Fund repatriation scheme active for over a month

Maltese banks and financial intermediaries are undoubtedly looking for the ways and means of capitalising on the new investment repatriation schemes, as an unknown yet potentially large number of Maltese take the leap by repatriating funds from accounts in British and Channel Island banks. However, only a handful appear to have announced concrete local re-investment schemes.

Valletta Fund Management is one of the financial intermediaries eager to seize the opportunity presented to it on 3 December, when the scheme came into force.

Effectively, VFM – owned jointly by Bank of Valletta and Rothschild Asset Management – has offered such investors the opportunity to invest in VFM funds and benefit from a three per cent discount on VFM’s up front charges, which amount to between three and four per cent themselves.

The scheme came about as a result of November’s budgetary concessions to those with ‘undeclared’ foreign accounts, allowing them to repatriate such funds without facing penalties. Finance Minister John Dalli recently stated that the scheme, which holds the potential of re-injecting vast amounts of funds back into the local economy, was being utilised by a many investors – according to the initial indications.

Anyone holding overseas investments, knowingly in violation of income tax laws or exchange control regulations, knew that the day would come when global co-operation on taxation would bring the Maltese taxman knocking at their door.

Now such co-operation between countries and corporations, coupled with the free flow of information between tax authorities, has meant that the global exchange of information is rapidly becoming a reality in this sphere.

Within this scope, the budgetary measure that introduced an investment registration scheme allowing those who had transferred funds overseas without the required permits and without paying the relevant taxes to regularise their position under the Income Tax and Exchange Control Acts was introduced and has been active now for over a month.

The investment registration scheme has provided tax defaulters with the opportunity to regularise their position and see their overseas holdings repatriated and integrated under the Maltese withholding tax system - without being reported to the tax authorities.

The scheme covers all overseas financial investments current as of 1 September and will run until 31 December 2002. Those registering for the scheme will receive a certificate ensuring exemption from steps being taken against them in terms of their repatriated assets.

The scheme is only applicable to those who had invested overseas in a transparent and regular manner. As such, the scheme is aimed at those who had invested overseas and had earned money legitimately but could have been breaching Maltese fiscal laws or exchange control regulations. Such persons will not be considered as having committed an offence.

The scheme stipulates that these repatriated assets can be converted into Maltese liri and held in bank deposits or invested locally through the appointed registration agents. The assets could be otherwise retained in foreign currency and be held locally in bank deposits or invested, again through the approved agents, in locally-listed securities.

However, Mr Dalli has always been adamant that the scheme will not serve as a conduit for those seeking to legitimise earnings made through crime. As he explained earlier this year, "The scheme will give no quarter to perpetuators of crime - such as theft, fraud, drug or arms trafficking, etc. - who will not be exempt from prosecution for these crimes nor for money laundering."

Throughout the scheme’s operation, a great emphasis is being placed on anti-money-laundering procedures and in ensuring that they are meticulously followed. In this scope, the scheme will be implemented in conjunction with various safeguards, including the current anti-money laundering legislation, to both deter and detect money laundering.

Those partaking in the scheme should do so through registration appointed agents including banks, stockbrokers licensed under the Stock Exchange Act, and persons with an investment service licence in categories two or three under the Investment Services Act.

Participants will be required to pay a one-off registration fee equal to a percentage of the current market value of their investment – three per cent if registered before 31 March, four per cent if registered between 1 April and 30 June and five per cent if registered after June.