MALTA Law and Practice Contributed by: Rosanne Bonnici and Rebecca Diacono, Fenech & Fenech Advocates
Insofar as the transfer of real estate located in Malta or of real rights thereon, is concerned, the default rate is 5% of the value or the consideration, whichever is higher. Several provisions in the law cater for a reduction in the quantum brought to charge or out - right exemptions, mostly targeting transfers between family members, such as the transmission upon death of the residential property occupied by the deceased at the time of death to their children. 1.3 Income Tax Planning There are limited opportunities for income tax plan - ning. A number of these opportunities arise from the transfer of assets subject to capital gains tax or prop - erty transfer tax and the transfer duty due from the owner of such assets, into companies, trusts or foun - dations during said owner’s lifetime, for the benefit of future generations. Article 4A of the ITA provides for a so-called step-up in the value of capital assets, which is applicable to persons (individuals and entities alike) who become resident or domiciled in Malta, subject to said person having never been domiciled or resident in Malta at any point in time prior to the change in question. In such cases, said person shall have a right to obtain a step-up in the value of all assets to market value upon relocation to Malta. 1.4 Pre-Immigration and Exit Planning As Malta operates a remittance-basis tax system for individuals who are resident but not domiciled in Malta, individuals seeking to relocate to Malta should always ensure that they segregate their foreign funds into foreign-sourced income and foreign-sourced capital prior to relocating and never mix the two. This allows individuals to retain a clear audit trail of the funds remitted to Malta and their source. Malta does not currently impose an exit tax on indi - viduals leaving Malta. 1.5 Taxation of Real Estate Owned by Non- Residents and Non-Citizens No taxes are levied on the owners of real estate in Malta. Tax is levied in the form of tax on capital gains or property transfer tax on transfers of real estate –
likewise transfer duty – subject to several exceptions and exemptions. 1.6 Stability of Tax Laws Maltese tax laws offer a significant level of stability, having been subject to relatively few changes over the last few decades, with the majority of the amend - ments being those harmonised at EU level. This has also been the case with the laws affecting the tax rules applicable to high net worth individuals, trusts, foun - dations and estates in general. 1.7 Transparency and Increased Global Reporting Malta has transposed the EU Directive on administra - tive co-operation in the field of taxation (DAC) and all amendments thereto (including the Common Report - ing Standard and the Tax Intermediaries Directive (DAC6)) into domestic law. The US Foreign Account Tax Compliance Act has also been transposed into Maltese law, with intermediaries being required to report financial account information to the US authorities. Following the CJEU judgment in Joined Cases C - 37 / 20 Luxembourg Business Registers and C - 601 / 20 Sovim , beneficial ownership information for companies is no longer publicly available. However, subject persons registered with the Malta Business Registry may still access this information. 2. Succession 2.1 Cultural Considerations in Succession Planning Over the past few years, there has been an increase in the number of families wishing to plan the succession of their family businesses. This has led to the introduc - tion of the Family Business Act, which establishes a regulatory framework for registered family businesses (as defined), catering, inter alia, to several fiscal incen - tives to facilitate a successful business transfer dur - ing the owners’ lifetimes and to post-transfer support measures.
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