EU Minimum Tax Directive: Malta delays implementation of minimum 15% corporate tax

Malta is making use of the Minimum Tax Directive exemption and postponing the application of the income inclusion rule (IIR) and the undertaxed profits rule (UTPR) beyond 2024. Additionally, the Maltese government will not introduce a qualified domestic top-up tax (QDTT) in 2024.

On 30 October 2023, the Maltese Finance Minister Clyde Caruana presented the government’s national budget for 2024. During the budgetary speech, he declared that Malta will be applying the derogation afforded by the Council Directive (EU) 2022/2523 of December 2022 – the Minimum Tax Directive – and will therefore delay the application of the income inclusion rule (IIR) and the undertaxed profits rule (UTPR) in 2024. Moreover, the Maltese government will not be introducing a qualified domestic top-up tax (QDTT) in 2024. Under this derogation, EU Member States are afforded the possibility to delay the introduction of a minimum 15% corporate tax for a maximum period of six consecutive years.

Planned tax relief for foreign companies

While Malta’s corporate tax rate stands at 35%, the local tax system allows foreign companies to benefit from substantial tax rebates by applying the imputation system and reducing their effective tax rate to 5%. This makes the island state a most attractive jurisdiction for foreign companies. The Minister went on to declare that no major changes to Malta’s tax system are envisaged for the coming year and confirmed that the current full imputation system will remain in place. However, he did recognise that the government is entering into a phase of transition, from the current set up to the minimum corporate tax of 15% under the EU Directive.

Malta offers tax measures, grants and incentives to assist, FDI startups and SMEs.

Anthony Vella, CPA Senior Partner / Director, ECOVIS Malta, Mosta, Malta

In preparation for this, the government is working on creating tax incentives which would align with Malta’s obligations under the Directive while securing the country’s attractive tax system for foreign companies.

Other measures in the 2024 budget to incentivise foreign investment in Malta, include:

• Grants and tax credits conforming with EU and OECD regulations
• Continuation of the ‘iSkills Development’ scheme, the ‘Rent Subsidy’ scheme, the ‘Innovate’ scheme, the ‘Smart & Sustainable’ scheme and the ‘Investment Aid for Energy Efficiency Projects’ scheme
• Support to SMEs for consultancy services
• A ‘Competence Centre’ for the semi-conductor sector to improve foreign direct investment
• A new complex and facilities for SMEs operating in the manufacturing industry
• Extended facilities for aircraft parking
• A revamped and improved MBR portal, which will facilitate the processes for overseas companies to register and submit documents online

For further information please contact:

Anthony Vella, CPA Senior Partner / Director, ECOVIS Malta, Mosta, Malta
Email: malta@ecovis.com