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.
|
|
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