In 2004 the Trusts Act 2004(Chapter 331) was enacted in Malta. With this law, Malta elimated “nominees” from its legal system thus abiding by its international commitments to the OECD and FATF. With these amendments, Malta moved closer to becoming an on shore regime and created a framework in which the use of trusts are properly marketed. It also sought to address the issue of taxation of trusts.
Some main features of trusts in Malta:
The trusts and Trustees Act is based on Jersey trust law
The trustee of a Maltese Trust can be either a “Private” or a “Professional trustee”.
Both “Private” and “Professional trustees” have to be authorised by the MFSA to act as such.
Possibility of choice of proper law governing the trust.
Recognition of foreign trusts.
Our firm owns an in-house trust company (CRV International Limited – Company Registration Number, C-18970), which is a Licensed Trustee Company under the terms of the Trusts and Trustees Act 1989 (Chapter 331 of the Laws of Malta). Its business is regulated and supervised by the MFSA. At Ciantar Associates we can offer you the following trust services:
Acting as professional trustees.
Acting as protectors.
Providing fiduciary/ nominee services.
Setting up a Trust in Malta
This brief introduction to trusts in Malta tackles situations where the Settlor and beneficiaries of the trust are all non-resident in Malta or hold Permanent Residence Permits in Malta and the tax implications of trusts as set out hereunder are limited to these situations. Where the Settlor and/or beneficiaries are resident in Malta, the tax situation is completely different. The Trusts and Trustees Act provides for the creation of trusts and the regulation and supervision of trustees. The MFSA (The Malta Financial Services Authority) is the Regulator for financial services in Malta and is the Authority responsible for the regulation, supervision and authorization of trustees in Malta. A trust can come into existence by an instrument in writing, or by a will, or by a unilateral declaration of trust by the trustee. A trust can be set up in such a way whereby the Settlor is the sole beneficiary and even a company (whether registered in Malta or not) can be the sole beneficiary of a trust. Trusts can be fixed, discretionary or charitable in the usual recognized way.
On a yearly basis, the Trustees must prepare and file audited accounts of the trust for tax purposes.
Income attributable to a trust is not charged to tax in the hands of the trustee if it is distributed to a beneficiary. Therefore on distribution of income to a beneficiary, tax is charged directly to the beneficiary. As a consequence, when all the beneficiaries of a trust are not resident in Malta and when all the income attributable to a trust does not arise in Malta, there is no tax due by the beneficiary, since non-residents are not subject to tax in Malta. Therefore in effect, where the beneficiaries under a trust are non-resident and the income of the trust does not arise in Malta, there is no taxation in Malta. A trust with non-resident beneficiaries can have a mixed income, partly arising in Malta and partly arising abroad. In such a case, the non-Maltese income is not taxed whereas the Maltese income of the trust is taxed in the normal way as for residents. Income arising in Malta would usually either be investment income or rental income from real estate owned by the trust Income attributable to a trust that is not distributed to beneficiaries is charged to tax in the hands of the trustee at the rate of 35% tax law. It is therefore always advisable to distribute trust income to the non-resident beneficiaries. Where the beneficiary of a trust is a Permanent Residence Permit holder under Maltese law, the non-Maltese income of the trust distributed to the Permanent Resident is taxed at 15% if such income is paid in Malta to the Permanent Resident; non-Maltese trust income which is distributed by the trust to the Permanent Resident but which is not remitted to Malta remains untaxed.
Fiduciary ( Nominee ) Legislation
Licences to act as fiduciaries (nominees) are strictly controlled by the MFSA and only granted to companies after a rigorous compliance exercise on both the company and the shareholders and directors are carried out.
Moreover at least two of the three mandatory directors must be professionals with a degree and who must have passed a certain diploma course on trusts and fiduciary services. Fiduciary companies can only carry out activities in the following areas:
Holding shares on behalf of the ultimate beneficial owners;
Acting as trustees.
Shares held under fiduciary will remain confidential. The identity of the ultimate beneficial owners will not be revealed even to the MFSA (the regulator) or the tax authorities. These confidentiality standards are set in law and are found in the Professional Secrecy Act. Any breach of these confidentiality rules can carry a prison term of two years.
Our subsidiary – CRV International Limited – is licensed by the Malta Financial Services Authority (MFSA) under the Trusts and Trustees Act to act as fiduciary and trustee .
We would be glad to assist you to develop the kind of trust which would meet your specific requirements. Our fees are very competitive.