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Establishment of trusts in Malta is based on the Trusts and Trustees Act in force since 2004. This act specifies both the procedure for establishing a trust in Malta and issuing permissions, as well as controlling the activities of trust companies by the Malta Financial Services Authority. This act takes into account current provisions of the Hague Convention on the Law Applicable to Trusts and on the Recognition of Trusts.
The Trusts and Trustees Act replaced the Offshore Trusts Act, adopted back in 1988, which was based on the Jersey Trust Law, and the latter, in turn, took the English trust law as a basis. Since 1988, the founders and beneficial owners of trusts, under the law in force at that time, should not be Maltese residents, and the trust could not have real estate on the Maltese territory. According to the Trusts and Trustees Act, residents of Malta (companies and individuals) can use local trusts.
Types of trusts in Malta
The Act of 1994 (Recognition of Trusts Act) ratified the Hague Convention and divided trusts into the following types:
Maltese Trusts - operating under the jurisdiction of the Maltese Trusts and Trustees Act.
Foreign trusts - working under the legislation of the country, which the founder preferred for one reason or another.
The trust in Malta can be led and headed by both a professional and a private manager. Their managerial activity is controlled by the Financial Services Authority, but only professional managers are required to obtain official authorization from the Authority.
Types of trust managers
Under the Maltese legislation, a private trustee can be a natural person who is in ancestral relationship in a direct line ascending or up to the fourth degree of kindred in collateral line with the founder. Also, a person who is familiar to the founder of the trust within at least ten years can be appointed as a trust manager. Either way, the designated private manager does not have remuneration rights, can not provide trust services to an unlimited number of persons or be a trust manager at one time for more than five founders.
A person who provides trust services on an ongoing basis and who receives remuneration for them (also makes an announcement for a wide range of persons about his willingness to manage the trust) should be called a professional trust manager. The manager of the trust of this type, according to the law, must necessarily have a permission for his activities, without which the beneficial owners will not be able to transfer their assets to trust usage and management. Trust manager of a professional type is a Maltese resident or a person conducting activities in Malta, and a legal entity registered in Malta, on which territory its trust activities are performed, may also be a professional manager.
Registration of trust in Malta
The law does not stipulate mandatory registration for foreign trusts in Malta. But if it did not pass the mandatory registration in the Financial Services Authority, then tax benefits do not apply to this trust; that is, it is not exempt from taxation as all officially registered trusts in the Authority. Among the staff of the registered Maltese trust, there should be at least one professional trust manager, who must submit an annual declaration of conformity of the trust to the Maltese law.
Taxes of the trust in Malta
The activities of trusts are considered transparent for the Malta tax authorities, if the trust manager does not pay tax on the income of the trust in the distribution of profits between the beneficial owners. In this case, if all the beneficial owners of the trust are non-residents of Malta, and its income is withdrawn outside Malta, then there are no reasons for the taxation of the trust, and the beneficial owners pay tax on the income distributed to them by the trust manager. But if the income of the trust was not distributed among the beneficial owners, then the manager is obliged to pay 35% tax on it.
Term of existence of the trust
The term of existence of the trust registered in Malta is 100 years, without the recognition of right of inheritance by the law in force in the island. At the same time, according to the same legislation, charity trusts do not have limitations on the term of existence.
Responsibility for the disclosure of professional secrets
Legislation regarding international Maltese trusts is loyal to the confidential policy of trusts and their managers. In Malta, the Professional Secrecy Act is in effect, which specifies the requirements for all officials who have access to confidential information according to their business occupation and responsibility for its disclosure in the form of fairly high fines and even imprisonment, which again is an additional guarantee for the beneficial owners of the trust.
