Taxation of Trusts, Foundations and Associations

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A trust is a legal relationship created by a person, the settler who places assets under the control of a trustee under an obligation to deal with that property for the benefit of a beneficiary/ies or for a particular purpose.

Trusts are considered to be transparent for tax purposes if the income of the trust is distributed to the beneficiaries. In such cases, the income of the trust is not subject to tax in the hands of the trustees but of the beneficiaries. Where all the beneficiaries of the trust are not resident in Malta, and where all the income attributable to the trust does not arise in Malta, there are no tax implications which arise under Maltese law. Income attributable to a trust which is not distributed to the beneficiaries is taxed in the hands of the trustees at a rate of 35%.

Foundations and Associations

Foundations shall be treated in the same manner as a company ordinarily resident and domiciled in Malta. Thus, the rules pertaining to the taxation of companies shall apply in the same way to foundations. This means that the tax rate shall be 35%. The full imputation system also applies in respect of distributions to beneficiaries of a foundation – as in the case of shareholders of a company. Furthermore, beneficiaries of the foundation may be entitled to claim the applicable Malta tax refunds.

Associations are taxed at marginal rates which range from 15 – 35%.