Global Forum on Transparency – Overall rating for Malta improved to 'largely compliant'

Deloitte Malta Tax Alert

30 May 2024

The OECD Global Forum on Transparency and Exchange of Information for Tax Purposes had previously conducted a peer review on the implementation by Malta of transparency standards and exchange of information on request (‘EOIR’) back in 2020, finding Malta, at the time, to be only ‘partially complaint’ due to deficiencies in the availability of and access to ownership and identity information, accounting information and banking information of relevant entities. Further to a request by Malta in 2021, a supplementary report was released on 28 March 2024 (‘Report’) in respect of EOIRs made during the period July 2019 to June 2022. The Report highlights Malta's efforts in enhancing the practical application of tax information exchange, resulting in a change in Malta’s rating from ‘partially compliant’ to ‘largely complaint’.

The Global Forum commended Malta for:

  • Introducing compliance monitoring procedures;
  • Striking off inactive companies from the Malta Business Register;
  • Extending the corporate service providers regulatory framework to warranted professionals; and
  • Enhancing cooperation amongst supervisory authorities.

The Report sets out further recommendations for Malta to implement, namely:

1. The disclosure of nominees and ownership information

The Report recommends:

  • The disclosure by nominee shareholders of their nominee status to the entities in which they hold an interest, to enable the latter to maintain and report accurate information to the regulator;
  • The improvement of supervision and enforcement of reporting obligations under the Cooperation with other Jurisdictions on Tax Matters Regulations, S.L. 123.127;
  • The disclosure of legal and beneficial ownership information also in respect of the individual cells of protected cell companies (‘PCCs’) and securitisation cell companies (‘SCCs’); and
  • Clarifying the Financial Intelligence Analysis Unit (‘FIAU’) Implementation Procedures in respect of partnerships.
2. Availability of accounting records held abroad or after redomiciliation

The Report acknowledges accounting records retention periods under tax law, company law and trust law yet recommends that measures are introduced with a view to ensure timely access when accounting records are held outside Malta. Further, the Report recommends

  • The requirement for accounting records to remain available for five years following the continuation of a company outside Malta; and
  • The improvement of supervision and enforcement of accounting records retention requirements.
3. Availability of up-to-date information on bank accounts:

The Report lauds Malta for significant improvement in supervising the availability of banking information, from both a financial and a beneficial ownership perspective. What remains outstanding, according to the Report, is:

  • The monitoring of beneficial ownership updates by banks which, since 2020, is required every three months, and the enforcement of this updating exercise by the FIAU and the MTCA;
  • Ensuring the availability of banking information for at least five years when a bank ceases to exist or operate in Malta; and
  • Resolving the inconsistencies in the FIAU Implementing Procedures relating to the identification of beneficial owners of bank account holders that are trusts, PCCs and SCCs.
4. Exchange of information in criminal tax matters

The Report found that Malta’s ability to obtain and provide information is broadly in line with the standard, and recommended:

  • Ensuring access to and exchange of information in criminal tax matters where the person subject to criminal tax investigation in the requesting jurisdiction is also the information holder in Malta, in particular where the requesting jurisdiction asks Malta not to inform the concerned taxpayer; and
  • Effective sanctioning in cases where the taxpayer or information holder does not comply with a request for information from the MTCA.
5. Safeguarding commercial secrecy in the context of exchange of information

The Report found Malta’s legal framework and practices in this context to be in line with the standard in that no person may be required to disclose trade, business, commercial or industrial secret, information subject to attorney client privilege or in situation in which the disclosure would be contrary to public policy. Nevertheless, to uphold effective exchange of information, it recommends that Malta ensures that this safeguard is not abusively invoked by the taxpayer.

Concluding remarks

Generally, Malta has been found to increase its EOIR volume and improve its response time when compared to the previous review period, reflecting an increased efficiency while leaving room for improvement.

A follow up report on the steps undertaken by Malta to address the recommendations made in the Report should be provided to the Peer Review Group of the Global Forum. The first such self-assessment report from Malta is expected in 2026, and subsequently once every two years.

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