Cassola to campaign for lower corporate tax for Maltese companies

Independent MEP candidate Arnold Cassola said he will campaign for higher taxes on foreign companies resident in Malta, to be accompanied by a decrease on corporate profits for Maltese companies.

Taxation in member states is not regulated by the European Parliament and remains a sovereign matter. But Cassola was reacting to Malta’s transposition of the EU’s rules on global minimum tax levels for multinationals.

“Successive Maltese governments have always resisted this law. Now, after having been humiliated through the FATF greylisting, Malta has been forced to adopt it and the country has now up to six years to adapt to the new fiscal regime,” Cassola said.

The independent candidate said that if elected MEP, he would campaign for a gradual increase from the 15% minimum tax payable by foreign companies to 20%, accompanied by a gradual 3% decrease on corporate profits for Maltese companies “to reach a final 20% for all companies, irrespective of nationality, creating a level playing field for all.”

There is no corporate tax for Maltese companies, which have to pay 35% by way of income tax. But foreign shareholders can apply for a six-sevenths rebate on the income tax paid on dividends recieved in Malta, bringing down the effective Malta tax rate on such profits to 5%.

Malta has transposed the EU’s rules on global minimum tax levels for multinationals that register annual turnovers of over €750 milion.  The effective tax rate will be compared to the agreed minimum tax rate of 15% in order to determine whether a multinational liable under the rules should pay a top-up tax. But it will delay the introduction of a 15% minimum corporate tax rate by six years.

“The situation till now, whereby Maltese companies pay 35% taxes on their profits while rival foreign companies qualify for rebates whereby, in the end, they pay only 5%, is a servile attitude brought about by successive PN and PL governments,” Cassola said in a statement. “As an MEP, I will work to ensure that fiscal justice becomes a priority and that Maltese companies are treated with the same respect and subjected to the same fiscal rules that foreign companies enjoy.”

The new global rules set by the OECD, an international organisation, will be adopted EU-wide by 2025 but the implementation process starts next year. However, member states were given the option to delay introducing the top up taxation rate by six years. 

Along with Malta, the other countries to delay the introduction of the new rules are: Slovakia, Estonia, Lithuania and Latvia. 

Malta has refunded over €13 billion in income tax to corporate shareholders in the last 14 years under its refundable tax credit system – an average of 14.2% from the tax owing from these eligible companies.

Currently there are 8,012 companies actively registering for tax refunds under the refundable tax credit system. The number of companies benefiting from the refund has grown exponentially since 2008, when over €276 million in tax owing was whittled down to €39 million; to 2022, when a sheer €1.5 billion was whittled down to €216 million after refunds.

The highest volume of taxation ever registered was in the pandemic year of 2021, with €1.8 billion, of which the taxman retained some €260 million.

In total between 2008 and 2022, the tax owing by these companies registered in Malta was of €15.4 billion, with €13.2 billion refunded and leaving a total of €2.2 billion in the Maltese coffers.