Tax Guidelines on Highly Qualified Persons Rules in MALTA

Tax Guidelines on Highly Qualified Persons Rules in MALTA

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Since joining the EU in 2004, Malta has been modernising its economy. and is becoming recognized as a highly functional, low cost, well regulated jurisdiction with the underlying theme being availability of trained staff through investment in education and training.. However, the expansion of the financial services and the gaming services since joining the EU and the aviation services in recent years, is showing a significant need for additional highly qualified workers. Therefore, the need is being felt for the importation of knowledge particularly in those areas of the financial services sector, the gaming sector and the aviation sector where local expertise is lacking.

The objective of the Highly Qualified Persons Rules (SL 123.126), is the creation of a scheme to attract highly qualified persons to occupy “eligible office” with companies licensed and/or recognized by the Malta Financial Services Authority, companies licensed by the Lotteries and Gaming Authority and undertakings holding an Air Operators’ Certificate or an Aerodrome Licence issued by the Authority for Transport in Malta.

“Eligible office” comprises employment in one of the following positions:

  • Actuarial Professional
  • Aviation Continuing Airworthiness Manager
  • Aviation Flight Operations Manager
  • Aviation Ground Operations Manager
  • Aviation Training Manager
  • Chief Executive Officer
  • Chief Financial Officer
  • Chief Commercial Officer
  • Chief Insurance Technical Officer
  • Chief Investment Officer
  • Chief Operations Officer (including Aviation Accountable Manager)
  • Chief Risk Officer (including Fraud and Investigations Officer)
  • Chief Technology Officer
  • Chief Underwriting Officer
  • Head of Investor Relations
  • Head of Marketing (including Head of Distribution Channels)
  • Head of Research and Development; (including Search Engine Optimisation and Systems Architecture)
  • Portfolio Manager
  • Senior Analyst (including Structuring Professional)
  • Senior Trader/Trader
  • Odds Compiler Specialist

“Eligible office” in an aerodrome licensed undertaking refers to employment in the following position:

  • Chief Executive Officer

The rules for the scheme came into force with effect from 1 January 2010 and apply to income which is brought to charge in year of assessment 2011 (basis year 2010) and apply to individuals not domiciled in Malta, with the exception to the positions associated with the aviation sector where the rules are effective from 1st January 2012 i.e. year of assessment 2013.

The scheme’s termination date is 31/12/2025. No determinations shall be issued by the respective Competent Authorities after 31/12/2020.

Scheme Rules

a) Employment Income

Individual income from a qualifying contract of employment in an “eligible office” with a company licensed and/or recognised by the Malta Financial Services Authority is subject to tax at a flat rate of 15% provided that the income amounts to at least €75,000 (seventy five thousand euro) adjusted annually in line with the Retail Price Index. The 15% flat rate is imposed up to a maximum income of €5,000,000 (five million euro), the excess is exempt from tax.

In practice this means that the minimum income (based on the Retail Price Index published by the National Statistics Office) must exceed the following thresholds:

  • €75,000 for basis year 2010
  • €76,136 for basis year 2011
  • €78,207 for basis year 2012
  • €80,100 for basis year 2013
  • €81,205 for basis year 2014
  • €81,457 for basis year 2015
  • €82,353 for basis year 2016

The 15% tax rate applies for a consecutive period of five years for European Economic Area (ie EU countries plus Norway, Iceland and Liechtenstein) and Swiss nationals and for a consecutive period of four years for third country nationals. Individuals who already have a qualifying contract of employment in an “eligible office” two years before the entry into force of the scheme may benefit from the 15% tax rate for the remaining years of the scheme. This means that a national of the EEA and Switzerland who has a qualifying contract of employment in an “eligible office” starting in 2008 (basis year) will benefit for three years from the scheme, ie basis years 2010, 2011 and 2012, while a third country national will benefit from one less. This “grandfathering” only applies for eligible offices in the financial services and gaming sectors.

The four or five year period, as the case may be, commences from the year when the individual concerned first becomes taxable in Malta. In cases where the individual was taxable in Malta but not benefiting under this Scheme and subsequently comes to Malta and becomes eligible under the Scheme, he can benefit only if the four or five year period has not elapsed; the benefit is for the years remaining from the date of eligibility under the Scheme until the said four or five year period from the date of first being subject to tax in Malta elapses.

Nationals of the EEA and Switzerland who have availed themselves of the benefit under this scheme may apply for a one-time extension of five years to the qualifying period.

b) Qualifying Contract of Employment

An individual may benefit from the 15% tax rate if he satisfies all of the following employment conditions:

  1. derives employment income subject to income tax in Malta
  2. has an employment contract subject to the laws of Malta and proves to the satisfaction of the Competent Authority that the contract is drawn up for exercising genuine and effective work in Malta
    (Note: where an individual receives salaries from different companies in the same group and the group relationship of such companies is of 100% ownership, he will still be eligible if the aggregate salaries (excluding fringe benefits) are higher than the minimum thresholds as specified above).
  3. proves to the satisfaction of the Competent Authority that he is in possession of professional qualifications and has at least five years professional experience;
  4. has not benefitted from deductions available to investment services expatriates with respect to relocation costs and other deductions (under article 6 of the Income Tax Act);
  5. fully discloses for tax purposes and declares emoluments received in respect of income from a qualifying contract of employment and all income received from a person related to his employer paying out income from a qualifying contract as chargeable to tax in Malta;
  6. proves to the satisfaction of the Competent Authority that he performs activities of an eligible office; and
  7. proves that:
    1. he is in receipt of stable and regular resources which are sufficient to maintain himself and the members of his family without recourse to the social assistance system in Malta;
    2. he resides in accommodation regarded as normal for a comparable family in Malta and which meets the general health and safety standards in force in Malta;
    3. he is in possession of a valid travel document;
    4. he is in possession of sickness insurance in respect of all risks normally covered for Maltese nationals for himself and the members of his family.

Exclusions from the Scheme

The individual income derived from employment in an “eligible office” will not qualify for the 15% reduced rate if it is paid by an employer who receives any benefits under business incentive laws or is paid by a person who is related to the employer who received any benefits under any business incentive laws or if the individual holds more than 25% (directly or indirectly) of the company licensed and/or recognised by the Malta Financial Services Authority or the Lotteries and Gaming Authority or of a company holding an Air Operators’ Certificate issued by the Authority for Transport in Malta or if the individual is already in employment in Malta before the coming into force of the scheme either with a company not licensed and/or recognised by the Malta Financial Services Authority or the Lotteries and Gaming Authority or not holding an Air Operators’ Certificate issued by the Authority for Transport in Malta (in the case of aviation services) or not holding “eligible office” with a company licensed and/or recognised by the Malta Financial Services Authority or the Lotteries and Gaming Authority or not holding an Air Operators’ Certificate issued by the Authority for Transport in Malta (in the case of aviation services).

The individual income derived from employment in an “eligible office” will not qualify for the scheme if a claim is made for any relief, deduction, reduction, credit or set-off of any kind except for any income tax deducted at source.

Provisions in respect of split contracts have been introduced. An arrangement in terms of which a beneficiary receives a payment from a person related to his employer and such payment is not declared for tax purposes in Malta is considered to be an artificial arrangement.

Any rights are withdrawn with retrospective effect if a beneficiary is a third country national and he either:

  • Physically stays in Malta, in the aggregate, for more than four years; or
  • Directly or indirectly acquires real rights over immovable property situated in Malta or holds a beneficial interest directly or indirectly consisting in, inter alia, of real rights over immovable property situated in Malta.

Any individual who claims a benefit under the scheme when he is not entitled to do so is liable to a penalty equal to the amount of benefit claimed and if the benefit is paid the individual is liable to repay the benefit received plus additional tax of 7% per month or part thereof.

Application to Benefit from the Scheme

An application for a formal determination relating to eligibility under the Highly Qualified Persons Rules must be made to:

  • The Chairman, Malta Financial Services Authority using this form (in the case of Financial Services). Persons who already submitted a personal questionnaire to the Malta Financial Services Authority can apply using this form instead.
  • The Chairman, Lotteries and Gaming Authority using this form.
  • The Chairman, Authority for Transport in Malta using this form (in case of Aviation Services).

The benefit is exercised for each year of assessment by means of a declaration made on the form RA 17 signed by the beneficiary and endorsed by the Malta Financial Services Authority or the Lotteries and Gaming Authority or the Authority for Transport in Malta as the case may be. This form is to be attached to the income tax return and filed with the Inland Revenue Department by the tax return date.


Malta, Europe, Brexit, relocation considerations

‘Brexit could positively impact Malta’s financial services industry’ … and much more

PN leader questions whether rights of Maltese living in UK will be diminished as a result of summit deal, suggests government should apply same treatment to British immigrants in Malta

MALTAway is your way to relocate yourself, your business,your wealth in Malta

A British exit from the EU could have positive ripple effects on Malta’s financial services industry, Prime Minister Joseph Muscat said.

While reiterating his support for Britain to remain an EU member state, Muscat said in a ministerial statement that Malta can benefit in that financial services companies based in the City of London might be tempted to relocate to an EU member state.


“This could be an opportunity for other jurisdictions,” he said. “On the other hand, the City of London can adopt different standards that will render it more attractive than European jurisdictions.”

In response to questions by PN leader Simon Busuttil, Muscat said that the government has commissioned several studies on the potential impacts – both negative and positive – of a Brexit on Malta.

Muscat said that the government is in favour of the UK remaining an EU member state for both economic and political reasons, arguing that it is currently the major counter-balance to Germany and France’s push towards a federal Europe.

“The EU requires the UK and vice-versa,” he said, while reiterating that the deal agreed at last week’s summit is not specific to the UK, but applicable to other EU countries who might find themselves in similar situations in the future.

Simon Busuttil had questioned whether the government had commissioned a study on the summit deal and a potential Brexit on the thousands of Maltese citizens currently living in the United Kingdom.

“If the British negotiated a deal at the summit that in some way diminishes social benefits rights for EU citizens working in the UK and the children, does this mean that the rights of the thousands of Maltese living in the UK will be in any way diminished?

“If the rights of the thousands of Maltese living in the UK were in any way diminished, then I’d expect the Maltese government to apply the same treatment for thousands of British living in Malta,” he added.

Muscat responded that the only benefits impacted at the summit will be in-work benefits and child benefits, and insisted that it will not in any way be related to pensions or other contributory benefits.

He added that a bilateral agreement on social security and health between Malta and the UK has been in place since 1986, and will still apply in the case of a Brexit.

FORBES, MALTA making Waves in Financial Services

FORBES, MALTA making Waves in Financial Services

MALTAway for your Board Members, Advisory and Governance 

The beautiful Mediterranean island of Malta covers 316 square kilometers and has a population of fewer than 450,000. Historically, its location between Europe and North Africa has given it great importance as a trading post and a naval base, but gone are the days when the island relied solely on tourism to support its economy, nowadays Malta is making waves for completely different reasons.

The Island making Waves in Financial Services – Forbes 2016


BOV takes Bank of the Year award for Malta from FTs The Banker

Bank of Valletta wins prestigious Bank of the Year award for 2015

BOV takes Bank of the Year award for Malta from FTs The Banker


MALTA a stable country with a strong Financial system

Bank of Valletta won the ‘Bank of the Year Award 2015’ for Malta, the prestigious award from The Banker, the monthly banking title of the Financial Times.

The award was presented to Charles Borg, CEO at Bank of Valletta by Brian Caplen, Editor of The Banker during an awards ceremony held at Hilton London Bankside Hotel in London.

The Banker has been a trusted source of global financial intelligence since 1926 and the Bank of the Year Awards listing has become an international key indicator of financial performance. The accolade of ‘Best Bank’ for a given country is awarded by the global editorial team of The Banker after it scrutinises the banks’ data re their earnings, assets, Tier 1 capital growth and return on equity.

They also look out for banks that are setting new standards for their local industries by being innovative in harnessing new technology as well as finding cost-efficient ways of expanding their business, whilst investing in their community. The award for a single bank in every country is for the best overall performance and qualitative achievements.

MALTA skilled workers, what’s next

Visa programmes to attract skilled workers?

MALTAway for your Board Members and Governance

To compete in a global market Malta has to compete on the skilled workers as well, rewarding them to move here, taxation is just a way

The KPMG’s biennial financial services conference questions ‘what’s next?’ for Malta’s financial services industry


The financial services industry is finding it hard to recruit skilled workers because Malta’s education is preparing “robots” and not independent thinkers, speakers taking part in a financial services conference said today.

In a day-conference at the Hilton organised by audit firm KPMG Malta, senior partner Tonio Zarb said Malta had to work harder to reach the level of sophistication of other countries in the financial services sector.

“One way of doing this is to import expertise. Innovation is closely tight to education and we need to encourage a change in our education system to produce independent thinkers, and not robots,” Zarb said.

Malta Financial Services Authority chairman Joe Bannister drew attention to the fact that, despite the complaints of the industry, very few came forward to help with training prospective workers.

He explained how last year, only 90 placements were granted down from a 120 the previous year. Bannister went on to state that students were attracted to the financial services industry because of the high salaries. He went on to warn of risks of creating a wage inflation.

One way of bridging the gap resulting from skills shortage was through the setting up of visas programmes, such as those employed by the United Kingdom, FinanceMalta chairman Kenneth Farrugia said.

The UK brought in a 20,700-a-year cap on skilled workers from outside the EU in 2011.

KPMG partner Juanita Bencini went on to suggest that the solution could be closer to home: increase female participation. 60% of University graduates are women but less than half of the full-time working population are women.

“We have to tackle the defeminisation of the workforce and we [financial services sector] should be at the centre of increasing female participation.

It’s also translated into how employers look at it,” Bencini said.

“There is a huge mismatch between what the industry wants and what comes out of university. We have not shown enough courage to ensure that this talent doesn’t drop off and we cannot afford to have them disappear of the face of the earth.”

Bencini added that what the government did with the universal provision of free childcare centres had helped a lot but the private sector needed to do something different too.

“Can we see our males working four days a week? We really need to start thinking to ensure female participation is there and this will make the industry grow,” she said.

Labour MP Charles Mangion also highlighted the country’s stability as a key attraction to investors. He noted, that the cross-party consensus that existed for years allowed the sector to flourish.

The financial services sector contributes some 12% to the country’s GDP.

The One-Man, $1.2 Billion ETF Shop, full outsourcing in finance as well.


The One-Man, $1.2 Billion ETF Shop, Andrew Chanin’s HACK is a rocket in an industry full of zombies.

There’s little that can’t be outsourced in ETF-land.

Starting an exchange-traded mutual fund is a little like launching a rocket. There are lots of different contractors and regulations. There are plenty of crashes.
Andrew Chanin, the 30-year-old founder of New York–based PureFunds, watched two of his first three ETFs fail before reaching Earth orbit. They liquidated because they couldn’t gather enough assets to cover expenses. A third fund barely made it aloft; it still has just $3.6 million in assets.
Chanin kept at it. In November, he launched the PureFunds ISE Cyber Security ETF (Symbol: HACK). By July, HACK had attracted $1.4 billion—one of the fastest ascents in ETF history. (On Aug. 25, after two days of turmoil in the market, it had $1.2 billion.)
It got lift from a well-timed computer breach. Just 12 days after HACK started trading, news broke that malefactors had looted the computer network at Sony Pictures Entertainment, taking terabytes of data, including Social Security numbers, salary figures, and e-mails that exposed the film studio’s leaders as the petty backbiters everyone imagines Hollywood big shots to be. Relentless coverage made computer security look like a crucial and immediate concern. And its ticker symbol advertised HACK as the way to play it.
PureFunds had, and still has, just one employee: Chanin, who looks like Ferris Bueller in a suit. He was competing against the biggest ETF companies around: BlackRock, Vanguard, and State Street. But Chanin was first to market with a computer-security ETF, and he had a perfect, memorable ticker symbol in an industry that is full of them: CURE (a health-care fund), FAN (wind energy), CROP (agribusiness), IPO (recent non-U.S. IPOs), and TAN (solar).

There are 6,500 ETFs in the world, with $3 trillion of assets under management. A new one rolls out, on average, every business day. The industry is surging, for a variety of reasons. Investors are dumping mutual funds for ETFs, which have a reputation for lower fees (though mutual funds are catching up, and some Vanguard funds are cheaper). Even better, ETFs can be bought and sold like equities during the trading day, and they have tax advantages, because ETF shares are created and redeemed in kind and thus almost never produce capital gains for shareholders.
Like the cheapest mutual funds, almost all ETFs are driven by indexes. With such scant fees, it’s hard to pay human managers, and, thanks to index evangelists like John C. Bogle, the founder of Vanguard, many people think managers aren’t worth the money.
But Bogle has never rolled out indexes like these. Take GURU—the Global X Guru Index ETF. It tracks the Solactive Guru Index built by Solactive AG, in Frankfurt. The gurus in this case are hedge fund managers, the alpha dogs who move billions in and out of stocks based on their wits and, sometimes, their whims.
A group at Solactive called the Index Committee compiles a list of hedge funds from various sources (including this magazine, according to Solactive documents) and then eliminates those managing less than $500 million, making that the guru cutoff. Also, the largest holding must be at least 4.8 percent of the fund, and the manager can’t change more than 50 percent of the portfolio in a quarter. Then Solactive takes the top holding from each of those funds and puts them in an index.
But is it really an index, or is it an ever-changing list of stocks held by hedge fund managers, most of whom are active managers, Bogle’s sworn enemy? Solactive CEO Steffen Scheuble says it is an index, because the methodology is strict.
In the worst cases, the index alchemists are preying on Bogle-headed investors who think indexes are always safe and cheap, says Chris Abbruzzese, chief investment officer at Rain Capital Management, which oversees $250 million in Portland, Oregon. “Just because something tracks an index doesn’t mean that the index doesn’t have its own tortured logic,” Abbruzzese says.
Gary Gordon, president of Pacific Park Financial in Ladera Ranch, California, is more charitable. He says the biggest problem with ETFs is liquidity. Some of the small ones trade so infrequently that they are hard to sell if you own them.
That’s the dirty secret of the ETF industry. All of the innovation has led to a lot of failure. Many ETFs are zombies. They stagger on with few assets and little trading. Take ProShares UltraShort Telecommunications, ticker symbol TLL. The fund, which lets investors make a bet that telecom shares are going to crater, has $154,000 of assets, and some days no shares trade. The fund started in April 2008, so ProShares, which has 146 funds with total assets of $25 billion, has had plenty of time to market it, a tough job in a bull market. ProShares declined to comment on TLL, which was set to close in September.
There are so many zombie funds that Ron Rowland, a portfolio manager at Flexible Plan Investments in Smyrna, Georgia, chronicles them on his website, Invest With an Edge, in a section titled ETF Deathwatch. “You and I could create an index in the next five minutes,” Rowland says. And because it’s an index, we can show how it performed during, say, the last five years, and then, voilà, we have a track record.
Many ETFs fail because no one ever hears about them, Rowland says, despite catchy tickers and trendy themes. It’s hard to stand out in a crowded field. “The bottom 50 percent of these things are untradable,” he says. Just eight ETFs accounted for half the trading, in dollar volume, for all U.S. ETFs in June, Rowland calculated. More striking: 81 percent of all the listings totaled 2.4 percent of dollar volume.
The bottom line: Most ETFs live in oblivion. All the clunkers show just how remarkable HACK is. And Chanin knows luck played a big part. But Chanin, a hyper-driven millennial, was well prepared when good fortune arrived.
Chanin at ISE’s New York offices. ISE collects a piece of the $9 million in fees HACK generates annually.
Chanin at ISE’s New York offices. ISE collects a piece of the $9 million in fees HACK generates annually.
He grew up in Mendham, New Jersey, and went to college at Tulane University, where he joined a club called the Jobs Group that aimed to put members in finance positions after graduation. During his senior year, a professor from the business school arranged for a group of students to go to New York for interviews. Chanin signed up for one at Kellogg Group, a brokerage. On the way to the airport, he got an e-mail list of the students scheduled for interviews. His name wasn’t on it. He called, and the professor said she had decided to take just graduate students.
Irked, Chanin flew to New York anyway and showed up at Kellogg with 10 other Tulane students. They went in one at a time until Chanin was the only one left in the lobby. The hiring manager took pity on him and asked him in. He got the job. “It never hurts to try,” he says.
At Kellogg, he became a market maker in ETFs, buying from sellers and selling to buyers and maintaining liquidity in various funds. He loved it. After two years, he went to Cohen Capital Group, another small New York brokerage.
He talked often with ETF issuers and suggested ideas for funds that Cohen would trade. One day, an issuer asked why he was giving away his best ideas. Why not build his own ETFs?
He and a friend from Cohen, Paul Zimnisky, considered it. “We thought you had to be a big banker to launch your own,” Chanin says. Not so. He soon discovered the cottage industry that existed for building ETFs. All he needed was an idea, seed capital, and some money for expenses.
Chanin and Zimnisky left Cohen and started PureFunds in 2010. Zimnisky became CEO, Chanin COO. They had in mind three ETFs: one holding diamond miners, another tracking small silver producers, and a third made up of companies that service miners. Metals were soaring, so the new themes seemed like money magnets.
Chanin chose a New York company called International Securities Exchange to devise his indexes. ISE has cooked up indexes that track things like Wal-Mart’s suppliers; Israeli tech stocks; and companies that make things that are bad for you: gambling, cigarettes, and booze. The symbol for a now-defunct ETF that tracked that last index (or SINdex, as ISE sold it) was PUF.

There’s little that can’t be outsourced in ETF-land.

Chanin needed a prospectus, approval from the U.S. Securities and Exchange Commission, an exchange listing, and a hairball of other things that go along with launching a regulated investment company, which is what an ETF is.
He chose ETF Managers Group, in Summit, New Jersey, to make all that happen. Founder Sam Masucci is trying to be a one-stop shop for ETF entrepreneurs. He also helps with marketing and sales, which is the toughest part for small ETFs. “ETFs are sold, not bought,” Masucci says. “You’re fighting for shelf space.” Chanin rolled out his three funds in November 2012. The diamond one sported the ticker symbol GEMS. Even so, it struggled to attract investors. Chanin tried to spread the word, appearing in videos on and other sites. GEMS and the mining ETF (MSXX) liquidated in January 2014.
Zimnisky left that same month (he didn’t return phone calls asking for comment), and Chanin was on his own with one ETF, the tiny PureFunds ISE Junior Silver Small Cap Miners/Explorers ETF (SILJ). He hadn’t been drawing a salary since starting PureFunds; he says he lived on a single slice of pizza for lunch, day after day.

A small-cap silver fund wasn’t going to pay the rent, not after metals plunged. But his friends at ISE were about to huck him a lifeline.
Like so many other crafts, building securities indexes has become something of a commodity. For years, ETF sponsors were required by the SEC to use indexes invented by other firms and to keep those firms at arm’s length. Otherwise, a sponsor could develop plans to change an index by adding another stock, say, and at the same time instruct employees to buy the stock. When the change in the index was executed, demand would drive the shares higher.

Keeping the fund sponsor and the index provider separate would mitigate the risk of such front-running.
Then, in 2006, the SEC allowed WisdomTree Investments to “self-index,” provided the methodologies behind its ETFs were rules-based and transparent.
Self-indexing is now widespread, and companies such as ISE have more competition. They have also lost some of the pricing power that brings them a chunk of an ETF’s fee action. ISE, for one, became an ETF venture capitalist, investing money to get ETFs up and running, in exchange for more of the fees.
Kris Monaco heads the ETF venture group at index builder ISE. HACK tracks an index created by ISE.
Kris Monaco heads the ETF venture group at index builder ISE. HACK tracks an index created by ISE.
The idea for computer security struck ISE’s ETF venture team, led by Kris Monaco, in 2012. Hacking was in the news, it was scary, and it was untapped. “There was no classification for computer security,” Monaco says.
He reached out to some fund sponsors, but no one was interested. So he shelved the idea. Then more hackers attacked, and ISE dusted it off. Index manager Mark Abssy started digging into the industry, learning about attacks and sifting companies that defended against them.
When you make indexes, you make enemies, Abssy says. ETF wonks can have strong opinions about what mix of companies should represent an industry. “I get guys calling me up with plenty of vitriol saying, ‘Why is this name in here?’” Abssy says.
For computer security, some companies are obvious, like Fortinet, which makes mostly hardware- and software-based firewalls. At other companies, like Cisco Systems, security is dwarfed by other businesses. But Cisco also controls 12 to 15 percent of the anti-hacker market, Abssy says. Monaco and Abssy decided that both focused upstarts and eclectic giants had to be included in their index.
Computer-security companies, in their analysis, fell into two broad categories: those that made infrastructure, like firewalls, and those that provided consulting and other services.
The formula for picking companies in those categories and setting their weights in the fund can be seen in the methodology guide for the ISE Cyber Security Index, a 23-page Levitical document written so strictly that the index probably could be resurrected even after an asteroid hit the Earth.
In the midst of the research, ISE reached out to Chanin at PureFunds. He loved the idea. So ISE pressed on and published the methodology on Sept. 2, 2014.
The HACK ETF launched on Nov. 12. The first headlines about the Sony hack hit Nov. 24. HACK jumped as cybersecurity stocks rallied. Then, in February, health insurer Anthem said computer intruders had stolen data on tens of millions of customers. HACK has been in orbit ever since, returning 21.7 percent from its inception through July 31, compared with 4.7 percent for the Standard & Poor’s 500 Index.
With fees of 75 basis points and an asset base of $1.2 billion, HACK stands to toss off fees of $9 million a year, shared by ISE, PureFunds, ETF Managers, and some of their service providers. In July, Chanin launched two new funds, one tied to mobile payments (IPAY) and another tracking companies that work with so-called big data (BDAT). He plans to hire staff.
Being the only game in town almost certainly helped HACK corral assets. On July 7, it got a competitor: the First Trust Nasdaq CEA Cybersecurity ETF. Symbol: CIBR. It had $60 million of assets after a month in business.
Chanin is still blown away by how HACK took off. “It was timing,” he says, “and a whole bunch of other things that I don’t know about and that I wish I could bottle.”

S&P: Malta’s exposure to Greece ‘limited’, Economic growth outlook positive

S&P: Malta’s exposure to Greece ‘limited’, Economic growth outlook positive, debt/GDP 55%, real GDP +3,5%

Maltaway is your gateway to access Malta’s stability,banking system, growth and competitiveness….why the gap…

Standard and Poor’s rate Malta’s economic growth outlook ‘positive’, revised upwards from ‘stable’ • Events in Greece unlikely to have a material bearing on Malta’s credit profile

Malta’s economic growth prospects remain strong relative to its EU and ‘BBB’ rating category peers, credit rating agency Standard and Poor’s said last night.

Malta’s budgetary consolidation is expected to continue, leading net general government debt to decline to 55% of GDP in 2018, from 59% in 2014.

S&P is also of the opinion that the ongoing financial crisis in Greece will not have a material bearing on Malta’s credit profile.

“The positive outlook reflects a one-in-three likelihood of an upgrade within the next 24 months if medium-term economic growth prospects are maintained and fiscal consolidation continues, while no bank- or nonfinancial public enterprise-related contingent liabilities or external risks materialize.”

Malta’s real (not nominal) GDP grew by 3.5% in 2014. This is projected to expand by close to 3% annually on average in 2015-2018.

“We believe Malta’s economy will continue to outpace the eurozone as a whole, notably because of investments in the energy sector,” S&P said referring to the interconnector and the Delimara LNG project.

Beyond 2016, further diversification of the economy–particularly into information and communication technology and medical tourism–could boost investment. Domestic demand is expected to be backed by stronger private consumption, resulting from government-mandated cuts to utility tariffs that have reduced electricity prices by 25%.

Lastly, consumption trends are being supported by rising real wages and, more importantly, broader female participation in the labor market.

“On the external side, we view Malta as an open, services-oriented economy. We expect the tourism sector will continue to perform well on the back of a favorable euro/pounds sterling exchange rate, the increased perception of terrorism-related risks in some other Southern Mediterranean countries, and the current turmoil in Greece.”

Malta’s exposure to Greece ‘limited’

“We do not believe events in Greece will have a material bearing on Malta’s credit profile. Like all eurozone members, Malta is exposed through common monetary, fiscal, and development institutions such as the European Central Bank, the European Financial Stability Facility, and the European Investment Bank.

“Apart from contingent liabilities associated with those institutions, Malta’s exposure to Greece is limited. Malta’s trade with Greece is small and direct financial links are few. We assess the external debt of Malta’s domestic banks as sufficiently contained such that Malta would cope with a permanent real increase in external funding costs spilling over to eurozone markets from Greece.”

Financial services

The low corporate tax rate has attracted significant foreign investment into Malta’s banking, insurance, and gaming industries, implying that the economy would be sensitive to potential pressure for a eurozone-wide standardization of corporate tax regimes.

“We expect that Malta will run a small current account surplus over our 2015-2018 forecast horizon, and remain in a narrow net external asset position of about 16% of current account receipts (CARs) on average during 2015-2018.

Offshore banks dominate Malta’s international investment position and it is understood that foreign banks use Malta as a booking center for their own financing needs.

Economic growth

S&P believes that Malta’s favorable economic growth prospects support further

budgetary consolidation. It forecasts general government consolidation to progress gradually through 2018, primarily owing to increased tax receipts from strengthening domestic demand and the expected decline in current expenditure from 2016 onward.

Net general government debt is expected to decrease to 55% of GDP by 2018, from 59% in 2014. General government gross debt forecasted to be 68% of GDP in 2015, excluding the guarantees related to the European Financial Stability.

General government interest payments forecasted tol average 7.1% of general government revenues per year over 2015-2018.


Malta’s contingent fiscal liabilities stemming from NFPEs derive mostly from

Enemalta’s government guaranteed debt (9.7% of GDP as of end-March 2015). Enemalta will likely not generate profits until 2017.

“We note that the current drop in international oil prices is helping Enemalta’s expected return on investments. Nevertheless, other state-owned enterprises also represent fiscal risks, as exemplified by this year’s government financial support to Air Malta, estimated at 0.5% of GDP.”

Government guarantees of NFPE debt totaled 16% of GDP at year-end 2014.

Reforms needed to avoid straining public finances

S&P reports that without further reforms in the pension and health care systems, public finances will become strained in the medium term.

“Under our criteria, we see contingent fiscal risks to public finances coming from the banking sector. Malta’s domestic banking sector operates alongside a large offshore sector which, we believe, the government would not support in case of financial distress.

“However, dislocations in their funding could affect the island’s reputation as a financial center.”

Assets of the total banking sector are nearly 7xGDP while assets of core domestic banks amounted to about 2x GDP. Domestic systemically important banks include 25% state-owned Bank of Valleta (total assets €7.7 billion or about 8% of GDP) and HSBC Malta Bank (total assets €5.15 billion).

To this list, S&P would add fast-growing Mediterranean Bank (total assets €2.2 billion), which the agency expects to join the other two under ECB supervision soon.

Euro area membership

Membership in the eurozone anchors Malta’s monetary policy and provides its banks access to funding at low nominal interest rates. Nevertheless, S&P believes that membership in a monetary union increases the onus on member governments to support competitiveness through fluid labor, product, and services markets, and to build up fiscal buffers against future shocks.

This is more the case now than a year ago, given that the ECB is undershooting its medium-term price stability target of close to, but lower than, 2% for the eurozone as a whole.

“We note that nominal unit labor costs have been increasing at one of the fastest rates in the euro area, posing risks for competitiveness when many euro area neighbors are undertaking structural reforms and internal devaluations.”