Incentives for family businesses in 2021 and beyond

It has long been recognised that family businesses are an indispensable asset for Malta and Europe‘s economic prosperity. In Malta, it is estimated that as many as 98% of businesses are Small or Medium Enterprises and the vast majority of such businesses are family-run. Family businesses generate economic growth, employment and provide long-lasting stability. However, as a corollary, they are exposed to vulnerabilities when it comes to succession planning and transfer of ownership between family members, which poses the most challenging yet crucial process for survival and growth.

The strength of a successful first generation family business is often the vision, energy, tenacity and experience of the original, together with its ability to adapt since typically it does not have complex governance structures. However, as the family, and the business, grows, its strengths can become its most significant weaknesses if it is unable to evolve beyond the original owner.

Since the introduction of the Family Business Act back in 2017, the Family Business Office has introduced numerous incentives to assist family businesses overcome obstacles, with the latest incentives launched during the ‘Support Incentives For Family Businesses: 2021 and beyond’ webinar. The benefits are twofold - governance and fiscal incentives.

Governance incentives supported through Malta Enterprise should range as follows, subject to the terms and conditions issued by Malta Enterprise:

1. Micro Invest tax credit of up to €70,000 over a three year rolling period;
2. Legal, notarial and accountancy advisory services for the purposes of assistance in the succession or business transfer of a family business;
3. Education and training for owners and their employees that will support the acquisition of new skills, knowhow and knowledge;
4. Grant to cover mediation services to resolve challenges and ensure continuity and possible succession of the family business;
5. The positive consideration of lease renewals occupying Government premises;
6. Investment Aid - where a member of the family of the original owner, or an employee, takes over an enterprise, the condition that the assets be bought from third parties unrelated to the buyer shall be waived.

The fiscal incentives should be integrated in the Duty on Documents and Transfers Act (Chapter 364 of the Laws of Malta) and should apply as follows:

1. Family Business Transfers: Parents transferring their family business to their children during 2021 shall benefit from a reduced stamp duty of 5% to 1.5% with no cap on the amount to be transferred.
2. Immovable Property: When transferring a family business, duty on immovable property shall be chargeable on the first €500,000 of the value of the property transferred at the advantageous rate of 3.5%.
3. Shares, Interest: When transferring shares, interests in a partnership, trust or foundation no account shall be taken of the first €150,000 or such other greater amount as may be prescribed.

Furthermore, advantageous loan debt financing by Bank of Valletta and the Malta Development bank up to a value of €750,000 is being provided to family businesses in acquiring and transferring the business.

These incentives aim to bring recognition of, and support to, this vital economic sector and are all applicable to registered family businesses.

How can Deloitte help?

Deloitte Malta can assist you in answering your queries about such incentives, including eligibility to benefit therefrom. Please do not hesitate to reach out to us so that we can guide you further.