Scicluna says Malta on board with EU’s anti-tax avoidance rules 

Budget 2019 saw Finance Minister Edward Scicluna telling the House that Malta will be introducing the EU directive for mandatory reporting and implement the EU Dispute Resolution Mechanism, in a bid to improve the island’s financial regulatory structure. 

“We are against the abuse of our tax system and I will declare – against much I have said before – that we did not create nor shall we create any opportunities for tax evaders or foreigners to live in Malta under one scheme or another to avoid tax here,” Scicluna said. 

“We are in favour of investment that offers a return and of serious enterprise, so we will not tolerate anyone using Malta or its regulatory framework for undue profit through tax avoidance.” 

Scicluna said Malta will be cooperating with other countries in the fight against tax avoidance, strengthening the regulatory framework to collect tax more efficiently, and that transparency will be increased in taxation systems. 

Scicluna said Malta was already an OECD partner in the BEPS (base erosion profit-shifting) programme aimed at fighting tax avoidance, and that Malta had adopted the first Anti-Tax Avoidance Directive and worked on the second ATAD. 

As part of the ATAD rules, as from 1 January, a change of residence of a company, or the movement of its assets or of its business to another territory will be treated as a taxable exit event. 

In such a case, the company will become subject to tax in the same manner as if it has disposed of its assets. The accrued gains will be calculated by reference to the market value of the asset at the time of the exit. Where the country of the new residence of the taxpayer or of the new location of the assets is another EU Member State, the payment of the tax can be deferred. 

No exit tax will be chargeable in the case of a temporary movement of assets that is linked to certain financial transactions as long as the assets are returned within 12 months. 

An entity will be considered a controlled foreign company where it is subject to more than 50% control by a parent company that is tax-resident in Malta and its associated enterprises, and the tax paid on its profits is less than half the tax that would have been paid had the income been subject to tax in Malta. This will not apply to CFCs with profits not larger than €750,000 and non-trading incomes not greater than €75,000, and to CFCs whose accounting profits amount to no more than 10% of their operating costs for the tax period. 

The implementation of the above measures will bring Maltese provisions in line with international standards, but they will not bring about any changes to the Maltese general tax system. The regulations implementing these changes will establish the same anti-tax avoidance regimes that will be applicable throughout the EU, but the current rules on the taxation of company profits will remain fully in force. The same applies to Malta’s tonnage tax regime, which has recently been cleared both by the OECD Forum on Harmful Tax Practices and under the EU State Aid rules. 

“The transposition of these measures constitutes a confirmation of Malta’s support for international anti-tax avoidance initiatives. Malta’s commitment is also evidenced by the obligations it assumed in 2017 when it joined the OECD Inclusive Framework and by its rating under the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes,” Scicluna said. 

A national risk assessment has also been prepared for an action plan against money laundering, with 45 actions to be taken over a period of three years. The first action will be the creation of a national coordinating committee currently led by its secretariat which will forge ahead with the action plan proposals. 

In the coming months, the Malta Development Bank will be offering new facilities and schemes for SMEs’ investment plans. The Malta Stock Exchange will also be evaluating the prospect of real estate investment trusts (REITS) which allow investors the option for an indirect investment in the property market. 

Apart from a Digital Innovation Authority (MDIA) that will regulate the application of Malta’s rules on distributed ledger technologies such as Blockchain, and the MFSA’s specialised Fintech unit, a new entity will be created to promote Malta’s industrial attractiveness for disruptive technologies such as Artificial Intelligence and ‘the internet of things’ – the entity will be called Tech.mt 

Malta Enterprise will be offering a business advisory service to SMEs which depend on the British market and will be affected by Brexit.