What does the Civil Code of Malta allow?
Article 22A of the Second Schedule of the Civil Code expressly states that any organisation which has been formed and incorporated or registered under the laws of a state within the European Union or within the European Economic Areas and which has a similar structure to an organisation under Maltese law, and allowed under its constitutive instrument or applicable law, shall be able to request the Registrar for its registration and in return its continuation in Malta.
Prior to such law being enacted, in order for a foreign foundation to continue in Malta, it was a requirement for a Maltese foundation to be set up in Malta for such purpose. Thus, the same foundation would need to transfer its assets to the newly established Maltese foundation and subsequently dissolve the foreign foundation. As a result, various foundations were experiencing negative tax consequences, due to the fact that through the liquidation process, the assets of the foundation needed to be distributed to its beneficiaries and then later deposited back within the newly established Maltese foundation. The need for such cumbersome process meant that the interested persons were also obliged to liquidate a foundation and establish another one within the same chosen transaction. This amendment shall, therefore, make the process much simpler and more cost-effective.
The Process: Continuing a Foundation under the Civil Code of Malta
In order to continue a foundation in Malta, one must first establish whether the foreign foundation in question falls under or is similar to the current form set out under the relevant Maltese law. Article 22A of the aforementioned Act, in fact, holds that the foreign organisation must be similar in nature to an organisation which is:
- Governed by the Second Schedule of the Civil Code; or
- Governed by a special law which does not, in itself or through other regulations, provide for its continuation.
When the organisation is successfully registered in Malta, it is registered in the same legal form which it had in the foreign country (from which it originated). If, however, this form is not recognised under Maltese law, the applicant is obliged to select and designate a form which he deems to be similar to the existing organisation being continued in Malta.
Should a foreign organisation in question not originate from the European Union or the European Economic Area, such foreign organization may still be continued in Malta in the same manner as stated hereinabove. This depends on the Minister responsible for Justice in Malta who may issue notices indicating the jurisdictions which are approved for such purpose. This list may be reviewed periodically by the Minister.
Once continued in Malta, the foundation must be, at all times, compliant with the form established under the Second Schedule of the Civil Code, including all the laws regulating that particular structure, its procedures, formalities and requirements.
Malta: A leader on various fronts
Dr Priscilla Mifsud Parker, Partner within the Corporate, Trusts and Foundations department at Chetcuti Cauchi has noted Malta’s efforts towards accommodating persons intending to establish foundations in Malta, “The registration of foundations is inexpensive and expeditious. Malta can also boast of extensive judicial and practical experience in relation to the employment and flexibility of the institute and the obligations inherent in fiduciary duties have long been recognised and enforced. This makes Malta an ideal location for the setting up of foundations”. This amendment shall further confirm Malta as an international business hub of interest.
Through its numerous efforts, Malta has also taken a leading role within the industry of financial services. It has duly adopted numerous legislative measures with the aim of creating an environment which caters for the latest technologies wherein they can flourish, including Blockchain, iGaming and Artificial Intelligence.
Many argue that such a pro-active attitude has created an environment which can foster innovation and cater for the development of rapidly developing technologies. It has created a system wherein investors may put their mind at ease that they are protecting their assets and securing their legacy for future generations within a jurisdiction which ultimately has as its main priorities security, transparency and stability.
Our Services
Chetcuti Cauchi has a team of experts who have years of experience within the field of foundations. They are able to apply this knowledge and provide assistance to clients who are interested in continuing their foreign organisations in Malta, wherever such organisations may originate from. They will work alongside various other teams, including the Tax and Corporate departments to ensure that clients receive a holistic experience during the process of re-domiciliation to Malta.
