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‘Malta and EU Tax and Compliance Policy Bulletin 86


EU Commission to Launch BEFIT Consultation & Proposal


During her State of the Union Address on 14 September, EU Commission President von der Leyen confirmed that the Commission plans to proceed with a proposal for a single set of tax rules for doing business in Europe as part of a SME relief package. 


The Commission’s consultation webpage sets out that the “Business in Europe: Framework for Income Taxation (BEFIT) will propose a comprehensive solution for business taxation in the EU. This initiative aims to introduce a common set of rules for EU companies to calculate their taxable base while ensuring a more effective allocation of profits between EU countries, based on a formula. It will also aim to reduce compliance costs and create a coherent approach to corporate taxation in the EU.”


The Have Your Say website indicates that a public consultation concerning the BEFIT proposal will be carried out in Q3 2022, and that a proposal will be adopted by the Commission in Q3 2023. 

EU Commission President Recommends ‘Windfall Tax’ on Energy Profits

The European Commission President Ursula von der Leyen has recommended to Member States that they set a maximum price for non-gas electricity producers, who are at present generating staggering excess profits due to marginal pricing, where the price of non-gas electricity being determined by the price of gas, and to redistribute excess profits to consumers to cushion the blow of soaring energy prices currently impacting the cost of living in Europe, which is understood as a form of windfall tax on excess profits. The Commission President is encouraging this rather than caps, subsidies or suspending the wholesale market. 


EU energy ministers are due to meet under the Czech EU presidency to discuss the energy crisis and the recommendation will be examined during the meeting. Germany has already announced it is following the recommendation, and will use the tax on excess profits collected to fund a 65 Billion Euro relief package that aims to minimise the impact of inflation and energy crisis on the economy. Germany will also be making one-off payments of 300 Euro to all pensioners.

EU Pillar II Implementation: Certain Member States to Proceed Unilaterally

From discussion at the informal ECOFIN meeting which took place on 10 and 11 September, it appears that agreement will be unable to be reached on the EU directive implementing Pillar 2. The Directive is at present being blocked by Hungary, following on from months-long opposition from Poland under the French EU presidency. An agreement which would be binding on all other Member states, but exclude Hungary, has been recently been discussed and is an option being considered.


Prior to the informal ECOFIN, France, Germany, Italy, The Netherlands and Spain issued a joint statement setting out their position that they reaffirm their commitment to swiftly implement the global minimum effective corporation taxation in their jurisdictions in order for the tax to be effective as of 2023, should agreement not be reached at Council in the coming weeks, and to complete work on the reallocation of taxing rights on MNE profits.


OECD: Tax Morale II – Building Trust Between Tax Administrations & Large Businesses 


The OECD has published a second report in its focus on the tax morale topic, entitled “Tax Morale II: Building Building Trust between Tax Administrations and Large Businesses”. The report examines levels of trust between tax administrations and large businesses, based on a survey carried out on tax administration perceptions of MNEs and previous research on MNE perceptions of tax administrations. The OECD in its summary concerning the report says:


“The survey shows that while MNEs are generally seen to demonstrate a formal commitment to co‑operation with tax administrations, notably through on-time payment, perceptions of MNE transparency and trust in the information provided by them are less positive. There are strong regional differences, with tax administrations’ perceptions of MNE behaviour generally poorer in Latin America and the Caribbean, and to a lesser extent Africa, when compared with Asia and OECD countries.


The survey also reflects tax administrations’ perceptions of the behaviour of the Big Four professional services networks (Deloitte, EY, KPMG, PricewaterhouseCoopers) on tax matters. It shows similar patterns of positive perceptions of their willingness to follow the letter of the law and formal compliance, but less positive perceptions of following the spirit of tax laws.”

The report can be accessed here.

USA & Pillar 2: A Minimum Tax However Not the OECD Minimum Tax

Over the summer, after many months of negotiation, US Congress passed legislation titled the Inflation Reduction Act 2022, under which a 15% corporate minimum tax is imposed on corporations with profits exceeding US 1 billion, in tax years from 2023 onwards, arguably, partially implementing Pillar 2 of the OECD’s 2-Pillar Agreement into national legislation. Under the legislation corporations can claim net operating losses and tax credits against the minimum corporate tax, and tax credits against the tax for minimum tax paid in previous years, if this exceeded 15% of the corporation’s income in any given prior year. President Biden signed the act into law on 16 August.

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


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

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