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Mark Galea Salomone |
Donald Vella |
In the budget speech for 2017, the Minister for Finance announced a number of fiscal incentives and measures targeted towards attracting local and foreign investment on the Malta Stock Exchange (MSE). These measures were implemented into Maltese law via the Budget Measures Implementation Act, 2017.
The most pertinent measure was the extension of the exemption from income tax on capital gains arising upon a disposal of shares listed on the MSE, to persons who held the shares immediately prior to listing. Before 2017, the Income Tax Act prescribed that only capital gains realised upon the transfer of shares listed on the MSE were exempt from income tax. However, where such shares were owned immediately prior to listing and were disposed of post-listing, the capital gain from the disposal of such shares attracted income tax on those capital gains at the flat rate of 15%. The ITA now exempts the latter scenario from income tax, effective from the 2018 year of assessment.
The aforementioned exemption will also be applicable to tax on capital gains derived from the sale of shares which are in consequence of a listing on the MSE, such as gains on the transfer of shares that are listed on Prospects (a platform specifically designed for SMEs). The latter platform, which was launched in 2016 and is operated by the MSE, was developed in order to open up new avenues for investor access to the capital market, and to provide more competitiveness and sustainability to SMEs by allowing them to raise capital through bond and share issues, as well as allow SMEs to sell shares to a wide pool of investors.
Another amendment includes a modification to the definition of a "collective investment scheme". The phrase has been extended to also cover schemes that have been notified in terms of the Investment Services Act (List of Notified AIFs) Regulations.
A new deduction has been introduced to the ITA for sums in respect of risk capital aimed at approximating neutrality between debt and equity financing. New rules are to still be prescribed by the finance minister. Such rules will provide the same benefits previously solely provided to debt, to equity investments, thus incentivising the use of equity.
A further incentive relates to a refund of tax at source on dividends paid by a company. Shareholders holding not more than 0.5% of the nominal share capital of a company listed on the MSE are now entitled to claim full credit of the tax at source on dividends distributed by the company from profits derived on or after January 1 2017, in accordance with their applicable income tax rates.
The aforementioned measures shall serve to ensure the vitality, growth and competitiveness of Malta's capital markets, and aim to incentivise further investment into the domestic market.
Mark Galea Salomone (mark.galeasalomone@camilleripreziosi.com) and Donald Vella (donald.vella@camilleripreziosi.com)
Camilleri Preziosi
Tel: +356 21238989
Website: www.camilleripreziosi.com
