Family Business

Reduction on tax on business inheritance comes into force

Reduction on tax on business inheritance comes into force

The Family Business Act (the “Act”) came in to force in January 2017 with the aim of facilitating the transfer of family businesses from one generation to the next with the hope of addressing significant succession planning issues. The legislator sought to achieve this result through the introduction of various financial incentives. By virtue of the Duty on Donations of Marketable Securities and Immovable Property Used for Business (Exemption) Order, 2017 (the “Order”) the legislator has introduced some appealing incentives for family businesses.

In virtue of the amendments brought into force by this Order, family businesses can now benefit from a reduced rate of duty for certain transfers which take place on or after 1 April 2017 but prior to 1 April 2018.

Individuals transferring marketable securities in a company by gratuitous title to a spouse, descendants and ascendants in the direct line and their relative spouses, or in the absence of descendants, to the individual’s brothers or sisters or their descendants can now benefit from a reduced transfers duty rate of 1.5%.

Anyone availing himself or herself of the aforesaid reduced duty rate will not be entitled to any other exemption or relief from duty on the same transfer. The Order also includes clawback provisions providing for circumstances where the conditions prescribed in the Order are not adhered to in the three (3) year period immediately following the gratuitous transfer.

Family owned businesses are the motor of Malta’s economy, with over 90% of all businesses being SMEs and the vast majority being family run. As such, the introduction the introduction of this measure reducing the duty rate on family business transfers by 3.5% is expected to facilitate estate and succession planning for family and closely held business.

 

How can we help?

Grant Thornton can help the individual transferring the business property with the preparation of the report, required by the notary publishing the deed of such transfer, giving assurance that the business property being transferred by gratuitous title has been used in a family business as defined in the Family Business Act for a period of at least three (3) years preceding the transfer.

By engaging with our team of professionals providing business and tax advisory services, you can be confident that our team of experts 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.

Our extensive experience serving the unique issues and needs of hundreds of family businesses in Malta and worldwide has made Grant Thornton an indispensable partner for family enterprises concerned with creating the strongest possible future for both business and family.

To learn more about our comprehensive approach to succession & continuity planning, contact us.