The setting up of trusts in Malta is regulated by the Trusts and Trustees
Act. The Act provides for the
creation of trusts and authorisation and supervision of trustees. In this
regard, the MFSA is the competent authority for the purposes of the Act.
The Act incorporates within its provisions the Hague Convention on the Law
Applicable to Trusts and on their Recognition which Malta has ratified.
A trust is an obligation which binds a person or persons (called the
‘trustees’) to deal with
property over which they have control (called ‘the trust property’) for
the benefit of
persons (called the beneficiaries) or for a charitable purpose in
accordance with the terms
of the trust.
Creation of Trusts
A trust can come into existence in any manner. A trust may come into
existence by an instrument in writing including by a will. A unilateral
declaration of trust is also possible. A unilateral declaration of trust
is a declaration in writing made by a trustee stating that it is the
trustee of a trust, containing all terms of the trust as well as the names
or information enabling the identification of all beneficiaries.
A trust may also come into existence by oral declaration, with the
exception of a unit trust which must be created by a written instrument.
Also in the case of an inter vivos trust, the trust must be created by
notarial trust deed. A trust may also come into existence by operation of
law or by a judicial decision.
Where assets are held, acquired or received by a person for another on the
basis of oral arrangements of a fiduciary nature, express or implied,
there shall be presumed to be mandate or a deposit rather than a trust,
unless there is evidence of the intention to create an oral trust.
A trust may continue until the 100th anniversary of the date on which it
came into existence, and, unless sooner terminated, shall terminate. This
limit does not apply to a trust for a charitable purpose or to a unit
Legal Effects and Formalities
The effects of any transactions related to property under trust are
regulated by the Act and other laws that apply specifically to trusts. The
formalities required with respect to such transactions are as a general
rule regulated in the normal manner. Transactions relating to the transfer
of ownership or other rights to or in property under trust shall therefore
be carried out in the form and manner required by the law applicable to
The settlor is the person placing the assets in the trust. This
includes a person who provides trust property or makes a disposition on
trust or to a trust. Once a trust has been created, the settlor ceases to
have any active role in the trust.
‘The Trustee’ or ‘Corporate Trustee’
The trustee is the person or persons holding or in whom the property
is vested on trust for the beneficiaries. Trustees are usually appointed
by, or as provided in, the trust instrument and in such number as may be
so provided. A trustee may be a natural person provided he is of full age
and legal capacity and not under any legal impediment to so act.
A trustee may also be a juridical person the objects of which include
acting as trustee. A corporate trustee can be defined as a trustee which
is any legal person wherever incorporated.
The beneficiary is the person entitled to benefit under the trust or
in whose favour discretion to distribute property held in trust may be
exercised. The rights of the beneficiary are personal to him. Thus a
person shall not be entitled to benefit under a trust unless he is either
identifiable by name, or ascertainable by reference to a class or to a
relationship to some person. If there are no beneficiaries identifiable or
ascertainable, the trust shall, unless the purpose is a charitable one,
The terms of the trust may provide for the office of protector of the
trust. Normally the powers of the protector cover matters such as the
appointment of a new or additional trustee, the removal of a trustee and
obtaining information as to the way in which trustees are managing the
trust. In the exercise of his office, the protector shall not be deemed to
be a trustee.
‘The Trust Deed’
The trust instrument is the instrument whereby the trust is created
and includes any instrument varying the terms of the trust and also a
unilateral declaration of trust.
Types of Trusts
There are three main types of trusts. These are express trusts,
implied or resulting trusts and constructive trusts.
Express trusts are declared by the settlor. In an express trust, the
intention to set up the trust is clearly and openly expressed.
Implied trusts are trusts arising from the unexpressed but presumed
intention of the settlor, which intention is presumed from his words or
actions. Implied trusts are also resulting trusts since the property will
return to the person setting up the trust.
Constructive trusts arise by operation of law and are in no way
dependent on the intention of the settlor. They are imposed by operation
of law in situations where not to do so would mean one party’s unjust
The taxation of income attributable to trusts and all matters relating to
taxation upon the settlement, distribution and reversion of property
settled in trust are regulated by the Income Tax Act (Chapter 123 Laws of
Trusts are considered to be transparent for tax purposes, in the sense
that income attributable to a trust is not charged to tax in the hands of
the trustee if it is distributed to a beneficiary. Also, when all the
beneficiaries of a trust are not resident in Malta and when all the income
attributable to a trust does not arise in Malta, there is no tax impact
under Maltese tax law. Beneficiaries are charged to tax on income
distributed by the trustees. Income attributable to a trust that is not so
distributed to beneficiaries is charged
to tax in the hands of the trustee at the rate of 35%.
Other laws and regulations may have an impact on the taxation of
trusts and trustees. Malta is also signatory to a number of
Double Tax Treaties that may apply in the circumstances.
The Maltese Regulatory Environment
Malta Financial Services Authority (MFSA) is responsible for the
authorisation, regulation and supervision of trustees. The MFSA also
licenses, regulates and supervises banking and financial institutions, and
investment services business.
The MFSA is an autonomous public authority constituted and regulated by
the Malta Financial Services Authority Act. The MFSA aims to
provide a seamless regulatory function for financial services. It also
houses the Registry of Companies.
The MFSA requires the highest standards of probity and honesty. Every
licence is issued subject to standard conditions which may be adapted to
suit certain circumstances so long as standards are not compromised.
Chetcuti Cauchi at IFA Paris 2011 the 65th
Congress of the International Fiscal Association | 09/09/2011