Trusts

The Hague Convention on the Law Applicable to Trusts and on their Recognition, has been given force of law through the Trusts and Trustees Act, thereby enabling Malta to recognise trusts whose proper law is not Maltese law. The Act places Malta in a unique position - being a civil law country which has introduced trusts law into its domestic law. The Act also creates the framework which enables residents and non-residents alike to set up various types of trusts in Malta.

The trust is constituted by settling, donating or transferring the property concerned to the trustee, who is to hold the same in ownership, but for the benefit of the beneficiaries. The beneficiaries are protected inter alia because the law provides for the separation of the trustee’s own personal estate, from any estate held in trust. The trust can be utilized and resorted to in various scenarios and circumstances, including the structuring of investments and estate planning, trade and commerce both in relation to individuals and organisations.

The law also provides for the creation of purpose trusts which is set up not for beneficiaries but for a specified purpose. Under Maltese law, it is only possible to set up such purpose trusts for a charitable purpose. This charitable purpose is defined in the Act and provides for such purposes as the advancement of education, the advancement of health, social and community advancement, and other activities including sports, the care of disabled persons.

It is the trustee who controls and administers the trust assets, and the settlor plays no part in the day-to-day administration of the trust assets. The Act provides for the figure of the “protector”, usually nominated by the settlor, that can qualify or in some cases limit the discretions exercised by the trustee.

Trusts are considered to be tax transparent – accordingly, income attributable to a trust is not charged in the hands of the trustee if it is distributed to a beneficiary. Beneficiaries are charged to tax on income distributed by the trustees. Income attributable to a trust that is not so distributed to beneficiaries is charged to tax in the hands of the trustee at the rate of 35%. However, in certain circumstances the trustee will be entitled to avail himself of double taxation relief; in addition, the trustee may be entitled to claim tax refunds in terms of Maltese law.  When all the beneficiaries of a trust are neither resident nor domiciled in Malta and when all the income attributable to a trust does not arise in Malta, there are no Malta tax implications.

Our firm offers all services relating to trusts, including advice on the setting up of trusts, fiduciary and trustee services and the establishment of trusts to suit personal and estate planning needs or organizational needs in a transactional context. We provide our clients with all the necessary expertise on a fully tailor-made basis.