Why choose a Maltese foundation?
June 04, 2021
Dixcart Group Limited
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This article starts by reviewing a number of general reasons for using a foundation, then looks at the specific features and benefits a Maltese foundation can offer.
Why set up a foundation?
There are numerous reasons why a foundation can be useful, all of which are relevant with regard to Maltese private foundations:
- Asset protection: If a home country is politically or economically unstable, a foundation can be set up abroad and assets transferred to it (professional advice should always be sought in the home country prior to a transfer).
- Confidentiality: the deed of foundation must contain the name of the foundation, its registered office, a description of the original foundation with which it was established, and its purposes and purposes.
- Lifestyle planning: Partners who are not married or whose family arrangements are difficult may find that the legal systems of some countries do not provide adequate solutions to their death or separation. In such cases, a specially designed foundation can ensure that partners and children of these partners are treated in the interests of the founder.
- Securitization vehicle: Maltese law allows a foundation to be used instead of a trust as an appropriate vehicle for securitizing debt.
- Beneficiaries of thrift:
Foundations can be created to prevent reckless heirs from spending family assets upon the death of the parents by limiting their interest on income or capital (at least until a certain age or until they meet certain requirements).
- Succession planning: A foundation can create a higher degree of privacy and flexibility than would be possible with a will alone. Foundations can be used to avoid division of family property and prevent disputes between heirs.
Legislation on the Maltese Foundation Foundation
In 2007, Malta introduced special laws on foundations. The following laws have been passed regulating the taxation of foundations, further strengthening Malta as a jurisdiction for international private wealth planning.
Characteristics of Maltese foundations
- Maltese private foundations are regulated by the “Second Annex to the Civil Code of Maltese Laws”. New laws introduced a registration process designed to protect the privacy of Maltese private foundations.
- A foundation can only be established by a
public document “Inter vivos”, drawn up by a notary or by a will. Once the foundation is established, it will be registered with the Maltese Registrar of Legal Persons.
- A private foundation is limited to a maximum of 100 years.
- According to Maltese legislation, it is possible to relocate a foundation in and out of Malta.
- A foundation can be dissolved at any time if all beneficiaries agree, provided they are all alive, no one has been convicted of a crime or is a minor. If the founder is still alive, his consent would also be required. Termination obligations must be included in the deed.
An interesting feature of a Maltese foundation is that separate cells can be set up within a foundation to achieve specific purposes with certain assets. The segregated cell does not have a legal personality of its own, however the assets and liabilities of the cell are segregated from the other assets and liabilities of the foundation and / or other cells.
Maltese Foundations: A Choice That Can Be Taxed In Two Ways
- A foundation can either be treated as a trust OR as a company that is both resident and resident in Malta:
Taxation as a trust
A Maltese foundation can irrevocably decide that the foundation is treated as a trust for tax purposes.
A choice to be treated as a trust leads to advantageous opportunities for private wealth planning, especially if the founder and the beneficiaries are not resident and / or resident in Malta. In such a situation there are no taxes and / or duties in Malta. This applies to the processing and in relation to the income attributable to the foundation.
Taxation as a company
If a Maltese foundation opts for taxation as a company, the realized income and / or profits in Malta, like other companies in Malta, are taxed at a flat rate of 35% worldwide.
However, when the Foundation distributes qualified foreign or local income to its beneficiaries, the beneficiaries are generally entitled to a refund of 6/7 of the Maltese tax paid by the Foundation, which is an effective tax rate of. corresponds to 5%. This assumes that the beneficiaries are not resident and / or resident in Malta.
A number of facilities are also available to foundations and companies. These include; With a full credit system, participation exemption and access to relevant unilateral agreements, Malta also has a wide network of double taxation treaties.
How can Dixcart help?
The Dixcart office in Malta can help with the efficient creation and management of a foundation in order to achieve the agreed objectives.
The content of this article is intended to provide general guidance on the subject. You should seek expert advice regarding your specific circumstances.
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