Malta

Corporate - Significant developments

Last reviewed - 03 September 2021

The following are some of the more significant developments that were introduced in Maltese tax law during 2021:

  • An enabling provision with respect to transfer pricing has been introduced in the Maltese Income Tax Act providing for the possibility to the competent Minister to issue rules for advance pricing agreements (APAs) as well as the determination of the arm’s-length pricing of a transaction/s. 
  • The possibility of setting up protected/segregated cell companies in the aviation and shipping sectors has been introduced in Maltese law. Such cell companies allow for the possibility of segregating vessels or aircraft portfolios within the same corporate entity, thus segregating the risks and benefits attributable to the particular cell, without affecting the risks and benefits attributable to other cells within the same cell company.
  • By means of the Consolidated Group Income Tax Rules, a parent company and its 95% subsidiary can form a fiscal unit for income tax consolidation, provided certain conditions are satisfied. These Rules come into force with effect from year of assessment 2020 in relation to accounting periods commencing in calendar year 2019 and subsequent years. The Maltese Commissioner for Revenue has supplemented these Rules with a set of Guidelines, with the last update issued on 28 September 2020.
  • The Patent Box Regime Deduction Rules provide for new deductibility rules applicable to income derived from qualifying intellectual property (IP).
  • Further tax incentives have been introduced for occupational pension schemes.
  • The minimum shareholding requirement of a ‘participating holding’ under the Maltese Income Tax Act has been reduced from 10% to 5%. This enables Maltese companies holding at least 5% of the equity shares, rather than 10%, to claim a participation exemption (subject to the satisfaction of other conditions) on dividend income and gains derived by a Maltese company from a qualifying ‘participating holding’ or from the disposal of such holding (apart from this 5% minimum equity holding, there may be other alternative conditions to qualify for the participation exemption).
  • A notional interest deduction (NID) system, aiming to approximate the tax treatment of equity with that of debt.
  • The Double Taxation Agreement (DTA) with Russia was amended in November 2020, with the introduced amendments applying provisionally from 1 January 2021. In the first half of 2021, the Double Taxation Relief on Taxes on Income with the Republic of Poland and the Convention between Malta and the Swiss Confederation for the avoidance of double taxation with respect to taxes on income were amended; however, they are yet to be enforced.
  • Malta Enterprise has had a crucial role in the implementation of measures of various financial aid measures and incentives as well as other employment-related measures in order to assist during the COVID-19 pandemic.
  • By virtue of a number of schemes, such as the Investment Aid for Energy Efficiency Projects Regulations and a number of research and development (R&D) schemes, undertakings operating in various industries may qualify for assistance by the Malta Enterprise.
  • In line with DAC6, information on any reportable cross-border arrangements must be filed with the Maltese tax authorities. The reporting of cross-border arrangements was extended to 28 February 2021; however, for reportable cross-border arrangements where the triggering event for the reporting took place between 1 July 2020 and 31 December 2020, the period of 30 days for filing information commenced as of 1 January 2021.
  • Recent amendments implement various eCommerce-related changes regarding certain value-added tax (VAT) obligations for supplies of services and distance sales of goods into Maltese legislation.