Pension Funds — Maltese Pension Funds, IRS Scrutiny & More
What This Video Covers
Maltese pension funds appear on the IRS “Dirty Dozen” list of tax scams — but the story is more nuanced than that designation suggests. Malta is a legitimate financial jurisdiction, and the funds themselves are not inherently illegal. The IRS’s objection is specific: it disagrees with the classification of these arrangements as pension funds entitled to the same tax deferral benefits as U.S. retirement accounts.
This video explains what Maltese pension funds are, why the IRS has targeted them, what your actual reporting obligations are if you participate in one, and why the answer to “is this legal?” depends heavily on how the arrangement is structured and disclosed.
Key topics addressed include:
- What a Maltese pension fund is and how it differs from a U.S. pension arrangement
- Why the IRS has placed these funds on its Dirty Dozen list
- The distinction between the fund itself being legal and the tax treatment being disputed
- FATCA and FBAR reporting obligations for foreign financial arrangements
- The difference between improper use of a Maltese fund and proper disclosure
- When to consult a tax professional before claiming pension treatment
Why This Matters
The IRS Dirty Dozen list includes two categories of items: arrangements that are outright fraudulent, and arrangements that are technically legal but that the IRS believes are frequently misused. Maltese pension funds fall into the second category. The fund itself is not the problem. The problem is the claim that contributions to a Maltese fund should receive the same tax deferral treatment — the same ability to defer income and grow assets without current U.S. taxation — as contributions to a qualified U.S. pension plan. That is the position the IRS rejects.
Malta has a bilateral tax treaty with the United States, and some promoters have structured these arrangements by arguing that the treaty entitles U.S. participants to treat the Maltese fund as a pension for U.S. tax purposes. The IRS has taken the position that this interpretation is incorrect and that the treaty does not support deferral treatment for U.S. taxpayers participating in these funds.
About the Presenter
Benjamin A. Goldburd, Esq.
Goldburd McCone LLP
Benjamin brings focused experience in IRS collection defense, including lien and levy disputes, CDP hearings and negotiated resolutions. Our team’s combined backgrounds in accounting, business and wealth management ensure that enforcement responses account for the full scope of a client’s financial position.
Frequently Asked Questions About Maltese Pension Funds & U.S. Taxes
Are Maltese pension funds illegal?
Not inherently. The funds exist lawfully under Maltese law, and having money in one is not itself a violation of U.S. law. The IRS’s objection is to the tax treatment — specifically, the claim that these funds qualify for the same deferral benefits as U.S. pension plans. If you participate in a Maltese fund without claiming improper deferral, and you report the account correctly under FATCA and FBAR rules, you are not necessarily doing anything wrong. The arrangement becomes problematic when it is used to defer U.S. income tax in a way the IRS says the law does not permit.
What are my FATCA and FBAR obligations if I have a Maltese pension fund?
Foreign financial accounts — including foreign pension arrangements — must generally be reported on FinCEN Form 114 (FBAR) if the aggregate value of your foreign accounts exceeds $10,000 at any point during the year. FATCA reporting on Form 8938 applies at higher thresholds. Failure to file these reports carries significant penalties — up to $10,000 per violation for non-willful failures and substantially higher for willful failures. If you have a Maltese fund and have not been reporting it, addressing that gap promptly and with legal counsel is essential.
What should I do if I already claimed pension deferral treatment for a Maltese fund on prior returns?
Consult a tax attorney before doing anything else. The options — whether to amend prior returns, pursue voluntary disclosure, or defend the existing position — depend on the specific facts of your arrangement, the amounts involved, and whether the IRS has already initiated any contact. Coming forward voluntarily before the IRS audits generally produce better outcomes than waiting. The privilege that attaches to your communications with an attorney also protects the assessment process in a way that communications with an accountant or the original promoter do not.