Setting up a Trust in Malta
CSB Group assists clients with the setting up of trusts in Malta. Malta Trusts are mainly regulated by the Trusts and Trustees Act. The Act provides for the creation of trusts and for the mandatory licensing and supervision of trustees. CSB Trustees & Fiduciaries Limited (a member of the CSB Group) is licensed by the Malta Financial Services Authority (MFSA) in terms of the Trusts and Trustees Act to provide trust, foundation, administration and fiduciary services. CSB Trustees & Fiduciaries Limited accordingly provides such services to CSB’s clients. Through our multi-disciplinary approach to business, we also provide comprehensive tax and legal guidance and support in respect of all trust and fiduciary related matters.
Trusts were subsequently fully absorbed into the Maltese legal system as a separate and distinct legal institute (available to all persons generally and in respect of property of any description) by virtue of the Trusts and Trustees Act, 2004. The Trusts and Trustees Act is largely modelled on the Jersey trusts law which itself represents a much acclaimed attempt at the codification of the English law of trusts. The 2014 amendments to the Trust and Trustees Act marked an improvement in Malta’s trust legislation and are certain to strengthen Malta’s trust offering internationally.
In terms of the Malta Trusts and Trustees Act, a trust may be constituted in any manner. Trusts are typically created by instrument in writing (including by a will) but a trust may also come into existence by oral declaration or by operation of law or judicial decision. The basic principle is that a trust is created when property is transferred by a settlor to a trustee for the benefit of one or more beneficiaries (beneficiary) or charitable purpose. The trustee would then be required to hold and/or administer and/or employ and/or deal in the said property for the benefit of said beneficiaries or charitable purposes, in accordance with the terms of the trust and the requirements of law. A Malta trust deed is the document setting up the trust and includes all 3 of the settlor, trustee and beneficiary.
Property transferred or settled on trust effectively constitutes a separate fund owned by the trustee and which is distinct and separate from the personal property of the trustee and from other property held by the trustee under any other trust. Maltese law and the Trustee Code of Ethics, which is binding on trustees in Malta, places emphasis on the proper and effective segregation of trust property. Accordingly, personal creditors of the trustee are denied access to the property comprised in the trust fund and, furthermore, that fund would not form part of the trustee’s personal estate upon his insolvency or bankruptcy, nor of his estate upon his death. Nevertheless, the trust is not a legal entity and has no legal personality (such as a company or a foundation). As a result, the trust property is managed via the legal personality of the trustee.
A Malta trust may exist for a maximum of 125 years, further to amendments introduced in 2014, which extended the period of validity from 100 to 125 years, to keep up with international trends in the trust industry. This limit does not, however, apply in respect of a trust created for a charitable purpose or a unit trust or a qualifying retirement scheme set up as a trust.
Participants in a Trust
- The settlor who settles property on trust and transfers title over that property to the trustee – typically (but not necessarily) ceasing to have any active role in the trust thereafter.
- The trustee who acquires the property settled on trust and holds the same on trust for the beneficiary/ies or for one or more charitable purposes and in accordance with the terms of the trust and the requirements of law.
- The beneficiary/ies having an entitlement to benefit under the trust and whose rights in relation to the property settled on trust are generally dependent upon the terms and nature of the trust. A beneficiary of a Malta trust is entitled to sell, charge, transfer or otherwise deal with his interest in the trust in any manner –subject, of course, to the terms of the trust.
- The protector who may be appointed and who may be vested with certain supervisory powers.
No Malta tax would be chargeable upon a settlement of property on trust in a number of cases. Likewise, the trustee of a trust would be wholly transparent for Malta tax purposes.