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
[CONTACT US] if you want to learn more on this issue or how we can assist you.
Franco Falzon C.P.A. LL.M
T: +356 2010 7771 (office)
M: +356 9989 5679 (mobile)
While FF International Limited (hereinafter referred to as “FFI”) endeavours to ensure that any information published in articles / publications / memos / updates (including any information published on our website) is accurate as at the time of publication, FFI nor any of their respective directors, partners, officers, employees, or agents make any representation or warranty (express or implied) or accept or will accept any responsibility or liability in relation to the accuracy or completeness of the information contained published in our articles / publications / memos / updates (including any information published on our website) or any other written or oral information made available or published on our articles / publications / memos and updates. Any responsibility or liability in respect of any such information or any inaccuracy or omission arising from any article / publication / memo is expressly disclaimed. In particular, but without prejudice to the generality of the foregoing, no representation or warranty is given as to the achievement or reasonableness of any future projections, estimates, prospects or returns published on our articles / publications / memos / updates (including any information published on our website) . The content of the above article / publication / memo / update and any information published on our website is intended to serve solely as general information only and its purpose is not to provide any specific professional advice whether of a financial, legal, tax or other nature. Since it is recommended that business decisions be based only on qualified professional advice, neither FFI nor any related company belonging to FFI nor any of the respective directors, partners, officers, employees, or agents of FFI will be held liable for any damages which might result as a consequence of relying on the information contained within. FFI including any directors, partners, officers, employees, or agents of FFI and / or any entity related to FFI accept no liability whatsoever for the content of this article / publication / memo / update for the consequences of any actions taken on the basis of the information provided. If you have any questions relating to the accuracy and correctness of the above article / publication / memo / updates or any information published on our website you are kindly requested inform us by sending us an email on firstname.lastname@example.org