Malta Budget, European Union Tax & Compliance Bulletin 70

Printable Version
AML CFT, Company taxation, EU, VAT (Value Added Tax), European Union Commission, double taxation, roadmap, transfer pricing, business taxation-CFE, OECD Pillar 1

MALTA BUDGET: Proposed amendment to the Participation Exemption Rule

The Budget measures Implementation Bill [Bill No. 173] has proposed the introduction of a new proviso to article 12(1)(u)(1) of the Income Tax Act (CAP 123) in terms of which the exemption from tax of income derived from a qualifying participating holding shall not apply to a dividend derived from a participating holding in a body of persons resident for tax purposes in a jurisdiction that is included in the EU list of noncooperative jurisdictions for a minimum period of 3 months during the year immediately preceding the year of assessment [see article 3 of Part III of the Budget Measures Implementation Bill].

MALTA BUDGET: New exclusion from tax deductions proposed

The Budget measures Implementation Bill [Bill No. 173] is proposing the introduction of a new exclusion from deductions permitted under the Income Tax Act (CAP 123). It is being proposed that the following be added to the list in article 26 of the Act:

“(i) any payment the making of which constitutes a criminal offence or, in the case of a payment made outside Malta, would constitute a criminal offence if made in Malta.”

MALTA BUDGET: Taxation of royalties on qualifying literary works

Pursuant to the announcement in the Budget for 2021 of a flat rate of 15% on royalties earned by authors (See MIT news 19 October 2020), article 15 of the Budget Measures Implementation Bill sets out the proposed new article 31F of the Income Tax Act (CAP 123).

In summary, the proposed provision will apply to individuals in their capacity as author of a qualifying literary work by virtue of their title to the copyright on that work conferred by the Copyright Act. It will allow the said individual to opt for taxation at 15% on the gross amount of the royalties (final tax).

Once enacted, this new article will apply to royalties derived on or after 1 January 2021.

EU: Commission Commences Infringement Proceedings for Golden Passport Schemes

The European Commission has commenced infringement proceedings against Malta and Cyprus in relation to investor citizenship “golden passport” schemes, on the basis that granting citizenship for a pre-determined amount of investment or payment without a genuine link with the Member State is not compatible with the principle of sincere cooperation in Article 4(3) of the TFEU.

This follows from reviews of these schemes by the European Parliament, and the resolution adopted in June 2020 calling on Member States to phase out citizenship or residency by investment schemes. It was also established as a priority by President Von der Leyen in her State of the Union Address in September.

Malta and Cyprus have been issued with letters of formal notice, to which they have two months to respond. The Commission, if not satisfied with the responses, can thereafter issue a Reasoned Opinion. In addition, Bulgaria has been furnished with a request for further information concerning an investor citizenship scheme being operated.

EU: Commission Prolongs Temporary State Aid Framework

The European Commission has prolonged the application of the Temporary State Aid Framework adopted in March to assist Member States in dealing with the economic impact of the COVID-19 outbreak. The application of the Framework will be extended for a further six months, until 30 June 2021.

To minimise the economic impact of the COVID-19 outbreak, the Framework allows Member States to provide aid by: providing grants, selective tax advantages, and advance payments of up to 800,000 Euro; providing State guarantees for loans taken by businesses; subsidising public loans to companies, putting in place safeguards for banks providing State aid to the economy; and providing short-term export credit insurance.


Source: Malta Institute of Taxation Click here and CFE Tax Advisors Europe Click Here

Please contact David Marinelli should you wish to discuss any matter relating to your Malta registered company.