Malta is responsible for almost 2% of the global risk of corporate tax abuse


Malta was ranked 21st in the Tax Justice Network’s corporate tax havens index, making the island’s financial services center responsible for 1.72% of the risk of corporate tax abuse in the world.

The Tax Haven Index, in which governments provide TJN with answers on their international tax rules, is a measure of the tax systems of any jurisdiction authorized for corporate tax abuse.

An index result of zero means that there is absolutely no possibility of such abuse, while a 100 indicates that there is unlimited scope.

Malta’s refuge score is 79.1.

The Corporate Tax Haven Index is published every two years. In 2019 Malta had a Paradise Score of 73.5 and ranked 23rd, making Malta responsible for 1.37% of the risk of corporate tax abuse globally. Now he has increased his ranking.

A notable increase was observed in the indicator of public enterprise accounts, which assesses whether a country requires all enterprises to keep accounts with a government authority.

While numerous legal requirements govern the availability of accounting information, TJN said in Malta “no systematic monitoring and supervision activity carried out by the Revenue Commissioner since the last review cycle”.

“In addition, according to the World Forum, there are a large number of inactive companies (around 14% of companies registered with the Register), which are not sufficiently supervised as to their obligation to keep accounting records and documentation under -jacent.

The same report found that only 50% of companies comply with the requirement to submit annual accounts to a government authority. “The average annual filing rate of accounts (financial statements) was around 50%, which is low and may raise concerns about the availability of accounting information of companies and partnerships by the Malta Business Register, such as shown during the current review period. ”

On the other hand, Malta has seen progress in reporting tax evasion schemes. The 2019 Corporate Tax Haven Index report noted that Malta does not require tax advisers to report on tax evasion schemes they sell or market throughout the year. The same applies to taxpayers, who were not required to declare in their annual accounts uncertain tax positions for which reserves have been established.

In 2021, after having transposed an EU directive in this area, intermediaries are now required to file information on cross-border devices to be declared. “The obligation is transferred to the taxpayer only when there is no intermediary, or when the filing of information by the intermediary would constitute a violation of professional secrecy”, we read in the report, citing a paragraph from the Deloitte website.

Any tax evasion scheme adopted is only reported to the tax authorities – unpublished. However, taxpayers or advisers still have an obligation to report uncertain tax positions.

Malta remained with a high score of 100 on the Foreign Investment Income indicator, which assesses whether a country includes global capital income in its corporate tax base.

This is largely due to the features of the tax system that mitigate situations where corporate or individual income is taxable in more than one country.

With regard to dividends, Malta offers a participation exemption allowing a shareholder of a company to avoid paying tax on the dividends received. This is offered as certain conditions are met.

For royalty income, Malta officially offers a tax credit as unilateral relief from double taxation, but the Tax Justice Network has argued that this tax credit may in fact result in tax exemption.

The finance ministry denied this argument, explaining that companies can claim an actual credit they paid or a fixed 25% tax credit on net foreign source income. “Unilateral relief is only available if the taxpayer has proven to the satisfaction of the Revenue Commissioner that the income has suffered a foreign tax and has proven the amount of that tax,” the government explained.

But TJN poured cold water on their claim, stressing in their report that they were unable to verify the claim that the fixed 25% credit on the net payment of the foreign royalty would not result in never a total exemption. “Depending on the situation, the rules even seem to potentially result in more than one exemption, ie a subsidy and the net payment of a tax credit on royalty income collected.”

Malta also scored high in the Capital Gains Tax indicator, still at 100. This indicator assesses the lowest available tax levied on corporate capital gains, applicable to large profit-making companies. profit who are tax residents in the jurisdiction, whether or not capital gains are taxed under corporation tax or under some other type of tax, such as income tax. fortune or an independent capital gains tax.

This high score is explained by the tax exemption of capital gains realized on a participation or on the disposal of such a participation. This makes the lowest tax available at 0%.

Another 100 were marked for Malta’s notional interest deduction scheme, allowing high capital companies to deduct fictitious financial costs from its tax base.

In February 2020, Malta’s score in another TJN ranking, the Financial Secrecy Index, deteriorated to push the island even higher in the top 20 of the world’s most secret financial jurisdictions. It went from 20th in 2018 to 18th in the 2020 index where the higher the ranking, the more secret a country’s tax practices are.

Although it only represents 0.66% of the global offshore financial services market according to TJN, Malta remains a small player compared to other secret jurisdictions.


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