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Malta introduces incentives providing relief to COVID-19 affected businesses

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Malta has taken steps to mitigate disruption caused by COVID-19

Donald Vella and Kirsten Debono Huskinson of Camilleri Preziosi Advocates discuss the tax measures adopted in Malta during the COVID-19 crisis.

The promotion of business development and business continuity lies at the heart of the comprehensive measures introduced by the Maltese government, in close collaboration with the Maltese Commissioner for Revenue (CfR) and Malta Enterprise, to assist various businesses, particularly those whose operations have come to a complete standstill, in weathering the unprecedented COVID-19 storm. 



In pursuance of the envisaged COVID-19 economic disruption, fiscal assistance in the form of tax payment deferrals has been introduced aimed at easing business cash flow pressures and improving business liquidity. Businesses and self-employed, provided they have complied with their tax obligations falling due by December 31 2019, are entitled to benefit from a four-month postponement of certain taxes which include VAT, provisional tax and employee taxes (final settlement system tax, maternity fund payments and social security contributions). 



Whilst the measures will seek to postpone any tax payments falling due within the months of March up until June 2020, no deferment is likewise applicable to the submission deadlines of tax forms as established by the relevant laws. Excise duty payable in April and May 2020 together with gaming taxes payable for the months of March, April and May 2020 have also been deferred. 



Undoubtedly, the extraordinary circumstances presented by COVID-19 have made it significantly more onerous for entities to subsist operational activity whilst simultaneously ensuring conformity with their various tax and related reporting obligations. To this end, extensions to tax deadlines have additionally been granted by the tax authorities, giving the much-needed flexibility to businesses as they navigate through such obligations whilst retaining their routine business operations flow. 



In response to the said challenges, the CfR has announced an extension to the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS) reporting deadline in relation to the Reporting Year 2019, whereby the updated deadline for Reporting Malta Financial Institutions to submit their FATCA and CRS reports will be on June 30 2020. On another note, the CfR has also announced an extension to the provisional tax deadline, in terms of which the April 30 2020 tax settlement deadline has been extended to May 31 2020. 



The reality that businesses may need to face in order to survive in a post-COVID business environment, is one which might necessitate the need to consolidate, reorganise or in some cases even merge with other entities. In order to support the plight of such businesses, Malta Enterprise in collaboration with the CfR has introduced a scheme aimed at facilitating any envisaged business reorganisations. Businesses will be exempted from paying capital gains tax or stamp duty payable within the context of a bona fide transaction undertaken, following the submission and approval of a ruling by the CfR to this effect. 



Various other schemes have also been launched, providing the necessary support to enable businesses to bounce back from the COVID-19 hardship being faced. In this respect, tax credits are being granted under the business development and continuity scheme, intended to support, inter alia, the initial development phase of undertakings establishing an operational base in Malta and expansion projects. Secondly, tax credits are available under the skills development scheme, intended to provide support to businesses, enabling them to provide non-legally mandatory training which will develop and update the skills and knowledge of their workforce. 



In addition to the COVID-19 driven measures outlined above, specific legislation was also enacted which suspends all legal timeframes in terms of certain Maltese tax acts. In this respect, all legal times, including prescription periods and peremptory periods imposed under the Maltese Income Tax Act, the Duty on Documents and Transfers Act, the Income Tax Management Act and the Value Added Tax Act have been suspended, until such date as may be prescribed by means of another order made by the Superintendent under the Public Health Act.



The suspension will apply vis-à-vis the performance of certain specific obligations. This includes the making of any assessment, demand for payment, request for information, or payment of any tax refunds by the CfR, as well as the institution, execution or continuation of any judicial action for the collection of tax, additional tax, administrative penalty or interest, or for the prosecution or request for the prosecution of any criminal offence.



A number of cross-border tax issues have also emanated in the wake of the COVID-19 pandemic, questioning the application of tax treaties between contracting states, particularly in terms of the attribution and exercise of taxing rights by the said states. To this end, the CfR will be adopting the guidance issued by the OECD Secretariat within the context of any issues arising out of the application of tax treaties, due to the impact of COVID-19, thus fostering an aura of increased legal certainty and practicability for both the taxpayer and the contracting states. 



Donald Vella

T: +356 2123 8989 

E: donald.vella@camilleripreziosi.com



Kirsten Debono Huskinson

T: +356 2567 8117 

E: kirsten.debonohuskinson@camilleripreziosi.com



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