External Transactions Act in force as from January

The Central Bank of Malta has advised the public that the amended Exchange Control Act, Cap 233, renamed the External Transactions Act, Cap 233 will come into effect from 1 January 2004.
The amended legislation establishes a framework for the liberalisation of external transactions and provides for the collection of related statistical information. The Act also provides for the retention of a number of restrictions, as described below. The removal or modification of these restrictions will be made through subsequent legal notices issued by the Minister of Finance and Economic Affairs.
The following restrictions will remain in force in the absence of specific authorisations issued by the Central Bank of Malta acting as agent for the Minister of Finance and Economic Affairs in terms of the External Transactions Act 2003:
Cash gift/family subsistence allowance
The maximum limit on payments by residents in connection with cash gifts or family living expenses is Lm30,000 per adult person each year.
Current accounts with credit institutions overseas
The opening and maintenance of current accounts by residents with credit institutions overseas is not permitted. Financial services companies which provide investment services to their clients are however permitted to open and maintain client current accounts with credit institutions overseas.
Foreign currency holdings – resident (natural person)
The maximum limit on foreign currency holdings (cash/cheques) that a resident is exempted from surrendering to an institution licensed to carry on the business of foreign exchange (formerly referred to as an authorised dealer) is the equivalent of Lm50,000.
Foreign currency current accounts with local credit institutions – resident (natural person)
The holding of foreign currency current accounts by natural persons with local credit institutions is permitted subject to the following conditions:
(i) that funds deposited are already denominated in foreign currency; and
(ii) the maximum aggregate balance in such accounts does not exceed the equivalent of Lm50,000.
Foreign currency accounts with local credit institutions – companies/retail outlets
The holding of foreign currency accounts (current, savings, time) by companies/retail outlets with local credit institutions is permitted subject to the following conditions:
(i) that funds deposited are already denominated in foreign currency; and
(ii) balances may only be used to effect overseas payments in connection with business costs.
Agents who receive payments in foreign currency from local customers for the import of goods and services may deposit such funds into foreign currency accounts with local credit institutions. However, such receipts have to be remitted to the foreign counterpart within a month of receipt.
Foreign portfolio investment
While foreign portfolio investments are not subject to any quantitative limit, residents are not permitted to place funds in portfolio assets with a maturity period of less than six months.

Financial loans by residents to non-residents
Residents are not permitted to extend financial loans to non-residents for periods of less than six months.

Financial loans to residents in foreign currency
Residents are not permitted to borrow in foreign currencies from resident or non-resident sources for periods of less than six months.

Investment by local fund investment schemes
Fund investment schemes which collect funds in Maltese liri from residents with the specific aim of investing such funds in Maltese liri-denominated assets are not permitted to maintain foreign currency assets in excess of 15 per cent of their shareholders’ funds.
Contracts with non-resident life insurance companies
Residents are not permitted to enter into life insurance contracts with non-resident life insurance companies except in cases where the policy of insurance provides solely for the payment of a sum of money, or other consideration, upon the occurrence of death within a period which is specified in the policy.
Contracts with non-resident non-life insurance companies
Residents are not permitted to enter into non-life insurance contracts involving motor vehicle insurance with non-resident companies (that is, any premium in terms of Group 2 of Part II of the Third Schedule to the Insurance Business Act, (Cap 403) which provides for policies of insurance issued by an authorised insurer as defined in the Motor Vehicles Insurance (Third Party Risks) Ordinance, Cap. 104).

Spot/forward currency
transactions
Institutions licensed to carry on the business of foreign exchange are not permitted to enter into spot/forward contracts relating to capital account transactions where funds in Maltese lira borrowed by the resident or non-resident counterpart are used in the transaction.
Repatriation of export receipts
Residents involved in export transactions are not permitted to retain export proceeds in accounts with foreign credit institutions, as mentioned in number 5 above. They are, however, permitted to deposit such proceeds in foreign currency accounts with local credit institutions.
Issue, acquisition, sale and redemption of securities not listed on the Malta Stock Exchange and registered in Malta – non-residents
Applications by non-residents for the issue, acquisition, sale and redemption of securities not listed on the Malta Stock Exchange in local companies established, or to be established, in Malta have to be cleared by the Registrar of Companies of the Malta Financial Services Authority. This procedure does not apply to companies as defined in article 2 of the Income Tax Act, Cap. 123, (that is, international holding/trading companies) and to companies which own a vessel registered under the Merchant Shipping Act, Cap. 234, and where the resident participation does not exceed 20 per cent.
In effecting foreign exchange transactions on behalf of their customers institutions licensed to carry on the business of foreign exchange will still be expected to examine the appropriate documentation provided to them by their customers as evidence of the purpose of the payment. It will be their responsibility to keep proper records of all such transactions and to provide the Central Bank of Malta with regular returns as requested by the Bank, which are required for monitoring and statistical compilation purposes. The procedures to be followed in implementing the restrictions described above will be elaborated upon further in circulars to be issued to these institutions by the Central Bank.