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You have a right to know the rationale for maintaining your existing Trust arrangement

Fiduciary Wealth Team

Anyone resident in Spain prior to the introduction of Modelo 720 may well have been tempted into setting up a Maltese Trust as part of their investment planning strategy and then placed their assets offshore through an investment commonly known as a tax wrapper. Of course in the good old days prior to the Spanish government’s thirst for revenue and the general laissez faire approach to non- disclosure of assets that may well have been a short term, practical, albeit expensive solution (how much are the annual fees on an offshore trust?).

However in the current climate you need to ask yourself what practical advice your advisers have given you now that Modelo 720 requires a declaration whether you are a beneficiary or settlor to a trust and that the Spanish Government have signed an agreement with the UK and other tax authorities to exchange information making sure that tax avoidance is a thing of the past. There has been a whole raft of legislation and agreements signed between different jurisdictions with a single purpose which is to prevent assets being held in secret without being disclosed to the relevant tax authorities.

The whole issue of offshore trusts and companies is likely to come even further under the spotlight when the EU Savings Directive is amended in the near future. When the Directive was originally drafted there was a significant switch of assets from individual ownership to trusts and companieswhich at the time were outside of the scope of the law but now governments have got wise to the fact and are cracking down on these types of arrangements. Did your advisers pro-actively warn you about the risks of holding funds in an offshore trust and not disclosing this to the authorities under the requirements of Modelo 720? Or perhaps they just waited until after the declaration deadline had passed before offering any clarity on the subject?

There may of course be legitimate reasons for some people putting assets inside a trust arrangement but if the main intention is secrecy and to avoid disclosure rather than for inheritance tax planning then I am afraid those reasons will not hold up in the current climate of transparency. Of course Malta is within the EU and there is a deep intent on the part of all EU member states to tackle the use of trusts and offshore companies as a way of avoiding tax. In fact the commitment on the part of the UK government extends beyond its EU counterparts with disclosure agreements being concluded with the Channel Islands, Isle of Man, Cayman Islands and BVI to name but a few.

Isn’t it time you reviewed your position and discussed what’s really best for you? A transparent and legitimate arrangement that will stand the test of time or the murky waters of an offshore trust and the risk that non- disclosure might entail.

For a full and frank discussion on your current Maltese trust arrangements or future requirements speak to one of our investment and tax advisers on Tel: 956796911or email enquiries@fiduciarywealth.eu.