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Malta Introduces New Tax Updates

Malta

The Government of Malta have recently introduced various legislation amends, focusing on tax issues. Taxand Malta discusses the key updates.

Partnerships

  • The definition of participation holding now includes partnerships registered outside Malta which are similar in nature to a partnership 'en commandite'
  • Income from a Maltese resident partnership 'en commandite' which satisfies the definition of participation holding is no longer allocated to the FIA
  • The definition of partnerships for the purposes of capital gains tax now applies to deemed transfers of interests in a partnership. Such transfer will be brought as a capital gain

Participation exemption

  • The participation exemption now also includes income and gains from partnerships en commandite resident in Malta
  • The participation exemption now also includes income received by the company which is attributable to an independent permanent establishment (including a branch). This new clause has an anti-abuse provision

Real estate & property

  • The definition of industrial building or structure now includes car parks
  • The election period for exemption from property tax upon disposal of immovable property situated in Malta is increased from 7 to 12 years
  • Intra group transfer of immovable property is exempt from tax only if the companies remain within the group for a period of at least 12 years
  • The acquisition value of property transferred which was exempt from tax upon transfer of such property from a partnership to a limited liability company is deemed to be the original purchase price when property is sold to third parties after 12 years from acquisition

Other highlights

  • Trademark income is exempt from tax
  • The claim for group loss relief provisions has been clarified. The claim is to be made by the tax return date or by 12 months from year end; whichever is the latest
  • The personal income tax brackets have been revised as follows:
    • Married rates - income between EUR28,700 to EUR60,200 is now taxed at the rate of 32%
    • Individual rates - income between EUR19,500 to EUR60,000 is now taxed at the rate of 32%
    • Parental rates - income between EUR21,200 to EUR60,000 is now taxed at the rate of 32%

Your Taxand contact for further queries is:
Walter Cutajar
T. +356 2730 0045
E. walter.cutajar@avanzia.com.mt

Taxand's Take

Multinationals and organisations with cross-border interests, especially those who already make use of a Maltese conduit holding company, should look into the participation exemption regime to determine whether or not the changes are of interest. The introduction of exemption to royalties derived from qualifying trademarks may be of interest to intellectual property companies who could benefit from this exemption and Malta's full imputation system of taxation and the wide treaty network. All corporates with operations in Malta should stay afresh of all tax updates in order to remain compliant.

Taxand's Take Author