MALTA Law and Practice Contributed by: Rosanne Bonnici and Rebecca Diacono, Fenech & Fenech Advocates
and the beneficiaries, the law has introduced some elements that are akin to the environment of the trust, with concepts such as the beneficiary statement that may take the place of a letter of wishes or the role of a protector, among others. This may make the Maltese private interest foundation, in particular, more attrac - tive to a family that is drawn to the trust world but that would be more comfortable with a vehicle they can see, touch and be involved in, to the degree required. As far as trusts are concerned, the private trust com - pany is subject to a regulatory regime administered by the financial services authority and provides an additional option for families wishing to structure their wealth. A private trust company may be set up if: • its objectives and activities are limited to acting as trustee in relation to a specific settlor or settlors and providing administrative services in respect of a specific family trust or trusts; • it does not otherwise hold itself out as a trustee to the public; and • it does not act habitually as a trustee, in any case in relation to more than five settlors at a time. The private trust company is attractive to individuals who wish to settle assets into a trust for the benefit of their family while retaining a degree of control over them through their family office or otherwise. 3.2 Recognition of Trusts Malta has a fully fledged trust law, introduced in the late 1980s and largely modelled on Jersey trust law. Malta has also adopted the Hague Convention on the Law Applicable to Trusts and on their Recognition (the “Hague Trusts Convention”), under which foreign trusts are recognised. The validity of a foreign trust and its construction and administration, shall be gov - erned by the foreign law and recognised in Malta in terms of the Hague Trusts Convention. 3.3 Taxation of Trusts, Foundations and Similar Entities Located in Other Jurisdictions 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 Tax Consequences of Fiduciary and Beneficiary Roles From a tax perspective, a trust falls within the scope of Malta tax if the trustee is resident in Malta. The tax treatment of a trust or foundation does not differ if the settlor or beneficiary of the trust is also the trustee. By default, a foundation is taxed in the same manner as a company; therefore, the fact that the founder or beneficiary also serves on the Board of Administrators should not, in principle, result in a different tax treat - ment. Foundations may, in certain cases, elect to be treated as a trust for tax purposes. In such a case, the above comments regarding trusts would be relevant. When dealing with asset planning, no one vehicle 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 4. Family Business Planning 4.1 Asset Protection
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