A new corporate tax regime that moves away from the existing imputation system will be enacted in time for the 2025 base year, Clyde Caruana said on Friday.
The major overhaul marks a major policy change and will be the first of its kind since the early 1990s, when the foundations of Malta’s financial services industry were laid.
Caruana said a draft new tax regime has been agreed and is currently being tested by the tax authorities to ensure that the government does not experience any shortfall.
He said the new regime has been drafted in consultation with all stakeholders and is a response to signals Malta has received from the European Commission and other foreign entities regarding its existing system.
Caruana would not say what the new tariffs will be but promised that the draft proposal would be released in the coming weeks for public comment.
“All industry players have had the opportunity to express themselves and contribute to this policy. We will also consult with the European Commission to ensure that what we have in mind can be implemented,” Caruana said.
Malta has fallen victim to various foreign entities and countries regarding its corporate tax regime, which is often used by foreign companies to pay less tax on income generated in other jurisdictions.
The aim is for the new corporate tax regime to be functional for the base year 2025 to allow time for the training of practitioners and public entities.
“The name of the game has changed there, so we have to implement changes while ensuring we stay competitive,” he said.
Caruana said the new regime will move away from the current imputation system that allows foreign companies to claim generous tax refunds, effectively lowering the corporate tax rate to 5%, and move towards a system more classic reflecting what is happening in continental Europe.
Asked by MaltaToday if the election pledge to lower the corporate tax rate to 25% was part of that change, Caruana said the pledge will be part of the package.
He said the change in the corporate tax system had nothing to do with Malta being placed on the FATF gray list. “The FATF assessors were in Malta and are grading us. The results of this visit will be known around mid-June.
Caruana was speaking at the launch of Malta’s first local neobank, Moneybase, developed by CC Finance Group.