Malta emerged as a primary family office and wealth management jurisdiction, drawing strengths through the holistic offering that caters for a wide spectrum of high-net-worth individuals and affluent families' needs. This includes succession planning, investment advisory, corporate structuring, investment banking, and estate planning.
Malta offers a stable and transparent legal environment that is highly conducive to the establishment and operation of family offices. The country boasts a robust regulatory framework overseen by dedicated authorities, ensuring compliance and protection for family offices. This regulatory oversight is complemented by a highly skilled, English-speaking workforce that is proficient in family office management and investment services.
The island's strategic location in the Mediterranean's heart makes it easily accessible for international affluent families. Malta's legal system incorporates common law, brought to Malta by the British, primarily in the realm of public law. Following independence, Malta evolved into a hybrid legal system that retained civil law principles in private law while incorporating contemporary common law elements, particularly in commercial law and is designed to offer both flexibility and security. Additionally, the widespread use of English as the main language of business further facilitates smooth and efficient operations. These factors collectively make Malta an ideal hub for family offices looking to manage and grow their wealth in a stable and supportive environment.
Malta's Wealth Management Offering
The role of third-party advisers and administrative partners such as Papilio Services has grown rapidly as family offices and wealth managers increasingly turn to outsourcing in pursuit of achieving sustainable profit generation; thus, Malta has emerged as a relevant and reliable partner for family offices.
Papilio Services' Private Client Service products benefit high-net-worth individuals and their families, family offices, family companies, legal and tax consultants, investment managers, and asset managers. At Papilio, we provide a comprehensive and personalised approach to meeting our clients' needs. We can help with succession planning, taxation for wealth and asset protection, relocation and residency services, trust and foundation setup and management, and high-value investment structuring and restructuring. We collaborate with the client or their advisors to identify the goals the client or family has for themselves or their business, and we help them set up strategies to reach those goals.
Let's delve into the most viable options for setting up family offices in Malta.
Malta Private Trust Company
A Malta Private Trust Company (PTC) offers a unique structure that allows families to maintain control over their assets while benefiting from the advantages of a trust. PTCs act as corporate trustees for trusts holding family assets, enabling effective family involvement in the administration of the trust. Typically, the board of directors of a PTC includes family members and trusted advisors, ensuring alignment with the family's interests.
Setting up a Malta Private Trust Company (PTC) in Malta is straightforward, with simple registration requirements and a quick process overseen by the Malta Financial Services Authority (MFSA). This ease of setup allows families to focus on strategic wealth management rather than administrative complexities. Additionally, the insurance cover requirements for a Malta PTC demand to be proportionate to the size and nature of the trustee's business operations, adding an extra layer of security. Malta PTCs are also advantageous for estate planning, offering flexibility in changing trustees and reducing administrative costs. The governance structure, requiring at least three directors, supports effective oversight and ensures the protection and growth of family assets. These features make Malta the primary jurisdiction for establishing a private trust company.
Malta Fund
Establishing a Malta fund is another viable option for family offices, providing a professionalised approach to wealth management. Malta's legal framework supports various fund structures, including the UCITS fund for retail investors, the notified alternative investment fund (NAIF) for diverse investment strategies, and the professional investor fund (PIF), which is particularly suitable for family office setups. A Malta fund benefits from an efficient and transparent tax system, with no further personal tax on dividends for business owners residing in Malta. The regulatory framework is responsive to changing financial markets, ensuring that family offices can adapt to new opportunities and challenges. Professional Investor Funds (PIFs), in particular, offer significant advantages, including tax benefits, flexibility in legal structures, and a level of regulatory scrutiny that provides confidence without excessive burden.
The eligibility criteria for a PIF are achievable by typical family offices, requiring a minimum investment of EUR 100,000 and a net worth test exceeding EUR 750,000. These features make Malta funds an attractive option for family offices seeking a tailored and efficient approach to wealth management.
Malta Foundation
Foundations in Malta provide a flexible and secure vehicle for asset protection and estate planning. They have a separate legal personality, which distinguishes them from trusts and can be used to hold and manage family assets according to specific purposes outlined in their statutes. Foundations offer perpetual existence and are particularly suitable for long-term family wealth preservation and philanthropic activities.
Setting up a foundation in Malta involves registering with the Malta Financial Services Authority (MFSA) and adhering to specific governance requirements. The foundation's council, similar to a board of directors, manages its assets and ensures that its purposes are fulfilled. This structure allows for clear and structured management of family wealth, offering benefits in asset protection, tax efficiency, and continuity.
Malta Holding Company
A Malta holding company is a popular structure for family offices due to its numerous features and benefits, particularly in terms of tax efficiency. Holding companies in Malta can benefit from an extensive network of double tax treaties, exemption from taxation on dividends, and capital gains tax exemption on the disposal of participating holdings. Dividend income and capital gains derived from a participating holding may be exempt from tax, provided certain conditions are met.
Malta's tax system adheres to EU non-discrimination principles and typically does not impose withholding taxes on dividends, interest, and royalties payable to non-resident shareholders. Furthermore, Malta companies can claim deductions for interest on risk capital through Notional Interest Deduction (NID), which applies to various forms of equity. Holding companies are particularly advantageous for families with high-value assets such as yachts, jets, and real estate, providing a tax-efficient environment for ownership and management. The stable legal framework, combined with these tax benefits, makes Malta holding companies an attractive option for family offices looking to protect and reinvest their assets.
Special Purpose Vehicles
Special Purpose Vehicles (SPVs) are utilised for specific, often temporary, purposes such as isolating financial risk associated with a particular project or investment. For family offices, SPVs can be an effective way to manage high-risk ventures without exposing the entire family's wealth to potential liabilities. SPVs in Malta benefit from a straightforward regulatory framework and favourable tax conditions. They are particularly useful for holding and financing large projects, such as real estate developments or complex financial transactions. By using SPVs, family offices can compartmentalise risk, streamline management, and achieve greater financial flexibility.
Limited Partnerships
Limited Partnerships (LPs) in Malta combine the elements of partnerships and corporations, providing flexibility in management and potential tax advantages. In an LP, there are both general partners, who manage the partnership and assume liability, and limited partners, who contribute capital and share in the profits but have limited liability. LPs are particularly beneficial for family offices that seek a collaborative investment structure with clearly defined roles and responsibilities. They offer a flexible and tax-efficient way to manage family investments, allowing for the involvement of multiple family members or external investors. The legal framework in Malta supports the establishment and operation of LPs, making them a viable option for family offices.
Comparative Analysis of Structures
Each of the structures discussed—Malta holding companies, private trust companies, funds, foundations, special purpose vehicles, and limited partnerships—offers unique benefits for family offices. Holding companies provide significant tax advantages and are ideal for managing high-value assets. Private trust companies offer family control and flexibility in trust administration, making them suitable for estate planning. Malta funds provide a professional and adaptable approach to wealth management, with various structures to meet specific needs. Foundations offer long-term asset protection and continuity, making them ideal for preserving family wealth across generations. SPVs are useful for managing high-risk projects and isolating financial risk, while limited partnerships provide a collaborative investment structure with clear roles and responsibilities.
Choosing the right structure depends on the family's specific objectives, asset types, and operational preferences. Families may also consider a combination of these structures to leverage the benefits of each and create a comprehensive wealth management strategy.
In Conclusion
Malta presents a compelling jurisdiction for establishing family offices, offering a stable legal environment, advantageous tax structures, and a skilled workforce. By carefully considering their unique needs and objectives, families can leverage Malta's offerings to ensure the continued growth and preservation of their assets for future generations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.