A. INTRODUCTION

The Malta Stock Exchange ('Il-Borza') was established by the Malta Stock Exchange Act, 1990 ("the Act") and became fully operational roughly towards the end of 1992.

The Council of the Exchange, headed by the Chairman thereof, is responsible for the management and conduct of the Exchange's business; the General Manager is responsible for the day-to-day management of the Exchange.

An application for listing on the Exchange must be approved by the Council, which is also responsible for ensuring that the successful applicant abides by its 'continuing listing obligations'.

B. WHO MAY APPLY FOR LISTING ON THE MALTA STOCK EXCHANGE?

The Exchange is quite clearly a very young institution - this factor has not however impaired upon its commitment to cater, in a very professional and timely manner, for the demands of the market.

A case in point refers to the various sets of listing requirements. Indeed, the listing requirements for 'regular' trading public companies have recently been joined by a set of listing requirements for open-ended collective investment schemes, quite obviously in response to the setting up of the first Maltese-registered SICAV the units of which are currently listed on the Exchange.

We understand that secondary listing requirements are also in the pipeline: Barclays' recent announcement of its intention to apply for a secondary listing of Barclays International Funds on the Borza will probably act as the catalyst in this context. On the same lines, one can probably expect the Council to consider listing requirements for closed-ended schemes, derivatives, and so forth, in line with market trends.

Securities currently listed on the Exchange include: equity of three leading Maltese banks, corporate bonds, government stocks, and CIS units.

C. TAX CONSIDERATIONS

1. REDUCTION IN CORPORATE TAX RATE

This tax benefit is applicable only to limited liability companies who have acquired the status of 'quoted company'.

It is interesting to note that the definition of "company" in the Act was recently amended to include companies constituted or incorporated outside Malta, irrespective of whether or not that company has or will have a place of business in Malta. Accordingly, the tax benefits previously restricted to companies constituted in accordance with Maltese company law have now been extended also to foreign companies, who may have income which is liable to Malta tax, whose securities are listed on the Borza.

The corporate tax rate applicable to the 'eligible' quoted company is reduced by:

(i) 2% - if over 20% but less than 30% of its issued voting share capital is offered to the public as a listed security;

(ii) 3.5% - if over 30% but less than 40% of its issued voting share capital is offered to the public as a listed security; and

(iii) 5% - if over 40% of its issued voting share capital is offered to the public as a listed security.

A company becomes eligible for a reduction in its corporate tax rate as from the year it becomes a quoted company. This reduction is available once only, applying for a consecutive 3-year period. It is also interesting to note that the percentage points reduction in tax can increase depending upon the percentage of issued voting share capital offered to the public within the said 3-year period.

This tax incentive came into force in 1992 and is available to all companies acquiring the status of 'quoted company' within five years from the said date. It is noted that the Act empowers the Minister to extend this period to 10 years.

2. TAX ON CAPITAL GAINS

Capital gains realised upon the disposal of securities which are listed on the Malta Stock Exchange are exempt from Malta tax - this exemption applies irrespective of the tax status of the person disposing of the investments in question.

Incidentally, capital gains realised by non-resident persons upon:

(i) the disposal of shares in a company the assets of which do not consist wholly or principally of immovable property situated in Malta; and

(ii) the disposal of units in a CIS, (as defined in the Investment Services Act)

are exempt from Malta tax in terms of the Income Tax Act, that is to say, irrespective of whether or not the said shares or units are listed on the Malta Stock Exchange.

DUTY ON DOCUMENTS AND TRANSFERS
The Malta Stock Exchange Act provides for an exemption from the payment of duty on documents and transfers ( in terms of the Duty on Documents and Transfers Act, 1993) in relation to any transfer of any securities of a quoted company, or on the transfer of any securities of the Government or any body corporate established by law, provided the said transfer is made in the Exchange.

Accordingly, this exemption applies to (1) transfers 'inter vivos', as well as to (2) transfers 'causa mortis', that is, transmissions upon death.

One notes that this exemption is apparently not applicable to quoted CISs which are not companies. It is however also noted that CISs holding a collective investment scheme licence under the Investment Services Act, 1994, benefit from even wider exemptions in terms of the Duty on Documents and Transfers Act 1993 itself, in relation to:

(i) acquisitions or disposals of securities for any reason whatsoever made by the CIS itself; and

(ii) acquisitions or disposals of securities for any reason whatsoever issued by the CIS (i.e. namely the purchase and sale of the units in the scheme) - this exemption applies to resident and non-resident holders alike.

THIS ARTICLE IS INTENDED TO PROVIDE GENERAL INFORMATION ON THE SUBJECT MATTER. IT IS THEREFORE NOT A SUBSTITUTE OF PROFESSIONAL ADVICE AND IS NOT TO BE ACTED UPON WITHOUT PRIOR CONSULTATION WITH SPECIALISED CONSULTANTS.