Family Businesses are the backbone of Malta’s economy, representing over 70% of Small and Medium-sized Entities (SMEs) and contributing significantly to employment. Their deep-rooted presence spans various sectors, making them essential to wealth creation, economic stability and social cohesion. Beyond their economic role, family businesses often embody core Maltese values, fostering strong community ties and resilience across generations.
However, these businesses face unique challenges. Family-run enterprises struggle with issues like succession planning, governance, and balancing daily operations with long-term strategy. Many family businesses operate without a formal Board of Directors or their Board is composed solely of family members. A study published earlier this year revealed that only a third of family businesses have a documented succession plan in place. This lack of strategic foresight threatens their long-term sustainability, especially as many owners focus on daily operations at the expense of planning for future growth.
To help address these challenges and support the sustainability of family enterprises, the Maltese government and key Authorities, including the Family Business Office, have introduced several incentives. These initiatives not only address financial concerns but also encourage strategic growth, governance improvements and succession planning.
Some of these incentives include:
- SME Guarantee Scheme (Bank Financing)
Family businesses often face barriers when seeking bank financing due to insufficient collateral, limited credit history or operating in high-risk markets. The SME Guarantee Scheme, administered by the Malta Development Bank, is designed to alleviate these challenges by offering an 80% loan portfolio guarantee through authorised financial intermediaries. Through this scheme, family businesses can access loans ranging from €10,000 to €750,000, with a repayment period of up to 10 years and an optional 12-month moratorium.
For example, a family-owned manufacturing firm struggling to expand due to limited collateral can benefit from this scheme. With reduced collateral requirements and lower interest rates, the company can secure the necessary financing to upgrade its equipment and expand operations, enhancing its competitiveness and long-term viability.
- Micro Invest Scheme
To encourage family businesses to innovate and expand, the Micro Invest Scheme, offered by Malta Enterprise, provides tax credits on eligible expenditure. These include improvements in infrastructure and increased wage costs. Family businesses can benefit from higher tax credits of up to €70,000 over a three-year rolling period, providing a financial cushion to offset their tax liability.
- Skills Development Scheme
Maintaining a skilled and adaptive workforce is essential for the long-term success of family businesses. The Skills Development Scheme, also administered by Malta Enterprise, offers financial assistance for employee training programs. This scheme is designed to promote innovation, improve productivity and strengthen competitiveness across various sectors. The partial financing of training costs allows family businesses to upskill their workforce without overburdening their operational budgets.
- Family Businesses Grant Scheme
Succession planning and conflict resolution are two areas where many family businesses struggle. The Family Businesses Grant Scheme offers financial assistance for professional consultancy services, covering succession planning strategies and mediation services. This initiative ensures smoother transitions between generations and promotes structured governance frameworks that enhance the long-term sustainability of family businesses.
- Fiscal Incentive to Support Family Businesses in Their Succession
One of the most challenging aspects of family business ownership is transferring the business to the next generation. The Family Business Transfer Incentive, established under the Family Business Act, offers reduced duty rates and financial incentives on the transfer of shares and business property. This lowers the financial burden on both the current and future owners, facilitating smoother transitions. Individuals transferring their business to their qualifying family members can benefit from a reduced stamp duty. There is no capping on the amount, hence making it an attractive incentive for larger family-owned businesses.
By taking advantage of these incentives, family-owned enterprises can enhance their resilience, foster innovation and secure their place in Malta’s economic future.
For more information on how to apply for these schemes or for personalised advice on how they could benefit your family business, please reach out to us.
Kris Bartolo
Partner
