Commissioner for Revenue publishes clarifications on technical matters in relation to Consolidation Group (Income Tax) Rules

Deloitte Malta Tax Alert

30 September 2020

Following the publication of procedural guidelines that sought to clarify the registration procedure of a fiscal unit, the Commissioner for Revenue has recently issued updated guidelines (‘Updated Guidelines’) to address a number of technical matters in relation to the Consolidation Group (Income Tax) Rules (Subsidiary Legislation 123.189) (the ‘Rules’).

The Updated Guidelines provide a number of clarifications in connection to the following notions established in the Rules:

  • The meaning of “voting rights” in the definition of “parent company” (rule 2(1));
  • The mechanisms for carrying forward of balances (such as unutilised tax losses and capital allowances) and the allocation of the tax account balances within the fiscal unit (rule 4(1));
  • The deductibility of expenses (rule 6(1)(b));
  • The attribution of income to foreign transparent subsidiaries within the fiscal unit for the purposes of rule 6(1)(f);
  • The applicability of rule 6(1)(g), relating to Malta’s source rules for companies that are not ordinarily resident nor domiciled in Malta;
  • The determination of the applicable income tax rate, the amounts of refunds claimable and the meaning of the term “specifically empowered” (rule 6(2));
  • The interaction of the Rules with rule 9 of the Tax Accounts (Income Tax) Rules, Subsidiary Legislation 123.101 (rule 8(3));
  • The application of the anti-abuse measures in terms of rule 13(2);
  • The interplay of the Rules with the group relief provisions in terms of articles 16 to 22 of the Income Tax Act (Chapter 123 of the Laws of Malta);
  • The reporting considerations in the event of different reporting currencies;
  • The necessary prerequisites to exit a fiscal unit (rule 5);
  • The obligations under the Final Settlement System (FSS) Rules, Subsidiary Legislation 372.14 and the Value Added Tax Act, Chapter 406 of the Laws of Malta; and
  • The reporting obligations for non-Malta resident entities forming part of a fiscal unit.

The full text of the Updated Guidelines can be found here.

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