MALTA Law and Practice Contributed by: Rosanne Bonnici and Rebecca Diacono, Fenech & Fenech Advocates
3.3 Tax Considerations: Fiduciary or Beneficiary Designation
ment a significant amount of flexibility in deciding the level of involvement and/or the extent of powers they wish to retain over the management of the arrange - ment.
A trust falls within the scope of Maltese tax if one of the trustees is resident in Malta for tax purposes, and also when a trust has any income or capital gains arising in Malta. If a foreign trust has Maltese resident beneficiaries but no Malta-resident trustees, and no income or capital gains chargeable to tax in Malta, that trust should fall outside the scope of Maltese tax. However, a trust that falls within the scope of tax may be tax-transparent in particular instances – for instance, if all trust assets are located outside Malta and the trust beneficiaries are individuals who are resi - dent or domiciled in Malta for tax purposes. If a beneficiary is resident but not domiciled in Malta, where the principle of tax transparency is applicable, the remittance regime will apply; accordingly, the for - eign-sourced income of the trust that is attributable to that particular beneficiary shall only be liable to tax in Malta if and to the extent that said income is remit - ted to Malta. 3.4 Exercising Control Over Irrevocable Planning Vehicles The law caters for irrevocable trusts and for founda - tions where the right of the founder to terminate the foundation may be limited by the foundation deed. Both entities provide opportunities to settlors and founders alike to maintain a level of control and/or involvement in the administration of the assets and, in the case of foundations, in the management of the foundation itself. This may be achieved in a number of ways: • the client may act as trustee or administrator; • both sets of laws cater for the appointment of a protector; and/or • the founder may reserve the right to amend the trust or foundation deed, to appoint or remove trustees or administrators, to receive information concerning the management of the assets, and so forth. The laws in question are drafted so as to give asset owners who are considering either type of arrange -
4. Family Business Planning 4.1 Asset Protection
When dealing with asset planning, there is no one vehicle that suits every family’s requirements, and the choice of vehicle typically depends on: • the asset owner’s needs and plans for the future; • whether they wish to retain a measure of control over the manner in which the assets are adminis - tered; • the extent to which they and/or the beneficiaries wish to be involved in the ongoing management thereof; and • the type of regime that is best suited from a legal perspective. As Malta is a civil law jurisdiction, the company has been the vehicle of choice for generations. Given the changing dynamic in family structures over the years, the use of trusts and foundations has increased, as they provide a level of flexibility in planning for future generations, particularly where the family dynamic is “non-traditional”. 4.2 Succession Planning Family businesses – both large and small – have been and remain the key driver of Malta’s economy. In this context, the company has traditionally been the vehi - cle of choice. Families are now increasingly consider - ing trusts and foundations as a means of facilitating the transfer of wealth to future generations and, per - haps more importantly at times, as a means of ensur - ing the proper management of long-established busi - nesses for the benefit of all moving forward. The Family Business Act was introduced fairly recently and made a significant contribution on the local front to facilitating the transfer of family businesses to the younger generations in a tax-efficient manner, through various tax incentives, thereby increasing the chances of said businesses remaining viable for the future. In
365 CHAMBERS.COM
Powered by FlippingBook