Foundations in Malta

Maltese legislation combines main elements of both Common Law and Civil Law, adding to its appeal, for individuals from countries operating either of these legal systems. Maltese Foundations are regulated by the Second Schedule of the Civil Code (Chapter 16 of the Laws of Malta), which was introduced by Act XIII of 2007 to complement the detailed regulatory framework for trustee and fiduciary activities, and voluntary organisations. The subsequent legislation was introduced, regulating the taxation of foundations, and this has further enhanced Malta as a jurisdiction for international private asset planning.

Three types of foundations can be registered in Malta:

  • Private foundations – For the benefit of a beneficiary or group of beneficiaries;
  • Charitable foundations – Public benefit foundations exclusively promoting a social or public purpose on a non-profit making basis;
  • Purpose foundations – Established for a purpose, without beneficiaries and generally have a philanthropic objective, although they can be established with a private purpose.

Taxation of a Foundation

In Malta a foundation can either be treated as a company, which is both resident and domiciled in Malta, or as a trust:

  • Taxation as a Company

If a Maltese foundation opts to be taxed as a company, just like any other company in Malta, the income and/or gains realised are subject to tax in Malta on a worldwide basis at the rate of 35%. However, if beneficiaries are not resident and/or domiciled in Malta the beneficiaries will be entitled to a refund of 6/7ths of the Malta tax paid by the foundation, giving an effective tax rate of 5%.

  • Taxation as a Trust

A Maltese foundation can elect for the foundation to be treated as a trust, for tax purposes. To be treated as a trust gives rise to beneficial private asset planning opportunities, particularly where the founder and beneficiaries are not resident and/or domiciled in Malta. In such a situation no tax and/or duty will be payable in Malta. This applies on settlement and in relation to the income, attributable to the foundation.

Why Establish a Foundation in Malta?

There are many factors as to why a foundation may be of benefit, and why many establish their foundations in Malta: 

  • The foundation deed only includes the foundation’s name, registered address, a description of the initial endowment with which it was formed, and its purposes and objects;
  • A foundation can create a degree of privacy and flexibility as appose to a will alone. Foundations can be used to avoid the separation of family estates and to prevent disputes between heirs;
  • It is possible to redomicile to Malta a foundation established abroad, subject to the foundation deed permitting such a move;
  • Within the founder’s lifetime, he/she may add, remove or change the foundation beneficiaries as well as their beneficial interest;
  • A Maltese foundation can be converted to a trust and vice versa.

Where is the Foundation Registered?

The registration of a foundation and associations has recently been delegated to the Malta Business Registry (MBR), a new unit within the MBR has been set up to handle the registration process. The new unit will also be tasked with vetting and registering the documents or notifications of these legal organisations in addition they will also handle the screening and verification of the beneficial owners, administrators and founders prior to the registration taking place.

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