US Malta Pension Plan
Table of Contents
A US-Malta Pension refers to a Maltese personal retirement scheme once marketed as a tax loophole for US taxpayers, but since 2021, the IRS has ruled that these schemes do not qualify for treaty benefits.
What is a “US-Malta Pension” and how did the treaty open this door?
A “US-Malta pension” usually means a Maltese personal retirement scheme that some advisors pitched to US taxpayers as a way to move appreciated assets into a foreign retirement plan, let them grow with low current tax, and later take distributions with little US tax.
The sales pitch leaned on the US-Malta tax treaty, arguing these schemes counted as “pension funds” that deserved favorable treatment.
Why did this get traction?
The treaty became effective for most items in 2011. After that, promoters read certain pension articles as broadly as possible and said a Maltese scheme could accept big contributions, even in kind, and still qualify for treaty benefits.
For a while, that messaging spread, and you may still see older marketing pages about a US-Malta Pension that sound generous.
What changed later?
In 2021, the US and Malta issued a Competent Authority Arrangement that narrowed what “pension fund” means for treaty purposes. The arrangement said those widely marketed Maltese personal retirement schemes don’t fit the treaty pension box for US taxpayers. From that point, the central planning idea began to fall apart.
Is there anything a normal expat needs to remember here?
Yes. Malta has legitimate retirement products. The risk isn’t Malta in general. It’s the specific strategy of using a Maltese personal retirement scheme to sidestep US tax by calling it a treaty-protected pension when the current interpretation says it isn’t.
Is a Malta Pension legal for us taxpayers today, or effectively off-limits?
The marketed version is effectively off-limits now.
- IRS warnings: Malta scheme variants have appeared in “Dirty Dozen” alerts as abusive arrangements to avoid.
- Treaty interpretation (2021): the US-Malta Competent Authority Arrangement narrowed the scope of what counts as a pension fund for treaty benefits, closing the door promoters were using.
- Listed-transaction proposals: Treasury and the IRS have proposed treating certain Malta personal retirement scheme transactions as listed transactions. Once finalized, they bring mandatory disclosure and steep penalties for missing forms.
- Enforcement posture: civil examinations are active, and Criminal Investigation has shown interest where promoters or taxpayers pushed aggressive fact patterns.
Is any Malta setup still okay?
Having a bona fide foreign pension is not illegal. The problem is claiming treaty pension treatment for a scheme the current interpretation says isn’t a treaty pension for US purposes. If you follow normal US rules for foreign plans and report them properly, that’s a different path than the old marketed idea.
I already used one. What should I do now?
- First question: did you contribute appreciated assets or take tax-favored distributions relying on the treaty?
- Answer and action: if yes, speak with a US international tax adviser. You may need to correct returns, evaluate penalties and defenses, and consider protective disclosures. Keep copies of plan documents, contribution records, valuations, and any distribution statements.
What filings might be involved while you unwind or get current?
Expect the usual foreign reporting where thresholds are met: FBAR for accounts, FATCA Form 8938 for specified assets, and any income recognition under US rules. If the listed-transaction rules are finalized and your facts fit, you may also have reportable-transaction filings. Your tax adviser will map out which forms apply in your case.
How does the US tax a Malta Pension now (contributions, growth, distributions)?
The US generally taxes a Malta pension under normal US rules today, which means contributions, inside growth, and distributions can all be taxable to the US person because broad treaty relief is no longer available.
In practice, that’s why the old “tax-free cash-out” marketing is at risk.
How are contributions treated now?
If you transfer assets or cash into a Maltese personal retirement scheme, there’s usually no US deduction and a transfer of appreciated property can trigger US gain. Think of the contribution as a funding step that doesn’t create a US tax break just because the destination is a Malta plan.
What about growth inside the plan?
Absent treaty protection, ongoing income and gains inside the scheme may be taxable each year to the US participant, depending on how the arrangement is structured. If the plan holds pooled funds or companies, you can also run into PFIC or controlled-foreign-company issues. This is the practical angle of US taxes on a malta pension how it works today.
How are distributions taxed?
Without the treaty benefits promoters once relied on, distributions are often taxable under normal US rules. Basis tracking matters: if you previously recognized income on funding or on annual growth, keep clear records so you don’t get taxed twice on the same dollars.
What changed the landscape?
After the US-Malta competent authority arrangement narrowed what counts as a treaty “pension,” many claimed exemptions no longer apply to personal retirement schemes.
That’s why the planning space has shifted from “preferential” to “proceed with caution.”
Can I still rely on the treaty for a personal retirement scheme?
No, not in the broad way marketing once suggested.
Is any Malta retirement product acceptable for a US person?
A legitimate foreign plan can exist, but don’t assume US tax deferral or exempt distributions. Model US tax as if no treaty break applies, then confirm with documentation.
Need help with US taxes abroad? Contact us today.
Do I have to report a Malta Pension on my US return (and which forms)?
US taxpayers with a Malta pension must usually report it on Form 8938 and FBAR, and possibly on Forms 3520, 3520-A, or 8621 depending on structure.
Which forms show up most often?
- Form 8938 (FATCA): Report the interest in the Maltese scheme as a specified foreign financial asset when you exceed the filing thresholds. This is the core of Form 8938 and FBAR for Malta pension accounts.
- FBAR (FinCEN 114): If you have signature authority or a financial interest and the aggregate of non-US accounts tops US$10,000 at any point in the year, include the plan’s cash or custody accounts.
- Forms 3520 and 3520-A (possible): If the structure is treated as a foreign trust with a US owner or beneficiary, you may have annual owner and trust filings. This depends on the plan documents and who effectively controls or benefits from the assets.
- PFIC reporting (Form 8621) (possible): If the scheme holds non-US funds, PFIC reporting can be required for the US person each year.
How do I keep filings aligned so nothing conflicts?
- One master summary: list the legal name of the scheme, registration number, the administrator, and any underlying accounts. Use the same naming on every form.
- Balances and dates: tie the highest balance on FBAR to the year-end and peak balances shown on Form 8938 and any trust statements.
- Income mapping: keep a worksheet that shows what income you picked up in the US return (interest, dividends, gains) and what remains as untaxed basis.
- Documents to save: plan deed, annual statements, contribution records, valuation reports, and any adviser memos explaining the structure.
Do I file even if I think nothing is taxable?
Yes, information returns can still be required even when no current US income is recognized.
What’s the fastest way to avoid mismatches?
Pick a single exchange-rate source for the year, lock in consistent account names, and reconcile totals across the tax return, Form 8938, FBAR, and any 3520/3520-A. If you later unwind the arrangement, keep a closing packet with the final valuation and distribution details so basis and income tie out cleanly on the US side.
Malta Pension vs IRA: What’s the real difference for US tax results?
What’s the core difference?
A US IRA or 401(k) is a qualified plan under US law. A Malta pension is a foreign arrangement. That alone changes how contributions, growth, distributions, and reporting work for US tax.
How do contributions compare?
- IRA/401(k): contributions may be deductible or pre-tax, within US limits.
- Malta pension: contributions are not deductible for US tax. If you contribute appreciated assets, you can trigger US capital gain at the time of transfer.
What about investment growth?
- IRA/401(k): earnings are tax-deferred until withdrawal.
- Malta pension: there is no automatic US deferral. Income and gains inside the scheme can be taxable each year to you. If the plan holds foreign funds, PFIC reporting may apply.
How are distributions taxed?
- IRA/401(k): withdrawals are taxed under clear US rules, with basis and penalties handled by statute.
- Malta pension: payouts do not get IRA treatment just because it is called a pension. Without treaty relief, distributions are usually taxable under normal US rules, and you need good basis records to avoid double tax.
What about paperwork?
- IRA/401(k): no foreign asset reporting.
- Malta pension: expect Form 8938 and FBAR if thresholds are met, and possibly Forms 3520/3520-A if the structure is trust-like, plus Form 8621 if PFICs sit inside.
What should you do if you set up, or were pitched, a Malta Pension?
Is a Malta pension legal for US taxpayers?
The marketed Malta personal retirement schemes are now considered off-limits for US taxpayers under IRS guidance.
What is the first step if you are involved or considering one?
Pause new contributions. Do not add cash or in-kind assets until you understand your US position.
What documents should you gather right now?
Plan deed and adoption documents, contribution records, statements, any valuations, a list of underlying investments, and the emails or memos used to justify the tax treatment.
How do you assess your exposure quickly?
- Treaty reliance: write a short note on which treaty article you relied on, then compare it to post-2021 guidance.
- US tax modeling: check if contributions triggered gain, whether annual income must be picked up, and how distributions would be taxed. Flag PFIC exposure if the plan holds offshore funds.
- Reporting map: line up Form 8938, FBAR, and if the setup is trust-like, Forms 3520/3520-A. Add Form 8621 if PFICs are present.
What if you already took distributions or filed using the old narrative?
Talk to a US international tax adviser. You may need amended returns, penalty mitigation for missed information returns, and a plan to reconcile basis so you are not taxed twice. If listed-transaction rules become final and your facts fit, be ready to file the required disclosures.
What does an action plan look like?
- Stop new funding and collect documents.
- Model US tax by year for contributions, growth, and payouts.
- Prepare a clean reporting package: FBAR, Form 8938, 3520/3520-A if needed, and 8621 where applicable.
- Decide to continue, unwind, or amend, then set dates and responsibilities.
- Keep a single worksheet with account names, highest balances, exchange rates, and basis. Use the same labels across every form to avoid mismatches.
FAQs
Can I roll a Maltese personal retirement scheme into a US IRA or 401(k)?
No. US law doesn’t allow rollovers from foreign personal retirement schemes into US-qualified plans, so you generally must withdraw or liquidate under normal US tax rules.
Did the 2021 US-Malta Competent Authority Arrangement “grandfather” older setups?
If I shut the Malta plan now, do penalties or past US taxes go away?
Are employer pensions in Malta treated differently from personal retirement schemes?
What are quick red flags of an abusive Malta pension pitch?
