By virtue of a legal notice issued on 2nd May 2017, a reduced rate of duty of 1.5% in connection with intra-family donations of shares in a Maltese company and immovable property used within a family business, has been introduced in Malta.
This incentive follows the recent enactment of the Family Business Act … and further bolsters Malta’s efforts to incentivise and preserve Malta’s vast family business sector
Accordingly, the new reduced rate is applicable as follows:
- The standard rate of 2% or 5% (as the case may be) applicable to the transfer of shares in a Maltese company shall be reduced to 1.5% for donations by individuals to qualifying family members (i.e. the transferor’s spouse, descendants and ascendants in the direct line and their relative spouses or in the absence of descendants to his/her brothers or sisters and their descendants).
- The aforementioned rate of 1.5% shall be applicable to intra-family donations of ‘business (immovable) property’ which has been used in the family business for at least three years prior to its donation to a qualifying family member.
- The reduced duty rate of 1.5% shall only be applicable to donations effected between 1st April 2017 and 31st March 2018, and provided that the applicable schedules prescribed under the Duty on Documents and Transfers Rules are delivered to the Commissioner for Revenue by no later than the 31st May 2018.
- The benefit of the reduced duty rate of 1.5% would be forfeited (and the standard duty rates would be applicable) if the donee transfers the donated shares or business property to a third party within 3 years from the intra-family donation, or if the business property is not used as such within 3 years from the said donation.
This incentive follows the recent enactment of the Family Business Act in January 2017 which was introduced with the aim of, inter alia, encouraging the regulation of family businesses, their governance and the transfer of the family business from one generation to the next, and further bolsters Malta’s efforts to incentivise and preserve Malta’s vast family business sector.