By means of ACT XVI of 2017, the Government of Malta has implemented the Budget measures for the financial year 2017 in which a number of fiscal incentives and measures targeted towards attracting local and foreign investment on the Malta Stock Exchange were announced.
With effect from year of assessment 2018, the exemption from tax on capital gains derived from the sale of shares has also been extended to shares which are in consequence of a listing on the Malta Stock Exchange (MSE). This will mean that any gains derived from the transfer of shares which are listed on the Prospects platform operated by the MSE, which is specifically targeted towards SMEs, will also be exempt from income tax.
The exemption from income tax did not apply to shares acquired prior to listing, which were subject to tax at 15%. By means of this amendment, the exemption from income tax will also apply to shares which were acquired prior to listing.
An important amendment is that with effect from year of assessment 2017, the definition of a Collective Investment Scheme has been amended to include schemes which have been notified in terms of the Investment Services Act (List of Notified AIFSs) regulations.
Another important incentive which was announced is that which is related to dividends received by individuals and which are exempt from income tax when the individual’s total income (excluding the dividends) exceeds a certain threshold (€28,700 for married individuals, €19,500 for single individuals and €21,200 for parents). Before the amendment, such individuals were not able to claim a credit in terms of Malta’s imputation system, which could possibly result in a refund of part of the tax at source paid by the company distributing the dividend, in cases where the corporate rate of tax (35%) exceeds that individual’s personal tax rate.
By means of this amendment, this exemption will no longer apply to dividends received in respect of shares listed on the MSE and distributed to individuals whose holding of shares in a company represent less than 0.5% of the share capital of the company. Thus, such shareholders will be able to claim the above-mentioned refund. The removal of the exemption will only apply to dividends which represent profits derived in the year preceding the year of assessment 2018 or later years.
A new deduction has also been introduced (Article 14(1)(o) of the Income Tax Act) for sums in respect of risk capital aimed at approximating neutrality between debt and equity financing. Rules still to be prescribed by the Minister.