The Maltese legal system has adopted a unique vehicle, based on a blend of civil law aspects, incorporated with the benefits provided by Anglo-Saxon jurisdictions, introducing a simplified regime with extensive flexibility, all the while retaining high standards of certainty.
The Second Schedule to the Civil Code (Chapter 16 of the Laws of Malta) (the ‘Second Schedule’) regulates the legal framework, supervision and administration of foundations.
The Maltese foundation is defined as an organisation consisting of a universality of things constituted in writing by public deed or will by one or more founders, whereby assets are destined either to fulfil a specified purposes or for the benefit a named beneficiaries or class of beneficiaries.
Unlike trusts, through a foundation, the founder is able maintain a level of control on the direction of the estate, since the foundation would have its own legal personality. Notwithstanding this, the assets of a foundation must be entrusted to the administration of a designated person or persons – the “administrator/s”. Through the principle of separate legal personality, a foundation would be capable of holding assets for its own benefit and of incurring obligations for which it is liable with all its assets, present and future.
From a tax perspective, Maltese foundations may elect to be treated in the same manner as a company ordinarily resident and domiciled in Malta, and thus may also be subject to a reduced tax rate to 5%, or, alternatively, a foundation may elect to have the foundation taxed in the same manner as a trust.
