Designed & Powered by, Financial Institutions License Assistance, Voluntary Occupational Pension Schemes Rules. For further information on tax treaties refer also to the Treasury Department's Tax Treaty Documents page. In terms of Maltese income tax legislation, any income or benefits distributed by a Malta-based retirement scheme is characterised as pension income, and is considered to be income arising in Malta i.e. However, it has planning benefits that far exceed the Roth IRA. ACT shall not be responsible for any loss whatsoever sustained by any person who relies on these notes. Unlike the Roth IRA, the taxpayer may make in kind contributions to the MPP through the contribution of the asset or an interest in an entity holding the asset. Forty percent of Roth IRA–owning households in 2016 indicated their Roth IRA was the first type of IRA they opened. However, in most respects, it is far superior than a Roth IRA. FIRTPA for real estate holdings does not apply. According to the ICI, Roth IRA investors tend to be younger than traditional IRA investors. According to the Investment Company Institute (ICI), Americans held $7.9 trillion in individual retirement accounts (IRAs) at year-end 2016, with Roth IRAs accounting for $660 billion of that total. In Year 4, the MPP may distribute additional funds to the participant without triggering a tax liability. However, the distribution from the Roth IRA must be a “qualified” distribution. paying unnecessary taxes. Few Roth IRA investors take withdrawals from their Roth IRAs in any given year. The account balance is included in the taxpayer’s taxable estate. Ratified by the United States Senate, it offers unlimited contributions as compared to the low ceiling Roth pension plans allow. However, trustees of a trust have the possibility to elect that the income attributable to the trust is to be treated as though it was income of a company. Sixty-nine percent of IRA investors in 2015 owned traditional IRAs and 34 percent owned Roth IRAs. The Malta Pension Plan (the “Malta Plan”) is a technique that allows U.S. and certain foreign taxpayers to contribute cash, appreciated real estate and securities to a “retirement plan” and pay zero taxes on certain distributions from such plan. The prohibited transaction guidelines applicable to the traditional IRA. At death, the remaining distribution of the account is subject to the same rules as the traditional IRA. Lump sum distributions may be made every year after the second lump sum distribution each year. In some of the treaties in which the exclusive taxing right is allocated to the country of residence of the beneficiary, the exemption is restricted if the beneficiary is subject to tax in his country of residence on a remittance basis (UK, USA and the Netherlands). In cases where the recipient of the income is resident in a country with which Malta has concluded a double taxation agreement for the avoidance of double taxation, one would have to look at the pertinent provisions in the said treaty. having a Maltese source. Roth IRAs cannot own collectibles. A taxpayer can make an unlimited contribution to the Malta Pension Scheme. The Malta Pension Plan is a powerful vehicle to provide for substantial tax deferral in a manner similar to the Roth IRA. It offers a special tax favored retirement account created for high income tax payers. Apart from its offices in St. Julian’s Malta, ACT operates from a second office in Gozo, which is situated in the capital city of Victoria. having a Maltese source. The contribution limit is only $5,500. Like the IRA, exceptions to these rules exist for a distribution for a first-time home buyer; distribution to a disabled taxpayer, or a distribution to a beneficiary on account of the taxpayer’s death. Click here to read more about how we use cookies. Based on treaty provisions, distributions that are non-taxable for Malta tax purposes are also non-taxable in the United States. The unrelated business taxable income (UBTI) (UBTI) rules also apply to Roth IRAs. Mine is Bigger Than Yours - The Relative Benefits of the Malta Pension Plans Over the Roth IRA, If It’s Monday, It Must Be Malta! At year-end 2015, 31 percent of Roth IRA investors were younger than 40, compared with only 16 percent of traditional IRA investors. Under Malta law, three years must pass after the initial lump sum distribution before additional lump sum distributions could be made to a resident of Malta tax-free. A few trust companies such as Pensco and Entrust specialize in self-directed IRA (traditional or Roth) with non-traditional assets. The contribution to the MPP is not deductible. Distributions before age 59 ½ are subject to a 10 percent early withdrawal penalty as well as normal tax treatment on the distribution (as if it were a traditional IRA). Malta offers a number of advantages: These notes contain general information only and are not intended to address the circumstances of any particular individual or entity. It is also possible to establish such pension schemes as Maltese trusts, with Maltese trustees as administrators, which may also be recognised as QROPS for UK tax purposes. The Malta Pension Plan is like a super charged cross border Roth IRA. In Pursuit of Puerto Rican Tax Incentives, Section 897 - Disposition of investment in United States real property, Section 1445 - Withholding of tax on dispositions of United States real property interests, Section 72 - Annuities; certain proceeds of endowment and life insurance contracts. Before making any decisions or before taking any action that may affect your finances or your business, you should consult a qualified professional adviser. An official website of the United States Government. DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. For further information please contact the firm’s tax partners: For further information, please contact one of the firm’s tax partners, Stephen Balzan on [email protected] or Elaine Camilleri [email protected]. The primary difference between the Roth IRA and IRA or qualified plan is that the Roth IRA does not have required minimum distributions. In 2015, while only 4.0 percent of Roth IRA investors aged 25 or older had withdrawals, 23.5 percent of traditional IRA investors had withdrawals. If treaty benefits are claimed, evidence of the recipient’s residence is required usually in the form of a tax residence certificate issued by the tax authorities of the country in which the recipient is a resident.