FOUNDATIONS (INCOME TAX) REGULATIONS

FOUNDATIONS (INCOME TAX)

SUBSIDIARY LEGISLATION 123.114

FOUNDATIONS (INCOME TAX) REGULATIONS

28th May, 2010

LEGAL NOTICE 312 of 2010.

The title of these regulations is the Foundations (Income

Tax) Regulations.

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 thereunder.

(1) A foundation shall, for the purposes of the Income Tax

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

th e Co m p a ni e s A ct , t h e a d m i n is t r at o r sh al l su b m i t si m i l ar

documents, certified by a certified public auditor, and which are

FOUNDATIONS (INCOME TAX)

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 sub-regulation (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

o p t s i r r ev o c ab l y to b e s o t r e at e d f r o m a pa r t i cu l ar y e ar o f

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 cells

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

FOUNDATIONS (INCOME TAX)

(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.