Legal Framework and Formation Rules and Fees
Trusts in Malta were based on the Offshore Trusts Act 1988 which was largely based on Jersey trust law, itself a common law implant stemming from English trust law. Trusts under this Act had to have non-resident settlor and beneficiaries, and trust assets could not include Maltese real estate. This legislation was amended by The Trusts and Trustees Act 2004, which became effective in January 2005.
Maltese trust law establishes the confidentiality of trust documents and dealings and the actions of the trustee. The Professional Secrecy Act 1994 imposes strict confidentiality rules on all professionals, officials and other individuals who receive privileged information in the course of their duties; the sanctions are heavy fines and imprisonment.
The Malta Financial Services Authority (MFSA) is responsible for the authorisation and supervision of trustees and the regulation of trusts. Its regulatory responsibilities also include the licencing and supervision of insurance companies, collective investment schemes and providers of investment services, banking and financial institutions.
Some of the main features of Maltese trust law are as follows:
The perpetuity period for Maltese trusts is 100 years;
The settlor may be a beneficiary under the trust;
Powers of the trustee are wide and flexible;
The office of Protector is allowed for;
Forced heirship provisions are excluded.
The Recognition of Trusts Act 1994 gave effect to the Hague Convention, and resulted in a division of trusts into:
Maltese trusts, where the proper law of the trust is Maltese, and the governing legislation is the 1988 Act (now called the Trusts Act 1988); and
Foreign trusts, governed by whatever law the settlor has nominated.
All trusts, including foreign ones, must register with the MFSA, for which a fee is imposed on registration and annually thereafter. Foreign trusts which do not register with the MFSC will not benefit from the tax advantages of registered trusts. A registered trust must have a Maltese nominee company as one of its trustees, which files an annual declaration of conformity with the law; no accounts or tax returns need be filed. (A nominee company is a Maltese company which has been authorised by the MFSC to provide services to trusts, and carries the supervisory responsibility on behalf of the MFSC.)
Both Maltese trusts and foreign trusts registered in Malta have by definition non-resident settlors and beneficiaries, and are exempt from income tax, except that they pay an annual fee to the Government.
Trusts do not have to file tax returns; the nominee company which is acting as their trustee makes an annual declaration of conformity with the law. No stamp duty or other taxes are payable in respect of trust transactions or documents. Trust property may be imported free of customs duty. A trust is not subject to exchange control unless a transaction is carried out with a Maltese resident.
Under the 2004 Act, transfers of assets into a trust or a change of beneficiaries may give rise to a charge to tax.
There are no special provisions in Maltese law covering Unit Trusts, which are therefore treated in the same way as ordinary Maltese trusts, and have the same tax regime.
It is likely that a Malta-registered trust will often be a more effective holding vehicle than the International Holding Company. On the other hand, when the assets to be held are Maltese real estate, it may be better to use an unregistered foreign trust. Trusts are able to use the extensive network of Maltese Double Taxation Treaties.
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