Category: Business

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The FAMILY BUSINESS ACT (Chapter 565)

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This Act is the first of its kind in Europe and is intended to address the various needs of family businesses. The Ministry of the Economy, Investment and Small Business of the Government of Malta created this Act to encourage the regulation of family businesses and their governance. Furthermore, it aims to assist family businesses to operate their in an efficient way and work towards a successful transfer of business from one generation to the next.

Some of the key aspects of the Act is the formal

definition of what constitutes a family business and a family member. A business shall only be registered as a family business once it has been accepted for registration by the Regulator and, a business shall be disqualified if it has not been actively trading or in operation without interruption for a minimum period of at least three consecutive calendar years. According to this Act, no single family member should hold more than 80 per cent of the shares in a family business to qualify for registration.

Prior to this Act, many family businesses in Malta did not succeeded to transfer their family businesses beyond their second generation. The newly enacted Chapter 565 aims to assist and reduce such difficulties for family businesses and their members, to be able to successfully transfer their business from one generation to the next.

The Family Business Act makes it possible for family businesses outside of Malta to register under this Act which in turn means that they will qualify for the incentives as well.  This makes Malta an attractive jurisdiction for the restructuring of Family Businesses wherever the operation may be situated. Also, it is not limited to the limited liability structures only but encompasses unincorporated firms, holding structures and informal partnerships often founded in families. In addition to, the

Maltese law that caters for the redomiciliation, this may be a very useful tool for relocating foreign family businesses to Malta.

Contact us on +356 20103020 or by mail at info@ellulschranz.com to find out how E&S can help you in ‘making things happen’.

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RESIDENT PERMITS ISSUED BY MALTA HIGHEST IN EU COMPARED TO POPULATION

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According to figures released by Eurostat, in 2015 Malta issued the highest rates of first resident permits compared to its population – 23.1 first residence permits issued per thousand population.

 

Malta was followed by:
Cyprus (18.4 permits),
Poland (14.3 permits),
Sweden (11.3 permits),
United Kingdom (9.7 permits).

 

According to Eurostat, increase was mainly due to the higher number of first permits issued in Malta for employment reasons.

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MALTA BUDGET 2017

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The 2017 Malta Budget was presented on Monday 17th October 2016. The Finance Minister noted the economic improvements which the country made over the past year, highlighting specifically the overall economic growth in certain critical sectors.
This document provides for the salient points of the budget 2017.

 

INCOME TAX MEASURES

 

Refund on tax paid on dividends

 

–          Shareholders who receive dividend profit after the 1st of January 2017 from a company listed on the Malta Stock Exchange, shall be entitled to claim a refund on the tax paid on such dividend. This applies to shareholders that do not own more than 0.5% of the nominal share capital and dividend rights of the company.
Malta Stock Exchange

 

–          A maximum credit up to €250,000 per year, in the form of a Risk Investment Scheme, will be granted to individuals or funds that invest in SMEs that are registered as an alternative trading platform, as ‘Prospects’ on the Malta Stock Exchange.

–          An exemption from tax will be introduced upon gains obtained from the sale of shares through a company listed on the Malta Stock Exchange.
Stamp duty

 

–          As of 2017, the stamp duty due on transfer of businesses by parents to their children will be reduced from 5% to 1.5%.
Eco-contribution and excise duty

 

–          Following last year’s removal of eco contribution, further removal of eco contribution has been announced on products such as batteries, mattresses, detergents, toiletries, vehicle filters, kitchen utensils and containers made of plastic. Instead, some of these products will be subject to excise duty.

 

–          An excise duty is being introduced on the following:

– On non-alcoholic drinks, excluding water, equivalent to 2c per litre;

– On materials used in the construction industry such as steel structures, glass and tiles will be introduced;

– On non-bio-degradable plastic bags in order to incentivize waste separation;

– On cigarettes and cigars at an average rate of 3.76% and at a rate of 5.5% with regards to other tobacco products.

 

INCENTIVE FOR START-UPS

 

A start-up company with a turnover of less than €80,000 per year may opt for:

–          Exempting the company from preparing a financial audit report for its first two years; or

–          The company prepares a financial audit report and instead shall be given a tax deduction on the audit fee incurred which will amount up to 120%, on a maximum fee of €700 per year.

 

PROPERTY MEASURES

 

First Time Buyers Scheme

–          First time buyers will be exempted from duty on part of the transfer of immovable property on acquisitions made in 2017.
Refund Scheme for first time buyers regarding restoration of UCA property

–          New schemes intended for first time buyers of immovable property within a UCA or any other property scheduled within one or two grade, will benefit from a refund capped at €100,000 on expenses incurred on restorations.
Stamp duty reduction on Gozo properties

–          Persons who enter into and register a promise of sale agreement by the end of 2017 and purchase a property in Gozo by 2018 will benefit from a reduction of stamp duty from 5% to 2%.
Tax on transfer of inherited property

–          Until today, immovable property that is transferred by means of a judicial sale by is charged as follows:

– 7% final tax charged if the immovable property being transferred was inherited before November 1992

– Property inherited after November 1992 and sold by a judicial sale by auction is subject to 7% provisional tax.

In order to simply the tax collection process and to create more equity between heirs, all inherited property that is to be sold by means of a judicial sale by auction will now be subject to a final tax at rate of 7%.
Registration of rent contracts

–          All property rent agreements for a term of three months or longer, including renewal agreements, need to be registered with the Inland Revenue Department by either the lessor or the lessee. In the absence of such registration the lessor will be subject to penalties, as contemplated by law.
Property Malta

–          In collaboration with Malta Developers Association an entity, Property Malta, will be set up in order to encourage foreigners to live and invest in Malta.
Rent subsidies 

–          Rent subsidies, depending upon the size of the family and the household income, will be doubled from the maximum of €83.33 to a maximum of €166.66 per month.

–          A pilot project will be launched for people leasing their property to families with a low income of a minimum of seven years. The landlords will benefit form a tax rate of 5%. This does not apply to Special Designated Areas.

 

PENSIONS

 

–          As of January 2017, the minimum retirement pension will be increased by €4 per week which will amount to €208 per year.

–          Individuals above the age of 61, with a retirement pension income up to €13,000 will be exempt from income tax. Furthermore, they will be exempt from tax on any income up to a maximum of €1,000.

–          Individuals above the age of 75 and that still live in their home, will receive a grant of €300 per year.

–          Disability pensions shall be increased.
Private Pensions Scheme by employers

–          A tax credit will be granted to employers that contribute and invest in a private pension scheme, on behalf of their employees.

 

TRANSPORT

–          Any person that attains the age of 18 in 2017 will be given one year of free access to public transport which amounts to a maximum of €312 for each.

–          From 2017, companies that provide organized transport for its employees will benefit from a deduction of 150% on the expenses incurred, up to a maximum of €35,000, if it offers the service on its own or €50,000 if it combines the service with another company.

–          Any government entity employing more than 50 employees will offer a plan of sustainable transport.

–          The scheme, introduced in the previous budget, relating to the installation of bicycle racks by companies to be used by employees will be extended to next year.

 

ENERGY

 

–          Solar bonds will be issued to the public, which will fund the installation of photovoltaic panels in commercial establishments and public spaces.

–          Schemes by the Malta Enterprise and MHRA will be put in place for the industries to benefit from efficient use of energy

 

HEALTH

 

–          From 1st January 2017, it will no longer be permissible to smoke in car in the presence of children.

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SKILLED BASED LICENSING FRAMEWORK IN MALTA

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In its first attempt to differentiate between games of chance and games of skill, the Maltese legislator has, through the recently published legal notice, L.N. 271 of 2016, set

out an exemption from the requirement to obtain a Malta Gaming Authority (“MGA”) licence for  Daily Fantasy Sports (‘DFS’) operators.

 

 

The L.N. defines Fantasy Sports as “a contest played for money or money’s worth whereby the winning outcome is determined predominantly through the skill or knowledge of the player, and where the results are determined by the accumulation of statistical results of the performance of a number of individuals in sporting events, but shall not include the forecast of the score, point spread or any other future occurrence of one or multiple events, and for the avoidance of doubt, the definition of a “bet” as defined in the Act shall not be applicable.”

 

Under the skilled based licensing framework, the MGA are welcoming such operators to voluntary notifying the MGA by simply completing the ‘Fantasy Sports Notification Form’. After vetting of standard due diligence required for a licence application and a fraud management procedure of the operator, the MGA can

grant a formal recognition to the operator, which recognition will effectively serve as seal of security to players and other service providers. Such formal recognition will assist the operator with the application to be submitted to the MGA when the Skill Games License will be made available for Licensing, which is anticipated early first quarter of 2017 with application already being submitted.

 

In view of the continuous evolution and development of different types of games, the MGA is of the opinion that the ideal manner in which to categorise gaming activities is by means of a subjective assessment, on a case-by-case basis, which should, however, be conducted on the basis of a series of objective criteria.

 

Why would a DFS operator seek to be regularised by the MGA?

 

1.       First EU country to license Digital Games of Skill including Fantasy Sports

2.       Skilled based legislative framework approved by the European Commission

3.       First EU license for the ’Daily Fantasy Sports Sector’

4.       Licensing of a Full white Label solution

5.       Forward-looking and pro-business approach by the Regulator

6.       EU Member and member of Euro Zone

7.       Malta has a very attractive fiscal regime

8.       License fees are transparent and known in advance

9.       Already part of a strong online gaming jurisdiction

10.   Licensing framework will provide users the peace of mind that the product is genuinely based on  their skill rather than chance and guarantees Player Protection and safeguards the interest of the operators

11.   Ability for Established financial services institutions, including payment gateways. 

For further information about the above kindly contact us on gaming@ellulschranz.com

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NEW TAX RULES ON QUALIFYING EMPLOYMENT IN AVIATION

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New legislation has entered into Malta’s aviation industry in relation to qualifying employment. The Inland Revenue Department has issued a list of those roles which are considered qualifying. Although the rules came into force on the 24th May 2016, the applications are now available. One should note that the rules apply to individuals not domiciled in Malta.

Individual income from a qualifying contract of employment qualifies under these rules when it is received by a beneficiary in an eligible office. Such  income is subject to tax at a

flat rate of 15% provided that the income amounts to at least 45,000 euros (forty-five thousand euros) annually. The 15% tax rate applies for a consecutive period of five years for European Economic Area (that is, EU countries as well as Norway, Iceland and Liechtenstein) and Swiss nationals and for a consecutive period of four years for third country nationals.

Before applying for this scheme one has to consider all the conditions laid out in the law in order to benefit from the 15% tax.

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VAT TREATMENT OF AIRCRAFT LEASING

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On the 5th of April 2016, Maltese VAT Department issued its new guidelines in respect to the VAT treatment for aircraft leasing by which a Maltese structure benefits from a significantly lower effective rate of VAT.

For VAT purposes, except for aircraft used by airline operators in international traffic, the lease of an aircraft is a supply of a service which is subject to VAT with the right of deduction of input VAT by the lessor. This service is taxable according to the use of the aircraft attributed within the airspace of the European Union. Since it is rather difficult to identify the time spent in European Union Airspace in advance, VAT department in Malta has issued the following guidelines for the established percentage proportions according to the maximum range of the aircraft:

 

Aircraft type by Range (KM)

% of lease taking place in the EU

Computation of VAT

0-2,999

60%

60% of consideration x 18%

3,000 – 4,999

50%

50% of consideration x 18%

5,000 – 6,999

40%

40% of consideration x 18%

7,000 – upwards

30%

30% of consideration x 18%

 

These changes will result in the lower effective rate of VAT for a large number of business aircraft.

In order to apply these treatment the following conditions shall apply:

·         The leasing structure requires both the lessor and lessee to be established in Malta.

·         The lease shall not exceed a period longer than 60 months.

·         The lease payments must be made monthly, and VAT paid every quarter.

·          At the end of the lease, the lessee may opt to purchase the aircraft at a percentage of the original cost.

·         If the Lessee exercises the option to purchase the aircraft, a VAT paid certificate will be issued as long as all the VAT due under the lease has been paid.

·         The Commissioner for Revenue in Malta has the right to request the lessor to submit details of the use of the aircraft.

·         Prior approval of the value of the aircraft and the applicable percentage of the lease subject to VAT shall be obtained in writing from the Commissioner for VAT.

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EXTENDED: FATCA REPORTING DEADLINE

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EXTENDED: FATCA Reporting Deadline

 

It has been announces that the deadline for 2016 FATCA Reporting has been extended from 30th April 2016 to 31st April 2016.

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MALTA BUDGET 2016

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The 2016 Malta Budget was presented on Monday 12th October 2015. The Finance Minister noted the economic improvements which the country made over the past year, highlighting specifically the attainment of a 1.6% budget deficit for 2015, growth in employment, and an overall economic growth in certain critical

sectors. The GDP for 2015 is expected to be €8.5bn a 4.2% increase over 2014.

This document provides for the salient points of the Budget 2016.

 

Income Tax Measures

 

·         Reduction in personal income tax rates

 

–          There shall be a reduction in personal income tax by widening the tax free brackets as per below :

€8,500 to €9,100 (single computation)

€11,900 to €12,700 (married computation)

€9,800 to €10,500 (parental computation)

Furthermore, through a change in computation on how individual’s tax is charged, the below will start to apply:

–          Individuals with an annual income of up to €19,500 will save €90 tax each year (single)

–          Individuals with an annual income of up to €28,700 will save €120 tax each year (jointly)

–          Individuals with an annual income of up to  €21,200 will save €105 tax each year (parents)

 

·         Income tax on sports activity

 

–          A reduced optional flat income tax rate of 7.5%  available to footballers and waterpolo players will as from 2016 be extended to cover all other sports players and also the income derived by sports coaches.

 

·         Incentive for research and innovation

 

–          A tax credit of up to a maximum of €10,000 is entitled to enterprises that employ individuals holding a doctorate or are in pursuit of studies for a doctorate in science, technology and/or engineering – so long that such individual retains employment for a minimum of 12 months.

 

 

·         Donations

 

–          Community Chest Fund donations made during 2015 that amount to not less than €2,000 made by companies shall be entitled to a tax deduction equivalent to the amount donated.

–          A new introduced tax deduction shall take place in relation to donations made to arts equivalent to 150% of the amount donated.

 

·         Tax deduction on electric/hybrid vehicles

 

·         A 50% tax deduction shall be availed off by businesses that opt to purchase hybrid and/or electric vehicles in the same year of purchase.

 

 

·         Police Officers earnings

 

–          Any ‘extra duties’ performed by police officers as of January 2016 shall be held as a separate chargeable tax from income and thus subject to 15% tax (reduced rate).

 

·         Fiscal Consolidation

 

–          Companies that are owned by the same persons have the option to undergo a fiscal consolidation regime in order to facilitate the computation of taxable income and therefore be eligible to submit one consolidated income tax return.

 

 

 

Value Added Tax

 

·         Reduction in VAT on sports activities

 

–          A reduced rate of 7% shall be introduced on gym memberships and fees charged by fitness centers and other similar sports activities.

 

 

Property Measures

 

·         Tax on rental immovable property

 

–          At the option of the taxpayer, the income derived from the rental of residential property may be chargeable at 15% final tax also on rental of commercial property, but will exclude rents between related parties.

 

Eco Contribution

 

·         Removal of Eco Contribution on more products

 

–          Following last years removal of eco contribution on electronic equipment, further removal of eco contribution from other products shall be effective, however simultaneously increasing in excise duty.

 

Company registration fees

 

–          The initial registration fee for companies registered in electronic format and whose authorised share capital does not exceed €1,500 shall be reduced to €100.

 

Family businesses and social entrepreneurship

 

–          White Paper on legal measures, corporate governance measures and fiscal incentives intended to facilitate transfers of businesses between family members to be launched for public consultation.

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CHANGE OF NAME OF OUR FIDUCIARY COMPANY – ALPHA BUSINESS LIMITED TO SOLV INTERNATIONAL LIMITED

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In pursuit of restructuring part of our group of companies and re-branding it under the SOLV brand, we are pleased to announce that our licensed trustee company, Alpha Business Limited, is now named SOLV International Ltd.

 

The name change does not affect the legal personality

of the existing entity which retains its rights and obligations in all existing legal relationships with third parties. Fiduciary and trustee services provided through this company therefore remain unchanged.

 

Kindly also note that the ownership, management and control of the company will remain the same.