Interview - Malta Trusts And Foundations

1. Why should HNWI Chinese and Asian investors consider Malta as a potential jurisdiction when setting up a trust or foundation? 

Since Malta’s accession to the EU in 2004, Malta has emerged as an attractive jurisdiction for the establishment of trusts and foundations for the holding of assets for investors and high-net-worth individuals (HNWI).

Financial services in Malta are based upon the key concepts of certainty, security and confidentiality. Establishing a trust in Malta gives investors the peace of mind that comes with a highly regulated EU Member State that remains up to date with all legislative and regulatory changes enacted by the EU. All legislation is published in English and the professional standards in Malta are very high with many accountants, bankers, lawyers and investment advisors holding overseas qualifications and having international experience.

Malta’s favorable tax regime makes it an attractive jurisdiction in which to establish a trust. Whilst the tax liability of the trust will depend on a number of factors including the type of asset, status and residence of the beneficiaries, where the beneficiaries of a trust are not resident in Malta and the income of the trust does not arise in Malta, there is no taxation in Malta.

Furthermore, Malta’s legislation recognizes all types of trusts you would find in other jurisdictions including discretionary trusts, interest in possession trusts, accumulation and maintenance trusts, fixed interest trusts and charitable trusts. Maltese legislation also allows more commercial types of trust such as unit trusts or collective investment schemes to be established. Furthermore existing Malta trusts can be converted into Malta foundations and vice versa giving added flexibility to the client.

2. What are the key advantages of your jurisdiction for a Chinese HNWI or Family (etc.) looking to succeed their assets to the next generation?

The key benefits that Malta offers to investors planning to establish a trust or foundation are:

• One of the few civil law jurisdictions that has developed its own domestic trust law
• Recognition of trusts set up under foreign laws
• Offering the set-up of domestic trusts and foundations
• Lower set up costs
• Favourable tax regime
• Legislation published in English
• EU and Euro zone location
• Reliable service providers with high professional standards; many accountants, bankers, lawyers, notaries and investment advisors hold overseas qualifications and having overseas experience
• Fast-track authorization for trustees licensed in other (approved) jurisdictions
• English-speaking country with a pro-business government

3. What differentiates trusts and foundations in your jurisdiction? 

Foundations have been recognized in Malta for over 200 years; however specific legislation was enacted in 2008 to clearly define their legal framework. This allows for two types of foundations: Private and Purpose Foundations, which have particular uses and benefits for certain clients.

Private Foundations are set up for the benefit of a named person or class of persons, the beneficiaries. Purpose Foundations have no ascertainable beneficiaries but are established for any charitable, philanthropic or other social purpose, as a non-profit making organization, or for any other lawful purpose (not necessarily social, and can be a private purpose).

The salient difference between Malta Trusts and Foundations are the following:

Trusts:

• Do not have a separate legal personality
• Defined in terms of relationship
• Trustee is the legal owner of the assets

Foundations:

• Have a separate legal personality
• Defined in terms of the assets making up the foundation
• Foundation is the legal owner of its own assets

4. In terms of cost, how does the cost of a setting up a trust/foundation in your jurisdiction compare to other jurisdictions?

One of the key attractions that Malta can offer to those considering where to set up a trust is its significantly lower set up and administrative costs. On average, setting up a trust in Switzerland will cost a minimum of €5,000 whilst in Malta the cost of setting up a fully-fledged trust is around €1,500. Professional fees in Malta, including trust management fees, are also significantly lower than in other jurisdictions, whilst the country’s professional classes enjoy an excellent international reputation.

5. When were trust and foundation law introduced in your jurisdiction?

Trusts have been established in Malta since 1988; however, the law governing trusts has in recent years undergone major changes. The Maltese trust laws were originally adapted from the 1984 Jersey Trust laws but were updated in 2004 under the new Trusts and Trustees Act. This law makes Malta one of the only countries to successfully incorporate the Anglo Saxon Trust concept with its Roman law based legal system. This new system has accelerated the process of setting up a trust by allowing the creation of customized solutions for each individual trust set-up making Maltese trusts an attractive solution to personal and business needs 

The Trusts and Trustees Act went under review in 2014 and culminated in The Trusts and Trustees (Amendment) Act, Act XI of 2014. Proving that this is indeed a dynamic area, the amendments were aimed at improving Malta’s legislative framework regulating both trusts governed by Maltese law and trustees resident or operating in or from Malta. The changes have provided greater certainty and at the same time bringing Malta’s trust law provisions in line with international developments in the area.

Contributed by: Finance Malta