Exchange control liberalisation measures come into effect on Monday

The following are details of the exchange control liberalisation measures which were announced by Finance Minister John Dalli in the Budget speech for this year. The new measures come into effect on Monday

1. Overall objectives of the measures
The measures are aimed at:
(1) relaxing quantitative limits on current payments which are still subject to exchange control;
(2) removing, or further relaxing restrictions on a number of capital transactions.
It should be emphasised that the Central Bank and authorised dealers will approve or effect the transactions specified below only after the requested documentation is provided to them as evidence of the purpose of the payment.
It will be the responsibility of the authorised dealers to ensure that the appropriate reporting forms related to transactions are correctly filled in by customers. Authorised dealers should also record details of all such transactions in order to provide the Central Bank with the necessary statistical returns on a regular basis.
It should be emphasised that in effecting transactions that are no longer subject to exchange control approval, authorised dealers should continue to ensure that all regulations regarding the prevention of money laundering are strictly adhered to.

2. Further relaxation of controls on current payments
(i) Travel allowance
The limit for travel purposes is raised from the present level of Lm5,000 per person per trip to Lm10,000. However any requests for travel funds in excess of the Lm10,000 limit will be permitted as long as details of the transaction are given by the remitter on the relevant Central Bank form.
(ii) Cash gift allowance
The limit for payments in connection with cash gifts or family subsistence allowances is raised from the present level of Lm5,000 per adult person each year to Lm10,000
(iii) Imports effected through a spot transaction overseas
The purchase of foreign currency for export by residents who intend travelling overseas to make merchandise payments is raised from the present limit of Lm20,000 to Lm50,000
(iv) Importation into Malta of local currency
The importation into Malta by any resident/non-resident of any notes and coins, which are or have been legal tender in Malta, is raised from the present level of Lm50 to Lm1,000.
(v) Exportation from Malta of local currency
The exportation from Malta by any resident/non-resident of any notes and coins, which have been legal tender in Malta, is raised from the present level of Lm25 to Lm1,000.
(vi) Import / export of gold in all forms including bullion
All imports and exports of gold in all forms, including bullion, are exempted from exchange control procedures but will still remain subject to the provisions of the Gold (Control) Regulations 1996.

3. Capita1 account liberalisation measures
(i) Investment in real estate
The limit that an adult person residing in Malta is permitted to invest in real estate overseas is raised from the present level of Lm50,000 to Lm150,000 per year.
(ii) Portfolio investment allowance
The foreign portfolio investment allowance for an adult resident person is raised from the present level of Lm15,000 to Lm30,000 per year.
(iii) Portfolio investment allowance for collective investment fund companies.
Fund investment schemes (SICAVs) which collect funds in Maltese liri from residents with the specific aim of investing such funds in Maltese lira denominated securities on the local market (that is, funds which are not eligible for investment in foreign currency denominated assets as part of the annual foreign investment allowance) are permitted to invest up to a maximum of five per cent of shareholders’ funds in foreign currency assets. There are no limits on the amounts that can be invested by individual resident shareholders’ funds since units held are not considered to be a foreign currency asset and are thus not subject to the annual personal investment allowance. These arrangements apply to new as well as existing fund schemes.
Exchange control regulations for other types of collective investment schemes which invest in assets denominated, in whole or in part, in foreign currency remain unchanged. Such schemes may collect funds in foreign currency or in Maltese liri from residents utilising their personal foreign investment allowances.
(iv) Savings and time deposit accounts in foreign currency with local credit institutions for export oriented companies
Locally registered companies engaged in the export of manufactured goods and services are curr-ently permitted to retain their foreign currency earnings in a foreign currency savings or time deposit account with a local credit institution for a period not exceeding six months. This retention period is now being increased to one year.
(v) Foreign currency holdings
The amount of foreign currency that a resident is exempted from surrendering to an authorised dealer (in terms of the relative Exchange Control Legal Notice) is increased from the present limit of Lm2,500 to Lm10,000.
(vi) Demand deposit accounts in foreign currency for residents with local credit institutions
The limit that a resident person may maintain in a foreign currency current (demand) account with local credit institutions is raised from the present limit of Lm2,500 to Lm10,000. These accounts may be credited with foreign currency that residents are exempt from surrendering in terms of the
relative Exchange Control Legal Notice, including funds converted from Maltese liri (which would then form part of the annual Lm30,000 investment allowance), and may only be debited in connection with payments in foreign currency related to balance of payments current account transactions.
(vii) Maintenance of demand/savings/time accounts in foreign curr-ency by bodies corporate and retail outlets with local credit institutions
Bodies corporate and local retail outlets are permitted to maintain with local banks demand, savings and time deposit accounts in foreign currency. The aggregate balance that may be held in such accounts should not exceed Lm10,000. These accounts may only be credited with foreign currency earnings generated through their business activities. They may be debited with pay-
ments in foreign currency related to balance of payments current account transactions.
(viii) Credit facilities in Maltese liri to non-residents carrying out economic activities in Malta
Domestic banks are currently permitted to grant credit facilities in Maltese currency to non-residents carrying out economic activities in Malta for transactions related to their operations. From 2001, loan facilities may be provided for any other purpose onshore including the purchase of securities in the local capital market as long as such facilities have a maturity of over one year.
(ix) Loans by residents to non-
residents
Lending extended by residents to non-residents is liberalised completely subject to the condition that such lending is for maturity periods of one year or more. Lending by residents to non-residents for maturity periods of less than one year requires the approval of the Central Bank.
(x) Loans received by residents from non-residents
Borrowing by residents from overseas is liberalised completely subject to the condition that such borrowing is for maturity periods of one year or more. Borrowing by residents, from non-residents for maturity periods of less than one year requires the approval of the Central Bank.
(xi) Guarantees issued by non-
residents in favour of residents
The granting of guarantees by non-residents in favour of residents is completely liberalised.
(xii) Guarantees issued by residents in favour of non-residents
The granting of guarantees by residents in favour of non-residents is liberalised as long as such guarantees are related to transactions which are permitted under current exchange control regulations.
(xiii) Endowments
All restrictions on payments by residents in respect of endowments to bona fide foreign institutions (that is educational, charitable, cultural, and so on) are removed.
(xiv) Dowries
All transfers by resident persons
in respect of dowry payments are
liberalised.
(xv) Transfer of assets by residents in connection with emigration
All limits on the amount of transfers of assets by residents, in the event of emigration, at the time of their establishment or during their period of stay abroad, are lifted.
(xvii) Settlement of debts by immigrants
All restrictions on payments in connection with the settlement of debts by immigrants in their previous country of residence are removed.

4. Repatriation of capital
Residents may repatriate, through local credit institutions/financial institutions, funds invested overseas without the need to submit declarations that such funds were registered with the Exchange Control Authorities. This does not imply that such repatriated funds are exempted from any legal obligations in terms of the Income Tax Act and the Prevention of Money Laundering Regulations.