Mergers and acquisitions fall under the regulations of Chapter 386 in the Maltese Commercial Code of 1995, also known as amalgamation of companies. The Maltese Companies Act allows two types of company amalgamation:
- – merger by acquisition,
- – merger by incorporation of a new company.
The acquisition of Maltese companies refers to the operation through which a company attains the both assets and liabilities of a company in exchange of shares in the acquiring company. The merger by formation a new company refers to the incorporation of a new company in Malta after the unification of two or more companies.
Merger control in Malta
The Maltese legislation also contains provisions with respect to the control of a merger once this happens. Merger control in Malta is regulated by the Control of Concentration Regulation within the Competition Act that establishes the anti-trust rules in case of mergers. The Control of Concentration Regulations establish that a merger must be brought to the attention of the Office for Competition in Malta based on amount of the aggregate turnover received in Malta by both parties involved in the merger. However, companies listed on the Malta Stock Exchange may benefit from different merger control.
Taxation of cross-border mergers and acquisitions in Malta
As an European member state and always seeking to simplify the legal and tax legislation for cross-border mergers and acquisitions, Malta has implemented the EU Merger Directive, which offers company amalgamations under tax-neutral regulations. Considering an amalgamation can be done by asset or share purchase, it is important to know which deal provides more benefits and lower tax rates in Malta.
The transfer of assets is usually subject to the 35% capital gains tax in Malta, but to the country’s full imputation tax system, the tax may drop down to 5%. If the seller is a Maltese company, the tax will be levied on the income received in the country only. In the case of purchase of shares, the same 35% capital gains tax applies, but there are certain provisions allowing reduced tax rates or even full exemptions from the capital gains tax. Among these, the group exemption and the participation exemption are the most important.
For details about the advantages of mergers and acquisitions, you may contact our law firm in Malta.