Malta: Law of Offshore
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 €250 for application and processing and €100 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).
The Trusts and Trustees Act 2004 went into force in January 2005. It 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 legislation creates a more streamlined and simplified trust regime and makes Malta more attractive to both international and domestic clients, by offering greater flexibility and certainty.
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 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.
In 2014, the Trusts and Trustees Act was amended. Changes include the following:
- Heirs of beneficiaries do not automatically receive beneficial entitlement unless it is expressly mentioned in the trust.
- The perpetuity period relating to trusts is extended to 125 years.
Settlors have added reserved powers relating to the appointment and removal of trustees, protectors and beneficiaries.
- For charitable trusts, the new office of enforcer is introduced. The enforcer ensures that the trustee administrates the trust in accordance with the terms of the charitable trust.
- A minimum capital requirement of €15,000 is applicable to all trustees and mandatories.
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 receive privileged information in the course of their duties; the sanctions are heavy fines and imprisonment.