Malta

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

• Maltese tax law provides for a tax deduction for expenditure of a capital nature on intellectual property (IP) or IP rights incurred in the production of income. Such deduction should be taken over the life of the relevant IP but, in any case, over a minimum period of three consecutive years. As of the financial year 2023, such expenditure of a capital nature on IP/ IP rights may, at the option of the taxpayer, be deducted in full in the year in which the expenditure is incurred or in the year in which the IP/ IP rights are first used or employed in producing the income.
• Transfer Pricing Rules were published in November 2022 and apply for basis years commencing on or after 1 January 2024. Further information on the Transfer Pricing Rules is set out under Transfer pricing in the Group taxation section.
• In terms of the European Minimum Tax Directive, Malta applied the derogation provided by the European Union (EU), and the application of the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR) is deferred by up to six years. The said Directive was transposed into Maltese law by means of the EU Global Minimum Level of Taxation for Multinational Enterprise Groups and Large-Scale Domestic Groups Regulations, 2024, published in February 2024.
• The possibility of setting up protected/segregated cell companies in the aviation and shipping sectors remains an option under 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.
• The Patent Box Regime Deduction Rules provide for deductibility rules applicable to income derived from qualifying IP.
• Further tax incentives for occupational pension schemes are available.
• The minimum shareholding requirement of a ‘participating holding’ under the Maltese Income Tax Act is 5%. This enables Maltese companies holding at least 5% of the equity shares 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.
• By virtue of a number of schemes, such as the Start-up Finance (2024) Regulations and a number of research and development (R&D) schemes, undertakings operating in various industries may qualify for assistance by the Malta Enterprise.
• Recent value-added tax (VAT) regulations require payment service providers to keep records of payments made and to submit such information to the VAT Commissioner in accordance with the provisions of Council Directive (EU) 2020/284 of 18 February 2020 amending Directive 2006/112/EC.
• The Convention between the Republic of Malta and the Kingdom of the Netherlands in respect of Curaçao for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income came into force on 1 September 2024.
• With effect from 1 January 2025, the special scheme for VAT purposes applicable to small undertakings was amended to take into account various EU-wide changes (such as widening this scheme so as to include certain cross-border transactions).