Malta has very recently introduced the concept of a notional interest deduction (NID). The recently published rules come into effect from year of assessment 2018 (basis year 2017) and they are aimed at mitigating the differences in the tax treatment between equity and debt financing. Avanzia Taxand, Taxand Malta, presents the features of these rules.
Before the introduction of these rules, debt financed entities could claim a tax deduction equivalent to the interest however no similar deduction was available for equity financed companies. These new rules entitle companies with an option to claim a tax deduction equivalent to the notional interest calculated on its equity thus making equity financing on the same level playing field as debt financing for taxation purposes.
Salient features of these rules:
Discover more: Notional interest deduction rules 2018
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Undertakings are advised to seek for professional tax advice in determining whether these rules would result in the most optimal scenario for the said undertaking and shareholders / partners.
