As a mixed jurisdiction, Malta enjoys the possibility of adopting a blended solution which draws the best from different legal systems. Malta’s domestic law provides for the setting up foundations, which are a civil law concept, however they also provide for the setting up of trusts in Malta, an institute which is of a common law nature. Malta's laws recognise foreign law trusts as well. This flexibility is part of what makes Malta an ideal jurisdiction for the setting up of investment vehicles. Our team of Trusts & Investment Vehicles professionals can provide expert advice in respect of what you need to know regarding the taxation of trusts and various investment vehicles. As part of our Families & Wealth practice group, our Tax of Trusts & Investment Vehicles practice can efficiently tackle important aspects of your wealth management.
Taxation of Malta Trusts
As per Maltese Law, a trust must be brought within the Malta tax net and all income attributable to it shall be taxed in Malta where at least one of the trustees is a Malta tax resident. The income attributable to a trust is made up of all income or gains which are chargeable to tax under Maltese law derived by the trustees from property settled in trust or property acquired in the course of the administration of the trust throughout the lifetime of the said trust.
A licenced trustee may choose for the trust to be taxed as a company which is ordinarily resident and domiciled in Malta for tax purposes, as if the trustees and trust meet a number of conditions:
- The trustee is an authorised trustee;
- The trust has been established by an instrument in writing;
- Election is made within 30 days from constitution of trust or appointment of Malta resident trustees;
- Income attributed to the trust consists only of dividends, interest, royalties, capital gains and income from investments.
Once a trustee has elected for the trust to be taxed as a company, this decision is irreversible. Therefore, the income attributable to the trust will be taxed at the corporate income tax rate of 35% and subject to double taxation relief in respect of income which has been taxed oversees.
Under Malta’s Trusts Law regime, there are two scenarios whereby income which would otherwise be taxable in the hands of the trustees is actually deemed to be income of the beneficiaries. This is applicable where:
- All income of a trust arises outside Malta OR consists of interests, royalties, gains or profits on disposal of shares or securities of a company the assets of which do not wholly or principally consist of immovable property in Malta, or
- All the beneficiaries of the trust are not persons ordinarily resident or domiciled in Malta OR persons whose income is exempt from tax under Maltese law.
As part of our Families and Wealth practice, we have a team of advisors specifically focused on the taxation of trusts and investment vehicles which is always ready to helping you understand tax-related implications of your investments and how you can benefit from Malta's trusts regime in a simple, transparent way.
Trusts as Investment Vehicles
Our advisors assist clients on how to use trusts for investment purposes, such as using unit trusts and real estate investment trusts.
Unit Trusts are one of the means through which successful families can amass large pools of moneys, thus providing each individual family member with access to substantial investment opportunities. Investors may collectively contribute through the set up of a unit trust.
Real Estate Investment Trusts (REITs) are also ideal for investment. REITs are a form of mutual fund which operate in real estate. REITs enjoy tax exemptions on condition that the structure in question distributes all (or almost all) of its profits to its investors. These vehicles typically own and manage income-generating properties that may be both residential and/or commercial, thus providing investors with access to property assets without having to personally/directly purchasing the property.
Our Tax of Trusts & Investment Vehicles Practice
Our Tax of Trusts & Investment Vehicles Practice acts as a platform for clients who are considering different investment vehicles in order to invest their wealth in the most fruitful way possible. Our goal is to effectively help our clients choose the best investment vehicle that suits their wealth management needs, keeping in mind various tax requirements and benefits.