed by third parties may be the subject of a securitisation transaction.
Taxation of the securitisation vehicle
The tax position of securitisation vehicles in Malta is generally neutral. Special purpose vehicles established in Malta are taxable in Malta under the normal income tax rules at the standard corporate income tax rate of 35%. However, substantial deductions are available.
Specifically enacted tax regulations clarify that the following deductions may always be availed of by a securitisation vehicle:
Cost of acquisition: Expenses payable to the originator for the acquisition of securitisation assets or the assumption of risk;
Finance expenses: Premiums, interest or discounts relating to financial instruments issued, or funds borrowed, to finance the acquisition of securitisation assets or the assumption of risks;
Operating expenses: Costs incurred in the day-to-day administration of the securitisation vehicle and the management of the securitisation assets, including the collection of any relevant claims.
After the aforementioned deductions are taken, the securitisation vehicle may opt to claim a further deduction on its remaining taxable income, thereby typically ensuring no taxation at the level of the securitisation vehicle. The deductions, including the further deduction, constitute deemed income for the originator. However, no tax is payable in Malta on such deemed income where the originator is not resident in Malta for tax purposes.
Donald Vella (donald.vella@camilleripreziosi.com) and Kirsten Cassar (kirsten.cassar@camilleripreziosi.com)
Camilleri Preziosi
Tel: +356 21238989
Website: www.camilleripreziosi.com
