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5 Benefits of the Malta Pension Plan


November 24, 2020 ( Newswire) The Malta Pension Plan (MPP) provides a number of benefits to people saving for retirement. For instance, MPPs can offer tax-savings potential and greater flexibility as compared to traditional retirement vehicles.

The US-Malta Income Treaty, which took effect in 2011, states that all or part of the income or gains generated through MPPs are exempt from taxation in the United States. Therefore, US taxpayers who invest in MPPs could potentially obtain considerable tax savings.

Under the legislation, US taxpayers investing in MPPs receive tax breaks on both their contributions and distributions, avoiding many of the limitations associated with traditional retirement savings vehicles.

From the potential for tax deferment to opportunities for early retirement, we look at five reasons to consider investing in MPPs.

1. Contributions to a Malta Pension Plan can be in the form of non-cash assets

Under US tax law, when real estate is liquidated, it creates a taxable gain. Through MPPs, however, non-cash assets such as real estate can be invested directly without first being liquidated. Therefore, this form of foreign grantor trust confers considerable tax-saving capabilities.

Other non-cash assets that can be invested directly into MPPs include works of art, life insurance, business interests, stocks and shares, and foreign investments, creating the potential for significant tax deferral.

2. Malta Pension Plans facilitate unlimited contributions

Whereas Roth IRA contributions are subject to a strict $7,000 per year limitation, there is effectively no cap on contributions to MPPs.

3. Malta Pension Plans support early retirement

Additionally, with a Roth IRA, an investor retiring before the age of 59½ must pay a 10% early withdrawal fee on all distributions and will incur income tax at the normal rate except in limited, prescribed circumstances.

Under Malta law, retirees can begin withdrawing distributions from the age of 50 and earn an initial lump sum payment of up to 30% of their pension fund tax-free. Under the terms of the US-Malta Tax Treaty, distributions that are non-taxable under Malta law are also non-taxable in the United States, facilitating considerable tax breaks for US investors.

4. There is no earnings cap on Malta Pension Plan investors

Moreover, with Roth IRAs, investors who use the single filing status are subject to a $139,000 earnings cap for the 2020 tax year, rising to $206,000 for couples filing jointly.

Under the terms of the US-Malta Income Treaty, these earning caps do not apply, making MPPs particularly attractive to high-net-worth US taxpayers.

5. Malta Pension Plans offer unparalleled flexibility

UBTI rules do not apply to MPPs, meaning that investors are not constricted by the transaction rules and limits applied to Roth IRAs.

Hailed as the new, supercharged Roth IRA, MPPs offer optimal tax-saving potential with none of the limitations of traditional retirement saving vehicles, enabling high-income US taxpayers to invest non-cash assets directly into their pension pot, without liquidating them first and avoiding capital gains liabilities.

Therefore, MPPs are an ideal tax deferment vehicle, facilitating tax-free distributions from the age of 50 with none of the contribution and earning limitations imposed by traditional and Roth IRAs. Little wonder that financial experts across the United States are recommending the MPP as the pension plan of choice.

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