On March 29 2018, the Budget Measures Implementation Act
(Act) was passed, whereby several of the 2018 budget proposed
measures were implemented. At the core of the Act are various
interesting fiscal measures and incentives for both businesses
and households.
One of the more pertinent measures is an amendment to the
definition of 'participating holding'. One of the conditions
for qualifying as a participating holding was that a company
must have held directly at least 10% of the equity shares of a
company, this holding having conferred an entitlement to at
least 10% of two out of (i) the right to vote; (ii) profits
available for distribution; and (iii) assets available for
distribution on a winding up. The thresholds have now been
reduced to 5%. The thresholds are relevant for the purposes of
qualifying for one of the limbs of the participation exemption,
which is an exemption from income tax on income derived from a
participating holding or gains derived from the transfer of
such a holding, provided additional conditions are met. The Act
has also widened the scope of entities in which a participating
holding can be held by including European economic interest
groupings and partnerships which did not elect to be treated as
a company under a particular provision of the law.
Another noteworthy introduction is that as from basis year
2018, individuals that are ordinarily resident but not
domiciled in Malta, who derive income of not less than
€35,000 ($42,000) that is received outside of Malta and
who do not avail themselves of any special tax programmes such
as the global residence programme or the Malta retirement
programme, will be subjected to a minimum tax of €5,000
per annum before taking into account any foreign tax relief. It
may, however, be possible for the tax liability to be capped at
a lower amount.
Moreover, the Act now clarifies that individuals who acquire
permanent residence in terms of the Free Movement of European
Nationals and their Family Members Order, or become long-term
residents of Malta in terms of the status of long-term
residents (third-country nationals) regulations are not able to
claim the remittance basis of taxation.
A new income tax deduction has also been catered for with
respect to intellectual property. The deduction must not exceed
a percentage amount of qualifying income derived from
qualifying intellectual property. The minister responsible for
finance is yet to prescribe more detailed rules. Further
developments are therefore expected in this area. The Act has
also clarified that the income tax deduction relating to
capital expenditure on intellectual property is to apply when
the intellectual property is used and employed in the
production of the relevant income and the expenditure must be
spread equally over at least three consecutive years.
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Mark Galea
Salomone |
Daniela
Cassar |
Mark Galea Salomone (mark.galeasalomone@camilleripreziosi.com)
and Daniela Cassar (daniela.cassar@camilleripreziosi.com)
Camilleri Preziosi
Tel: +356 21238989
Website: www.camilleripreziosi.com