Exchange controls to be removed

The liberalisation of a number of exchange control measures comes into effect on January 1, as announced by Finance Minister John Dalli in the budget speech, the Central Bank said.

All exchange controls are to be removed by the date of EU accession. In the period up to accession all remaining controls will be removed except those which apply to short-term capital transactions. Short-term capital transactions are defined as having a maturity period of under six months. The exchange control liberalisation measures that come into effect from January 1 are:

1. Travel allowance
The purchase of foreign currency for travel purposes is being completely liberalised, subject to the reporting requirement (item 15).

2. Cash gift allowance
The limit for payments in connection with cash gifts or remittances for family living expenses is being raised, from the present level of Lm10,000 per adult person each year to Lm20,000.

3. Imports made through a spot transaction overseas
The purchase of foreign currency for export by residents who intend travelling overseas to make payments for merchandise imports is being completely liberalised, subject to the reporting requirement (item 15).

4. Importation into Malta of local currency
The importation into Malta by a resident/non-resident of any notes and coins which are or have been legal tender in Malta is being completely liberalised subject to the reporting requirement (item 15).

5. Exportation from Malta of local currency
The exportation from Malta by a resident/non-resident of any notes and coins which are or have been legal tender in Malta is being completely liberalised subject to the reporting requirement (item 15).

6. The foreign portfolio investment allowance
The foreign portfolio investment allowance for an adult resident person is being raised from Lm50,000 to Lm100,000 each year. However, in utilising this new yearly allowance residents will not be permitted to invest in short-term financial assets.

7. Foreign currency holdings/demand deposit accounts - natural persons
(i) The amount of foreign currency that a resident is exempted from surrendering to an authorised dealer is being raised from the present limit of Lm15,000 to Lm20,000.
(ii) This amount may be deposited in a foreign currency demand deposit account with a local bank. Apart from personal withdrawals converted into Maltese liri, such accounts may be used to effect payments in foreign currency in connection with balance of payments current account transactions.

8. Foreign currency holdings/bank deposit accounts - bodies corporate/retail outlets
(i) Bodies corporate/local retail outlets which receive foreign currency, in cash, in the course of their business activities may retain up to a limit of Lm20,000 in cash for use in their business without surrendering this amount to an authorised dealer.
(ii) This amount may be deposited in foreign currency accounts with local banks.
(iii) The maximum balance that may be held in such accounts is thus increased from the current level of Lm15,000 to Lm20,000.
(iv) These accounts may be debited with payments in foreign currency related to current account transactions.

9. Payments by residents in foreign currency to commission agents
Bodies corporate in Malta which act as commission agents on behalf of foreign companies may receive and deposit into foreign currency accounts held with local banks, as mentioned under item 8, payments in foreign currency made to them by their local customers as long as such funds are remitted to the foreign company within a month of receipt.

10. Credit facilities in Maltese liri to non-residents operating locally
Local banks are being permitted to grant credit facilities in Maltese currency to non-residents carrying out economic activities in Malta for periods of six months and over. Currently the minimum period for such loans is one year.

11. Loans by residents to non-residents
Residents are being permitted to extend credit to non-residents for periods of six months and over. Currently the minimum period for such loans is one year.

12. Borrowing by residents in foreign currencies
Residents are being permitted to borrow in foreign currencies from resident or non-resident sources for periods of six months and over. Currently the minimum period for such borrowings is one year.

13. Investment by fund investment schemes
Fund investment schemes which collect funds in Maltese liri from residents with the specific aim of investing such funds in Maltese liri-denominated securities on the local market are now being permitted to invest up to a maximum of 15 per cent of their shareholders' funds in foreign assets, instead of 10 per cent as at present.

14. Clients' accounts for financial and investment services companies
Financial and investment services operators who provide such services to local and overseas clients are being permitted to maintain clients' accounts with foreign banks abroad. These accounts are to be used strictly for the temporary deposit of funds received from their clients, prior to the use of the funds for new investment. Operators are obliged to provide details of such accounts to the Central Bank of Malta immediately after these accounts are opened.

15. Obligation to declare import/export of cash
The reporting obligation that was announced in last year's budget, which was aimed at strengthening existing measures to combat money laundering or other criminal activities such as the channelling of funds for terrorist activities, will come into effect from early next year following the issue of a legal notice. The reporting form will have to be filled in by both incoming and outgoing travellers (resident and non-resident) who carry on them cash in excess of Lm5,000. Cash is defined as any currency (bank notes and coins), monetary instruments and gold or silver bullion.

The Central Bank emphasised that all transactions specified in this notice may only be effected after the necessary documentation is provided to the authorised dealers as evidence of the purpose of the payment. The authorised dealers on their part will have to ensure that the appropriate reporting forms related to these transactions are correctly filled in by customers and accurately reflect the economic nature of the transaction. Authorised dealers are obliged to maintain records of all transactions in order to respond to the Central Bank's needs for statistical information.