register of beneficial owners of trusts...for trusts which were in existence prior to 1st january...

REGISTER OF

BENEFICIAL OWNERS OF TRUSTS

FREQUENTLY ASKED QUESTIONS (FAQs)

Malta Financial Services Authority Issued on: 21 June 2018

Contents Background .................................................................................................................... 1

List of Acronyms and Definitions ................................................................................. 2

Q1(a). Who needs to provide the beneficial ownership information of trusts to the

Authority? .......................................................................................................... 3

Q1(b). Where the Authorised/Registered Trustee is acting as co-trustee with another

trustee, which trustee shall be responsible to provide the relevant beneficial

ownership information? ..................................................................................... 3

Q2. What trusts should be deemed to be ‘express trusts which generate tax

consequences’? .................................................................................................. 3

Q3. Which is the first tax year to be taken into consideration for the purposes of

triggering tax consequences in terms of the Regulations? ................................ 4

Q4. When does a trustee have to submit the relevant declaration of Beneficial

Owners of Trusts?.............................................................................................. 4

Q5. What information needs to be registered? ......................................................... 7

(a) The Settlor ................................................................................................ 8

(b) The Trustee .............................................................................................. 8

(c) The Protector(s) ........................................................................................ 8

(d)(i) Beneficiaries ........................................................................................ 9

(d)(ii) Class of Beneficiaries ........................................................................ 10

(e) Any other person exercising ultimate and effective control over the trust

by any means ............................................................................................... 11

Q6. Who can access the registered beneficial ownership information of trusts? .. 12


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Register of Beneficial Owners of Trusts (‘FAQs’)

Background

The Trusts and Trustees Act (Register of Beneficial Owners) Regulations, 2017 (“the

Regulations”) were published on 20th December 2017 by virtue of Legal Notice 373 of

2017. The provisions of these Regulations are aimed at implementing the relevant

provisions on beneficial ownership information, emanating from article 31 of Directive

(EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the

prevention of the use of the financial system for the purposes of money laundering or

terrorist financing (“4th AMLD”), in so far as they are applicable to trusts and trustees.

The provisions and requirements emanating from these regulations came into force on 1

January 2018, other than the provisions of regulation 6 related to access to such

beneficial ownership information, as the latter enter into force on 1st April 2018.

The aim of these Frequently Asked Questions (“FAQs”) is to provide guidance as to the

expectations for the setting up of this Register of Beneficial Owners of Trusts (“the

Register”), particularly in relation to what is deemed to constitute a trust “which

generates tax consequences”, and the details which need to be provided for the relevant

persons involved in such a trust relationship. These FAQs should be read in conjunction

with, and as supplementary guidance to the Regulations, and should not be deemed to

substitute a thorough reading thereof.

In referring to this document the following points should be kept in mind:

- This document is intended to be a live document and therefore the contents

thereof may be updated from time to time as deemed appropriate by the

Authority.

- The replies provided in this document do not purport to cover all the obligations

applicable to trustees in terms of the said Regulations, but should merely serve

as guidelines to the parties concerned in adhering to the requirements set out in

the Trusts and Trustees Act (Register of Beneficial Owners) Regulations, 2017.

http://www.justiceservices.gov.mt/DownloadDocument.aspx?app=lp&itemid=28817&l=1

http://www.justiceservices.gov.mt/DownloadDocument.aspx?app=lp&itemid=28817&l=1

REGISTER OF BENEFICIAL OWNERS OF TRUSTS (FAQs)


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List of Acronyms and Definitions

“the Authority”: The Malta Financial Services Authority

“the Regulations”: The Trusts and Trustees Act (Register of Beneficial Owners) Regulations,

2017

“4th AMLD”: Directive (EU) 2015/849 of the European Parliament and of the Council of 20

May 2015 on the prevention of the use of the financial system for the purposes of money

laundering or terrorist financing.

“The Register”: The Register of Beneficial Owners of Trusts set up by the Authority in terms

of Regulation 4.

“the Act”: The Trusts and Trustees Act (Cap. 331, Laws of Malta)

“incurred a tax liability”: when the trustee of a particular trust has paid tax or when a payment

of tax is due by the trustee in respect of that trust (whichever is the earlier) in terms of the

Income Tax Act (Cap.123, Laws of Malta) or the Duty on Documents and Transfer Act (Cap.

364, Laws of Malta), namely:

i. Income Tax attributable to a Trust, including any income tax on capital gains

and any property transfer tax, in terms of article 5A of the Income Tax Act (Cap.

123, Laws of Malta), and any relevant regulations issued thereunder;

ii. Duty on Documents and Transfers, in terms of the Duty on Documents and

Transfers Act (Cap. 364, Laws of Malta), and any relevant regulations issued

thereunder.



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Q1(a) Who needs to provide the beneficial ownership information of trusts to the

Authority?

Any Trustee authorised in terms of Article 43, or registered as a Trustee of Family Trusts in

terms of Article 43B of the Act, is required to provide the beneficial ownership information

of any express trust under its administration, which generates tax consequences in Malta.

Therefore the legal responsibility falls upon the Trustee to submit the relevant declaration

of beneficial ownership of trusts in terms of the Regulations.

The tax consequences must be generated by the trust and not by the trustee or the settlor or

the beneficiaries, and the tax consequences must be generated in Malta.

Q1(b)

Where the Authorised/Registered Trustee is acting as co-trustee with another

trustee, which trustee shall be responsible to provide the relevant beneficial

ownership information?

Where the Trustee as defined in Q1(a) above is acting as co-trustee with another

authorised/registered trustee(s), any one of the said trustees may complete the relevant

declaration of beneficial ownership. The relevant details of all co-trustees must however be

provided within the declaration of beneficial ownership. Both trustees, if

authorised/registered in terms of the Act as aforesaid, would remain liable for providing the

relevant beneficial ownership information on the appropriate form, or for failure to do, or

delay in doing, so.

Q2. What trusts should be deemed to be ‘express trusts which generate tax

consequences’?

a) An express trust is defined in the Regulations as a trust which is set up in writing, by

means of a trust instrument as defined in the Act. This therefore includes any instrument

whereby the trust is created and includes any instrument varying the terms of the trust

and also a unilateral declaration of trust.

A constructive trust, a resulting trust or any other trust created by operation of law or by a

judicial decision, shall not be deemed to be an express trust.

b) An express trust shall be deemed to generate tax consequences when the trustee has

incurred a tax liability (as this term is defined).

If an express trust as defined in (a) above has not incurred a tax liability (as defined) in

Malta, in any particular year, the beneficial ownership information of such a trust need not

be included in the Register.



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c) Trusts that elect to be treated as companies in terms of article 27D(1) of the Income

Tax Act (Cap.123, Laws of Malta), or that adopt the transparency model in terms of

article 27D(3) of the Income Tax Act (Cap.123, Laws of Malta), will be exempt from

the obligations in terms of the Regulations as long as they have not incurred a tax

liability in Malta, as explained above, in any particular year. Similarly, the mere

application by a trustee for an income tax number will not be sufficient, by itself, to

bring the trust within the scope of the Regulations.

Q3. Which is the first tax year to be taken into consideration for the purposes of

triggering tax consequences in terms of the Regulations?

For trusts which were in existence prior to 1st January 2018, and in respect of which the

authorised/registered trustee was so acting, the first trigger for such trustee to provide the

beneficial ownership information on the trust arises if such trustee has incurred a tax liability

(as defined) from 1 January 2018 onwards. The deadline for the trustee to provide the

beneficial ownership information of such a trust is 1st July 2018.

Any such trust which has not incurred a tax liability in 2018, but which incurs a tax

liability as explained in Q2 above, in any subsequent year shall be required, in that

particular year, to register the beneficial ownership information of such trust within

fourteen (14) days from the date when the trustee incurred a tax liability (as this term is

defined).

Q4. When does a trustee have to submit the relevant declaration of Beneficial Owners

of Trusts?

This depends on whether the Trustee was already acting as trustee of the relevant trust prior

to the coming into force of the Regulations (1st January 2018) or whether the relevant trust

was set up after 1st January 2018.

Express trusts which generate tax consequences before the 1st July 2018 and which

were set up, and in respect of which the authorised/registered trustees were so

acting, prior to 1st January 2018: Subject to the qualification in Q3 above, the

relevant declaration of beneficial ownership information must be completed and

submitted to the Authority by not later than 1st July 2018, and if the tax consequences

are generated after the 1st July, 2018, the relevant declaration of beneficial ownership

information must be completed and submitted to the Authority within fourteen (14)

days from when a tax has been paid or has become due to be paid.



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Trustees of express trusts, who are appointed as such from 1st January 2018

onwards (irrespective of whether the trust is newly set up on that date or whether

the trustee has taken over an existing trust): Such authorised/registered trustee shall

complete and submit the declaration of beneficial ownership within fourteen (14) days

of being appointed as trustee. If the trustee has not incurred any tax liability as at the

date when the trustee is so appointed, the declaration of beneficial ownership will be

completed and submitted with respect to such trust within fourteen (14) days from

when the trustee incurred a tax liability.

Below are a number of scenarios to assist trustees to determine whether a trust is deemed to

generate tax consequences and to establish the reporting timeframe.

Scenario 1

A trust was set up in 2010 to hold immovable property. In 2017, the trustee acquired another

immovable property situated in Malta. Upon the said acquisition of such property, the trustee paid

duty in terms of the Duty on Documents and Transfers Act.

This transaction gives rise to duty paid before 1 January 2018. To the extent that no further taxable

transactions are entered into by the trustee in respect of such trust post-31 December 2017 the trust

is not deemed to generate tax consequences in Malta and the trust will therefore fall outside the

scope of the Rules.

Scenario 2

A trust was set up in 2010 to hold immovable property. In 2018, the trustee acquired another

immovable property situated in Malta. Upon the said acquisition of such property, the trustee paid

duty in terms of the Duty on Documents and Transfers Act.

This transaction gives rise to duty paid after 31 December 2017 and therefore the trust is deemed to

generate tax consequences in Malta and would fall within the scope of the Rules. To the extent that

the transaction occurred by 1 July 2018, the trustee must complete and submit the relevant

declaration of beneficial ownership to the Authority by 1 July 2018. If the transaction happens after

1st July 2018, the declaration of beneficial ownership must be submitted within 14 days of incurring

the tax liability.

Scenario 3

An individual settled upon trust shares held in a number of foreign entities. In 2018, the trustee of

the said trust derived a dividend that suffered a withholding tax outside Malta. The trustee

determined that the dividend would not be subject to any Maltese income tax in 2018.

To the extent that no further taxable transactions are entered into by the trustee in respect of such

trust, the trust is not deemed to generate tax consequences in Malta and the trust will therefore fall

outside the scope of the Rules.



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Scenario 4

A trust was set up in 2018 and the trustee elected (in terms of Article 27D(1), Income Tax Act) for

the income attributable to the trust to be computed as if such income was derived by a Maltese

company.

The trust derived income during 2018 and the trustee determined that the income is subject to

income tax in Malta. The trustee will be required to prepare an income tax return and pay any

resulting tax liability for the trust in 2019.

The trust is deemed to generate tax consequences in Malta and would therefore fall within the

scope of the Regulations and must file a declaration of beneficial ownership with respect to such

trust within 14 days from date from when the trustee incurred a tax liability in 2019.

Scenario 5

A trust was set up in 2018 and the trustee elected (in terms of Article 27D(1), Income Tax Act) for

the income attributable to the trust to be computed as if such income was derived by a Maltese

company. The trust assets consisted exclusively of a shareholding in another company and the

trustee determined that such holding was a ‘participating holding’ (as defined in the Income Tax

Act).

In 2019, the trustee transferred the entire shareholding and made a gain on such transfer. However,

such gain was exempt from Maltese income tax in terms of Article 12(1)(u)(1) of the Income Tax

Act.

To the extent that no further taxable transactions are entered into by the trustee in respect of such

trust, the trust is not deemed to generate tax consequences in Malta and the trust will fall outside

the scope of the Rules.

Scenario 6

A trust was set up in 2018 and one of the trust assets consisted of cash held on deposit in an

account with a Maltese bank. The deposit generated interest income and the trustee elected to have

such income taxed at source at the rate of 15% (in terms of the investment income provisions of

the Income Tax Act).

The trust is deemed to generate tax consequences in Malta and will fall therefore within the scope

of the Rules and the trustee must complete and submit the declaration of beneficial ownership

within 14 days from when the trustee incurred a tax liability.



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Scenario 7

A trust was set up in 2010 to hold immovable property. The immovable property was made

available to one of the beneficiaries of the trust in 2018 on title of precarious loan. The beneficiary

decides, with the trustee’s consent, to rent the property out to a tenant (with the condition that the

lease can be terminated by the beneficiary/landlord by giving as little as seven days’ notice).

As the income from the rent is deemed to be earned by the beneficiary and not the trustee, the trust

itself is not deemed to generate a tax consequence in Malta and the trust will fall outside the scope

of the Rules.

Scenario 8

A trust was set up in 2010 to hold immovable property. In 2018, the trustee started renting the

immovable property to a third party and receiving a rent in return, on which the trustee was bound

at law to pay income tax.

The trustee will be required to pay any resulting tax liability for the trust in 2019.

The trust is deemed to generate tax consequences in Malta and will fall therefore within the scope

of the Rules and the trustee must complete and submit the declaration of beneficial ownership

within 14 days from when the trustee incurred a tax liability.

Q5. What information needs to be registered?

The Regulations provide that trustees must submit a declaration of beneficial ownership of

all express trusts which generate tax consequences, as defined above. For the purposes of

the Regulations, a “beneficial owner” shall have the meaning assigned to it under the

Prevention of Money Laundering and Funding of Terrorism Regulations, and in relation to

trusts this includes:

(a) The Settlor;

(b) The Trustee(s);

(c) The Protector, if any;

(d) (i) The Beneficiaries, or

(ii) Where the individuals benefiting from the trust have yet to be determined, the

class of persons in whose main interest the trust is set up or operates; and;

(e) Any other person exercising ultimate and effective control over the trust by any

means, including any person (other than those referred to in paragraphs (a) to (d))

whose consent is to be obtained, or whose direction is binding in terms of the trust

instrument or of any other instrument in writing, for material actions to be taken by

the trustee. The term “material actions is defined within the Regulations.



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The following sections set out the details which need to be provided in respect of each of the

above-mentioned parties.

(a) The Settlor

Where the Settlor is an Individual: The name and surname, date of birth, nationality,

country of residence, official identification number, type of identification document,

and country of issue of the document.

Where the Settlor is a Body Corporate: The Name of the Body Corporate (such as

company name), date of registration, country of registration and registration number.

In the event that the Settlor is deceased: The name and surname, date of birth,

nationality. In all the other fields insert ‘deceased’ followed by the year of death, with

no spaces (Ex. “deceased1995”)

Where there are multiple settlors, relevant details as explained above should be

provided for each and every settlor.

ALL of the information must be provided. Trustees are expected to take all reasonable

steps to obtain and hold the information indicated above, and to ensure that the records

and information provided are accurate and up to date.

(b) The Trustee

Where the Trustee is an Individual: The name and surname, date of birth, nationality,



Where the Trustee is a Body Corporate: The name of the Body Corporate (such as


Where there is a Co-Trustee(s): The above-mentioned details must also be provided

for the co-trustee, depending on whether the co-trustee is a body corporate or an

individual.

(c) The Protector(s)

Where the Protector is an Individual: The name and surname, date of birth, nationality,





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Where the Protector is a Body Corporate: The Name of the Body Corporate (such as


ALL of the information must be provided. Trustees are expected to take all reasonable

steps to obtain and hold the information indicated above, and to ensure that the records

and information provided are accurate and up to date.

(d) (i) Beneficiaries

Where the beneficiary is an Individual: The name and surname, date of birth,

nationality, country of residence, official identification number, type of identification

document, and country of issue of the document. The information must be provided

for each and every individual beneficiary. For each of these individuals, the Trustee

must also indicate the nature and extent of the benefit (ex. Fixed interest [and the

percentage], discretionary, lifetime beneficiary, remainderman etc) as well as an

indication as to whether the instrument includes any suspension of the trustee’s duty to

inform such beneficiary of his benefit under the trust or that he forms part of a class of

beneficiaries which may so benefit.

Where any of the individuals is a minor, the field related to the ‘Nature and Extent of

the Benefit’, should also include:

a. A specific indication that such individual is a minor;

b. The name and surname, and nationality of the legal guardian(s) of such minor;

AND

c. An indication whether such minor has ever received any financial payment or

has been provided with a non-financial benefit by the trustee.

The above-mentioned details in relation to minors are required as, in terms of

Regulation 6(2), the MFSA may concede, on a case-by-case basis and in exceptional

circumstances, that access not be granted , in full or in part, where the beneficiary is a

minor, to certain subject persons in terms of the Prevention of Money Laundering and

Funding of Terrorism Regulations requesting access to the beneficial ownership

information of any particular trust for the purposes of carrying out customer due

diligence in accordance with the Prevention of Money Laundering and Funding of

Terrorism Regulations.

Where the beneficiary is a Body Corporate: Information should be provided about

both the body corporate and the beneficial owners thereof, specifically as follows:

a. Body Corporate: The Name of the Body Corporate (such as company name),

date of registration, country of registration and registration number; AND



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b. Beneficial Ownership: The name and surname, date of birth, nationality,

country of residence, official identification number, type of identification

document, and country of issue of the document, for any individual holding

direct or indirect ownership of 25% plus one or more of the shares in the body

corporate, or more than 25% of the voting rights or other ownership interests,

including through bearer shares or through control with other means.

Provided that if, after having exhausted all possible means and provided there

are no grounds of suspicion, no beneficial owner in terms of this paragraph

has been identified, the beneficial owner shall be considered to be the natural

person or persons who hold the position of director of the Body Corporate,

and the above-mentioned details relating to individuals shall be provided for

such director(s), with a specific indication that such person or persons are the

director(s) of the said body corporate. A record must be kept of all the actions

taken to identify the beneficial owner in terms of this paragraph.

Where the beneficiary of the trust is, in turn, the Trustee of another trust: Information

should be provided about both the Trustee and the Trust (ex. XYZ Trustee Ltd as Trustee

of ABC Trust) and the beneficiaries of the said trust, as follows:

a. Where the trustee is an individual: The name and surname of the trustee

followed by the name of the trust (as per example above), date of birth,

nationality, country of residence, official identification number, type of

identification document, and country of issue of the document; OR

b. Where the trustee is a body corporate: The name of the Body Corporate (such

as company name) followed by the name of the trust (as per example above),

date of registration, country of registration and registration number; AND

c. To the fullest extent possible, the above-mentioned details related to individual

beneficiaries, but as a minimum, the name and surname, nationality and country

of residence of the said individuals.

(d)(ii) Class of Beneficiaries

In terms of the Regulations, where the individuals (or some of the individuals)

benefiting from the trust have yet to be determined, a description of the class of

beneficiaries can be provided. In this context ‘determined’ should be interpreted to

mean ‘identified’ or ‘named’ in a written document from the settlor (not restricted to

the trust instrument) as someone who should benefit from the trust. When a

beneficiary can be clearly identified by his or her name, then the identity details

referred to above need to be provided, even if such beneficiary is a discretionary

beneficiary who has not yet received any financial payment or has been provided

with a non-financial benefit by the trustee.

When a beneficiary forms part of a class of beneficiaries who are not named (ex. the

grandchildren of the Settlor), then a description of the class of beneficiaries shall be



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provided instead. Similarly a description of the class of beneficiaries is to be provided

where the beneficiaries are yet to be born.

If an individual from the class of beneficiaries can be identified, then the beneficial

ownership details referred to above must also be provided. The same applies to

individual beneficiaries within a class of beneficiaries who are named and can be

identified, even if such individuals have not received any financial payment or been

provided with a non-financial benefit by the trustee.

Where a description of a class of beneficiaries is provided in the Register, the Trustee

shall nonetheless update the information and provide the beneficial ownership details

of any individual forming part of that class who subsequently receives any financial

payment or is provided with a non-financial benefit by the trustee.

The above guidelines should also be read in conjunction with the rules relating to a

class of beneficiaries as set out in Regulation 3(3).

Where an individual beneficiary has not yet received any financial payment or been

provided with a non-financial benefit, or the beneficiary may not be aware of his

entitlement under the trust, and verification of identity may therefore not have been

carried out on the said beneficiary, it shall be sufficient to provide the identification

details which are available on the trust instrument or on any other written document by

the settlor wherein such beneficiary is named.

Where a trust is set up solely for a charitable purpose as defined in the Trusts and

Trustees Act, and which trust does not have any beneficiaries as defined in (d) above,

the trustee shall only be required to provide the beneficial ownership information

relating to the Settlor, the Trustee, the Protector and any other person exercising

ultimate and effective control over the trust by any means, as defined in (e).

(e) Any other person exercising ultimate and effective control over the trust by any

means

For individuals falling within this category, the Trustee shall provide the name and

surname, date of birth, nationality, country of residence, official identification number,

type of identification document, and country of issue of the document as well as details of

the role of this individual in the trust or the manner in which control is exercised.



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Q6. Who can access the registered beneficial ownership information of trusts?

i. In terms of the Regulations, the following institutions and authorities shall be granted

access to the registered beneficial ownership information of trusts in a timely manner,

without any restriction and without alerting the beneficial owners concerned:

a. national competent authorities with designated responsibilities for combating money

laundering and terrorist financing;

b. national competent authorities that have the function of investigating or prosecuting

money laundering, associated criminal offences and terrorist financing, or of tracing,

seizing, freezing and confiscating criminal assets;

c. the Financial Intelligence Analysis Unit;

d. national tax authorities; and

e. any other national competent authority within the meaning assigned to it under the

Prevention of Money Laundering and Funding of Terrorism Regulations, not already

covered above.

ii. The Regulations also provide that access shall also be granted to subject persons in terms

of the Prevention of Money Laundering and Funding of Terrorism Regulations, for the

purpose of carrying out customer due diligence in accordance with the said

regulations, in a timely manner and subject to the MFSA’s right to request any of the

documents outlined in Regulation 6(1)(b).

Subject persons in terms of this paragraph shall only be allowed to request access to

beneficial ownership information by name of a particular trust or trusts for the purposes

of carrying out customer due diligence in accordance with the said regulations.