Maltas antiquated tax regimes
hit the spotlight, by mistake
Julian Manduca and David Lindsay
A number of Maltas various tax regimes hit the international headlines
this week after an article in the Financial Times erroneously quoted
an antiquated EU report that had listed seven Maltese tax regimes found
to be harmful and out of line with those of member states, Malta Financial
Services Authority Chairman Professor Joe Bannister told this newspaper
In fact, as matters stand today only one of the issues remains outstanding
that which offers a number of tax breaks to international companies
setting up operations in Malta.
In fact, no less than three of the tax regimes quoted in the Financial
Times referred to Maltas now defunct offshore sector, Profs. Bannister
told The Malta
Financial and Business Times yesterday. Three of the others taxes practices
listed have also been resolved with the EU.
However, the tax regime related to internationals operating out of Malta
remains a pending issue, albeit outside the scope of the Acquis Communitaire
and is being treated by the Code of Conduct.
Within this scope the EU had objected to Maltas beneficial tax
treatment for foreign companies, claiming a case of reverse discrimination
as non-residents are given preferential tax benefits to residents.
Malta has prepared a proposal that will hopefully rectify the situation
and the EUs last report noted the fact that Malta had submitted
such a proposal to that effect.
The details of Maltas proposal are still not known and the matter
is being handled by Maltas Chief Negotiator Richard Cachia Caruana.
On conclusion of EU negotiations, Malta committed itself to comply with
the principles of the Code of Conduct for Business Taxation and to introduce
only new tax measures that are in conformity with these principles.
The Malta Financial and
Business Times yesterday contacted Jonathan Todd, spokesperson for EU
Taxation Commissioner Frits Bolkestein, who confirmed that acceding
countries are expected to fall in line with the EU Code of Conduct before
Maltas Business Promotion Acts had introduced a new incentives
range including reduced income tax rates and investment tax credits.
The Act was drawn up to assist companies that either carry on, or plan
to carry on trade in Malta.
According to the Act, manufacturing companies can benefit from reduced
tax rates so that in the first seven years only five percent is due,
in the next six years only 10 per cent is paid, while for the following
five years the rate goes up to 15 percent to reach the full 35 percent
in subsequent years.
Companies that qualify for reduced income tax are also entitled to an
investment tax credit of up to 65 percent for small or medium sized
enterprises and up to 50 percent for any other company for specified
investments made by the company within a specific period of time.
Other incentives that the Act offers include: loan interest rate subsidies,
loan guarantees and incentives for job creation.