Private Foundations

private foundations

Private foundations are considered the civil law variant of trusts, however they also have a “company” flavour to them, in that they are endowed with separate juridical personality and are bodies corporate in terms of law.

Maltese Foundation law has borrowed much from concepts existing under Liechtenstein and Panamanian foundation law, and has created an EU-compliant vehicle which is a fantastic tool for estate and tax planning.

Maltese Private Foundations start off to be taxed as companies, however they may opt out of such regime and be transparent for tax purposes which could enable tax neutrality provided the underlying beneficiaries are non-resident individuals.

A very interesting feature of private foundations is that cells may be created, and each cell may select which type of tax registration would apply to it.

Hence, for example, a foundation could be made up of three cells, two of which are treated as trusts for tax purposes and one of which could be registered as a company for tax purposes – all this within the same legal vehicle being one private foundation.

Highlights of Private Foundations:

•    Possibility of tax neutrality with correct structuring

•    Foundation may opt to be treated as a trust for tax purposes

•    Creation of cells provides exceptional flexibility for tax and estate planning.