Towards the end of 2017, Malta's capital gains rules (subsidiary legislation 123.27 to the Income Tax Act, Cap 123 of the laws of Malta) were amended and now include a specific rule relating to the taxation of capital gains derived by an original shareholder from the transfer of shares that have been admitted for trading on an alternative trading platform.
For the purposes of the new rule, 'alternative trading platform' is a platform (as defined in Commission Regulation (EU) No. 651/2014) that is operated by the Malta Stock Exchange. In terms of the new rule, the capital gain is to be derived by the original shareholder of the shares, that is, the person who was a shareholder of the company before any of its shares were admitted for trading on an alternative trading platform and is not limited to instances where there was only a sole original shareholder. 'Original shareholder' is broadly defined to also include within scope:
The spouse, or direct descendant, or spouse of a direct descendant, of an original shareholder;
A trust or a company, partnership, foundation or other legal person whose beneficiaries are, to the extent of more than 50%, original shareholders or which trust, company, partnership foundation or other legal person is owned and controlled, whether directly or indirectly, to the extent of more than 50% by the original shareholders; or
A shareholder in a company who acquired his/her shares from an original shareholder by transmission causa mortis, that is, which devolved upon the demise of the original shareholder, or any other transfer to which the new rule did not apply.
In computing the capital gains derived by an original shareholder, the chargeable amount on which tax is to be calculated is to be computed as per the normal rules; generally the selling price of the said shares, less the cost of acquisition and relevant deductions. However, the chargeable amount is to be multiplied by varying percentages, dependent on the level of public participation in the company in which the shares are held. The level of public participation means the percentage of the equity shares in the said company held by persons who are not original shareholders at the particular end of the day on which the transfer in question is affected. Where the level of public participation is:
Less than 10%: 100% of the taxable portion;
At least 10% but less than 15%: 75% of the taxable portion;
At least 15% but less than 20%: 50% of the taxable portion;
At least 20% but less than 25%: 25% of the taxable portion; and
25% or more: 0% of the taxable portion.
The new rule also adds that when a person who is not an original shareholder transfers shares in a company that have been admitted for trading on an alternative trading platform and the level of public participation in the company is at least 10%, no tax is to be chargeable on capital gains derived from that transfer. The rules are in line with recent announcements as well as legislative developments targeted at incentivising the domestic financial markets.
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Mark Galea Salomone |
Donald Vella |
Mark Galea Salomone (mark.galeasalomone@camilleripreziosi.com) and Donald Vella (donald.vella@camilleripreziosi.com)
Camilleri Preziosi
Tel: +356 21238989
Website: www.camilleripreziosi.com