US Foreign Account Tax Compliance Act (FATCA)
The agreement concluded between the Republic of Malta and the United States to improve international tax compliance and to implement the FATCA (the 'Agreement') entered into force on 26 June 2014. On 18 November 2014, the FATCA Regulations were accordingly issued implementing the said intergovernmental agreement (IGA). Guidelines on the implementation and interpretation of the FATCA Regulations and the said Agreement have been issued by the Maltese Inland Revenue and are updated periodically.
Furthermore, the Exchange of Information (United States of America) (FATCA) (Amendment) Order was enacted in 2015.
Guidelines on FATCA, providing guidance for its implementation and interpretation, have also been issued by the Maltese Commissioner for Revenue and should be periodically updated.
The Common Reporting Standard (CRS) and EU Council Directive 2011/16/EU and 2014/107/EU
By virtue of LN 384 of 2015 entitled the ‘Cooperation with Other Jurisdiction on Tax Matters (Amendment) Regulations, 2015’, the EU Council Directive 2014/107/EU of 9 December 2014 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation (DAC2) and the CRS have been accordingly implemented into Maltese legislation, with effect from 1 January 2016.
Guidelines on the implementation and interpretation of the DAC2 and CRS have also been issued by the Maltese Commissioner for Revenue and updated periodically, with the last update issued in March 2022. Changes to the guidelines include updates to the list of non-EU reportable jurisdictions and the list of participating jurisdictions.
Although FATCA and CRS/DAC2 reporting is to be done primarily by the XML Schema reporting, the Maltese Commissioner for Revenue updated the alternative online reporting tool available to Maltese Financial Institutions that were classified as Reporting Malta Financial Institutions for DAC2 and CRS purposes. The reporting tool now includes both the report to be submitted relating to the FATCA as well as DAC2/CRS. According to the latest Guidelines, the alternative online reporting tool is only made available after Reporting Malta Financial Institutions request authorisation from the Maltese Commissioner for Revenue, after they successfully manage to explain why they are unable to report by using the XML Schema reporting.
Disclosure of Tax Arrangements (DAC6)
The provisions of the sixth update to Council Directive 2011/16/EU on administrative cooperation in the field of taxation have been transposed and implemented into Maltese law (DAC6 or the Directive). The rules transpose the Directive provisions and impose mandatory disclosure by intermediaries (and taxpayers, in specified situations) of certain arrangements with an EU cross-border element where the arrangements bear certain 'hallmarks' set out in the Directive.
It should be noted that there are certain instances wherein an intermediary may waive the filing of certain information in certain situations. In such circumstances, the reporting obligation may shift to another intermediary or to the relevant taxpayer. However, the intermediary is nevertheless required to notify such persons of their reporting obligations.
In the case that intermediaries have waived such reporting obligation, said intermediaries are required to provide the Maltese Commissioner for Revenue with an annual update specifying other intermediaries or taxpayers who will be carrying out the reporting.
Reporting obligations for digital platforms: DAC7
Directive 2021/514/EU, amending Directive 2011/16/EU on administrative cooperation in the field of taxation (‘DAC7’), was adopted by the Council of the European Union on 22 March 2021 outlining the scope of the provisions relating to the exchange of information and administrative cooperation between EU member states by requiring qualifying digital platform operators to collect and verify the information of their sellers (as defined in terms of the Directive) and report information such as the income earned by such persons through the use of the qualifying digital platforms.
The deadline for member states to implement DAC 7 is 31 December 2022; however, no official rules have yet been transposed into Maltese law and no guidelines/commentaries have yet been issued by the Maltese tax authorities regarding the practicalities and interpretation of DAC7. Having said that, digital platform owners should, nonetheless, assess their DAC7 reporting position and ensure that the relevant necessary actions are undertaken in a timely manner so as to comply with the new mandatory reporting obligations.