This note sets out the IFSP’s understanding of the tax treatment of remuneration derived by non-
Maltese resident members of an Investment Committee (‘IC’) of a Maltese licensed collective investment scheme (‘CIS’).
In terms of the Standard Licence Conditions in the Investment Services Rules for Professional Investors Funds issued by the MFSA, a self-managed CIS must establish an in-house Investment Committee (‘IC’) in lieu of an investment fund manager. The Standard Licence Conditions provide that the IC shall be made up of at least three members. The Conditions further provide that the majority of the IC meetings:
– the required frequency of which should depend on the nature of the CIS’s investment policy, but which should be at least quarterly
– are to be physically held in Malta.
As regards the tax treatment of remuneration derived by a member of the IC, were the remuneration to consist of income derived from holding office, in line with the directors’ fees, it would be taxable where the company’s effective management would be located. However, where the remuneration to be for services rendered to the relevant collective investment scheme, such income would be taxable where the services are performed (bar any double taxation treaty protection).
From discussions held in between IFSP and the Inland Revenue, IFSP’s understanding is that an IC member’s remuneration for providing advice in such role should be regarded as income derived from the rendering of services. This means that where the IC members are persons who are not resident in Malta, they are taxable on so much of the remuneration as is deemed to arise in Malta subject to the application of a double taxation agreement.
Given the complexity surrounding the determination as to the amount of the remuneration which is deemed to arise in Malta, it is understood that the Inland Revenue would deem the remuneration arising in Malta and thus liable to tax in Malta as consisting of the amount corresponding to the higher of:
i. The actual number of days of presence in Malta in a given calendar year; and
ii. 1/12th of the IC member’s compensation as such for a given calendar year.
Therefore, by way of example, where the IC member derives IC member fees amounting to €12,000 in a given year, and attends only the minimum number of meetings in Malta as required by the Standard Licence Conditions in the Investment Services Rules (that is, a minimum of 3 meetings out of 4 held in Malta), the proportion of the income derived from such services subject to tax in Malta will be €1,000 (that is 1/12th progressive non-resident tax rates (or such other rates that may be applicable under the Income Tax Act).
It is understood that the Inland Revenue would apply the above in the particular circumstances of the collective investment schemes described in this note. Therefore, it should not be deduced that similar treatment will apply in any other circumstance. Furthermore, it should be borne in mind that the Commissioner for Revenue may make enquiries as provided in the Income Tax Act where he deems such enquiries necessary.