Malta introduced a fiscal unity regime on the 31st May 2019 allowing a parent company to be the principal taxpayer for its direct and indirect transparent subsidiaries. The rules for a fiscal unity allowing a consolidated group income tax return enter into force from the year of assessment 2020 (basis year 2019).

Furthermore, this means, that holding company (principal taxpayer) can submit consolidated financial statements and the tax returns and accounts only are due. It still means that the accounts of the parent company(s) must be completed but it requires no separate tax declaration anymore.

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What Impact Does This Have On Your Business?

The tax authorities in Malta grant that all possible reimbursements will be credited towards the tax payable to the shareholder of the group holding company. Applying for the 6/7th tax refund may not be required anymore, thus only the effective tax is due.

Forming a Fiscal Unit

A parent company may make an election in order to form a fiscal unit and consolidate the corporate structures’ income. However, the parent company can only form a fiscal unity if it is satisfying two of the following conditions:

  • The parent company holds at least 95% of the voting rights in the participating subsidiary company;
  • The parent company is entitled to at least 95% of it’s profits available for distribution;
  • The parent company would be entitled to at least 95% of any assets available for distribution by the subsidiary company.

In case of the subsidiary company is itself a holding company, the subsidiaries where the company has at least 95% rights to the profits mentioned above, shall also fall under the same fiscal unity.

Companies not resident in Malta may also form part of the fiscal unity, however the parent company/principal taxpayer must be a registered company in Malta.

More information about the changes in law can be found in the Income Tax Act (CAP. 123) – Consolidated Group (Income Tax) Rules, 2019.

Complete information about Malta Company Tax can be found on our Tax Advisors page.