MALTA Law and Practice Contributed by: Rosanne Bonnici and Rebecca Diacono, Fenech & Fenech Advocates
foundations specifically stipulate the respective rights and obligations of trustees and administrators, setting high standards of behaviour for either type of fiduciary. 6.2 Fiduciary Liabilities Both the local trusts law and the law regulating foun - dations include provisions to the effect that trustees and administrators, respectively, cannot negotiate their way out of liability for a breach of trust arising from their own fraud, wilful misconduct or gross neg - ligence in the case of trustees, or arising from wilful misconduct, gross negligence or breach of duty in the case of administrators of foundations. 6.3 Fiduciary Regulation Maltese law does not set any particular investment approach that trustees or administrators are obliged to take in investing and administering trust and foun - dation assets, respectively. Both sets of laws require these fiduciaries to act in matters of investment like a bonus paterfamilias – ie, as a responsible head of a family would in investing that family’s wealth. In the absence of provisions to the contrary in the trust or foundation documentation concerned, it follows that the fiduciary is obliged to invest the assets of the trust or foundation prudently. 6.4 Fiduciary Investment As indicated in 6.3 Fiduciary Regulation , Maltese law does not set any particular investment approach that trustees or administrators are obliged to take when investing and administering trust and foundation assets; both sets of laws require these fiduciaries to act in matters of investment like a bonus paterfamilias – ie, as a responsible head of a family would in invest - ing that family’s wealth. It would therefore be prudent to ensure diversification in terms of investment on principle. It is, however, per - missible for a settlor or founder to allow the trustees/ administrators to administer the trust or foundation funds without ensuring diversification if, for example, the key/sole significant asset of the trust or foundation is to be the family business. Following up on the duty imposed on the fiduciaries to act as a bonus paterfamilias, it would be prudent for the fiduciary to source the required expertise, by
engaging a qualified investment manager or adviser in the fulfilment of said duties. In terms of the law, both trusts and private interest foundations may be used as commercial vehicles, although in the latter case, certain restrictions apply. However, neither is used very often, with the trust or foundation concerned typically setting up a special purpose vehicle (SPV) through which to undertake activity. The family business may be so held, with the settlor/founder and/or their children normally retaining positions at management level thereafter. 7. Citizenship and Residency 7.1 Requirements for Domicile, Residency and Citizenship Domicile Domicile is a private international law principle based on the concept of a permanent home – ie, the place where a person has strong ties. An individual acquires a domicile of origin at birth, which is typically the dom - icile of their father at birth, but they may also acquire a domicile of choice during their life. An individual may only have one domicile at a given time, and cannot be without a domicile at any point in time. Residence EU/EEA/Swiss nationals EU/EEA/Swiss nationals may take up residence in Malta in the exercise of their EU Treaty rights, tak - ing up residence there based on economic self-suf - ficiency, employment or study. While EU/EEA/Swiss nationals may freely move to Malta at any time, they are obliged to apply for registration with the Expatri - ates Unit at Identità after three months of residence in Malta, through an application for a residence permit. They may also apply to benefit from one of Malta’s tax programmes, such as the Residence Programme (modelled on much the same lines as the GRP). Like the GRP, beneficiaries of the Residence Programme benefit from a flat 15% rate applying to any foreign- sourced income remitted to Malta, subject to a mini - mum annual tax payment of EUR15,000.
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