MALTA Law and Practice Contributed by: Rosanne Bonnici and Rebecca Diacono, Fenech & Fenech Advocates
tions tax-free. One such exemption covers donations of all chargeable assets to an individual’s children and grandchildren, including donations of immovable property and securities. Along similar lines, the DDTA provides for several exemptions and reduced rates of transfer duty for transfers of assets during an individual’s lifetime and upon death. Since the exemptions and reduced rates of capital gains tax and transfer duty are already quite gener - ous, this may make the need for complicated succes - sion plans slightly redundant – unless, for example, an estate is comprised of significant illiquid assets, such as immovable property, the inheritance of which on the owner’s death will trigger a high transfer duty bill that the heirs would need to not only pay but also potentially finance. In such instances, succession planning that achieves a measure of tax deferral may be useful, if only from a cash-flow perspective. This is where trusts and foundations may come into play, keeping in mind that a foundation may also be set up with several cells, each of which constitutes a separate patrimony of assets and liabilities and to which individual assets may be allocated in order to be administered for one or more specific beneficiaries of the foundation to the exclusion of the others. The ITA caters for a number of exemptions from capital gains tax on the settlement of chargeable assets on trust and likewise on the endowment of such upon a foundation, in either instance when such is set up for the benefit of, inter alia, the settlor/founder’s children and grandchildren. 2.7 Transfer of Assets: Digital Assets There is no hard and fast rule regarding the manner in which digital assets are to be treated for succession purposes, as the matter is not currently regulated in Malta. When considering digital assets such as email or cloud accounts, the starting point should be the terms and conditions the deceased would have accepted for the particular digital asset in question. Each such set of terms and conditions is to be considered on a case- by-case basis, in order to take a view as to whether
or not heirs have acquired a right to access that par - ticular account. It is most often the case that accounts are non-transferable and, accordingly, the service pro - vider would be expected to refuse to provide access to any such account to the account holder’s heirs. The same principle applies to other digital assets, such as financial tokens and cryptocurrencies, if no private key is involved in their ownership. If there is a private key, the heirs may benefit only if they have access to or control of that private key in practice. If financial tokens transferred upon death have the same characteristics as “marketable securities” as defined in the DDTA, transfer duty shall be levied on the transfer thereof to the deceased’s legatees or heirs inheriting such. 3. Trusts, Foundations and Similar Entities 3.1 Types of Trusts, Foundations or Similar Entities Maltese law caters for a wide range of both trusts and foundations. In the case of trusts, in addition to the typical discretionary trust, the law also caters for the settlement of spendthrift trusts, disability trusts and charitable trusts, as well as the concept of a private trust company that can go a long way to granting a number of settlors/a family office stronger controls over the family’s assets. Where foundations are con - cerned, one can set up the following: • a social/purpose foundation with charitable or social objectives or similar; • a public benefit foundation set up for the benefit of public interest beneficiaries such as religious or public organisations; • a private benefit foundation that essentially caters for a public purpose vehicle with an element of private benefit included therein; or • a private interest foundation, which is the vehicle of choice for a founder wishing to set up a vehicle that will hold and administer assets for their benefit and that of their family and future generations. While the foundation is firmly rooted in civil law prin - ciples, being a separate legal person to the founder
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