Malta

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 Commissioner for Tax and Customs  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 Tax and Customs 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 Tax and Customs and updated periodically, with the last update issued in December 2023. Changes to the guidelines include a clarification to the definition of “Passive Income” in the context of Specified Insurance Companies. In terms of such clarification, in order to determine whether investment income derived by such entities is passive in nature, one must determine if such income is being derived in the normal course of a trade or business, or otherwise. The clarification outlines that it is expected that only investment income arising from capital in excess of the amount of capital required to be maintained by such entities for regulatory purposes will be viewed as passive income. Although FATCA and CRS/DAC2 reporting is to be done primarily by the XML Schema reporting, the Maltese Commissioner for Tax and Customs 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 Tax and Customs, after they successfully manage to explain why they are unable to report by using the XML Schema reporting.

Although FATCA and CRS/DAC2 reporting is to be done primarily by the XML Schema reporting, the Maltese Commissioner for Tax and Customs 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 Tax and Customs, 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 Tax and Customs with an annual update specifying other intermediaries or taxpayers who will be carrying out the reporting.

Reporting obligations for digital platforms: DAC7

Legal Notice 8 of 2023, which was published on 20 January 2023, introduced rules that transposed the provisions of the seventh update to Council Directive 2011/16/EU on administrative cooperation in the field of taxation into Maltese law (DAC7). DAC7 extends the EU tax transparency rules to digital ’platforms‘ and introduces an obligation on ’reporting platform operators‘ to collect, verify, and report specific information with respect to ’reportable sellers‘ that have undertaken ’relevant activities‘ through their platforms. DAC7 also introduces new automatic exchange of information between the EU tax authorities regarding the taxable events and income generated through these platforms. Furthermore, DAC7 includes a legal framework to enable joint audits. In joint audits, two or more countries join to form a single audit team to conduct a taxpayer examination.

Reporting platform operators are required to report to the local tax authorities specific information with respect to the operator itself and also with respect to the reportable sellers by 31 January of the year following the calendar year in which the seller is identified as a reportable seller. Declarations in terms of the DAC7 regulations and legislation should be filed by the reporting platform operator by 31 January 2024 (covering calendar year 2023), and the tax administrations will exchange the information between member states by the end of February 2024, subject to penalties for non-compliance.