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  • Tag Archive: Malta

    1. Malta Faces Crucial Anti-Money Laundering Reforms to Exit FATF Grey List

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      Malta AML Reforms to Exit FATF Grey List – Introduction

      Malta has been tasked with implementing three essential reforms to its anti-money laundering (AML) strategies to be removed from the Financial Action Task Force’s (FATF) enhanced monitoring list, commonly referred to as the grey list.

      Following an agreement on an action plan with the FATF, Malta’s government is under pressure to address significant issues identified by the global financial crime watchdog. 

      FATF’s Action Plan for Malta: Key Reforms

      General

      The action plan outlines a comprehensive strategy for Malta, focusing on:

      Accurate Beneficial Ownership Reporting

      Malta must ensure that company ownership information is precise, with strict enforcement actions against inaccuracies.

      This includes imposing sanctions on legal persons and gatekeepers failing to maintain accurate beneficial ownership information.

      Enhanced Use of Financial Intelligence

      The government’s Financial Intelligence Analysis Unit (FIAU) is expected to better utilize financial intelligence to support the pursuit of criminal tax evasion and associated money laundering cases.

      This entails clarifying the roles of the Revenue Commissioner and the FIAU.

      Targeted Analysis on Criminal Tax Offences

      The FIAU’s analytical efforts must focus on criminal tax offences to produce intelligence that aids Maltese law enforcement in detecting and investigating tax evasion-related money laundering activities in alignment with Malta’s risk profile.

      Background and International Context

      Malta, alongside Haiti, the Philippines, and South Sudan, was grey-listed by the FATF, signaling the need for enhanced AML measures.

      Despite having a robust legal framework on paper, Malta’s practical implementation of these laws has been under scrutiny.

      The nation’s commitment to fighting tax crimes and policing beneficial ownership rules is central to the FATF’s concerns.

      Progress and Remaining Challenges

      Although Malta has made significant strides in addressing some issues flagged in 2019, including improving financial intelligence analytics and resourcing law enforcement, the FATF’s latest review indicates that critical areas still require attention.

      The Maltese government has acknowledged progress on most recommended actions but admits that three critical points have only been partially addressed.

      Government Response and Economic Implications

      The Maltese government has expressed disagreement with the grey-listing, emphasizing its dedication to rectifying the remaining deficiencies promptly.

      The economic impact of the FATF’s decision on Malta, a notable financial hub, hinges on the government’s effectiveness in implementing the necessary reforms.

      Rating agencies and investors are closely watching the situation, as Malta’s attractiveness for foreign investment is at stake.

      Malta AML Reforms to Exit FATF Grey List – Conclusion

      Malta’s path to exiting the FATF grey list is paved with stringent AML reforms and enhanced financial transparency measures.

      The nation’s ability to fulfill the FATF’s action plan will not only determine its removal from the grey list but also reinforce its standing as a reliable and compliant financial centre.

      The Maltese government’s commitment to these reforms is crucial for restoring international confidence and securing Malta’s economic future.

      Final Thoughts

      If you have any queries regarding this article relating to Malta AML Reforms to Exit FATF Grey List, or Maltese tax matters, then please get in touch.

    2. New Tax Rules for Digital Nomads in Malta

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      New Tax Rules for Digital Nomads in Malta – Introduction

      On 7 December 2023, Malta’s Finance Minister announced the implementation of the Nomad Residence Permits (Income Tax) Rules 2023.

       These rules offer a beneficial tax regime for digital nomads, reducing their tax burden and simplifying compliance.

      Overview of the New Tax Rules

      Reduced Tax Rate

      Individuals with a valid nomad residence permit will be taxed at a flat rate of 10% on income derived from “authorised work”.

      This is a notable decrease from Malta’s progressive tax rate, which can go up to 35%.

      Definition of “Authorised Work”

      “Authorised work” refers to services provided remotely through telecommunications technology by a main applicant either employed by a non-resident employer or self-employed for clients not residing or operating in Malta.

      Double Taxation Relief

      Eligible individuals can benefit from double taxation relief as per Malta’s tax treaties, provided they meet the criteria of being a tax resident in one of the contracting states.

      Exemption Period

      A 12-month exemption period from income tax on authorised work is available, starting either from the issuance of the nomad residence permit or 1 January 2024, whichever is later.

      This exemption aims to ease the transition for new permit holders.

      Conditions for Exemption

      To qualify for the exemption, applicants must declare that their residence in Malta during this period is not merely temporary.

       However, the exemption does not apply to those whose nomad visa has expired within two years, although they can still benefit from the reduced tax rate.

      Taxation of Other Income

      Income not derived from authorised work will be subject to Malta’s general taxation rules under the Income Tax Act.

      Reporting Obligations

      Nomad visa applicants must file income tax returns and register for income tax in Malta.

      During the first twelve months, income from authorised work is exempt from reporting unless a specific declaration is made.

      Proof of foreign tax payment at a rate of at least 10% exempts applicants from reporting that income in Malta, with the responsibility of forwarding proof lying with the Residency Malta Agency.

      Implications for Digital Nomads

      These new rules make Malta an attractive destination for digital nomads.

      The reduced tax rate, combined with the initial tax-exempt period, provides significant financial benefits.

      Additionally, the clear definitions and simplified reporting obligations facilitate compliance and reduce administrative burdens for digital nomads.

      The approach acknowledges the growing trend of remote working and positions Malta as a forward-thinking jurisdiction that caters to the needs of this emerging workforce segment.

      It offers a viable option for digital nomads seeking a tax-efficient base while maintaining compliance with international tax norms.

      New Tax Rules for Digital Nomads in Malta – Conclusion

      In summary, Malta’s new tax rules for digital nomads offer an enticing mix of reduced tax rates and simplified procedures, likely to attract more remote workers to its shores.

       

      Final thoughts

      If you have any comments or queries about this article on the new tax rules for digital nomads in Malta, or other Malta tax matters, then please get in touch.

    3. New Malta VAT rate – new 12% rate on certain services

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      New Malta VAT rate – Introduction

       

      On 6 October 2023, Legal Notice 231 was published by the Maltese government.

       

      The Notice amended the Eighth Schedule of the Value Added Tax Act in Malta (Chapter 406 of the Laws of Malta). 

       

      Broadly, this amendment introduced a reduced VAT rate of 12% for specific services

       

      New Malta VAT rate – Deeper cuts

       

      The Notice transposes paragraph 5 of Article 105a of Council Directive 2006/112/EC, as amended by Council Directive (EU) 2022/542 in April 2022. 

       

      This obliges Member States to provide detailed rules for applying reduced rates, not lower than 12%, to specific transactions by October 7, 2023.

       

      The Eight Schedule

       

      The Eighth Schedule of the VAT Act in Malta specifies the tax rates for particular supplies and imported goods, offering a reduction from the standard rate of 18%. 

       

      With the publication of this Legal Notice, four new services are included, all subject to the reduced VAT rate of 12%.

       

      Newly introduced services

       

      The newly introduced services are as follows:

        

      • Custody and management of securities;
      • Management of credit and credit guarantees, excluding those who grant credit. (Credit management by those granting credit is already exempt without credit as per the VAT Act.)
      • Hiring of pleasure boats, with the condition that they are not rented for more than five weeks when aggregating rental time during the previous year.
      • Services related to the care of the human body, provided by regulated healthcare professionals in accordance with the Health Care Professions Act (Chapter 464 of the Laws of Malta). This includes services offered in health studio businesses or similar enterprises, excluding exempt supplies. This addition aligns with the guidelines issued by the Malta Tax and Customs Authority (MTCA) in September concerning VAT exemptions for certain healthcare services.

       

      New Malta VAT rate – When is this effective?

       

      The implementation of the 12% VAT rate will become effective from January 1, 2024. 

       

      The MTCA is expected to release further details on its application in the coming weeks.

       

      If you have any queries about this new Malta VAT rate, or Maltese tax matters in general, then please get in touch.

    4. Malta’s new VAT rate on certain services

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      Malta’s new VAT rate – Introduction

       

      On 6 October 2023, Legal Notice 231 (“The Notice”) was published by the Maltese government.

       

      The Notice amended the Eighth Schedule of the Value Added Tax Act in Malta (Chapter 406 of the Laws of Malta). 

       

      Broadly, this amendment introduced a reduced VAT rate of 12% for specific services.

       

      Let’s look at the reasons behind the Notice and where the changes might apply.

       

      The Why

       

      The Notice transposes paragraph 5 of Article 105a of Council Directive 2006/112/EC, as amended by Council Directive (EU) 2022/542 in April 2022. 

       

      This obliges Member States to provide detailed rules for applying reduced rates, not lower than 12%, to specific transactions by October 7, 2023.

       

      The Eight Schedule

       

      The Eighth Schedule of the VAT Act in Malta specifies the tax rates for particular supplies and imported goods, offering a reduction from the standard rate of 18%. 

       

      With the publication of this Legal Notice, four new services are included, all subject to the reduced VAT rate of 12%.

       

      Newly introduced services – where the new rate applies

       

      The newly introduced services are as follows:

        

      • Custody and management of securities;
      • Management of credit and credit guarantees, excluding those who grant credit. (Credit management by those granting credit is already exempt without credit as per the VAT Act.)
      • Hiring of pleasure boats, with the condition that they are not rented for more than five weeks when aggregating rental time during the previous year.
      • Services related to the care of the human body, provided by regulated healthcare professionals in accordance with the Health Care Professions Act (Chapter 464 of the Laws of Malta). This includes services offered in health studio businesses or similar enterprises, excluding exempt supplies. This addition aligns with the guidelines issued by the Malta Tax and Customs Authority (MTCA) in September concerning VAT exemptions for certain healthcare services.

       

      When is this effective?

       

      The implementation of the 12% VAT rate will become effective from 1 January 2024. 

       

      The MTCA is expected to release further details on its application in the coming weeks.

       

      If you have any queries about the Malta’s new VAT rate, Maltese tax, or tax matters in general then please get in touch.

    5. Malta Transfer Pricing Rules published

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      Introduction

      Malta has recently published legislation that implements Transfer Pricing Rules into Malta’s tax code (“TP Rules”).

      From when will the TP rules apply?

      The TP Rules apply to transactions entered into on or after 1st January 2024 as well as pre-existing ones if they are materially altered on or after that date.

      Where will the TP rules apply?

      The TP Rules will apply when calculating a company’s tax base derived from “cross-border arrangement” between “associated enterprises”. They will apply where associated enterprises have more than 75% (directly or indirectly) of participating rights.

      This is reduced to 50% where the entity is a Multi-National Enterprise (“MNE”).

      SMEs and MNEs

      SMEs, as defined in the State Aid Rules, do not fall under these rules.

      The term “MNE group”, as used in these Rules, refers to a multinational enterprise (or other entity) whose tax residence(ies) or permanent establishment(s), within and outside of Malta, exceeds 75 million Euro per year.

      Cross-border transactions

      The TP Rules don’t apply to cross-border transactions with an aggregate arm’s length value of €6m and €20m revenue and capital respectively.

      The TP Rules will apply to cross-border transactions and arrangements taking place between:

      • a resident and a non-resident company; an
      • a resident company having a permanent establishment situated outside Malta and a non-resident company dealing with a PE in Malta of another non-resident company to which the transactions are effectively connected in ascertaining the total income of the company.

      The TP Rules provide for a deeming provision that, where the actual amount differs from an arm’s-length amount under cross-border arrangements, the latter figure shall be used in ascertaining total income instead of the former.

      Next steps?

      It is anticipated that more detailed guidance will be issued in due course.

      Amongst other things, it is expected that this will include reference to the OECD Transfer Pricing Guidelines.

      If you have any queries about this article on Malta Transfer Pricing Rules or Malta tax matters in general, then please do not hesitate to get in touch.

      The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article