Malta collective investment vehicles (CIV)

The subject of CIV’s has drawn many questions in Malta and other EU member states. The issue lies with a lack of clarity on taxation and reimbursements as far as tax agreements are concerned. A thin line would have to be drawn between the funds and investors in order to deal with the criteria objectively.
Legislators have managed to resolve the tax concerns that come with CIV’s locally in Malta. These, however, apply when the investors, CIV’s and the funds are all in the state. Challenges have not ceased where these entities are separately situated. Presently, most countries have started to discuss CIV’s in their tax agreements.


Double Taxation Agreements and CIV’s
The OECD commission published a gazette addressing issues related to CIV’s and Double Tax Agreements. This gazette opened up on some issues which yielded changes to the OECD on CIV’s inclusion in double taxation agreements. The OECD update of 2010 described the CIVs as broad and diverse, an aspect which led them to dispense the regulation of CIV’s fiscal concerns to the states they are located.
Some of the aspects put forward for a CIV to become eligible for reimbursements under DTA include that it has to be nominated as a ‘person’ who is a ‘tenant’ in the country where the business is situated. The CIV should assume independence and be responsible for the utility of its income.


The CIV personification
Many nations handle CIV’s in a variety of ways. While CIV’s could assume any business form like trusts or partnerships, they usually take the form of companies in the EU. The reason why they were personified is to ease the management of their taxes in the country where the business is situated. The meaning of ‘person’ in this criteria is broad and is understood by comprehending the CIV’s business form. According to the Model tax conventions, CIV’s are levied for tax bestowed by the state of residency and that automatically personifies them with regard to tax agreements.


CIV residency
For EU countries to consider CIV’s as resident in their states, they should consider on its tax liability. The model tax convention explains how tax liability on reimbursements could be variably applied depending on the country accommodating the CIV. In some occasions, some countries would consider a CIV tax liable thus qualifying it to become a resident even though it is exempted from taxation. On the other hand, some States are of the concept that a tax exempted organization cannot be tax liable. Such issues are to be addressed between states making bilateral agreements on double taxation.


Beneficiation of incomes by CIV’s
The beneficial ownership of a CIV is decided by the country contracting it. These owner rights are the ones which could unlock treaty privileges’ when agreements are signed. The OECD convention recommends CIV’s to be granted owner rights, to be able to benefit from its income. The purpose of the treaties is to do away with double taxation and create a favorable environment for investors hence CIV’s should have access to such benefits.


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