The Commissioner for Revenue has recently published the tax consolidation guidelines. The tax consolidation allows a Maltese company to avoid paying the corporate tax and applying for a tax refund if such Maltese company consolidates for tax purposes with a parent company who is entitled to claim a refund of corporate tax.
Salient points of the Guidelines as follows:
- In order to join or form part of a fiscal unit, a company should neither have any outstanding balances due nor any outstanding filings nor any penalties in terms of the Income Tax Acts, the Value Added Tax Act and the Final Settlement System Rules.
- When the principal taxpayer elects for a ninety-five percent (95%) subsidiary to join or form part of the fiscal unit, and such company has already filed an income tax return for that year of assessment, the election will enter into effect as from the following year of assessment.
- The principal taxpayer shall be granted a 6-month period in order to register a fiscal unit, starting from the morrow of the financial period end, but not before 1 August of the calendar year of the financial period end.
- Following the lapse of the 6-month period, the principal taxpayer may not add or remove any subsidiary companies to the fiscal unit and may only remove existing transparent subsidiaries in instances where a change is effected in the structure. The obligation to notify the CfR of any changes rests with the principal taxpayer.
- Registration of the fiscal unit may only be done through the online profile of the principal taxpayer as accessed from the CfR income tax portal. Upon the initial formation of the fiscal unit, the registered tax representative is required to enter the total number of transparent subsidiaries that will be forming part of the fiscal unit, in which the principal taxpayer has direct or indirect ownership.
- In order for the registered tax representative to add a company to the fiscal unit, the majority shareholder of such company should already be included within the registration form of the fiscal unit.
- The registered tax representative may only remove a company from the fiscal unit once all subsidiaries of such company have already been removed from the registration form of the fiscal unit.
- In order for a company to join or form part of a fiscal unit, such company must be represented by the same registered tax representative as that of the principal taxpayer. The registered tax representative should have authorisation to submit the income tax returns of all companies which are to join or form part of the fiscal unit.
- It is possible for a non-resident Maltese company to form part of a fiscal unit. In such instances, the foreign company would also be required to register with the CfR in order to be granted a Maltese income tax registration number. A foreign principal taxpayer would need to have a fiscal representative in Malta. Such a fiscal representative may be a Maltese-resident transparent subsidiary forming part of the fiscal unit.
- Prior to terminating a fiscal unit, all transparent subsidiaries must be removed from the registration form of the fiscal unit.
The full guidelines can be found on this link: GUIDELINES IN RELATION TO THE CONSOLIDATED GROUP (INCOME TAX) RULES
More information on the group tax consolidation can be found on our previous tax update: CONSOLIDATED GROUP INCOME TAX RULES
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Franco Falzon C.P.A. LL.M
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