In 2004 the Trusts Act 2004(Chapter 331) was enacted in Malta. With this law, Malta eliminated “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.
The Trustees must prepare and file audited accounts of the trust for tax purposes annually
Income arising to a trust is not taxed in the hands of the trustee if it is distributed to a beneficiary, but is taxed directly to the beneficiary. Therefore in the case of non resident beneficiaries receiving trust distributions, as long as that income did not arise in Malta , no tax is brought to charge on that income, since non-residents are not subject to tax in Malta on income arising outside Malta .
In the case of a trust having both income arising in Malta (such as investment income or income from rentals of real estate) and income arising outside Malta different tax treatments apply. In the former case this income is taxed at normal rates applicable to Maltese residents. In the latter case there is no tax as we have already seen.
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. Therefore trust income should always be distributed to non resident beneficiaries where possible
In cases where the beneficiary of a trust is a Permanent Residence Permit holder as defined under Maltese law, the non-Maltese portion of that income having been 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.
Our subsidiary – CRV International Limited – is licensed by the Malta Financial Services Authority (MFSA) under the Trusts and Trustees Act, and can act as Fiduciary shareholder, where the beneficial owner wishes to keep his identity confidential.