The Malta Financial Services Authority ("MFSA") has become aware of an entity operating under the name of KREDIT GROUP FINANCE. The entity is promoting the provision of loan services via advertisements on various internet web pages. The entity is also contacting prospective clients via mass emails in which they state: "Għandek bżonn self biex tikklerja d-djun tiegħek, tħallas il-kontijiet tiegħek jew twaqqaf proġett … Il-kapaċità tas-self tagħna hija minn 5,000 € sa 50,000,000 € b'rata raġonevoli ta' 1.25% … Fi sħubija ma' sħab bankarji madwar l-Unjoni Ewropea, l-offerti ta' kreditu tagħna huma pprovduti permezz ta' trasferiment bankarju għas-sigurtà tat-tranżazzjoni lil kwalunkwe persuna."

While the contents of the email may vary, recipients are provided with the following contact details: email address lencrero@gmail.com and Whatsapp number +33 755931315 for further business enquiries.

The MFSA wishes to alert the public, in Malta and abroad, that KREDIT GROUP FINANCE is NOT a Maltese registered Company NOR licenced or otherwise authorised by the MFSA to provide any banking services or other financial services which are required to be licenced or otherwise authorised under Maltese law. Furthermore, information available to the MFSA suggests that KREDIT GROUP FINANCE is likely to be a scheme of dubious nature with a high risk of loss of money. The public should therefore refrain from undertaking any business or transactions with the above-mentioned entity.

The MFSA would like to remind consumers of financial services not to enter into any financial services transaction unless they have ascertained that the entity with whom the transaction is being made is authorised to provide such services by the MFSA or another reputable financial services regulator. Investors should also be extra cautious when being approached with offers of financial services via unconventional channels such as telephone calls or social media.

A list of entities licensed by the MFSA can be viewed on the official website of the MFSA at http://www.mfsa.com.mt/pages/licenceholders.aspx.

If you are a victim of a scam or think you might be dealing with an unauthorised entity or any other type of financial scam, first of all stop all transactions with the company and contact the MFSA at https://www.mfsa.mt/about-us/contact/ as soon as a suspicion arises

The Commissioner for Revenue notifies that as from January 2020, the annual declaration and any notice of payment of VAT for persons registered under article 12, should be filled online through this link. Moreover, it is also notified that the annual declaration for the year 2019 will not by furnished by the Office of the Commissioner.

It is important that registered persons have their e-ID active. If not, kindly obtain it since without the e-ID, no access to the VAT Online Services will be available. For more information regarding the e-ID, you may wish to visit the servizz.gov.mt website

For more information please phone 144 or send an e mail to vat.cfr@gov.mt

Guidelines for such submissions are available from here.

The Commissioner for Revenue notifies that as from January 2020, the annual declaration and any notice of payment of VAT for persons registered under article 12, should be filled online through this link. Moreover, it is also notified that the annual declaration for the year 2019 will not by furnished by the Office of the Commissioner. 

It is important that registered persons have their e-ID active. If not, kindly obtain it since without the e-ID, no access to the VAT Online Services will be available. For more information regarding the e-ID, you may wish to visit the servizz.gov.mt website. 

For more information please phone 144 or send an e mail to vat.cfr@gov.mt

Guidelines for such submissions are available from here. 

The circumstances prevailing within the country are so extraordinary and grave that immediate actions are needed to restore serenity and confidence in the country and in our marketplace. 

Our profession demands an incredibly strong message from government and the institutions in the form of immediate changes in the executive arm running this country and those leading the relevant institutions.   The satisfactory conclusion of the investigations into the murder of Daphne Caruana Galizia must be the primary objective within the country to ensure justice is served, and definitely seen to be served without any shadow of doubt. Conflicts of interest, actual or perceived, must not impact the process or outcome of the investigations.  The persons leading the country, within the government, and the persons leading the relevant institutions have chosen to do so to protect our society, our economy and our market.   These positions carry with them responsibility and accountability for the achievement or otherwise of these objectives.  The people occupying such roles should make way now to avoid further reputational damage for Malta and above all to carry political responsibility. We are in this unsustainable situation where stakeholders and the Maltese people in general have to plead for the appropriate reaction which is obviously expected in a democracy.

Our profession is continuously expected to raise quality standards, comply with more rigorous regulatory requirements and perform better generally.  Likewise, our profession certainly demands that higher standards are also imposed on government, on the public sector and on the relevant institutions.  Our profession is working in extreme adverse conditions with the difficulties experienced with correspondent banking and hence strained relationships with banks and financial institutions; the outcome of the Moneyval assessment and the potential implications on the profile of the country; together with the proposed changes in the regulatory framework within which accountants work, impacting severely the market place.  We have been let down by the certain elements within government and the institutions.  The professed higher standards need to be embraced by these as well as being imposed on the private sector and professionals in general. 

These higher standards need to be implemented today through changes in the leadership of the country and of the institutions.   We simply cannot wait anymore; our economy and our market dictate this.

Please note that an updated version of the NID Guidelines will be uploaded to the CfR website shortly. The update consists of a new paragraph ‘xi’ applicable from YA2020 which will read as follows:
 
“(xi) Accounting Periods other than 12 Months
 
To further approximate the neutrality between debt and equity financing, an adjustment shall be applied to the NID to remove distortive and disproportionate deductions in respect of accounting periods that are longer or shorter than 12 months. The NID in respect of the years of assessment to which such accounting periods refer shall be inflated or reduced by multiplying the deduction contemplated by Rule 4(1) of the Rules by the number of days in the accounting period and dividing the result by 365. This paragraph (xi) shall be applicable to the year of assessment 2020 and subsequent years of assessment.”

The Commissioner for Revenue notifies that the year of assessment 2019 electronic income tax return for companies is now available on their online services.  For this year of assessment there were the following salient changes to the tax return:

Index updated to reflect the addition of new attachments and the removal of attachments no longer applicable.

TRA 05 – changes are consequential to the Amendment to the Deduction for Wear and Tear of Plant and Machinery Rules (LN 322 of 2018).  The minimum number of years over which Aircraft airframe, aircraft engines, Aircraft engine or airframe overhaul and Aircraft interiors and other parts is now four years.

TRA 08 to 14 – the return now includes space to indicate any ‘interest expense’ that is mandatory. The interest expense has to be allocated against the source of income it generates.

TRA 09 – space is provided to indicate any Deemed Interest Income received under the Notional Interest Deduction Rules. The result under the MTA is transcribed to TRA 100.

TRA 100 – layout partially changed from the previous year version and most workings have been transferred to the new TRA 100A (see below).  Data entry in this attachment is restricted to four initial questions, the additional 10% reallocation to the Final Tax Account and shareholder details and notional interest deemed received by them. The rest is all calculated.

Page 4 of the Return – three new fields [49d to 49f] introduced but limited for use when NID is claimed and there are trading losses and gains in the different tax accounts. 

New Tax Return Attachments

TRA 101A – This new attachment complements TRA 100 and incorporates all workings. It caters for the Direct and Indirect attribution of risk capital according to source, the calculation of the Notional Interest Deduction (NID) and the NID that may be claimed against each source of income. Input is required for NID claimed for the year segregated by source, tax account and Direct /Indirect Attribution. The NID totals are then transcribed to Page 4 of the tax return (fields 68e and 68f). Any excess unabsorbed NID c/fwd is also required.

TRA 107 – introduced to cater for the Amortisation of Capital expenditure on Intellectual Property or Intellectual Property Rights [Income Tax Act Article 14(1)(m)]. The resulting amortisation in this attachment, is transcribed to Page 3 of the return [field 32a].

TRA 108 – this attachment requires input in the case of Tax credits supporting the refurbishment of Hotels and Restaurants [Malta Enterprise Act – LN 120 of 2018].

TRA 109 – caters for the Tax credits under the Investment Aid for Energy Efficiency Regulations [ME Act - LN 122 of 2018].

Note that TRA 35 is updated with the new tax credits introduced.

TRA 110 – this new attachment sets out three questions (column B) about the Nexus with any of the jurisdictions listed in the EU List of Non-Cooperative Tax Jurisdictions. Depending on the answers given to each question, (column C), the attachment may also require the number of transactions or links that will in turn control the data entries in columns D to I. The use of this attachment is triggered by the response to statement 27 on Page 2 of the return that is in turn also hyperlinked to the CfR web page disclosing the EU List of Non-Cooperative Jurisdictions for Tax Purposes.

For this year of assessment there were a number of salient changes to the Company Tax return Y/A 2019.

Click here for more information. 

Organisations from 23 countries including Malta participated in the APSF this year, representing thousands of professionals working in different regions to discuss emerging technical and strategic issues affecting the profession and its stakeholders. The event provides a unique opportunity for professional bodies to connect in a peer-to-peer environment.

Addressing the Forum, the president of the Institute of Accountants (MIA) William Spiteri Bailey said that with challenges becoming increasingly global, accountants must rally together to find effective solutions and add value to national economic performance and the general public interest.

“Our mission is to serve a new generation of business, public, and social leaders,” said Mr Spiteri Bailey, speaking about the profession’s responsibilities towards stakeholders as they experience structural shifts driven by market and technological developments.

This was the first time that Malta was chosen to host the Accountancy Profession Strategic Forum, a sign of the growing respect that the Malta Institute of Accountants and local professionals command on the international stage.

“The accountancy profession in Malta earned a reputation for competence and, in fifty years, it has established itself as one of the most trusted professions in the country,” said MIA CEO Maria Cauchi Delia. In the meantime, the Institute has worked to forge strategic relations with international organisations to open new opportunities for its 3,000 members.

MIA has established strong partnerships with bodies in other countries and the collaboration with ICAEW on the Forum was, in fact, one in a series of joint projects that the two organisations are currently cooperating on.

After a successful and productive APSF event, participants were invited to a special dinner at the Maritime Museum in Vittoriosa.

The Accountancy Profession Strategic Forum provided a unique opportunity for professionals and regulators in Malta to network with counterparts from other countries while enabling the Institute to set the agenda for international discussion based on the interests of the profession in Malta. The discussion engaged various interested participants and organisations including: the European Contact Group, the European Group of International Accounting Networks and Associations, the Malta Accountancy Board, the Malta Financial Services Authority, and the Public Interest Oversight Board.

MIA and ICAEW hold exclusive screening of Without Question ®

The following day members of the Malta Institute of Accountants enjoyed a complimentary screening of the thought-provoking film Without Question. Produced by the Institute of Chartered Accountants in England and Wales (ICAEW), the drama movie raises crucial issues relating to accountancy professionals and the impact of their decisions on businesses.

In his remarks, MIA president William Spiteri Bailey said that Without Question makes a “pertinent point” about the role of accountancy professionals as consultants and experts. The film provides a fictional setting mirroring incidents and situations that accountants experience in their professional lives.

The screening was followed by a debate moderated by ICAEW Executive Director Mr Robert Hodgkinson. The panel of experts included: Dr Aileen Pierce, board member of the Public Interest Oversight Board; Mr Anton Borg, Director of Impresa Group; Mr David Xuereb, President of the Malta Chamber of Commerce, Enterprise and Industry; Mr Kyriakos Iordanou, General Manager of the Institute of Certified Public Accountants of Cyprus; and Mr Nick Captur, Tax Partner at Deloitte.

Apart from members of the Institute, the event also welcomed international delegates from other professional accountancy bodies.

The screening was part of an ongoing collaboration between the Institute and ICAEW, designed to offer new and better prospects for professionals in Malta.

Background

Malta’s position in the centre of the Mediterranean, its magnificent natural harbours and its warm climate makes it a natural choice for yacht owners. Over the years, Malta has also established a strong reputation in the industry by offering reliable solutions to yacht owners, depending on their specific requirements and the intended use of their yacht.

Main characteristics of the Guidelines

Earlier this year, the Commissioner for Revenue (“CfR”) issued a new set of guidelines (“the Guidelines”) in relation to the VAT treatment of the hiring of pleasure yachts, which shall apply to operating leases commencing on or after the 1st November 2018. In setting these Guidelines, the CfR has recognised the difficulty faced by the lessor of a pleasure yacht, at the start of a lease, to determine the geographical reach of the pleasure yacht during the term of the lease, especially in those situations where the lease payments are payable to the lessor in advance.

In order to prevent double taxation or non-taxation, the VAT Act1, in line with Article 59a of the EU VAT Directive, allows the CfR to consider the place of supply of the hiring of a pleasure yacht, if situated in Malta, as being situated outside the EU territorial waters if the actual effective use and enjoyment of such pleasure yacht is deemed to take place outside the EU. The Guidelines make reference to this section of the law but also provides additional conditions that need to be satisfied to determine the place of actual effective use and enjoyment of a pleasure yacht.

Calculating the output tax in the initial periods and in subsequent periods

According to the Guidelines, upon the inception of a new lease of a pleasure yacht which is intended to be effectively used and enjoyed outside the EU territorial waters, the lessor is required not to consider the expected effective use and enjoyment of the yacht, which in the past was estimated based on the size of the yacht and its method of propulsion, but to apply VAT as follows:

• If the lease of the yacht begins at least 30 days before the end of the tax period in which the lease commences (referred to as “the first tax period”), the lessor is required to charge the full VAT due on the consideration payable by the lessee during the first tax period.

• If the lease begins less than 30 days before the end of the first tax period, the lessor is required to charge the full VAT due on the consideration payable by the lessee for the first tax period and for the subsequent tax period (referred to as “the second tax period”).

Once the first tax period has elapsed (in the case of (i) above), or the first and second tax periods if applicable (in the case of (ii) above), the Guidelines oblige the lessor to obtain from the lessee “reasonable documentary and/ or technological data” in order to determine the actual use and enjoyment of the pleasure yacht during the tax period, or tax periods if applicable. This data is required to be used by the lessor to calculate the “Preliminary Ratio”, by dividing the actual effective use and enjoyment of the pleasure yacht within EU territorial waters by the total effective use and enjoyment of the pleasure yacht during that period. Since the lessor would have charged the full VAT during the first tax period/s, the Guidelines allow the lessor to make an adjustment for the tax overpaid by the lessor during the first tax periods (assuming that the calculated “Preliminary Ratio”
produces a result that is less than 100%), in its tax return for the tax period immediately following the first tax period/s.

This “Preliminary Ratio” is then required to be applied to estimate the effective use and enjoyment of the pleasure yacht within EU territorial waters for the following tax periods up to the end of the first 12 months (or less if the duration of the lease is shorter than 12 months) of the lease. 

At the end of first 12 months of the lease duration, the lessor is obliged to once again obtain from the lessee “reasonable documentary and/ or technological data” to determine the “Actual Ratio” of effective use and enjoyment of the pleasure yacht within EU territorial waters as a percentage of the total effective use and enjoyment of the pleasure yacht. 

According to the Guidelines, this Actual Ratio must then be used to calculate the actual output tax that should have been charged by the lessor during the preceding twelve months based on actual data. This is then compared to the output tax that was actually charged by the lessor during the preceding 12 months. Any difference should then be adjusted for by the lessor in its next tax return.

The Actual Ratio calculated for the preceding 12 months should also be required to serve as the “Temporary Ratio” for the subsequent 12 months. This ratio, which is an estimate for the next 12 months based on the actual data of the preceding 12 months, is required to be taken into consideration when charging VAT on the lease payments during the next 12 months. At the end of the next 12 months, the lessor is once again obliged to obtain “reasonable documentary and/ or technological data” from the lessee and repeat the process of comparing actual data against estimated output tax charged.

Concluding remarks

The Guidelines issued by the CfR in relation to the hiring of pleasure yachts strike a clear resemblance to the rules governing the calculation of the partial attribution ratio and should provide a more accurate method of applying the effective use and enjoyment principle set out in the EU VAT Directive. Having said this, the onus is now considerably shifted onto the lessor to obtain the data necessary to apply the Guidelines correctly.

Item 12 of Part Two of the Third Schedule to the VAT Act

A certified accountant and auditor, Mark is a Director at Mint Finance, a young accounting and audit firm established in 2017. He has previously worked within the Tax Department at one of the Big 4, where he specialised in indirect tax matters. He is also a member on the MIA Young Members Committee

AML Best Practices for Life Insurance Companies. – Helping Life insurers guard against the wrong customers.

Although life insurance products are not high on a money launderer’s shopping list, life insurers do promote flexible investment-type products which might be viable as a medium to launder illicit funds. Albeit a remote one, the threat cannot, therefore, be ignored.

Establishing robust Anti Money Laundering & Combatting the Financing of Terrorism (AML & CFT) procedures and controls requires time, effort and investment in resources. With regulations continuously changing, the whole process may seem to be embarking on a never-ending journey.

It is not my intention to cover all the details of the implementation of AML & CFT procedures, but simply to give an overview of the main best practices that may be adopted.

1. Setting the Risk Appetite - Customer Acceptance Policy

One of the first steps an insurer must make is to create a Customer Acceptance Policy which should, briefly, provide a description of the characteristics of customers that are likely to pose a higher-than-average risk and which therefore fall outside the customer acceptance policy of the company.  

2. Understanding Potential Risks

To mitigate the risks of doing business with potentially devious characters insurers need to understand threats, which might emanate from the main risk areas i.e. its Customer, Geographical, Transactional, Method of Payments, Product and Distribution Channel.

This process requires a good dose of common sense and creativity on our part as we need to put ourselves in a money launderer’s shoes to identify potential vulnerabilities.

The process by which money laundering vulnerabilities are identified includes:

Analysing money laundering typologies facing the life insurance industry
An insurer should adopt a proactive approach to identify current and new AML/CFT typologies by analysing its own internal reports, submitted Suspicious Transaction Reports (STR) and typology reports published by international or local authorities.

Business Risk Assessment
A Money Laundering Business risk assessment enables an insurer to identify and measure actual risk exposures emanating from the main business risk areas.

This exercise can turn into a complicated one, but in very simple terms, the objective is to enable the insurer to implement adequate risk mitigation measures and controls to those risk areas where the actual exposures are deemed to be too close to or outside its risk appetite.

This assessment needs to be reviewed at least annually to ensure that there are no material changes. It is good practice to review the process more frequently when new internal or external threats and vulnerabilities are identified, or to monitor the success or lack thereof of any risk mitigation measures applied.

Customer Risk Assessment & Grading
In order to ensure that Customer Due Diligence measures will reflect each customer’s risk profile insurers need to carry out a customer risk assessment covering, at least, the following steps:

1. Know who is Your Customer and Your Customer’s Customer by ensuring that the Customer(s) (including the beneficiaries, Ultimate Beneficial Owners) have been satisfactorily identified.

2. Know Your Customer’s source of funds and source of wealth by establishing the nature of the activity (e.g. occupation) which generated the payment.

• Identify potential high-risk features:

Geographical risks e.g., whether a customer’s nationality, residency or business activity is linked to a high-risk country.

Occupational Risks e.g. whether the customer’s occupation/business is a high-risk one e.g. PEP.

Customer’s behaviour e.g. if there is lack of cooperation in submitting KYC, source of funds/wealth information.

Transaction risks e.g. transactions which do not seem to fit into the customer’s profile.

Presence on an international Sanctions lists prohibits the insurer from offering any product to the targeted individual/entity.

Presence on internal Watch lists. Maintaining an IT data base of High-Risk customers ensures an automated referral process to the MLRO. Such a list should include individuals or entities linked to:

• A Suspicious Transaction Report;

• Internal Reports submitted to the MLRO;

• Requests for information from the FIAU, Police and

• Attachment/Freezing Orders.

3. Know your Distribution Channel

Abnormal behaviour emanating from customers serviced by the same Intermediary should trigger the application of stricter monitoring, at least for an appropriate period. If the abnormal patterns persist then the insurer’s Compliance Unit should be informed to ensure that the Intermediary is subject to a compliance review at the earliest opportunity.

4. Training & Guidance

We are only as strong as our weakest link. For this reason, training cannot be approached with a ‘tick the box’ mentality and provide the same training to all staff, irrespective of the tasks they actually carry out. This approach is certain to create weak AML & CFT defences. Specific training is required for staff in different units reflecting internal procedures and potential money laundering risks relevant to each unit.

Best practice also dictates that insurers should train their intermediaries even though these are separately responsible for compliance with AML & CFT legislation. Intermediaries are an insurer’s first line of defence because they know and have met the customer.

5. Create an effective and efficient AML & CFT Structure

Abiding with AML & FT Legal obligations must never be the sole responsibility of the MLRO.  Internal technical expertise in the areas of Compliance, Risk and Internal Audit needs to be actively involved to provide the necessary high-quality oversight and controls. It is also advisable that external specialists are engaged to periodically review internal procedures.

6. Amalgamating Anti- Insurance fraud and Money Laundering functions

An insurer’s anti-fraud measures are similar to those employed for AML/CFT e.g.  establishing financial capabilities/wealth of clients and monitoring business. Moreover, life Insurance fraud red-flags have similar characteristics to those relating to money laundering e.g. unreasonableness of transactions or abnormal customer behaviour.

Consequently, consideration should be given to amalgamate the MLRO & Anti-Fraud functions into one function which can also be tasked with the responsibility of complying with International Sanctions, Court Orders and requests for information from the FIAU or Police. This consolidated approach will also be beneficial in identifying potential high-risk customers and suspicious transactions.
 
Conclusion

In an ever-changing regulatory environment and the eagerness to protect reputation, the ongoing challenge is to strike a balance between fulfilling legal obligations and ensuring that we do not make it difficult and frustrating for legitimate customers to do business with us.

Insurers need to remain vigilant to ensure equally robust AML & CFT defences to avoid attracting the wrong type of customers.  Money laundering, after all, is like water -- it chooses the path of least resistance.

Mark Camilleri FCII, CAMS, is the Chief Underwriting Officer at MAPFRE MSV Life p.l.c.. He is also the Money Laundering Reporting Officer for MAPFRE Middlesea p.l.c. and MAPFRE MSV Life p.l.c. . He is a member of the Association of Certified Anti-Money Laundering Specialists (ACAMS) and represents the Malta Insurance Association on the Joint Committee for the Prevention of Money Laundering & Funding of Terrorism. He may be contacted on markc@msvlife.com