Key Reasons for Malta's Success

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Malta, a civil law country, is an exception to this rule. Malta trusts and ... service-driven culture, the MFSA has gain
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FinanceMalta investor guide series trusts & foundations

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FinanceMalta investor guide series trusts & foundations

A Leading Domicile for Asset Protection

Key Reasons for Malta’s Success Malta is one of the few jurisdictions that cater for both trusts and foundations. While trusts are peculiar to systems of law based on common law and are not generally found in civil law countries, Malta, a civil law country, is an exception to this rule. Malta trusts and foundations benefit from a number of advantages when compared to other trust jurisdictions and the country’s lower set-up and management costs are proving attractive to both corporate entities and high-net-worth individuals.

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0OF+VSJTEJDUJPO  Two Solutions Skilfully combining all the features of the Anglo-Saxon trust concept within a civil law framework, the Malta trust is an effective and reliable vehicle that provides both certainty and security. The Malta trust offers a useful and practical vehicle that gives settlors the peace of mind that comes with a highly regulated, EU environment, while remaining faithful to the original concept of a trust. With legislation in place to regulate the setting up of foundations, through which founders are able to maintain a level of control on the direction of the estate, Malta offers an additional instrument for wealth management, tax and succession planning. While there are a number of similarities between trusts and foundations, there are also substantial distinctions. With both concepts firmly established, Malta is ideally placed to answer the most diverse of needs.

Offering Protection and Security Offering a high level of protection and regulation, the advantages of locating a trust or a foundation in Malta are numerous. They include Malta’s specific legislation that creates a highly regulated environment offering a high degree of assurance. In Malta trustees and foundation administrators have to be authorised by the Malta Financial Services Authority (MFSA), and are highly regulated, with audits taking place at least once a year. More than 120 companies are currently authorised to provide these services. With its service-driven culture, the MFSA has gained a reputation as an effective and responsive regulator of the industry.

7BMVFGPS Money Malta offers another key attraction to people choosing a jurisdiction to set up a trust or a foundation: significantly lower set up and administrative costs. On average, setting up a trust in Switzerland will cost a minimum of 5,000 euro; in Malta the cost of setting up a fullyfledged trust is around 1,500 euro. Professional fees in Malta, including trust management fees, legal fees and audit fees, are also significantly lower than in other jurisdictions, while the country’s professional service providers enjoy an excellent reputation internationally.

Differences between Malta Trusts and Foundations Trusts

Foundations

Do not have a separate legal personality

Have a separate legal personality

Defined in terms of relationship

Defined in terms of the assets making up the foundation

Trustee is the legal owner of the assets

Foundation is the legal owner of its own assets

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Familiar Tools and Systems Malta, as a civil law country, offers a more familiar legal terrain to people from other civil law countries, which include all mainland European countries. While the Maltese trust is based on the AngloSaxon concept of trusts and incorporates all the features and flexibility of such a structure, in Malta a trust is also given legal recognition in relation to other areas of the law and is created with sufficient legal powers to be able to manage conflicts between the two systems of law, without invalidating the trust. This is achieved through some mandatory rules which are at the basis of a civil law system prevailing on the terms of trust. A relatively new concept for Malta, foundations provide an alternative structure to the trust institute and have proved a popular vehicle with the island’s continental clientele. An interesting aspect of Malta’s legislation is also that it allows for the conversion of a trust into a foundation and vice versa, a facility which adds even further flexibility to financial management undertaken in Malta.

FinanceMalta investor guide series trusts & foundations

EU Location of High Repute Malta offers a highly-regulated, well-respected, sophisticated EU environment and the country is fast becoming the wealth management jurisdiction of choice for people from across the world. Historically, trusts or foundations have been seen as instruments designed to maintain discretion and have been associated with tax avoidance structures. A Malta trust or foundation offers security, assurance and flexibility in an EU regulated environment, while maintaining the principle of confidentiality that settlors expect. Internationally, the island’s reputation as a location to establish and manage private and commercial trusts is growing significantly as the demand for secure solutions to wealth management issues increases.

Full Control of Assets Malta’s legislation also caters for the establishment of private or purpose foundations, which continental Europeans generally prefer to trusts because they allow the founder to continue to maintain a level of control on the direction of the estate. Unlike trusts, foundations have a legal personality and the foundation itself becomes the legal owner of the foundation estate. Based on Maltese company law principles and Italian and French civil law provisions, Maltese foundations require the appointment of administrators, who are responsible for the administration of the foundation’s assets, and these are regulated under the Trusts and Trustees Act.

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FinanceMalta investor guide series trusts & foundations

Customised Trust Set-ups While trusts have been recognised in Malta since the 1980s, a key instrument in the attraction of wealth management activities to Malta is the Maltese Trusts and Trustees Act which introduced domestic trusts and came into force in January 2005. This has helped to transform Malta into a major trust jurisdiction. The Act created a streamlined and simplified trust regime, and made Malta much more attractive to international clients by offering greater flexibility and high standards of certainty. The legal framework surrounding Malta trusts allows for the creation of customised solutions for each individual trust set-up.

An Instrument for Business The trust law identifies a number of commercial scenarios within which the use of trusts would attract more favourable treatment. These include security trusts, unit trusts or collective investment schemes and securitisation, amongst others. One of the great attractions of the trust for the transaction planner designing a business deal is the convenience of being able to absorb into the ground rules for the business deal those fundamental principles of fiduciary law that protect trust beneficiaries of all sorts. These attractions have made the trust a reputable alternative to other devices, such as contract and incorporation, whenever the relationship to be established is too delicate or too novel.

Free Choice of Trust Law Malta does not offer ‘off-the-shelf’ trusts: each trust is structured carefully to reflect the requirements of the settlor, to ensure a set-up which is both flexible and responsive to any changes. This includes the option to have the trust governed by the laws of a country other than Malta. Indeed, while a continental European may be happy to have his trust governed by Malta, a civil law country, somebody from Australia, for example, might prefer to have his trust governed by a common law country, such as the United Kingdom. Maltese law permits the settlor to choose to have his trust governed by the laws of another jurisdiction provided this is specified in the trust deed.