Trusts & Foundation
As a civil law jurisdiction, Malta’s Roman law tradition, provides a strong regulatory frame for all fiduciary obligations, including those emanating from trusts. Based on Jersey statute and UK jurisprudence, Maltese trust law is purposely pro beneficiary, and ideal for estate planning and structuring business continuity. In line with 2018 transposition of EU rules on disclosure of beneficial ownership, the identity of settlors, protectors, and beneficiaries must be disclosed to the authorities upon establishment and confirmed for CRS purposes on an ongoing basis. The Malta trust is a versatile frame to protect assets and structure business continuity. In the case of non-resident beneficiaries deriving income from non-Maltese activities or assets, Capital Growth and any Income derived from trust activity or trust assets will not be subject to tax in Malta, as it will be treated as tax neutral.
This allows a transparent model of tax deferral (on movable assets) to the point of distribution, attributable to the home jurisdiction of the non-resident beneficiary. Since 2001, DAL experts have been advising on the trust matters; ensuring beneficiaries have their rights fully protected, and trust assets are appropriately monitored, by duly qualified and vetted duly licensed investment managers in Malta and overseas. DAL therefore insists that each Settlor obtains written advice from a tax expert in his home jurisdiction as to how such distributions from a Malta trust will be treated, and where necessary engage our trusted experts in all major cities to provide the requisite certainty, enabling establishment.
Via Malta’s Roman law / Code Napoleon heritage; the concept of foundations has existed in Maltese culture and jurisprudence for centuries, and is finding a new lease of life as a special purpose ‘international asset holder’; given their inherent advantage over trusts in terms of being an actual entity with its own legal personality thus enabling the foundation to own assets itself rather than via trusteeship’s trilateral contract which vests ownership of trust assets in the trustee. Similar to a trust, establishment secures distinct patrimony from that of the founders, its administrators and those that are entitled to benefit therefrom, and also enjoys the versatility of being able to have any legal purpose (not just philanthropy), and also like a Malta trust has a maximum duration of 125 years.
It is of primary importance to note that like a trust, an overseas foundation can be re-domiciled to Malta (and vice-versa), and although tax neutral, also like a Malta trust, a Malta foundation can also elect to be treated like a Malta company for tax purposes, thus benefiting from the EU’s most competitive tax regime, and attractive business residence; making it ideal as a vehicle to hold the shares in a company or own intellectual property and manage commercialization and succession / business- continuity thereof. For those unfamiliar with trust’s and uncomfortable with the demands of separating settlor influence from trustee management of a trust asset, the more formal structure of a foundation, will be easier to live with as the administrators of a foundation function in a similar way to the directors of a company, having a narrowing of function and powers, and of corresponding liability as specified in the founding instrument and less subject to the challenges of interpreting the boundaries of trustee discretion, and delicate settlor-trustee rapport, especially from the perspective of third parties.
Be it a trust or foundation, each with their own specific strengths and weaknesses and diverse cultural / jurisdictional characteristics; our legal, finance, tax and family office team will assist the client to select whether a trust or a foundation is the most suitable platform for his / her / their specific needs, and will also assist with the selection of the most appropriate jurisdictions, and service providers, ensuring peace of mind in completing the design and in ongoing monitoring to ensure suitability of purpose from a compliance perspective as well as that of client-deliverables.