 27 Dec 00 – 2 Jan 2001 |
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Exchange control liberalisation effective Monday The exchange control liberalisation measures announced by Finance Minister John Dalli during Budget 2001 will come into effect on Monday. The new measures have been adopted as a means to removing, or further relaxing, restrictions currently imposed on many types of capital transactions while also holding the aim of relaxing quantitative limits on current payments that are still subject to exchange control. Quantitative limits on current payments (such as those pertaining to travel allowance, the importation/ exportation of local currency and gold and the merchandise payments ceiling) have been made far less stringent. The travel allowance limit, for example, has been doubled from its current level of Lm5,000 to Lm10,000 – while requests for funds over the new limit will be granted provided that the details of the transaction are lodged with the Central Bank in the appropriate manner. Meanwhile, the limit for payments of cash gifts or family subsistence allowances has also been raised from Lm5,000 per adult to Lm10,000. On the other hand, the purchase of foreign currency for export for merchandise payments by overseas travellers has been amply boosted – from the current Lm20,000 to Lm50,000. While the import and export of all types of gold, including bullion, have now been exempted from all exchange control procedures, gold will still remain subject to the provisions of the 1996 Gold Regulations. Meanwhile, the import and export of any local bank notes and coins have been raised, respectively, from Lm50 to Lm1,000 and from Lm25 to Lm1,000. Capitol account liberalisation measures account for activities such as real estate and portfolio investments, foreign currency bank accounts and holdings, dowries, endowments, repatriation of capital and loans to non-residents. The limit of an adult person residing in Malta for investment in real estate overseas has been upped from Lm50,000 to Lm150,000 per year. Meanwhile, foreign portfolio investment allowance has been doubled from the present level ofLml5,000 to Lm30,000 per year. Fund investment schemes (SICAVs) that collect funds in Maltese liri with the specific aim of investing such funds in Maltese lira denominated securities on the local market (i.e. funds which are not eligible for investment in foreign currency denominated assets as part of the annual foreign investment allowance) are permitted to invest up to a maximum of 5 per cent of shareholders' funds in foreign currency assets. There are no limits on amounts that can be invested by individual resident shareholders' funds since units held are not considered to be a foreign currency asset and are thus not subject to the annual personal investment allowance. These arrangements apply to both new and existing fund schemes. However, exchange control regulations for other types of collective investment schemes investing in assets denominated, in whole or in part, in foreign currency remain unchanged. Such schemes may collect funds in foreign currency or in Maltese liri from residents utilising their personal foreign investment allowances. Meanwhile, locally registered companies engaged in the export of manufactured goods and services are currently permitted to retain their foreign currency earnings in a foreign currency savings or time deposit account with a local credit institution for a period not exceeding six months. This retention period is now being increased to one year. The amount of foreign currency that a resident is exempted from surrendering to an authorised dealer has been quadrupled from the present limit of Lm2,500 to Lml0,000. Meanwhile, the limit that one is allowed to hold in a foreign currency current (demand) account with local credit institutions is raised from the present limit of Lm2,500 to Lml0,000. These accounts may be credited with foreign currency that residents are exempt from surrendering in terms of the relative Exchange Control Legal Notice, including funds converted from Maltese Liri (which would then form part of the annual Lm30,000 investment allowance), and may only be debited in connection with payments in foreign currency related to balance of payments. Corporate bodies and local retail outlets will now be permitted to hold - with local banks - demand, savings and time deposit accounts in foreign currency. The aggregate balance which can be held in such accounts should not exceed Lml0,000. These accounts may only be credited with foreign currency earnings generated through their business activities and can be debited with payments in foreign currency related to balance of payments. Domestic banks are currently permitted to grant credit facilities in Maltese currency to non-residents carrying out economic activities in Malta for transactions related to their operations. From the beginning of 2001, loan facilities may be provided for any other purpose onshore including the purchase of securities in the local capital market as long as such facilities have a maturity of over one year. Lending extended by residents to non-residents has been liberalised completely, subject to the condition that such lending is for maturity periods of one year or more. Lending by residents to non-residents for maturity periods of less than one year requires the approval of the Central Bank. Borrowing by residents from overseas has also been completely liberalised and is subject to the condition that such borrowing is for maturity periods of one year or more. Borrowing by residents from non-residents for maturity periods of less than one year requires the approval of the Central Bank. The granting of guarantees by non-residents in favour of residents has additionally been completely liberalised. The granting of guarantees by residents in favour of non-residents is liberalised as long as such guarantees are related to transactions which are permitted under current exchange control regulations. All restrictions on payments by residents in respect to endowments to bona fide foreign institutions (educational, charitable, cultural etc) are removed. All transfers by resident persons in respect of dowry payments are liberalised. All limits on the amount of transfers of assets by residents, in the event of emigration, at the time of their establishment or during their period of stay abroad, are lifted. All restrictions on payments in connection with the settlement of debts by immigrants in their previous country of residence are removed. Residents may repatriate, through local credit institutions/financial institutions, funds invested overseas without the need to submit declarations that such funds were registered with the Exchange Control Authorities. This does not imply that such repatriated funds are exempted from any legal obligations in terms of the Income Tax Act and the Prevention of Money Laundering Regulations. The Central Bank has emphasised that the Bank and authorised dealers will approve or effect these transactions only after the requested documentation is provided to them as evidence of the purpose of payment. Meanwhile, it is noted that it is the responsibility of the dealers that the appropriate forms relating to such transactions are correctly filled in by customers and that dealers should also record details of all transactions in order to provide the Central Bank with the necessary statistical returns on a regular basis. Additionally, when effecting transactions that are no longer subject to exchange control approval, dealers should continue to ensure that all regulations regarding the prevention of money laundering are strictly adhered to. | ||||||
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