The Internal Revenue Service (IRS) is looking into Malta-US pension plans and has put them on its so-called ‘Dirty Dozen’ scam list.
The IRS said that some US citizens are relying on an interpretation of the US-Malta Income Tax Treaty to “take the position that they may contribute appreciated property tax free to certain Maltese pension plans and that there are also no tax consequences when the plan sells the assets and distributes proceeds to the US taxpayer.”
The American regulator is now worried that people are using such pension schemes to avoid paying tax.
It continued: “Ordinarily, gain would be recognised upon disposition of the plan’s assets and distributions of the proceeds.”
As a result, the IRS is assessing whether these arrangements are valid and whether the benefits that the treaty brings should be available. This may result in a challenge of the tax treatment, the regulator added.
The Maltese government said it is ready to tighten up its policies, if needed.
A spokesperson told local newspaper Times of Malta: “Without going into the merits of this particular issue, since broader analysis is entailed and ongoing, I can confirm that Malta is, as always, ready to discuss, support and implement any strengthening of policies that would lead to an improved and fairer framework for all.”
Commenting on the schemes present on the list, which include the US-Malta pension plans, IRS commissioner Chuck Rettig said: “We are stepping up our enforcement against abusive arrangements. Don’t be lulled into these shady deals. The IRS recommends that anyone who participated in one of these abusive arrangements should consult independent counsel about coming into compliance.”
