Incentives for Maltese family businesses

Family business always had a pivotal role in the economic growth of any nation, and Malta makes no exception, with over 75% of businesses being family-owned.

By means of ACT No. XLVIII of 2016, the Parliament of Malta has enacted the Family Business Act, Chapter 565 of the Laws of Malta, in order to allow businesses to structure and become regulated, and acquire the status of family business with the opportunity to benefit from such structure and identity. The Act provides for other assistance to registered family businesses in terms of the Duty and Documents Transfers Act, Malta Enterprise Act and Business Promotion Act.

A family business can qualify for registration if the business is established in Malta and:

1. In the case of a Public limited liability company whose shares are listed on a regulated market or traded on a multilateral trading facility, the majority of the shares including  the  rights  are  held,  whether  directly  or indirectly,  by  at  least  two  owners  who  are  family members within the same family; or
2. in the case of a limited liability company all the shares of the company are held, directly or  indirectly,  by  at  least  two  owners  who  are family members within the same family, and at least one family member is formally involved in  the  general  governance,  its  proper administration and management of the company; or
3. in  the  case  of  partnerships the  full  capital  contribution  to  the  partnership shall have been made, directly or indirectly, by at  least  two  owners  who  are  family  members within  the  same  family  having,  directly  or indirectly, the right to receive the majority of distributable profits; and at least one of whom holds the majority of the decision making rights

Incentives for Maltese family businesses

Once a family business is recognized and regulated under the Act, the company can further avail of the following incentives:

• BANK FINANCING: both Bank of Valletta and Malta Development Bank have made available loan debt financing up to a value of €750,000;

• TRANSFER OF IMMOVABLE PROPERTY: when transferring a family enterprise, duty on immovable property shall be chargeable on the first €500,000 of the value of the property transferred at the rate of €3.50 per €100.00;

• TRANSFER OF SHARES INTEREST: upon transferring of shares, interests in a partnership, trust or foundation no account shall be taken of the first one hundred and €150,000 or such other greater amount;

• ADVISORY SERVICES: legal, notarial, and accountancy advisory services of €2,500 annually over five years up to a maximum of €12,500 for the purposes of assistance in the succession or business transfer of a family enterprise;

• MICRO INVESTMENT: of a maximum tax credit of €70,000 over a three year period;

• EDUCATION AND TRAINING: for business owners and their employees of up to €1,000 annually per family enterprise;

• MICRO LOAN GUARANTEE: of up to €500,000 per business with the aim of acquiring the enterprise or parts thereof;

• ARBITRATION: of up to five sittings with a value of €2,500 with the aim to establish the fair value of a business.

Intra-family donations

Apart from the aforementioned measures the Duty On Donations of Marketable Securities and Immovable Property Used For Business (Exemption) Order, allows donations of marketable securities and business property used in a family business, to be subject to a reduced duty rate of 1.5%, from the standard 2% or 5%.

The incentive (which has been extended to run until 1 January 2022) can be applied on the transfer of properties used for conducting business activities and which have been used for commercial purposes. It can also be applied for intra-family donations of company shares and other types of marketable securities.

Qualifying family members include one’s spouse, descendants and ascendants in the direct line as well as their relative spouses. In the absence of descendants, donations to brothers or sisters, and their descendants, are allowed. Individuals choosing to avail themselves of this benefit must hold on to the marketable securities for a period of at least three years after the donation. Likewise, the immovable property must not only be retained by the donee but also continue to be used within the business.

Get in touch with us now

We encourage family businesses to get in touch with our experts to find out more about how to avail themselves of this reduced rate. Grant Thornton can help with the preparation of all required documentation including the deed of transfer, obligatory reports, and filings.

You can be confident that our team of professionals will work with you to assist with your family business planning requirements. We believe that succession planning is an ongoing process that includes critical decisions as well as careful planning and preparation in order to successfully transition ownership, leadership, and management of the business and the family's assets to successive generations.

Get in touch to find out more or for a no-obligation meeting.