Tax Archives - EMCS

Important Changes: Amendments to the Company Service Providers (“CSP”) Act

Faye Mallia — Wed, 21 May 2025 19:36:14 +0000

The Company Service Providers Act, Cap. 529 (Act No. X of 2025) came into force as of 16 May 2025, introducing significant changes for anyone providing company services in or from Malta. These services include acting as a director or company secretary. The most notable change, however, is in relation to directors or company secretaries who previously fell outside the scope of the Act – these persons may now be required to submit a notification.

In line with the regulatory developments, the Malta Financial Services Authority (“MFSA”) has published an updated CSP Rulebook and Guidance Notes.

Key Changes Under the Revised Framework

Under the revised framework, three categories of CSPs are now recognised:

Authorised CSPs - subject to full licensing;
Registered Persons - individuals with up to 10 involvements acting “by way of business” (also referred to as Limited Company Service Provider); and
Restricted CSPs - individuals not acting “by way of business” (also referred to as Notified Persons).

Anyone offering directorship or company secretary services must now be either Authorised, Registered, or Notified by the MFSA, depending on their role, number of involvements and level of activity.

Simplified Regulation for Registered Persons (Limited CSPs)

The introduction of the Registered Persons category would mean that authorised persons that qualify under this category can benefit from simpler regulations.

Obligations for Restricted CSP (Notified Persons)

Individuals who are not acting by way of business, but still hold roles such as director or company secretary, fall under the Restricted CSP (Notified Person) category. These individuals must ensure that they do not hold more than 5 involvements and must not be involved in more than 2 Groups of Companies, as defined in the CSP Rulebook. Such individuals are required to notify the MFSA of their involvements via the LH Portal:

By 16 July 2025, if already holding such roles before 16 May 2025;
Within 14 days, for new appointments thereafter.

What you need to Do

If you act as a director or company secretary, it is now essential to:

Assess the total number of involvements;
Determine whether these are Exempt or Excluded;
Consider whether they may be deemed to be acting by way of business.

This assessment will enable you to determine whether you fall under the Authorised, Registered or Restricted CSP category.

Non-compliance may lead to enforcement action or penalties. If you are unsure of your obligations, we strongly recommend seeking professional advice to ensure full compliance with the new framework.

Should you require assistance in determining your status or submitting the relevant forms to the MFSA, please reach out to your contact person at EMCS or send an email to: corporate-services-team@emcs.com.mt

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Budget Measures Implementation Act 2025

Faye Mallia — Thu, 15 May 2025 08:30:00 +0000

The Budget Measures Implementation Act 2025 introduces several tax-related measures, most of which are effective as from 17 April 2025, and a summary of these measures is contained below.

Vacation of Immovable Property

The Income Tax Act already exempts any gain arising from the transfer of one’s own residence, if it has been occupied for at least 3 years and it is disposed of within 12 months of vacating the property. A new proviso has now been added to clarify the applicability of the exemption in the case of a divorce or separation. The proviso clarifies that the property will only be deemed as vacant when neither spouse continues to occupy the property as the sole ordinary residence. Therefore, if only one of the spouses continues to occupy the property, the exemption may still apply provided the other conditions are satisfied.

Deduction for the acquisition of business permits, concessions and commercial leases

Article 14 of the Income Tax Act has been amended to provide for a deduction with respect to capital expenditure incurred on the acquisition of a business permit, concession, or a commercial lease. Therefore, a person carrying on a trade, business, profession or vocation may now claim a deduction with respect to such capital expenditure incurred on or after 1 January 2025. The said deduction is also applicable to capital expenditure incurred for the extension, renewal, or modification of business permits, concessions, or commercial leases.

The deduction does not cover any sums paid or attributable to the acquisition of a business, business goodwill, or rights in accordance with an emphyteutical concession, or any intellectual property or rights, or any other tangible or intangible asset other than the business permit, concession or commercial lease as defined in the legislation. Moreover, the business permit, concession or commercial lease cannot exceed 15 years for the deduction to be allowable. The deduction is spread over the duration period. Also, a document in writing is required to enable the taxpayer to claim this deduction. An acquisition from a related party falls outside the scope of this new deduction.

The following aspects are also relevant in determining the applicability of the deduction:

● If there is the option to extend or renew the permit or lease, the permissible extension/renewal shall be deeded to be part of its duration for all intents or purposes.

● Right of deduction ceases if:

Permit is subsequently transferred, leased or ceased,
Property is sublet,
Permit or property is no longer used or employed in the production of income from a trade, business, profession or vocation.

● If permit is transferred, or lease is assigned or sublet, the cost of acquisition must be reduced by the deductions claimed in determining the gains or profits on such transfer, assignment or sublease. The deduction cannot exceed the cost of acquisition.

School Fees deduction

The deduction for private school fees is being increased, with effect from year of assessment 2026, as follows:

Secondary School – €6,500 (from €2,600),
Primary School – €4,600 (from €1,900),
Kindergarten – €3,500 (from €1,600).

Elective Tax

The Budget Measures Implementation Act introduces a new Article 22B to the Income Tax Act. The new article provides that the Minister responsible for finance may make regulations for the charging and levying of an Elective Tax and that such regulations provide for:

the scope, applicability and amount of such tax,
the manner in which the elective tax is to be calculated, paid and collected,
the obligations in respect of the payment of the elective tax, and
such other conditions and consequences in relation to the application of the elective tax.

No further details are available at this stage.

Personal income tax rates

The personal income tax rates applicable to married couples, singles and parents have been updated and are effective for year of assessment 2026. A proviso now allows the rates to apply even in case where a child is gainfully occupied or earns more than €3,400.

Endangered Tax

A new proviso has been introduced to the definition of endangered tax. This provides that if the Commissioner is satisfied that the tax, or any portion thereof, has been paid under the Final Settlement System Rules, such payment shall not be considered endangered tax. This is retroactive from 1 January 2025.

Criminal Offences

A person who fails to submit a return which he is required to furnish in accordance with the Income Tax Acts may be liable to a fine of a criminal law nature, to treble the amount of the undercharged tax and / or imprisonment. Also, the Commissioner is not required to sanction the prosecution of offences under the Income Tax Acts and therefore, the police may now initiate prosecutions without the need to obtain consent from the tax authorities.

Should you require assistance on tax related matters, please reach out to your contact person at EMCS or send an email to: corporate-services-team@emcs.com.mt

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Introducing a Large Taxpayer Office

Faye Mallia — Thu, 24 Apr 2025 08:20:42 +0000

The Malta Tax and Customs Administration (MTCA) recently announced the establishment of the Large Taxpayer Office (LTO) designed to provide a specialised, coordinated, and integrated service to large companies as well as High Net Worth Individuals (HNWIs) who meet specific eligibility criteria.

The eligibility criteria for companies are:

Annual turnover exceeding €20 million in any year of assessment from 2020 to 2022 and having at least 50 employees in any basis year from 2019 to 2022, or
Annual turnover exceeding €20 million in any year of assessment from 2020 to 2022 and having domestic VAT supplies in excess of €10 million for year of assessment 2022.

The eligibility criteria for HNWIs are:

A shareholding of 25%, whether directly or indirectly, in a company that has total assets in excess of €50 million in any year during the last 5 years, or
Property acquisitions exceeding €3 million since basis year 2021, or
Declared income of more than €2 million in any year of assessment between 2021 and 2023.

The qualifying status of taxpayers will be reviewed every three years and it is at the discretion of the tax authorities to add or remove taxpayers from the list of large taxpayers.

The services offered to taxpayers who qualify for the LTO include:

Monitoring and processing of tax returns and payments as well as taking appropriate action following receipt of taxpayer documents,
Handling enquiries, rulings, interpretations, requests, and complaints,
Exemption and tax clearance certificate applications,
Processing tax refunds,
Special attention to taxpayers with complex tax issues.

The taxpayers will be grouped into four sectors as follows:

Tourism, Wholesale and Retail,
Gaming and Financial Services,
Construction and Manufacturing,
High Net Worth Individuals.

The setting up of the LTO and the dedicated service to large taxpayers is also intended to build up a relationship based on a proactive approach in order to streamline the administrative and compliance obligations of taxpayers.

At EMCS we will continue to act as tax representatives for large taxpayers in order to further enhance the relationship between the taxpayer and the tax authorities.

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Amendments to the Malta Merchant Shipping Act

Faye Mallia — Fri, 04 Apr 2025 15:35:20 +0000

The Malta’s Flag strength relies on a consolidated set of rules aimed at protecting creditor interests and confidence in our flag. Over the last few decades, this has facilitated owners’ access to credit facilities and led to a substantial growth for Malta’s flag. For this reason Malta decided to introduce additional tools in the recently approved amendments to the Merchant Shipping Act (the “Act”) meant to diversify Malta’s maritime offering and consolidate Malta’s position as a leading flag. These changes will come into force on 16th April, 2025.

The below mentioned amendments to the Act are the results of a continued dialogue between Maltese maritime authorities and industry practitioners aimed at updating Malta’s legal framework and aligning it with most recent industry practices originating from different jurisdictions across the world. One such change saw a shift from bank financed vessel purchases to models based on finance leases. Apart from cosmetic changes paving the way to the introduction of electronic tools, the Act will reduce the age of vessel allowed to be registered under the Malta flag from 25 to 20 years. This will consolidate the flag’s commitment to a younger fleet, more efficient in terms of energy consumption and safety standards. Other changes will see the removal of anachronistic requirements such as the need for vessels to include identification markings on the keel, delegation of certain powers from the Minister to the Registrar-General and more flexibility in correcting registration mistakes included in mortgages.

In addition to the above the Flag will now allow the possibility to register mortgages over ships under construction. This instrument will render registration of ships under construction more practical while allowing the ship builder to retain control in case the owner would not honour its commitment. The possibility to register ships under construction has also been extended from two to three years. The Act also introduced the possibility to record in the Malta Shipping Register mortgages registered abroad.

However, one of the most innovating novelties revolves around the possibility to register an interest in favour of lessors in a finance charter transaction in relation to Malta flagged vessels. Such provisions were introduced following the growth of sale and lease back financing transactions allowing financiers to benefit from additional security under Maltese law.

What is a Finance Charter?

A Finance Charter refers to “chartering or lease of a vessel following which a charter obtains possession and control of such vessel and where the principle objective is the financing of the operation, purchase, administration or management of the vessel”. The registration of an interest in favour of a lessor is meant to secure payment of hire, a principal sum and interest, an account current and any other obligation mentioned in the charter agreement.

The term “bareboat charterer” is separately defined as “a person who leases or sub-leases a ship, by means of a contract for a stipulated period of time, during which period such person shall acquire full control and complete possession of the ship, including the right to appoint her master and crew for the duration of the charter but excluding the right to sell or mortgage the ship”.

Once recorded, the finance charter becomes a charge over a ship with preference over all debts, claims or interests of any other unsecured creditor, save for any privileged claims which would rank in preference of a finance charter interest. The interest secured by a finance charter will always rank after any registered mortgage. Therefore the rights of the mortgagee shall in no way be prejudiced by the registration of the finance charter instrument. It is to be noted that since the only person to be able to grant a mortgage over a vessel can be the lessor, it will be highly unlikely to have a simultaneous registration of a mortgage and interest over a finance charter, unless the vessel is given as security through a mortgage for obligations with third parties other than the charterers.

Similarly to provisions governing registered mortgages, the bankruptcy or involvement in court winding up procedures of the charterer will not affect the registered interest hold, this notwithstanding the fact the ship was under the possession or not of the charterer. Therefore, a finance lessor becomes a secured creditor increasing its chances of recovering amounts due to it.

Although the mortgage holder will always rank before a finance lease interest holder, also for mortgages registered after the registration of an interest over a lease, such interest will still attach to a vessel. This, together with other security interests used commonly in financing transactions such as share pledges, assignments and guarantees, strengthen the position of the financier encouraging the use of the Maltese legal framework.

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Reduced 12% VAT rate on short term chartering of yachts

Faye Mallia — Mon, 17 Jun 2024 07:40:37 +0000

As from this year the yachting chartering industry may benefit from a reduced VAT rate of 12%. The reduction of VAT rate was introduced to further boost the yachting industry and promote Malta as a prime yachting destination in the Mediterranean.

Malta is a recognised centre of excellence within the yachting industry. Its yachting register is one of the biggest in the world supported by specialised professionals such as surveyors, brokers, marina operators, lawyers and accountants.

As from 1^st January 2024, the hiring of pleasure yachts may benefit from a reduced 12% VAT rate. Such reduced rate is applicable to the chartering of yachts to the same person for a maximum period of 5 weeks within a period of 12 months. The yacht must be put at the disposal of the lessee in Malta. Periods exceeding 5 weeks will be subject to the ordinary 18% VAT rate.

Should you wish to obtain more information about the application of such reduced VAT rate feel free to reach out to us on info@emcs.com.mt

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Malta among most tax compliant countries

sadmin — Fri, 12 Jan 2018 11:48:14 +0000

"Indicators just published by the Organisation for Economic Co-operation and Development (OECD) portray Malta as a tax compliant jurisdiction. This is exactly what we have been stating all along in the face of unfair criticism by uninformed or malicious quarters. Thus, while we intend to continue to be one of the competitive choices in the Mediterranean for investors, we are resolute to keep to the best international standards on taxation matters." This was stated by Minister for Finance Professor Edward Scicluna in response to the 2017 Organisation for Economic Co-operation and Development's (OECD) International Tax Co-Operation Report.

The OECD has recently introduced a new interactive tax map, which provides information on the results of peer reviews of over 140 countries on how they are addressing issues related to tax transparency and Base Erosion and Profit Shifting (BEPS). OECD's assessment is based on three main pillars, whereby it looks at the jurisdiction's co-operation when it comes to Exchange of Information on Request (EOIR), Automatic Exchange of Information (AEOI) and the BEPS initiative outcomes.

As an overview, results show that Malta is quite successful in this regard. With regards to Malta, the OECD indicators show the absence of harmful tax practices in relation to BEPS, as well as a strong commitment in relation to tax cooperation in general. For Automatic Exchange of Information, Malta has commenced exchanging information in line with the Common Reporting Standard and has an activated information exchange network in relation to Country by Country Reporting for multinational enterprises. Moreover, Malta is ranked as being largely compliant when it comes to the Exchange of Information on Request.

The OECD assesses tax regimes in relation to intellectual property rights, financing and leasing, banking and insurance, distribution and service centres, shipping, holding companies and fund management regimes. In relation to Malta, this assessment shows that there are no "harmful features" for the purpose of base erosion and profit shifting.

"The OECD report clearly shows that Malta has been upholding the international agreed standards and providing the necessary exchange of information for investigations when it comes to tax related issues", concluded Minister Scicluna.

(Source: Ministry of Finance press release)

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