Promoter structures library
Malta Pension Plans
Sold as: "Malta pension plan", "treaty-based retirement scheme", "tax-free forever under Article 17"
The treaty protects a pension funded with cash out of a salary. It does not protect a container you dropped appreciated stock into.
Classification A. There is no compliant way to do this as it is marketed.
The pitch
Contribute appreciated stock or business interests to a Maltese pension scheme with no earned-income limit and no contribution cap, let the plan sell them, and take distributions tax-free forever under Article 17 of the treaty.
How the structure works
Contribute HIGHLY APPRECIATED NON-CASH assets (stock, business interests, real estate) to a Maltese personal retirement scheme with no earned-income limitation and no contribution cap. The plan sells the assets. Distributions are claimed exempt under Article 17 of the U.S.-Malta treaty.
Where it breaks
The U.S.-Malta Competent Authority Agreement of December 21, 2021 confirmed that a qualifying pension fund must accept CASH CONTRIBUTIONS ONLY and must LIMIT CONTRIBUTIONS BY REFERENCE TO EARNED INCOME from personal services. Most U.S.-promoted Malta plans failed one or both, eliminating treaty protection. See also Notice 2021-17.
The way back into compliance
IRS Voluntary Disclosure Practice, typically a single 75 percent fraud penalty on the highest year but unavailable once the IRS learns of it. Streamlined Filing Compliance Procedures at 5 percent, non-willful only. Qualified amended returns. Or no action, with a long or unlimited statute given omissions and unfiled information returns.
What it costs you if it is wrong
Sec. 6707A if it were a listed transaction. Form 3520 and 3520-A failures up to 35 percent of the transfer and 5 percent of trust value annually. Form 8938 10,000 dollars per year. FBAR 10,000 dollars non-willful to 50 percent of balance willful.
Red flags specific to this structure
- The contribution is appreciated stock rather than cash
- There is no cap tied to earned income
- You do not work in Malta and never have
- Forms 3520, 8938, and the FBAR are not part of the plan
Questions to ask the person selling this
Take these into the next meeting. Someone selling the legitimate version answers them without difficulty.
- 1Is the contribution cash, or appreciated property?
- 2Is there a cap tied to my earned income from personal services?
- 3Do I work in Malta?
- 4How does this survive the 2021 Competent Authority Agreement?
- 5Who files Forms 3520, 3520-A, 8938, and the FBAR?
Which of the Seven Markers this trips
'The IRS has never listed this'
The legitimate version
A U.S. person genuinely employed abroad participating in a bona fide foreign pension recognized under an applicable treaty.
What distinguishes it
- Contributions are CASH, tied to salary, and within local caps
- The client actually works in that jurisdiction
- Properly reported on Forms 8938, 3520, and FBAR
Reporting status
PROPOSED ONLY. Prop. Reg. 1.6011-12 (REG-106228-22, June 7, 2023). NEVER FINALIZED and absent from the 2025-2026 Priority Guidance Plan.
Holding one of these, or being pitched one?
The diagnostic work is worth doing before the return gets filed rather than after. That is a conversation, not an engagement.
Schedule a complimentary consultation