Malta to overhaul corporate tax regime by 2025 in major policy shift

Malta’s corporate tax regime is in for a major overhaul and the new structure and rates will be adopted for the basis year 2025, Finance Minister Clyde Caruana says

Finance Minister Clyde Caruana
Finance Minister Clyde Caruana

A new corporate tax regime that moves away from the existing imputation system will be adopted in time for the basis year 2025, Clyde Caruana said on Friday.

The major overhaul marks a major policy shift and will be the first of its kind since the early 1990s when the foundations of Malta’s financial services industry were laid down.

Caruana said a draft of the new tax regime has been concluded and is currently being tested by the tax authorities to ensure the government does not experience any shortfall in revenue.

He said the new regime has been drafted in consultation with all stakeholders and is a response to the signals Malta has been receiving from the European Commission and other foreign entities over its existing system.

Caruana would not say what the new rates will be but promised that the draft proposal will be published in the coming weeks for public consultation.

“All stakeholders in the industry have had the opportunity to have their say and contribute to this policy. We will also consult with the European Commission to ensure that what we have in mind can be implemented,” Caruana said.

Malta has been on the receiving end from various foreign entities and countries over its corporate tax regime that is often used by foreign companies to pay less tax on income generated in other jurisdictions.

The target is for the new corporate tax regime to be functional for the basis year 2025 to allow time for training of practitioners and public entities.

“The name of the game has changed out there, which is why we have to implement change while ensuring that we remain competitive,” he said.

Caruana said the new regime will move away from the current imputation system that allows foreign companies to claim back generous tax refunds, effectively lowering the corporate tax rate to 5%, and move towards a more classical system reflecting what is happening in continental Europe.

Asked by MaltaToday whether the election promise to lower the corporate tax rate to 25% was part of this change, Caruana said the pledge will form part of the package.

He said the change in taxation system for companies had nothing to do with Malta’s greylisting by the FATF. “The FATF assessors were in Malta and are now grading us. The results of that visit will be known around mid-June.”

Caruana was speaking at the launch of Malta's first home-grown neobank, Moneybase, developed by the CC Finance Group.