A Malta Pension Plan is a retirement account, account arrangement, or a pension account held in the country of Malta. Typically, they are accounts under the custody of an authorized registered trustee company in Malta.
The Internal Revenue Service (IRS), which is the taxing governmental authority in the United States, is investigating Malta Pension Plans. The criminal investigation (IRS-CI) division and civil division (that audits or examines taxpayers’ tax compliance) of the IRS is handling the investigation. IRS-CI has issued hundreds of summonses to US persons regarding their Malta Pension Plans. The investigations are expected to last for many months (or even years).
Malta Pension Plan participants or account holders are being investigated. Advisers who allegedly arranged or recommended multiple pension plans are also being investigated.
In 2021 the IRS first added Malta Pension Plans to its list of “dirty dozen” tax schemes, which is an annual compiled list of fraudulent or suspicious tax arrangements. The IRS often takes target enforcement activity against such text games. Malta Pension Plans have been on the same list ever since. In 2023, IRS issued proposed regulations that identify certain Malta personal retirement schemes as a “listed transaction.” Participants in listed transactions must file a disclosure statement with the IRS and may be subject to significant penalties if they do not.
The IRS periodically investigates aggressive tax schemes. With new funding, the IRS has increased all of its enforcement activity. The new IRS enforcement plan specifically targets high income taxpayers and taxpayers with foreign noncompliant assets and income. Recently in late 2021, the IRS published a Competent Authority Arrangement (CAA) that was entered into between the United States and Malta regarding pension rollovers. The issue stemmed from some Taxpayers were claiming the Malta/US tax Treaty to mean that they could form a Malta Pension under the Retirement Pensions Act of 2011 and obtain significant tax-exempt pension benefits (similar to a Roth IRA) when distributions were properly staggered.
Yes, at this time the US Department of Justice is prosecuting some individuals connected to Malta Pension Plans. These cases probably involve defendants with alleged criminal intent to evade taxes.
In 2013, the U.S. signed an intergovernmental agreement, including several traditional offshore tax havens, to implement the Foreign Accoun
t Tax Compliance Act, or FATCA, including Malta. It requires foreign financial institutions to report on the holdings of U.S. taxpayers to the Internal Revenue Service or face heavy penalties. In addition, many taxpayers disclose the existence of foreign accoun ts in annual tax returns and FBAR filings.
The IRS has served criminal summonses against Malta Pension Plan participants and alleged promoters.
Theoretically, if you receive a summons, you are not legally required to respond to the summons. However, a court ordered summons could then be issued against you, which would require a response.
Speak to a licensed and qualified tax attorney. A tax attorney with experience in the Malta plans can assist taxpayers in compliance and solutions. All discussions with an attorney is subject to attorney-client privilege, which cannot be divulged to any governmental official. Therefore, all of the information you share will remain fully confidential and private. Based upon your fact pattern, various courses of action are possible, such as preparing a basic response to the summons or not responding at all.