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Malta Expands Fiscal Unity Guidelines

by Jason Gorringe,, London

20 October 2020

Malta's tax agency has announced that it has expanded its guidance on the territory's Fiscal Unity regime, to clarify technical matters in relation to the Consolidated Group (Income Tax) Rules.

The guidance is set out in new paragraphs (viii) to (xix).

Malta introduced the fiscal unity regime via Legal Notice 110 of 2019. Under the regime, a group can form a fiscal unit with a subsidiary, or subsidiaries, in which the principle taxpayer owns at least a 95 percent shareholding at the end of the preceding year of assessment. When a fiscal unit is formed, transactions between entities within the unit are disregarded for tax purposes (except transactions involving immovable property) and the income of the unit is taxable in the hands of the principle taxpayer only.

Malta began accepting applications for the Fiscal Unity regime from August 1, 2020. Generally, taxpayers seeking to register a fiscal unit should do so within six months of the end of their basis year ending. More time is being allowed this year for businesses whose financial year ended on July 31, 2020, or earlier. Applications for these taxpayers will be accepted until January 31, 2021.

Entities must not have outstanding tax balances or outstanding filings under the Income Tax Acts, the Value Added Tax Act, or the Final Settlement System Rules to form a fiscal unit.

Registration of the fiscal unit should be done through the online profile of the principal taxpayer, through the CfR income tax portal.

TAGS: tax | business | Malta | transfer pricing | Tax

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