A Malta trust exists when property is transferred by one party (the settlor) to another party (the trustee) which holds and administers the said property for the benefit of a third party (the beneficiary) and/or for one or more charitable purposes in accordance with the terms of the trust and the requirements of law. Trusts set up in Malta are regulated by the Trusts and Trustees Act (Chapter 331 of the Laws of Malta) which provides for the creation of trusts and authorisation and supervision of trustees under the purview of the Malta Financial Services Authority. Some trusts may also enrol as a voluntary organisation.

Maltese law allows quite a lot of flexibility in relation to the terms of the trust and thus they may be used for various purposes from asset protection, wealth management, portfolio management, custody of investment instruments to provision of a life annuity. A trustee generally cannot be a beneficiary of a trust except for trustees of some commercial trusts which are used for financial services. A trustee may benefit under a trust as long as he is not the sole trustee or if he has approval from the MFSA or the court. Maltese law also provides for the possibility of having a protector in a trust relationship. Such a protector is designated by the settlor so as to supervise the operation of the trustees in terms of the trust deed.

No specific formalities are required for a trust to come into effect, thus even an oral declaration is valid, unless the law specifies otherwise in particular instances. A unilateral declaration is also possible, so that a trustee can simply nominate its beneficiaries and the terms under which the trust will be operated. It must be noted that a trust does not achieve separate juridical personality as does a company, foundation or association.

Unless already terminated beforehand, a trust will terminate automatically 100 years from the date of its creation.  This limit does not apply to trusts set up for charitable purposes or unit trusts.

Property transferred or settled on trust is distinct and separate from the personal property of the trustee and from other property held by the trustee under any other trust; thus the trustee’s creditors cannot turn on such property in the event of a credit against the trustee. Furthermore, the property on trust does not form part of the trustee’s personal estate upon his insolvency or bankruptcy or of his estate upon his death.

In accordance with the Income Tax Act (Chapter 123 of the Laws of Malta) Trusts are considered to be transparent for tax purposes, so that income attributable to a trust is not charged to tax in the hands of the trustee if it is distributed to a beneficiary. In addition to this, 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 impact under Maltese law. Beneficiaries are charged to tax on income distributed by the trustees. 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%.

Equinox is able to assist with the establishment of a trust in Malta and any advice related thereto, including advice in relation to property and estate planning, efficient tax structuring, drafting of the trust deed, liaising with the Malta Financial Services Authority and registration of a trust as a voluntary organisation.

For further information on online Maltese Trusts, please contact us on info@equinoxadvisory.com

For more information about our Trusts services, please contact us here.