Trusts and Foundations
Trusts and Foundations can be efficient vehicles for wealth management purposes: both are thoroughly regulated and embedded within the Maltese legislative framework
Trusts in Malta are regulated by the Trusts and Trustees Act of 2004 which provides for the setting up of trusts as well as the authorisation and supervision of trustees. On the other hand, foundations have been recognized and regulated in Malta for almost 200 years through Maltese case law and doctrinal writings however specific legislation on foundations was only enacted in 2008.
Malta does not impose any withholding taxes and therefore can be used to extract profits outside of Europe.
Creation of Trusts
With few exceptions, a trust may come into existence in any manner. Apart from a trust for a charitable purpose, aunit trust ora retirement scheme set up as a trust, a trust remains in force up to 100 years after its creation unless terminated earlier.
A trust may be governed by the proper law of Malta or of a foreign jurisdiction.
Types and Uses of Trusts
Under Maltese law it is possible to set up any type of trust. Typical uses include testamentary, estate and tax planning trusts, cross border trusts and trading trusts.
In the case of a charitable trust it may be set up for a specified purpose and not for the beneficiaries.
A Trustee may be a natural or a legal person. A professional trustee resident or operating in Malta is obliged to be licensed (subject to certain exemptions) by the Regulator. The Trustee must satisfy different strict criteria including good reputation, fit and proper test and a proven track record in financial, fiduciary, accounting or legal services.
Under Maltese law, a trust is not a separate legal person. However, protection of the beneficiaries is secured as there are strict provisions requiring that the trust property is kept separate from the trustee's personal property.
- Upon settlement to a trust, where the settlor is a person who is not resident and not domiciled in Malta and the assets settled on trust are situated outside Malta, no tax and duty will be payable in Malta.
- Where at least one of the trustees is resident in Malta, any income attributable to the trust will be subject to taxation in Malta.
- However the tax transparency principle applies where the income of a trust arises outside Malta or dividends distributed out of profits of a Maltese company and the beneficiaries are not ordinarily resident in Malta. If the income attributable to the trust does not arise in Malta and the beneficiaries of a trust are neither resident nor domiciled in Malta, there are no Malta tax implications.
- A trust can opt to be taxed as a company and consequently will be entitled to tax refunds.
Corporate Resident Trustees
A Maltese trust company is subject to the tax rate of 35% on worldwide income. Upon a distribution of dividend, the shareholder can claim a 6/7th refund.
A company licensed to act as a trustee in another jurisdiction may set up a branch in Malta without the need for redomiciliation, through a simple notification procedure. This ensures minimum costs and red tape.
Foundations – An Alternative
Contrary to trusts, foundations consist in the creation of an entity with separate legal personality distinct from the founders, the administrators and the beneficiaries.
Foundations can only be constituted by a public deed inter vivos or by means of a will.
A feature of Maltese foundations is that segregated cells within a foundation may be established to achieve particular purposes in which the assets and liabilities of a cell are distinct from those in other cells.
A foundation may be treated either as:
- A company which is both resident and domiciled in Malta thereby benefitting from the full imputation system
- As a trust for tax purposes (subject to certain requirements). The latter gives rise to beneficial private asset planning opportunities.
EMCS International Services Ltd is licensed by the Malta Financial Services Authority to act as trustee. The extensive mixed competences of our directors and staff ensure that we are professionally equipped to provide the following services:
- Advice on the set-up of a trust or foundation in Malta and registration of foundations
- Acting as trustee/administrator and the provision of related services
- Preparation of trust deed and other necessary statutory documentation
- Administration of the trust/foundation
- Accounting and maintenance of asset ledgers
- Reporting and filing with the relevant authorities
- Ongoing compliance
- Liaising with local authorities