Transfer of an asset attracts duty on documents. The duty owed by the transferee shall be calculated on the value of the asset being transferred. The percentage of duty owed depends on the nature and to a certain extent origin of the asset being transferred. The obligation for duty on the transfer of an asset stems out from the duty on documents and transfers act, Chapter 364 of the laws of Malta.
A transfer of both marketable securities and immovable property puts an obligation on the individual acquiring the asset being transferred. The transfer of shares whether inter vivos or by transmission causa mortis is subject to Duty on Documents and Transfer Tax at the rate of 2% on the value. The rate of 5% is however levied on the transfer of shares in an immovable property company. It is worth noting that the transfer of immovable property whether inter vivos or by transmission causa mortis is subject to Duty on Documents and Transfer Tax at the rate of 5% on the market or transfer value of the immovable property whichever is the higher.
By virtue of Legal Notice 131 of 2017, the legislator has reduced the duty applicable to transfer of company shares for intra-family donations from 2% or 5% to 1.5%. This reduced rate is applicable in cases where the donations are made by individuals to qualifying family members. A qualifying family member would be one’s spouse, descendants and ascendants in the direct line and their relative spouses or in absence of descendants to his brothers or sisters and their descendants.
This rate is also applicable for intra-family donations of business immovable property which was used in a family business for at least three years prior to the donation.
This legal notice sets a timeframe of applicability, that is, the reduced rate is applicable only for donations effected through a public deed between the 1st of April 2017 and the 31st of March 2018, provided that the applicable schedules prescribed under the Duty on Documents and Transfers Rules are delivered to the Commissioner for Revenue by the 31st of May 2018.
The legislator sets a condition to such a benefit whereby the reduced duty rate shall be forfeited where the acquirer transfers the donated shares or the donated business property to third parties within three years from the donation. Another cause bringing about the forfeiting of such a benefit would be where the business property is not used for business purposes within the first three years from the date of donation.