On 20 February 2024, Malta transposed Council Directive (EU) 2022/2523 of 14 December 2022 (“EU Minimum Tax Directive”), implementing Pillar 2 rules in the EU, through Legal Notice 32 of 2024 "European Union Global Minimum Level of Taxation for Multinational Enterprise Groups and Large-Scale Domestic Groups Regulations, 2024" (the “Notice”).
Malta Defers Pillar 2 Provisions until 2029
At the same time, as allowed by EU Minimum Tax Directive, Malta deferred the adoption of the following Pillar 2 provisions until the 31st of December 2029:
- Income Inclusion Rule (“IIR”) - Under this rule, the minimum tax is paid at the level of the parent entity, in proportion to its ownership interests in those entities that have low taxed income.
- Undertaxed Profits Rule (“UTPR”) - it comes into play when not all top-up tax is allocated under an IIR (or for instance if there was no IIR in the relevant jurisdiction); in such case the top-up tax may be collected by jurisdictions where the group is present, other than the jurisdiction of the parent entity.
- Qualified Domestic Top-up Tax (“QDTT”) – Member States may implement a domestic top-up tax which applies to low taxed entities located in its territory. It therefore allows to tax such low taxed entities, instead of them being taxed at the level of the parent entity. Where a domestic top-up tax is levied, the amount of the top-up tax by the parent entity under the IIR is reduced by the amount that was charged.
- Malta’s approach reflects its commitment to the evolving international tax rules, nevertheless preserving Malta's appeal as an attractive and competitive destination for investors.
Highlights
- Malta deferred the adoption of the IIR, UTPR and the QDTT of the EU Minimum Tax Directive until the 31st of December 2029.
- Malta's existing corporate tax system, featuring the full imputation system and associated tax refund rules, will remain unchanged.
How we can help
Our skilled team of tax experts can assist you in understanding how the Pillar 2 rules (as implemented by the EU Minimum Tax Directive’s) will affect your organization. We’ll evaluate how these rules impact your operations and finances. Additionally, we’ll help you assess the data you currently collect, identify any gaps or risks, and suggest areas for improvement. We can also create a thorough policy to tackle challenges and opportunities related to the Minimum Tax Directive. Plus, we’ll ensure your organization complies with reporting requirements to avoid penalties.
