The eighth edition of the Family Business Survey held by PwC showed that as many as 80% of family businesses in Malta report increased turnover over the past 12 months. The results from this study were published during the Family Business Forum organized by PwC and BOV, during which the ramifications of the newly published Family Business Act on these businesses was explained by Minister for the Economy, Investment and Small Business Dr Chris Cardona.
The PwC Family Business study interviews thousands of senior executives from across 50 countries, including Malta. In the local scene, as many as 98% of all businesses are SMEs with the vast majority being family run, making up about 80% of local employment. Minister Cardona has on multiple occasions described family businesses as the pillar of Maltese economy.
Family businesses universally fail or shrink due to the lack of success in transferring their business beyond the second generation. The Family Business Act encourages such succession and the recently announced Budget incentive for 2017 will allow all those businesses which transfer their business to their children in the coming year to benefit from a reduction of tax from 5% to 1.5%. The PwC survey shows that only 20% of family businesses in Malta have a robust, documented and communicated succession plan in place, with less than half of family businesses in Malta claim that the family and business strategy are completely aligned, considerably lower than the global average (69%).
Apart from the initial boost for 2017, the Family Business Act will provide incentives that cover legal and accountancy advisory services, arbitration, education and training, and extend to loan guarantees, micro investment, concessions on duty and lease renewals of government premises. The Act was published on the 9th of September as Chapter 565 Family Business Act Laws of Malta and can now be found online where one will find the legislation as well as the fiscal incentives.
The implementation of the Family Business Act proves more essential with the new findings of the PwC survey, with 60% of family businesses surveyed generating an average of 24% of turnover from overseas markets, and as many as 52% of family businesses recognizing the importance of establishing new entrepreneurial ventures. The Minister noted how the new legislation whilst aiding to ensure their survival through the generations will guide and provide strategic planning and processes that will allow such business to explore and expand their ventures abroad.
“This Act will formally recognise the crucial role of this sector. And we wanted to do what we could to secure its future. A great deal of people contributed, and I think we have legislation that all of us in Malta can be proud of. But now we have to make sure it works well in practice,” said Minister Cardona.
The Ministry has also recently won EU Funds, on the basis of the official legal definition of a family business Malta has adopted. This will make Malta one of the very few EU Member States to have obtained official statistics on family businesses, and the first to have been able to carry out a survey based on legislation.
The Minister also announced how during the Maltese Presidency of the EU Council, the Ministry will host a high-level business transfer conference, allowing for the discussion of the pioneering Act, the results of the statistical survey as well as other areas concerning business transfers. Former Prime Minister of Finland and current European Commission Vice-President for Jobs, Growth and Competiveness Jyrki Katainen will be in attendance.