Foundations (Income Tax) Regulations, 2010

L.N. 312 of 2010

INCOME TAX ACT

(CAP. 123)

Foundations (Income Tax) Regulations, 2010

IN exercise of the powers conferred by articles 27E and 96

of the Income Tax Act, the Minister of Finance, the Economy and

Investment has made the following regulations

The title of these regulations is the Foundations (Income

Tax) Regulations, 2010.

In these regulations, unless the context otherwise

requires -

“the Act” means the Income Tax Act;

“foundation” means a foundation created in terms

of the Second Schedule of the Civil Code or as recognised

thereunder and which has submitted evidence to the

Commissioner of its registration or recognition, as the case

may be, in accordance with the relevant provisions of the

Civil Code;

“non-profit making” shall have the same meaning as in

article 2 of the Voluntary Organisations Act;

“social purpose” shall have the same meaning as that

found in article 2 of the Voluntary Organisations Act;

“trust” means a trust established in accordance with

the Trusts and Trustees Act, or a trust which is recognised Cap. 331.

thereunder.

(1) A foundation, shall, for the purposes of the Income Foundations taxed as

Tax Acts, be treated in the same manner as a company that is companies.

ordinarily resident and domiciled in Malta and any rules pertaining

to the taxation of income applicable to companies as provided for

under the laws of Malta shall equally apply to foundations. Tax

shall be payable on the profits of a foundation at the rate specified

in article 56(6) of the Act and it shall be payable in the same

manner applicable to such companies.

(2) Distributable profits shall be allocated in the

same manner applicable to such companies. For the purposes of

this regulation, distributable profits of a foundation shall mean the

total profits which are available for distribution to the beneficiaries

resulting from the income of such foundation from the sources

specified in Part II of the Act.

(3) The administrator of a foundation shall be

answerable for doing all matters and things required to be done

under the Income Tax Acts for the purposes of the determination,

assessment and payment of tax in connection with the income of

the foundation. Where two or more persons act in the capacity

of administrators of the same foundation, they shall be jointly

and severally so answerable. In particular, the administrator of a

foundation shall keep all records, submit all returns and documents

and pay tax to the Commissioner as is required in the case of

companies. Where the Income Tax Acts require documents which

are to comply with the Companies Act, the administrator shall

submit similar documents, certified by a certified public auditor,

and which are either provided for under specific provisions under

the Laws of Malta for foundations or, in the absence of such

provisions, which comply as far as possible, with the Companies

Act.

(4) Distributions of profits allocated in accordance

with the provisions of regulation 3(2) to beneficiaries of a

foundation shall be treated as if they were dividends distributed to

shareholders of a company and any transfer of a beneficial interest

in the foundation by such beneficiaries shall be deemed to be a

transfer of a security for all the purposes of the Income Tax Acts.

(5) Notwithstanding the previous sub-regulations of

this regulation, in the case of a foundation that is enrolled in terms

of the Voluntary Organisations Act, or not being so enrolled is

established for the achievement of a social purpose and is non-

profit making, the provisions of this regulation shall only apply

where such foundation informs the Commissioner in writing

that it opts irrevocably to be so treated from a particular year of

assessment onwards. Where such foundations do not exercise this

option, tax shall be chargeable on the relevant profits at the rate

specified in article 56(1)(d) subject to the provisions of 56(9)(b) of

the Act.

(1) The administrators of a foundation may by notice

in writing to the Commissioner irrevocably elect that a foundation

shall be taxed under the provisions of the Act applicable to trusts.

(2) When an election as provided in this regulation

has been made, the provisions of the Income Tax Acts and any

regulations thereunder applicable to trusts, shall be applied to the

founder, the foundation and the beneficiaries mutatis mutandis

keeping in view that –

(a) reference to the settler of a trust in the Act shall be

construed as reference to the founder of a foundation;

(b) references to the patrimony of the trust or the

trust fund or property shall be treated as reference to the

foundation;

(c) reference to the trustees of the trust shall be treated

as references to the administrators of the foundation;

(d) references to the beneficiaries shall be treated to

be references to beneficiaries of a foundation, or in case of a

purpose foundation to those persons who personally benefit

Provided that where the Income Tax Acts refer to a

duty relative to the trust, it shall be treated as a duty of the

administrator or of the foundation as the case may be.

(1) When a foundation is established with segregated Segregated cells of a

cells in terms of article 20 of the Second Schedule of the Civil foundation.

Code, each cell of the said foundation shall be deemed to be

a separate foundation and any words and expressions which are

relevant to a foundation in these regulations shall be construed

accordingly.

(2) The interpretation of such words and expressions

insofar as applicable to a cell shall be made on the basis of the

relevant provisions of article 20 of the Second Schedule to the

Civil Code.

(1) All the returns issued by the Commissioner with

reference to trusts shall apply to foundations where an election

to be treated as a trust is made, until such time as returns for

foundations are prescribed.

(2) When completing and submitting a return, the

administrators shall expressly state the fact that such returns are

being used for a foundation under an election in terms of these

regulations.

€0.37