Setting Up a Foundation in Malta: The Steps, the Documents and the Deadlines

There are two ways to approach foundations in Malta. One is to start with what a foundation can do: hold a family company, keep assets together across generations, ring-fence wealth from personal creditors. That ground is covered in the guide to the Maltese foundation. The other is to start with the paperwork, because a foundation does not exist in law until a notary, a deed, an endowment and a registration file have all lined up. What follows takes the second route: how to set up a foundation in Malta, step by step, with the documents each step needs and the deadlines the law attaches to them.

Every rule below comes from the Civil Code, Chapter 16 of the Laws of Malta, and its Second Schedule, which governs legal persons, together with the regulations on beneficial ownership and income tax made under it. Where a fee or a processing time is not fixed in the law, it is left out: those numbers change, and the Registrar and the notary are the people to quote them.

Step 1: Decide What the Foundation Is For

Article 26(6) of the Second Schedule allows a foundation in one of two legal forms. A beneficiary foundation exists for the benefit of named persons or a class of persons, such as a founder's descendants. A purpose foundation has no beneficiaries and exists to fulfil a stated purpose, for example holding the shares of a company. Whichever form is chosen, the foundation's patrimony, its assets and liabilities, is distinct from that of the founder, the administrators and any beneficiaries (article 26(1)).

Within those two forms the law also distinguishes a private interest foundation, the category used for family wealth and holding structures, from a public benefit foundation. The difference matters at every later step: the minimum endowment is higher for a private foundation, its registration file contains an extra document, and its file is closed to the public. The choice therefore comes first. If the real question is whether a foundation or a trust fits better, that comparison has its own treatment in Malta trust vs foundation; the steps below assume the foundation has been chosen.

Step 2: Choose the Administrators and, if Needed, a Local Representative

A foundation acts through its administrators, so they have to be identified before the deed is drafted. Article 29(4)(e) requires the deed to state the composition of the board of administration and each administrator's name, identification or registration number, nationality and residential address, or, where no administrators are appointed yet, the person who has the power to appoint them. The deed must also set out how administrators are appointed and removed and for how long. If no duration is stated, they hold office until they retire or are removed.

Two rules narrow the choice in practice.

A licensed administrator. Under article 43(12)(b) of the Trusts and Trustees Act, anyone resident or operating in or from Malta who acts as administrator, trustee, director or similar functionary over the assets of a private interest foundation needs authorisation from the Malta Financial Services Authority, "irrespective of the extent of his activities, whether remuneration is payable therefor or whether he holds himself out as providing such services or not". A relative acting unpaid is caught by that rule unless one of the exemptions in article 43(6) applies. What an authorised fiduciary does in that role is set out in the guide to fiduciary services in Malta.

A local representative. Where the administrators are not ordinarily resident in Malta, article 1 of the Second Schedule makes it a condition of registration to appoint, and keep at all times, a person ordinarily resident in Malta as local representative, with legal representation of the foundation in Malta and the power to sign forms and notifications to the Registrar. The deed must name that person and give the address (article 29(4)(g)).

Every administrator also has to consent in writing. Article 29(6) requires that consent to reach the Registrar before registration, unless the administrators consent on the statute itself.

Step 3: Draft the Deed and the Statute

Article 29(1) is the starting point of any Malta foundation setup: a foundation may only be constituted by a public deed inter vivos or by a will. A public deed means a notarial deed, so a Maltese notary is involved from the outset. The steps here follow a foundation set up during the founder's lifetime.

The deed must state, under article 29(4):

• the name, which must include the word "foundation";
• the registered address in Malta;
• the purposes or objects, and, for a public benefit or a private interest foundation, an indication of that category in the statute;
• the constitutive assets the foundation is formed with;
• the administrators, or who appoints them, and how they are appointed and removed;
• the term, if any;
• the local representative, where the administrators are non-resident;
• for a beneficiary foundation, either the names of the beneficiaries or a declaration that it is constituted for the benefit of beneficiaries;
• where there is more than one board or committee, which one is the board of administration.

On the term, article 29(7) caps a private foundation at 125 years. Where no term is stated, a beneficiary foundation is valid for 125 years from its establishment, and a longer stated term ends on the 125th anniversary. Public benefit foundations and foundations used for the commercial purposes in article 31B(4) to (6) may run without limit.

The statute is signed by the founders (article 29(5)). Anyone who later subscribes to it is deemed to accept all its provisions as they stand at that time.

Step 4: The Beneficiary Statement

Many founders do not want their children or grandchildren named in a document that goes to a public register. The law provides a separate instrument for this. Article 29(4)(h) allows the beneficiaries of a beneficiary foundation to be indicated in a written beneficiary statement, signed by the founder in the presence of a notary and addressed to the administrators. It need not form part of the public deed.

The statement stays with the administrators. Article 31(9) says the Registrar, in the case of a private interest foundation, is not entitled to request a copy of the beneficiary statement from the administrators or the notary. The statement is not available where the foundation is set up exclusively for public interest beneficiaries.

The beneficiary statement does not take the beneficiaries out of view of the authorities. The beneficial ownership rules in step 7 still apply to them.

Step 5: The Endowment

The deed must contain an endowment, and article 29(2) puts a floor under it on pain of nullity: money or property worth at least €1,164.69, or €232.94 for a public benefit foundation. A deed without it is void, not merely irregular.

Cash is simple. Where the endowment is property whose value does not appear on its face, such as shares in a private company, article 29(3) requires the administrators to sign a statement that, in their considered opinion, the property is worth at least the required amount. That statement is attached to the application form for registration. A foundation that later loses value does not lose its registration because its assets fall below the minimum.

Further assets can be added after registration. The large transfers usually follow once the foundation has its legal personality, because before registration the administrators' room to act is narrow (step 8).

Step 6: Register With the Registrar for Legal Persons

A Maltese foundation becomes a legal person when it is registered. Article 30(1) puts the duty to register on the administrators. Registrations and filings for foundations go to the Registrar for Legal Persons at the Malta Business Registry, whose online system, BAROS, handles documentation for legal persons including foundations.

For a private interest foundation, article 31(1)(a) lists the registration file:

1. the prescribed application form;
2. an authentic copy of the constitutive instrument and the statute, without the beneficiary statement;
3. the prescribed Note of Initial Registration;
4. the written consent of the administrators;
5. where the endowment is not cash, the administrators' valuation statement under article 29(3).

The authentic copy can be delivered by the founder, by the administrators once they have accepted office, or by the notary who published the deed (article 31(2)).

The three-month deadline. Under article 31(6)(a), the delivery must be made within three months of the date of the deed. Missing it exposes each person responsible, including the person with the power to appoint the administrators, to a penalty of €232.94 (article 31(10)).

The Registrar registers the foundation once satisfied that the requirements have been met, or refuses in writing with reasons (article 31(8)). The certificate of registration is conclusive evidence that the registration requirements were complied with (article 1 of the Second Schedule). It is the document banks and counterparties will ask for.

What becomes public is defined in article 31C. The application form, most notified forms including the Note of Initial Registration, the administrators' consent and the certificate are open to inspection. For a private foundation, everything else submitted to the Registrar is closed to third parties unless the administrators consent or a court is satisfied that the person asking has a legitimate interest, and the founder may waive that confidentiality in writing.

Step 7: The Beneficial Owner Declaration

Registration has a second file running alongside it. The Register of Beneficial Owners for foundations, set up under Subsidiary Legislation 16.18, applies to private and public foundations alike.

Under regulation 6(2), a new foundation must comply with those regulations within three months of its establishment and deliver a declaration in the prescribed form, signed by one of the administrators, with adequate, accurate and up-to-date information on all its beneficial owners. Regulation 4 sets the minimum content: each beneficial owner's name, nationality, country of residence, date of birth, an official identification document number with its type and issuing country, the date they became a beneficial owner and their role. For beneficiaries it also covers the nature and extent of the beneficial interest.

The two files are linked. Regulation 6(3) says a foundation shall not be registered under the Second Schedule unless the Registrar is satisfied that the beneficial ownership requirements have been met. In practice the beneficial owner declaration goes in with the registration file.

The beneficial ownership information is held in a separate register and not in the main Register of Legal Persons (regulation 7(2)). Access to it follows its own rules. Companies have a parallel regime, described in the piece on Malta's company beneficial owner register.

Step 8: What the Administrators May Do Before Registration

Between the deed and the certificate there is a gap of up to three months. Article 30(2) covers it: acts carried out by the administrators on behalf of the foundation before registration are governed by article 14 of the Second Schedule, and the administrators are not personally liable for them if two conditions are met. The acts must implement what the deed expressly requires of them, and the foundation must then be registered within the three-month period.

That is a reason to write the first steps into the deed itself, for example the acceptance of a specific shareholding, so that the administrators act within that protection.

Step 9: Register With the Tax Authorities

A foundation is a taxpayer in its own right. The Foundations (Income Tax) Regulations, 2010 define a foundation for tax purposes as one created under the Second Schedule that has submitted evidence of its registration to the Commissioner. Registration with the Registrar is therefore followed by a submission to the Commissioner for Tax and Customs.

Regulation 3 treats a foundation in the same way as a company ordinarily resident and domiciled in Malta. Company tax rules apply, distributions to beneficiaries are treated as dividends, and the administrators are answerable for records, returns and payment, jointly and severally where there is more than one.

There is one decision to make at this stage. Under regulation 4, the administrators may, by written notice to the Commissioner, irrevocably elect to have the foundation taxed under the rules for trusts instead. Because the election cannot be reversed, it belongs in the planning before the deed is signed, not in the first tax return. How the trust rules work is explained in the trust and foundation comparison. Where the foundation holds a Maltese company, the holding company guide covers how dividends move up the structure.

Step 10: Running It Once It Exists

Setting up a foundation in Malta creates obligations that run for as long as it exists.

• Records. Under article 10 of the Second Schedule the administrators keep records of all assets and liabilities and all income and expenditure for annual financial periods, prepare accounts as prescribed, and keep those records for ten years after the period they relate to.
• Changes to the statute. Article 31A requires amendments and changes to be registered. Where a prescribed form exists, filing the form is enough. Other amendments are made by resolution, private writing or notarial deed under the statute; unless made by notarial deed they are enrolled with a notary, and the notary registers them within fourteen days. For a private interest foundation, a change that affects the Note of Initial Registration needs an amended Note.
• Changes in beneficial ownership. Under regulation 8(2) of S.L. 16.18, the foundation notifies the Registrar of any change in its beneficial owners within fourteen days of the change being recorded with the foundation, on the prescribed form signed by an administrator.
• Fiduciary duties. Article 26(1) binds the foundation and everyone administering it to the fiduciary obligations of article 1124A of the Civil Code towards the beneficiaries, subject to restrictions in the statute or the administrators' terms of engagement.

The Deadlines in Order

For a foundation set up by public deed during the founder's lifetime, the statutory clock reads as follows:

• Day 0: the public deed is signed before a notary, with an endowment of at least €1,164.69 (€232.94 for public benefit).
• By month 3: the registration file reaches the Registrar (article 31(6)), and the beneficial owner declaration is delivered (regulation 6(2) of S.L. 16.18).
• On registration: the certificate issues, the foundation is a legal person, and evidence of registration goes to the Commissioner for tax purposes.
• Within 14 days of any later change: beneficial ownership changes go to the Registrar; notarial amendments are registered by the notary.
• Ten years: how long each year's records are kept.

What the law does not fix is how long the preparation takes before day 0: agreeing the purposes, appointing an authorised administrator, the administrator's checks on the founder and the source of the assets, and the tax planning. That preparation is where most of the time goes, and it decides whether the structure holds up later.

Before the Deed Is Signed

The order matters more than the speed. The choice between beneficiary and purpose foundation, the administrator, the tax election and the founder's reserved powers all need to be settled before a notary is booked, because the deed fixes them and some cannot be undone. For a founder or a family domiciled outside Malta, the home country's view of the structure also needs checking: article 29A of the Second Schedule switches Maltese mandatory succession rules off only where the foundation has no Maltese connection through the founder's domicile or Maltese immovable property, and a beneficiary's home country taxes what it receives under its own law. Where a Maltese family business is part of the picture, the duty side on death is covered in the piece on transferring a family business on death.

If you are considering a foundation in Malta and want to work through the order of these steps for your own family and assets, book a private consultation.