Malta to delay new minimum tax rules for large companies by six years

Malta has informed the European Commission it will delay the introduction of a 15% minimum corporate tax rate by six years, MaltaToday has learnt. 

Malta is one of five EU member states that are availing themselves of the option to delay the new rules for large companies. 

EU member states are obliged over the next two years to introduce a minimum effective tax rate of 15% for companies with an annual group turnover of €750 million. 

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. 

“Malta informed the European Commission in September that it will be delaying the introduction of the minimum tax rate because the tax authorities need more time,” a senior European Commission official told MaltaToday. 

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

“I would not over interpret the reason for the delay because Pillar 2 is a very complex rule and the Commission has received a lot of questions from several jurisdictions, including large ones, on how to interpret the regulations,” the official said. 

The new rules would mean Malta will effectively lose its low-tax jurisdiction status. 

As things stand today, Maltese companies are liable to the top tax rate of 35%, one of the highest in the EU. However, Malta applies an imputation system that affords companies generous refunds on profits that are taxed here. This system effectively reduces the tax rate for companies to 5%. 

Under the new regime, the companies in scope of the directive will have to pay a minimum 15% tax, although countries are allowed to introduce specific refunds that would be applicable to all companies. 

Finance Minister Clyde Caruana has not yet said what Malta intends to do, telling journalists last September the tax authorities were still running simulations with the new rules to determine their impact on government revenue and the economy. 

However, he insisted the new tax regime would be revenue neutral and any announcement would be made in the budget. 

MaltaToday reported in April that the lack of clarity on the EU-mandated changes to the company tax regime was causing unease among industry’s big players. Industry sources had said the lack of information on how the new tax regime will be structured was contributing to the uncertainty. 

The new rules will impact several companies employing hundreds in manufacturing and gaming. Although they only make up a fraction of the companies operating in Malta, they are among the largest and are crucial for the export economy. 

Tax practitioners had also questioned why Malta was rushing to introduce the new regime by 2025 when the directive allowed the country to delay its introduction.