The Duty on Donations of Marketable Securities and Immovable Property Used for Business (Exemption) Order, 2017 (L.N. 131 of 2017) was passed on 2 May 2017, whereby a reduced rate of duty for intra-family donations of company shares and immovable property used within a family business was introduced to Maltese legislation.
The Order effectively provides for the reduction of the standard rate of duty applicable to the transfer of company shares from 2% or 5%, down to 1.5% where such a transfer constitutes a donation to a qualifying family member (spouse, descendants and ascendants in the direct line and their relative spouses, or in the absence of descendants, brothers and sisters and their descendants) of the donor.
This reduced duty rate of 1.5% will also be applicable to the donation of immovable property that was used as “business property” (as defined in the Family Business Act) for a period of at least 3 year preceding the donation. In this case, the donor must provide the notary with a report, prepared by a CPA, assuring that the business property was in fact in use by the business for that 3 year period.
The reduced duty rate of 1.5% will only be applicable to donations that are made from 1st April 2017, up until 1st April 2018, and where the appropriate schedules provided for under the Duty on Documents and Transfers Rules are delivered to the Commissioner for Revenue (who may request further information) by 31st May 2018. In order for the reduced rate to be availed of, the donation must have been made by public deed.
Where the person receiving the shares/property by donation transfers such shares/property within a period of 3 years immediately following the donation, the relief provided through the reduced duty rate shall be forfeited. Forfeiture will also occur where the business property is not used within a business carried on by the done for a period of3 years immediately following the donation.
Where forfeiture occurs, the duty that would have been chargeable had no relief been applicable will become the duty chargeable. In this case, the excess of the amount of the duty so chargeable over the amount of duty that was paid on deed of that donation shall become payable.
A copy of the Order can be obtained by clicking here. Should you require any assistance in this regard, please contact us on firstname.lastname@example.org.