New minimum tax for companies will be ‘revenue neutral’, Finance Minister pledges

The introduction of a minimum 15% tax on companies with an annual turnover of €750 million will be “revenue neutral” for the country, Clyde Caruana has pledged.

The Finance Minister said details on the new corporate tax regime will be announced in the budget.

The global minimum tax rules were set by the OECD, an international organisation, and all EU countries have to adopt them by 2025. The minimum effective tax rate system will overhaul Malta’s corporate tax regime that currently affords foreign companies rebates that bring down the effective tax rate to 5% from 35%.

The high turnover threshold means that several companies employing hundreds in manufacturing and gaming will be impacted.

Asked by MaltaToday about the impact of the impending tax change on public finances, Caruana insisted it was not intended to generate additional revenue.

“The new rules allow countries to introduce incentives but these would have to apply across the board to all companies and not just those for whom the rules apply. This is the balance we are trying to seek but I have made it amply clear with practitioners and stakeholders that this change will be revenue neutral for the country,” he said.

So far, the finance ministry has been running simulation models of the new system to determine how the change will impact public finances.

Last April, MaltaToday reported that lack of clarity on how the new corporate tax regime was going to be structured was causing unease among companies that would be impacted by the changes.

Malta's existing tax imputation system that gives it its low-tax jurisdiction status was cleared by the European Commission when Malta joined the EU. But over the years, larger countries like Germany and France applied pressure to have corporate taxes harmonised across the EU to stop large companies from shifting profits to low-tax jurisdictions.

Taxation within the EU is a national competence and any changes to this require unanimous support at Council level. Unanimity was achieved last December as the EU settled for the global minimum tax of 15% agreed at OECD level.

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