Following the adoption of the Anti-Tax Avoidance Directive by the European Council, as with the other European Jurisdictions, Malta has been bound to implement a number of provisions in its tax legislation to ensure compliance thereto.
Malta’s new regulation implementing the Council Directive (EU) 2016/1164 of 12 July 2016 in relation to tax avoidance practices that directly affect the functioning of the internal market (‘ATAD Implementation Regulations’) come into force on 1 January 2019.
The ATAD Implementation Regulations is meant to deter tax avoidance and associated artificial strategies, abuse and debt arrangements intended to minimise tax.
The said Regulation shall apply to all companies, trusts and similar arrangements that are subject to tax in Malta, as well as to entities that are not resident in Malta but have a permanent establishment in Malta that are subject to tax in Malta.
Some of the crucial elements introduced by the said Regulations are as follows:
In line with the EU Directive, Malta’s new Regulation also introduces an exit taxation rule directed at preventing companies from avoiding tax when relocating assets. This tax applies to capital gains at an amount equal to the market value of the transferred assets at the time of exit of the asset. This provision shall come into force on 1 January 2020.
Malta has therefore embraced the same anti-tax avoidance regimes applicable in other EU member states, but despite the adoption of such regulations, the Maltese general tax system and the current rules on the taxation of company profits, including the significant tax refunds to shareholders based on the imputation tax system, remained unchanged allowing Malta to retain its distinct advantage in terms of competitivity and efficiency.
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