Malta enacts Family Business Legislation

  • By:Corrieri Cilia Legal
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On the 1 January 2017, the Family Business Act entered into force, with the purpose to encourage the regulation of family businesses, their governance and the transfer of the family business from one generation to the next. The aim of the incentive is to support and assist family businesses and the transfer thereof from one generation to another by granting governance and fiscal benefits.

Families businesses are given an identity, which will permit the family businesses to further expand in the sector and grow to reach their aims. The key fiscal incentives include the rate of stamp duty on the value of the immoveable property on the first €500,000 will be at a reduced rate of 3.5% instead of 5%. The property benefitting from the beneficial rate shall be used by the members of the family or else by the family business for at least three years, starting from the date of transfer whereby the reduced rate of stamp duty is applicable.

In situations whereby the property is relocated and substituted within one year by an alternative property which is used for identical purposes, the duty imposed on the replacement shall be reduced by the stamp duty payable on the transfer of the property.

The Family Business Act provides that a family business can qualify for registration as such whether it is set up in the form of a public limited liability company, a private limited liability company, a registered partnership or a trust.

In the case of a public limited liability company, the majority of the shares must be owned by at least two owners who are family members in the same family.

In the case of a private limited liability, all the shares must be held 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, proper administration and management of the company.

In the case of a trust all the shares or the interest must be held by a trustee under trust for the benefit of members of a family as beneficiaries, and which has been established by a written instrument and all the beneficiaries are owners and family members within the same family.

This measure is intended to be offered until 31st December 2020.

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Posted in: Maltese Tax Law