Where assets are held, acquired or received by a person for another on the basis of arrangements of a fiduciary nature, express or implied, there shall be presumed to be mandate or a deposit rather than a trust, unless there is evidence of the intention to create a trust.

A trust is an obligation which binds a person or persons (called the ‘trustees’) to deal with property over which they have control (called ‘the trust property’) for the benefit of persons (called the beneficiaries) or for a charitable purpose in accordance with the terms of the trust. A trust may continue until the 100th anniversary of the date on which it came into existence, unless sooner terminated. This limit does not apply to a trust for a charitable purpose or to a unit trust.

Our Firm’s corporate subsidiary has extensive experience in this area and we can provide all ancillary services necessary for the setting-up and management of a trust for such practical applications as estate planning.

Trusts are considered to be transparent for tax purposes, in the sense that income attributable to a trust is not charged in the hands of the trustee if it is distributed to a beneficiary. Also, 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 tax law.

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%.

It is however possible to gain exemption from both Maltese capital gains tax and income tax, in the case of mixed residence trustees with a non-resident and non-domiciled settlor. A Maltese trust can be as tax efficient as an offshore trust and at the same time assets can be registered in the name of an entity which does not appear on a black list of jurisdictions.

The Continuation of Companies Regulations apply in that it is possible for foreign trustee companies to relocate to Malta and effectively continue their operations from Malta without having to wind up their operations in the original country, as long as such foreign companies are established in an approved jurisdiction.

Companies that provide trust-related services and that are ordinarily resident and domiciled in Malta are subject to the normal company tax rate of 35% on their worldwide income. Where they are involved in international activity it is possible for non-resident shareholders on a receipt of a dividend to claim a refund of the tax paid by the company on the profits out of which the dividend is paid.

Tax is paid in the currency in which the share capital of the company is denominated. Any refund of tax is made in the same currency. Any tax payable by the company with respect to profits derived from international activities is not payable before the earlier of the date of distribution of such profits or eighteen months after the end of the relevant accounting period of the company.

This does not apply to income that is attributable to trusts in respect of which such company acts in its capacity as trustee.