The European Commission last week formally requested Malta under EC Treaty state aid rules to abolish the tax regime for Maltese Companies with Foreign Income (CFI) and the International Trading Companies’ (ITC) regime by the end of 2010 at the latest.
Under these regimes, revenues from foreign sources paid to shareholders of an ITC or a CFI are subject to minimal or no taxation.
The Commission stated that it intends to put a definitive end to these offshore tax regimes because they seriously distort competition and trade in the Single Market.
Malta has one month to accept the proposed measures, failing which the Commission may open a formal state aid investigation.
Competition Commissioner Neelie Kroes observed that:
“The schemes provide sizable aid to companies that are owned by non-Maltese and produce revenues outside of Malta, and are therefore highly distortive without promoting growth of the Maltese economy”.
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