On 16 April 2021, Malta has published and enacted Act to implement Budget Measures for the Financial Year 2021and other administrative measures (Act No. XVIII of 2021). The budget measures were announced in October 2020 which came into force on the 1st January 2021. Through the enactment of this Act, amendments were made to several tax laws. The main tax measures of the Act are as follows:

Transfer Pricing

Article 51A is added regarding transfer pricing provisions where it is stated that the Minister of Finance may make rules in relation to transfer pricing generally and may, in particular by such rules, provide for the determination of the arm’s length pricing of a transaction or a series of transactions, any adjustments in relation thereto and advance pricing agreements (APA).

Adjustment forms regarding MAP

The Act removes the five-year prescription period for the filing of tax adjustment forms where the adjustment results in a reduction in the tax payable by or an increase in the tax refundable to the taxpayer, where such forms are being filed regarding Mutual Agreement Procedure (MAP).

This five-year rule shall not apply when a further return is filed with the Commissioner for the purposes of implementing an agreement reached pursuant to a Mutual Agreement Procedure in terms of an arrangement in terms of article 76 of the Income Tax Act including Convention 90/436/EEC of 23 July 1990on the elimination of double taxation in connection with the adjustment of profits of associated enterprises.

Information exchange with foreign tax authorities

The Act reduced the time limit from 30 days to 20 days of information requests from the Commissioner for Revenues for the purposes of providing information to foreign tax authorities in jurisdictions that had a mutual exchange of information agreement with Malta.

Participation exemption on shareholder dividends

The Act provided that the exemption shall not apply to income derived from a participating holding in a  body of persons resident for tax purposes in a jurisdiction that is included in the  EU  list of non-cooperative jurisdictions for a minimum period of 3 months during the year immediately preceding the year of assessment unless it is proved to the satisfaction of the Commissioner that the said body of persons maintains sufficient significant people functions in that jurisdiction as is commensurate with the type and extent of the activity carried on in that jurisdiction and the income earned therefrom. Where such 3 months are consecutive and fall in 2 subsequent consecutive basis years, the exemption shall not apply in respect of any such income derived in any 1 of the 2 years.