By means of Legal Notice 379 of 2017, the Government of Malta has made a number of amendments to the Capital Gains Rules, which were originally issued by means of Legal Notice 102 of 1993 as subsequently amended by various Legal Notices.
(i) Transfer of shares that have been admitted for trading on an alternative trading platform
Any capital gains derived from the transfer of shares by the original shareholders (as defined below) which is made in consequence of the admission of those shares for trading on an alternative trading platform will be calculated in the manner prescribed by the rules. However, the gain derived will be multiplied by a percentage as indicated below depending on the level of public participation in the company in which the shares are held.
|Level of public participation||Taxable portion|
|Less than 10%||100%|
|At least 10% but less than 15%||75%|
|At least 15% but less than 20%||50%|
|At least 20% but less than 25%||25%|
|25% or more||0%|
Furthermore, when persons who are not the original shareholders transfer 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 will be due on the capital gains derived.
The original shareholders consist of:
- Persons who were shareholders of the company before any shares in that company were admitted for trading on an alternative trading platform.
- The spouse, direct descendant or the spouse of a direct descendant of an original shareholder.
- A legal entity whose beneficiaries consist as to more than 50% of original shareholders, or which is owned and controlled, directly or indirectly as to more than 50% by such original shareholders.
- A shareholder in a company who acquired his shares from an original shareholder by means of a transfer ‘causa mortis’ to which the reduction in the taxable proportion referred to in the above table was not applicable.
An alternative trading platform is a multilateral trading facility where the majority of the financial instruments admitted to trading are issued by small and medium sized enterprises (SMEs) and which is operated by a Stock Exchange recognized by the Financial Markets Act (The Malta Stock Exchange PLC and The European Wholesale Securities Market Limited).
The level of public participation referred to above is the percentage of equity shares held by persons who are not the original shareholders at the end of the day when the transfer in question takes place.
(i) Gains derived from the transfer of intellectual property or intellectual property rights
In the calculation of any capital gains derived from the transfer of intellectual property or intellectual property rights, the cost of acquisition shall not include any amounts in respect of which a deduction has been claimed in terms of Article 14(1)(m) of the Income Tax Act.
Article 14(1)(m) of the Income Tax Act provides for a deduction of any expenditure of a capital nature on intellectual property or any intellectual property rights which is incurred by a person in the production of the income. The expenditure is spread equally over the life of the relevant intellectual property or rights in a reasonable manner, which cannot exceed three consecutive years, the first year being that in which the said expenditure has been incurred.