Malta has specific rules on the tax treatment of securitisation vehicles to eliminate tax leakage. Such tax neutrality can be achieved through a combination of the general provisions on deductibility of expenses under the Income Tax Act and further deductions under the Securitisation Transactions (Deductions) Rules. The securitisation vehicle can opt to wipe out all of its chargeable income by making use of those deductions, resulting in no income tax being payable in Malta. Thus, there are generally no Maltese tax implications for originators participating in a securitisation transaction with a Maltese securitisation vehicle as long as such originators are themselves not tax resident in Malta.
Taxable income on Securitization Vehicles is calculated after deducting:
All allowable expenses;
Any sum paid to assignor for the transfer of the asset / risk;
Premium, interest, discounts or borrowed funds on the acquisition of the asset / risk;
Day to day administration expenses of the SV;
Optionally, any chargeable income balance, this effectively reducing chargeable income of the SV to NIL.
The Originator will be taxable on 2 and 5 (if option 5 is taken by SV). However if the control and management is not in Malta, income would not be considered to arise in Malta and thus there will be no tax in Malta.
At Investors level:
If SV is a company, income distribution in respect of optional deduction under (5) above is not subject to tax in Malta;
Interest payment to Investors is not taxed in Malta (if investors are non-residents and do not have a permanent establishment in Malta and are not controlled by residents;
Dividends payment to Investors not taxed in Malta (if investors are as per above);
Transfer of units by Investors are not subject to stamp duty (if >90% of business is outside Malta).
Activities which are core and essential to the management of securitization are not subject to VAT.