MALTA Law and Practice Contributed by: Rosanne Bonnici and Rebecca Diacono, Fenech & Fenech Advocates
2.6 Transfer of Assets: Vehicle and Planning Mechanisms Capital gains tax and transfer duty are both levied on a very limited number of assets (see 1.1 Tax Regimes ). In addition, the ITA provides a number of generous exemptions from capital gains tax that act as incen - tives for asset owners to transfer their wealth to the younger generations tax-free. One such exemption covers donations of all chargeable assets to an indi - vidual’s children and grandchildren, including dona - tions of immovable property and securities. Along similar lines, the DDTA provides for a number of exemptions and reduced rates of transfer duty for transfers of assets during an individual’s lifetime and upon death. Since the exemptions and reduced rates of capital gains tax and transfer duty are already quite gener - ous, this may make the need for complicated succes - sion plans slightly redundant – unless, for example, an estate is comprised of significant illiquid assets, such as immovable property, the inheritance of which on the owner’s death will trigger a high transfer duty bill that the heirs would need to not only pay but also potentially finance. In such instances, succession planning that achieves a measure of tax deferral may be useful, if only from a cash flow point of view. This is where trusts and foundations may come into play, keeping in mind that a foundation may also be set up with a number of cells, each of which constitutes a separate patrimony of assets and liabilities, and to which individual assets may be allocated in order to be administered for one or more specific beneficiaries of the foundation to the exclusion of the others. The ITA caters for a number of exemptions from capital gains tax on the settlement of chargeable assets on trust, and likewise on the endowment of such upon a foundation, in either instance when such is set up for the benefit of, inter alia, the settlor/founder’s children and grandchildren. 2.7 Transfer of Assets: Digital Assets There is no hard and fast rule regarding the manner in which digital assets are to be treated for succession purposes, as the matter is not currently regulated in Malta.
A decision of a foreign court on the status of a married person, or affecting such status, shall be recognised in Malta. The decision must have been handed down by a competent court of the country in which either of the parties to the proceedings is domiciled, or of which either of the parties is a citizen. However, this is subject to Council Regulation (EU) 2016/1103 on implementing enhanced co-operation in the area of jurisdiction, applicable law and the rec - ognition and enforcement of decisions in matters of The donation of immovable property to an individual’s spouse, descendants in the direct line or ascend - ants in the direct line, or to an individual’s siblings or their descendants in the absence of ascendants and descendants in the direct line, is exempt from capi - tal gains tax in the hands of the transferor in Malta. However, transfer duty is still payable on any such donation. On a subsequent transfer of that property, the donee is deemed to have acquired the property on the date it was originally acquired by the donor. If the transfer is made more than five years after the date of donation, the transferor may either: • opt to be taxed at 12% of the excess, if any, of the transfer value over the market value; or • pay property transfer tax (ranging from 8% to 10%) on the transfer value of the property. These conditions apply solely where the property does not form part of a project, as defined. matrimonial property regimes. 2.5 Transfer of Property If the transfer is made less than five years after the date of donation, the transfer is not subject to capital gains tax but the transferor is to pay property transfer tax. Accordingly, the transferor shall pay a final with - holding tax (again ranging from 5% to 10%) on the transfer value of the property so transferred.
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