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 on 2 January 2020. Changes to the guidelines include clarification on distributed ledger technology assets, rules on citizenship by investment and residence by investment, updated information on recalcitrant accounts and undocumented accounts, and updated rules as applicable to trusts in respect to registration and reporting by the trust to the Commissioner for Revenue, amongst others.
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. The reporting deadline for basis year 2020 has been extended to 30th June 2021 due to the exceptional circumstances brought about by the COVID 19 pandemic.
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.
On 2 July 2020, the Maltese Commissioner for Revenue issued a notice confirming that the first reporting deadlines will be deferred by six months; thereby deferring the applicable DAC6 reporting deadlines as follows:
- for reportable cross-border arrangements the first step of which was implemented between 25 June 2018 and 30 June 2020, the filing deadline is 28 February 2021.
- for reportable cross-border arrangements where the triggering event for the reporting took or takes place between 1 July 2020 and 31 December 2020, the period of 30 days for filing information will commence on 1 January 2021.
As a form of fiscal assistance in order to improve an entity’s liquidity due to the coronavirus pandemic, postponement of payment of certain taxes were introduced, including provisional taxes, employee taxes, maternity fund payments and social security contributions, social security of self-employed persons, and VAT. The eligible period for such tax deferral scheme has been extended to cover eligible taxes due up until December 2021.
Additionally, various support measures taking the form of cash grants and tax credits were introduced in order to assist eligible undertakings in sustaining and preserving their economic activity.
Another measure introduced in the light of COVID-19 is that there is the possibility of requesting a three-month moratorium for both personal and business loans. Other measures linked to employment include grants to full-time employments and employees of enterprises that suffered a complete suspension of operations.
The Government also launched the reformed Wage Supplement Scheme, which is administered by Malta Enterprise Corporation. This is intended to provide assistance to beneficiaries in accordance with the reduction in turnover suffered as a result of the pandemic. As from January 2021, the amount of the wage supplement awarded will depend on the level of turnover derived by a beneficiary during 2020 compared to that of 2019 as declared in the beneficiary's VAT return(s). For VAT exempt and new VAT numbers, the level of support will continue to be determined according to the NACE code categorisation of the particular business.
The European Commission allows member states to temporarily waive custom duties and VAT on the import of medical devices and protective equipment as a form of aid due to the coronavirus pandemic. The waiver originally applieds to importations made from 30 January 2020 to 31 July 2020 and as a result of a further, extension, has been extended to December 2021. As a result, the 8th Schedule of the VAT Act was amended to include protective face masks and visors.
Also in line with Directive 2020/2020 of 7 December 2020 amending Directive2006/112/EC (the EU VAT Directive), certain VAT-related temporary measures have been recently been introduced in responde to the Covid-19 pandemic. These are namely:
- an exemption with credit for certain services closely linked to COVID-19 vaccines; and
- An extension of the 5% reduced rate for certain Covid-19 in vitro diagnostic medical devices.
Local VAT legislation has been updated in this respect also and will remain applicable until 31 December 2022.
For further information, please visit: https://www.pwc.com/mt/en/pwc-malta-press-room/covid-19.html