The Reinsurance Special Purpose Vehicles Regulations (‘RSPV Regulations’) came into force on 27 December 2013. From a legal perspective Reinsurance SPVs (RSPVs) must be set up as limited liability companies with an authorisation from the MFSA to carry out their activities. In principle therefore RSPVs are taxable in accordance with general tax principles applicable to companies, that is to say they are taxable at 35% on accounting profits adjusted for tax purposes. Upon distribution of a dividend to the shareholders, the latter would be eligible to claim a refund of 6/7ths of the Malta tax suffered on the profits of the RSPV resulting in an effective tax burden of 5% on profits in the hands of the shareholders.
Malta has however recognized the importance of such vehicles being tax neutral and RSPVs will be deemed to be securitisation vehicles for Malta tax purposes and thus benefit from the SecuritisationTransactions (Deductions) Rules, 2011 applicable to such vehicles. The Rules provide a wide list of deductions which can be claimed by securitisation vehicles in addition to the normal deductions permitted to companies. Furthemore should there be any remaining chargeable income after the permitted deductions the securitisation vehicle may opt to claim a further deduction of an amount which is equal to the said remaining income. In this manner, the securitization vehicle will neutralise all of its chargeable income. Exercise of this option is subject to the irrevocable written consent of the originator or assignor.
The main focus of Malta’s RSPV proposal is clearly the robust yet flexible legal and regulatory framework, however the tax treatment of such vehicles as well as the general flexibility of the Malta tax system makes Malta an attractive option all round.
