- Through ATAD 1 implementation Exit Taxation Rules were intorduced:
These entered into force as from 1 January 2020.
Exit taxes are a tax on capital gains deemed to arise when a taxpayer transfers:
- assets from its head office to a permanent establishment (PE) in another state or vice versa, or from one PE to another, to the effect that Malta no longer has to the right to tax Capital Gains (CG) derived upon a future transfer of the assets;
- its tax residence from Malta to another state, except with reference to assets which remain effectively connected with a PE in Malta;
- its business carried on by its PE in Malta to another state, to the effect that Malta no longer has the right to tax CG derived upon a future transfer of the business;
Exit taxes are contemplated in Rule 5 of S.L. 123.187 (ATAD 1) and have entered into force on 1 January 2020.
The deemed capital gain is calculated at an amount equal to the market value of the transferred assets, at the time of exit of the assets, less their value for tax purposes.
The exit tax is due for payment by not later than the taxpayer’s tax return date.
When the deemed transfers occur intra-EU, the payment of exit taxes may be deferred at the option of the taxpayer, subject to payment of interest on amounts outstanding.
The deemed capital gain is calculated at an amount equal to the market value of the transferred assets, at the time of exit of the assets, less their value for tax purposes.
The exit tax is due for payment by not later than the taxpayer’s tax return date.
When the deemed transfers occur intra-EU, the payment of exit taxes may be deferred at the option of the taxpayer, subject to payment of interest on amounts outstanding.
- ATAD II implemented into Maltese Law as well as from 1 January 2020:
ATAD II comprises a set of anti-abuse provisions aimed at neutralising hybrid mismatches, reverse hybrid mismatches and tax residency mismatches when these occur between:
- associated enterprises;
- a taxpayer and an associated enterprise;
- the head office and a PE; or
- two or more PEs.
The provisions contemplated in ATAD II were transposed in domestic law via L.N. 348 of 2019, published on 24 December 2019. Derogations where applied where possible.
Most of the provisions enter into force on 1 January 2020, with the exception of the rule on reverse hybrid mismatches, which enters into force on 1 January 2022.
For more information, please contact Mark Ciappara: m.ciappara@rosemont.com.mt
Subscribe to our newsletter and don’t miss our news.