Typical Malta structures for Family Offices

Dr. Priscilla Mifsud Parker | 14 Jun 2024

Typical Malta Structures for Family Offices img

Malta as a Family Office Jurisdiction

Malta has established itself as an ideal jurisdiction for family offices seeking a stable and transparent legal environment. The benefits of choosing Malta for family office structures are various, offering complete serenity and confidence in the jurisdiction's clearly defined laws and regulations.

One of the key advantages is the presence of a dedicated authority that oversees both service providers and the investment services industry, ensuring compliance and protection for family offices. This regulatory framework is complemented by a highly skilled technical workforce, well-versed in the intricacies of family office management and investment services.

Furthermore, Malta's authorities and institutions operate primarily in English, the main language of business communication, which facilitates clear and efficient interactions. This linguistic advantage, coupled with Malta's strategic location at the heart of the Mediterranean, makes it an attractive hub for international family offices seeking accessibility and ease of operation.

The combination of Malta's robust legal framework, skilled workforce, and English-speaking environment provides family offices with the assurance they need to operate with transparency and efficiency within the jurisdiction.

A Solution for Multigenerational Wealth Management

Multigenerational wealth management presents unique challenges that require careful structuring and strategic planning. Families often face the complex task of ensuring that the wealth amassed by family members can be distributed and enjoyed across generations. This involves navigating the intricacies of wealth transfer, tax implications, and maintaining the family's legacy.

One of the primary challenges is the passing of time itself, which can bring about changes in family dynamics, investment opportunities, and market conditions. These factors can significantly impact the family's wealth and necessitate a flexible and adaptable management approach.

External challenges, such as market volatility and economic fluctuations, also pose risks to multigenerational wealth. Families must be prepared to respond to these conditions to protect their assets and ensure continued growth and stability.

Jurisdictional risks are another critical consideration. The legal and regulatory environment of the family's home country or countries where their assets are located can affect wealth management strategies. It is essential to understand and comply with the various laws and regulations to avoid potential legal issues and financial losses.

Other risks that families might face include political instability, currency risks, and changes in the global financial landscape. These can all have a direct impact on the family's wealth and require a proactive approach to risk management.

To address these challenges, families often turn to jurisdictions like Malta, which offers a stable and favorable environment for wealth management. Malta's legal framework, skilled workforce, and use of English as a primary language of business make it an ideal location for establishing structures that can effectively manage and protect multigenerational wealth.

In the next section, we will explore the specific features and advantages of setting up a family office through various vehicles as a solution to these challenges.

Malta Holding Company

Setting up a Malta Holding Company offers numerous features and advantages, particularly for families seeking to protect and reinvest their assets. Here are some key points to consider:

  • Malta holding companies are attractive for international trading groups due to their tax advantages. They can benefit from Malta's extensive double tax treaty network, exemption from taxation on dividends, and capital gains tax exemption on the disposal of participating holdings.
  • Dividend income and capital gains derived by a Malta Holding company from a "participating holding" may be exempt from tax, provided certain conditions are met.
  • Malta's tax systems comply with EU non-discrimination principles, and typically, Malta does not impose any withholding taxes on dividends, interest, and royalties payable to non-resident shareholders.
  • Malta companies can claim deductions for "interest on risk capital" which is optional and subject to shareholder approval. This deduction is known as Notional Interest Deduction (NID) and applies to risk capital, which includes share capital, share premium, retained earnings, and other reserves shown as equity in the financial statements.
  • Holding companies for high-value assets like yachts, jets, and real estate can benefit from Malta's tax-efficient environment. Ownership can be full, fractional, or through real/personal rights.

These features make Malta an ideal jurisdiction for establishing a holding company as the main entity to carry forward a family office, providing asset protection, tax efficiency, and a stable legal environment for wealth management.

Malta Private Trust Company

Establishing a Malta Private Trust Company (PTC) provides a wealth of benefits and features, particularly suited for families looking to manage and protect their assets across generations. Here's an overview of the key advantages:

  • A Malta PTC acts as a corporate trustee for trusts holding family assets, allowing for effective family control and involvement in the administration of the trust. The board of directors often includes family members and their trusted advisors, ensuring that the family's interests are closely aligned with the management of the trust.
  • The process of setting up a PTC in Malta is straightforward, with simple registration requirements and a quick process overseen by the Malta Financial Services Authority (MFSA). This ensures a smooth and efficient setup, allowing families to focus on the strategic aspects of wealth management.
  • Malta PTCs are an attractive option for incorporating within a family estate plan, providing a simple and efficient way of changing trustees and reducing administrative costs. They also offer certainty in the process with rules published by the MFSA.
  • The insurance cover for a Malta PTC must be proportionate to the size and nature of the trustee's business operations, providing an additional layer of security and protection.
  • The board of directors of a Malta PTC must comprise at least three directors, each collectively responsible for the trust's administration. This structure supports effective governance and oversight of the trust's activities.

These features make Malta an ideal jurisdiction for setting up a private trust company as the main entity to carry forward a family office, offering a combination of control, flexibility, and regulatory oversight to ensure the protection and continued growth of family assets.

Malta Fund

When considering the establishment of a Malta fund for family offices, there are several features and advantages to take into account:

  • The legal framework in Malta allows for a professionalized holistic wealth management solution, distinguishing between a family office, which typically manages wealth, insurance, trust, and estate issues, and a holding company, which is a portfolio of business equity stakes.  There are also situations where the family office starts off as mainly one wherein the immediate mundane needs of the family are addressed and this can slowly progress into a more comprehensive set.      It can therefore also be a structure with its main aim being that of employing the key staff assisting the family such as personal assistants, nannies, housekeeping staff, boating team like captains and skippers etc. 
  • Malta's tax system is efficient and transparent, with no further personal tax on dividends for business owners resident in Malta.
  • A Malta fund can enjoy a legal and regulatory framework that responds to changing financial markets, with clear estate and succession planning rules that allow for various precautions to be put in place for the protection of the family's wealth.
  • Malta allows for different types of fund structures including the UCITS fund (mainly used for retail investors), the notified alternative investment fund (NAIF – accommodating different types of investment strategies), and professional investor fund (PIF) with this last one being the most appropriate for family office setups.   Malta's advantageous tax benefits, the option to be tax transparent, and the flexibility in the legal vehicle that may be utilized are key benefits for family offices setting up a fund.
  • The fact that the PIF is subject to licencing by the Malta Financial Services Authority (even though it is not subject to harmonisation at EU level), is an advantage seeing that it is subject to the Authority’s scrutiny whilst at the same time it is not unnecessarily hampered by EU directives or regulations which are more appropriate for larger setups. 
  • Eligibility criteria for a PIF are achievable by a typical family office.      The requirements are a minimum investment of EUR 100,000 and a net worth test exceeding EUR 750,000. 

These features relate to using a Malta fund as the main entity to carry forward a family office, where the family can remain involved by being appointed on the board of the fund. This involvement ensures that the family's interests are closely aligned with the management of the fund, providing a tailored approach to managing and protecting the family's assets.

How can we help 

We can help first and foremost with a discovery exercise wherein the family is taken through a process of identifying their main objectives and wishes of how they would like to set up their family office and the implications of this.  After this initial phase one can then decide on the best structure to use depending on which one will best address the family’s needs. Execution is core to our offering meaning that the approach is one wherein the same team is overseeing the design and implementation of the structure.


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Key Contacts

Dr Priscilla Mifsud Parker

Senior Partner, Corporate, Tax & Immigration

+356 22056122
pmp@ccmalta.com

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