Money - Euro

Malta’s Government has agreed to sign the OECD 15 per cent global minimum corporate tax pact, despite continuing to hold certain reservations over the text, according to a report by MaltaToday.

The news platform cites comments by Finance Minister Clyde Caruana, who explained the Government has agreed to the corporate tax rate while holding reservations regarding the €750 million profit threshold and excluded sectors.

Under the deal, explained Mr Caruana, countries will be able to tax companies the difference between tax paid in their registered tax base, and that due under the minimum rate. This, he says, means that “every country” is being forced to accept the deal.

Malta has long benefitted from a 6/7 tax refund scheme allowing companies registered in Malta with foreign ownership to effectively pay five per cent corporate tax. 

The scheme has been in place prior to Malta’s accession to the EU and has attracted large multinationals to the island. It has also attracted criticism by other EU jurisdictions for ‘taking’ taxable income from countries where the majority of profits are being earned.

Under the proposed OECD text, which will eventually be discussed at an EU level, the 15 per cent will only apply to companies generating a turnover of more than €750 million.

If the law is set in stone, a transition period will allow Governments to help companies settle into the new system.

In September, analysis by the EU Tax Observatory found that leading European banks are storing around €20 billion a year in 17 tax havens, including the Caymen Islands, Panama, and Malta.

The EU has long discussed a similar proposal to that proposed by the OECD, which Malta, together with jurisdictions such as Luxembourg, the Republic of Ireland and the Netherlands, had been steadfastly against.

Indeed, Ireland was one of the most reticent signatories of the agreement, agreeing to raise its corporate tax rate from 12.5 per cent to the agreed 15 per cent.

The country is the European host of several large multinational corporations, including Google and Facebook – meaning it is especially vulnerable to the impacts of the raised taxes.

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