MALTA Law and Practice Contributed by: Donald Vella and Kirsten Debono Huskinson, Camilleri Preziosi Advocates
gains on the sale of shares in foreign companies or affiliates. If the relevant conditions are not satisfied, such gains would form part of the taxable income of the company that is calculable and taxable under the general rules.
ferences between the tax treatment of an entity or instrument under the laws of two or more jurisdictions, with a view to achieving double non-taxation.
8. Audit Cycles 8.1 Regular Routine Audit Cycle
7. Anti-Avoidance Provisions 7.1 Overarching Provisions
No regular routine audit cycle is in place. The Com - missioner for Tax and Customs generally has the power to initiate an income tax audit in respect of any Maltese tax-resident person within five years from the end of the year in which the tax return or further return for that year was furnished. 9. BEPS 9.1 Adoption of BEPS Recommendations While not a member of the OECD, Malta can never - theless be deemed to have implemented a number of the action points of the OECD’s base erosion and profit shifting (BEPS) project within its tax framework, through the transposition of various EU Directives that in themselves take on board specific BEPS recom - mendations. 9.2 Government Policy and Objectives Approach Malta has adopted a number of EU Directives, some of which appear to have been a reaction to the BEPS initiative. These include: • the Administrative Cooperation Directive, which also includes country-by-country reporting; • ATAD, which includes various recommendations derived from the BEPS initiative; • the anti-abuse rules in the Parent-Subsidiary Direc - tive; and • the sixth and seventh iterations of the Administra - tive Cooperation Directive (“DAC 6” and “DAC 7”, respectively), which, in line with Action 12 of BEPS, introduce mandatory disclosure rules enhancing information transparency between tax authorities. The ratification of the MLI (see 9.3 International Tax ) has further shown Malta’s commitment to support -
The ITA sets out a general anti-avoidance rule, which is applicable to any scheme that reduces the amount of tax payable and is deemed by the Commissioner for Tax and Customs to be artificial or fictitious in nature. In such a case, the Commissioner has the compe - tence to assess the tax payable by that person as if the scheme in question were not present. The following tax-related anti-abuse measures based on ATAD have been introduced: • Interest limitation rules that limit the deductibility of borrowing costs to a certain level. ATAD caps the deductibility of interest expenses at 30% of a taxpayer’s earnings before EBITDA. The limita - tion is not applicable where borrowing costs do not exceed EUR3 million and will also not apply to financial undertakings. • An exit tax rule that applies when a company either changes its place of residence or decides to trans - fer its assets/business to a different tax jurisdiction. In such cases, the taxpayer is liable to be taxed at an amount equal to the market value of the trans - ferred asset. • An extension to the current general anti-avoidance provision already contemplated by Maltese tax legislation aiming to further target artificial arrange - ments put in place for the main purpose of obtain - ing a tax advantage in conflict with the spirit of the law. • A CFC rule that includes in the tax base of a Maltese-based company diverse types of income not distributed by a foreign-based subsidiary or permanent establishment of this company, bringing these profits to tax liability in Malta. New rules to counteract a broader range of arrange - ments relying on hybrid mismatches that exploit dif -
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