REGISTER OF BENEFICIAL OWNERS OF TRUSTS. FREQUENTLY ASKED QUESTIONS (FAQs)

Transcription

1 REGISTER OF BENEFICIAL OWNERS OF TRUSTS FREQUENTLY ASKED QUESTIONS (FAQs)

2 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 (e) Any other person exercising ultimate and effective control over the trust by any means Q6. Who can access the registered beneficial ownership information of trusts?.. 12

3 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 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 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,

4 List of Acronyms and Definitions the Authority : The Malta Financial Services Authority the Regulations : The Trusts and Trustees Act (Register of Beneficial Owners) Regulations, th 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. 2

5 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. 3

6 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 1 st 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 1 st July 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 (1 st January 2018) or whether the relevant trust was set up after 1 st January Express trusts which generate tax consequences before the 1 st July 2018 and which were set up, and in respect of which the authorised/registered trustees were so acting, prior to 1 st 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 1 st July 2018, and if the tax consequences are generated after the 1 st 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. 4

7 Trustees of express trusts, who are appointed as such from 1 st 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 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 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 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. 5

8 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 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 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. 6

9 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 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. 7

10 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, country of residence, official identification number, type of identification document, and country of issue of the document. Where the Trustee is a Body Corporate: The name of the Body Corporate (such as company name), date of registration, country of registration and registration number. 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, country of residence, official identification number, type of identification document, and country of issue of the document. 8

11 Where the Protector is a Body Corporate: The Name of the Body Corporate (such as company name), date of registration, country of registration and registration number. 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 9

12 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 10

13 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. 11

14 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. 12