From tax credits to advisory support, the benefits of registering as a family business

There are plenty of incentives for family business in Malta, chief among them being that such companies are eligible to receive an additional €20,000 tax credit under the Micro Invest Scheme.

Under Micro Invest, which is aimed at encouraging operators to invest in their business, so as to innovate, expand and develop their operations, the maximum eligible tax credits per applicant undertaking is capped at €65,000 over any three year period. But the capping is increased for certain applicants, including those registered as a family business.

The Family Business Office, that was set up in 2017, introduced incentives to assist family businesses overcome obstacles which make them vulnerable. Its website is a valuable resource for family businesses, and the incentives available for such companies.

There have been issues in the past where businesses missed out on incentives that were on offer. For instance, In 2023 it was reported that only two businesses availed themselves of a facility meant to ease the transfer of family businesses from one generation to the next, with only €98,000 being used of the €10 million pool of loans made available by BOV in collaboration with the Malta Development Bank (MDB).

The MDB at the time had flagged “one critical condition” that eligible beneficiaries needed to first be recognised as family businesses and it appeared that such a condition was considered too onerous by prospective applicants [and] could have been one of the main reasons why that scheme had not been taken up well.

That scheme has been absorbed under the SME Guarantee Scheme, which facilitates increased lending and aims at enhancing SME access to bank credit for new investment as well as other purposes. Family Businesses can also make use of this facility.

To get officially registered as a family business however, there are certain requirements.  Among these requirements it that the business must be registered with the Malta Business Registry as a business structure or have a private unregistered partnership for more than three years. Registrations based solely on a VAT number are not eligible, the Family Business Office explains. It must also have a minimum of two family members being directly involved and with no single family member holding more than 80 per cent of the issued share capital. Where applicable, non-family members may collectively hold up to 15 per cent of the shareholding.

Registering as a family business requires a €100 registration fee.

Aside from the Micro Invest Scheme incentive, family businesses also benefit from a range of others. Among them, the Family Business Office, in collaboration with Malta Enterprise, offers support for professional advisory and mediation services to help registered family businesses plan succession, manage transitions, and strengthen long-term growth.

“Through the Family Businesses Grant Scheme, eligible businesses can receive up to €20,000 in support over three years, including: 50 per cent of advisory costs, up to €2,500 per project; and mediation services up to €100 per hour for 25 hours,” the Family Business Office states.

There are also incentives when it comes to transferring a family business. Here, duty on immovable property shall be chargeable on the first €500,000 of the value of the property transferred at the advantageous rate of €3.50 per €100, the Office said.

In addition, 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, the Family Business Office states.

These are some of the incentives available for registered family businesses.