The legislation that applies to Stamp Duty (SD) in Malta is the Duty on Documents and Transfers Act” (DDTA).
As you can see below, with the proper planning, this tax does not apply to many situations due to the various exemptions provided for by law. Among these exemptions, we highlight the one for companies with more than 90% of their business outside of Malta and the exemption for companies with more than half of their shareholder capital held by non-residents of Malta (among other conditions).
Application of the Duty on Documents and Transfers in Malta
Documents are subject to Duty on Documents and Transfers if issued in Malta or if issued outside Malta but used in Malta.
A document issued outside Malta shall be subject to tax if used in Malta and if it would have been subject to tax had it been issued in Malta. A document is considered to have been used in Malta when it is submitted to a Court or Arbitrator as proof or submitted to any person or authority in Malta for registration or execution purposes.
Sales and transfers are subject to Duty on Documents and Transfers in the following situations:
- Real estate and other real rights (5% or 3.5% for the first €116,468.67 in the case of permanent housing);
- Securities (5% for a property company -- company with 75% or more of its assets in real estate -- or 2% for other companies);
- Life insurance policy (0.1% of insured capital under certain conditions);
- Partnerships capital (2%);
- Furniture sold at auction in which the amount paid per article exceeds €230 (2.6%).
In the case of Securities:
- Transfer of a foreign security inter vivos to or by any person residing in Malta, including shares in foreign companies that own real estate in Malta (€2 per €100);
- Transfer of a local security to or by any person residing in Malta, (€2 per €100);
- The tax is calculated on the basis of the declared or real value of the security in accordance with the regulations on Capital Gains.
Exemptions
- The transfer of foreign securities shall be exempt from tax if the transfer is performed via a local bank or duly licensed entity, with specific limitations for foreign companies that own real estate;
- Transfer of local Securities shall be exempt from tax if the transfer is made via merger, de-merger or restructuring within the scope of a group of companies (holding company and its subsidiaries in which a holding company holds more than 50% of voting rights in the subsidiary or companies that are more than 50% directly or indirectly controlled by the same partners) and involves:
- transfer, by a person, of shares that are part of a group of companies in exchange for shares in a company or companies that are part of the same group; or
- the exchange of shares between one company and another when such shares are from companies that are part of the same group; or
- transfer, at a cost, of shares in a company to another in which the companies are part of the same group.
- Exchange of Securities between married persons, in the case of separation -- judicial or by mutual consent -- or in the event of death, involving the respective heirs;
- Transfer of Securities listed on the Malta Stock Exchange;
- Purchase, sale or issue of Securities by duly licensed entities;
- Purchase, sale or issue of Securities by companies that:
- Have more than half of their shareholder capital, voting rights and right to profits held by non-residents of Malta (or by a trustee whose beneficiaries are non-residents of Malta);
- Are not held or controlled, directly or indirectly, by residents of Malta;
- The CIR has decided that the majority of the companies’ interests are outside of Malta;
- They have more than half of their profits allocated to the Foreign Income account (FIA);
- They do not hold property in Malta (excluding some property).
- Purchase, sale or issue of Securities by collective investment entities;
- Purchase, sale or issue of Securities by companies that have more than 90% of their business outside of Malta, as long as CIR approval is given;
- Purchase, sale or issue of Securities by international trading companies, as defined by Malta legislation.
The aforementioned exemptions shall not apply to Property Companies.
In the case of Property Companies:
- During the transfer of shares in a Property Company (a company with 75% or more of its assets in real estate), the law presumes that the sale is of its own real estate and as such is subject to a tax of €5 per €100;
- In determining the value of the shares of a Property Company, only the following obligations can reduce the respective value:
- Bank loan for the purchase/repair of the real estate property in question;
- Duly registered debt with respect to the cost of acquiring the real estate property.
In the event of capital transfer in Partnerships:
The transfer of the capital of a partnership shall be subject to Duty on Documents and Transfers at a 2% rate when:
- It is a Partnership residing in Malta and the transfer is by or to a Malta resident;
- Due to mortis causa;
- If it is a Property Partnership (whose assets are 75% or more in real estate property), shall also be subject to a tax of €3 per €100 of the price.
The transfer of the capital of a foreign partnership shall not be subject to Duty on Documents and Transfers when it meets certain requirements, essentially related to ownership of real estate in Malta.
