Malta: Law of Offshore
The Offshore Trusts Act 1988 was amended by The Trusts and Trustees Act 2004, which became effective in January 2005, and allows Maltese residents and firms to use local trusts, while also furthering Malta's international obligations on non-discrimination, transparency and the prevention of money laundering.
The government believes that the legislation, which creates a more streamlined and simplified trust regime, will make Malta much more attractive to both international and domestic clients, by offering greater flexibility and certainty. The new Act eliminates the nominee company regime, and introduces a licensing regime for professional trustees.
Until 2005, trusts in Malta were based on the Offshore Trusts Act 1988, which was largely based on Jermal trust law, itself a common law implant stemming from English trust law. Trusts under this Act must have non-resident settlor and beneficiaries, and trust assets must not include Maltese real estate.
The Recognition of Trusts Act 1994 gave effect to the Hague Convention, and results in a division of trusts into:
- Maltese trusts, where the proper law of the trust is Maltese, and the governing legislation is ) The Trusts and Trustees Act 2004; and
- Foreign trusts, governed by whatever law the settlor has nominated..
All trusts, including foreign ones, must register with the Maltese Financial Services Centre (MFSC), which costs EUR250 for application and processing and EUR100 upon approval. Foreign trusts which do not register with the MFSC will not benefit from the tax advantages of registered foreign trusts (they are tax-exempt). Under the 2004 Act, transfers of assets into a trust or a change of beneficiaries may give rise to a charge to tax.
Under the 2004 Act, a registered trust must have a Maltese Professional Trustee as one of its trustees, which files an annual declaration of conformity with the law; no accounts or tax returns need be filed.
Some of the main features of Maltese trust law are as follows:
- The perpetuity period for Maltese trusts is 100 years;
- The settlor may be a beneficiary under the trust;
- Powers of the trustee are wide and flexible;
- The office of Protector is allowed for;
- Forced heirship provisions are excluded.
There are no special provision in Maltese law covering Unit Trusts, which are therefore treated in the same way as ordinary Maltese trusts, and have the same tax regime.
Maltese trust law establishes the confidentiality of trust documents and dealings and the actions of the trustee. The Professional Secrecy Act 1994 imposes strict confidentiality rules on all professionals, officials and other individuals who recieve privileged information in the course of their duties; the sanctions are heavy fines and imprisonment.