About Us
Magri & Associates Ltd is a boutique accountancy firm established in Malta mainly providing accounting, tax, VAT, advisory and payroll services to both local and international businesses. The managing director of the company is Mauro Magri, a Certified Public Accountant specialised in direct taxation, accounting and payroll services. Mauro has been specialising in direct taxation for the last eleven years and occupied the role of Senior Manager at a medium sized firm before taking the position of director at Magri & Associates Ltd. Mauro has vast experience in direct taxation, group restructuring, succession planning, accounting and payroll services. Mauro is a member of the Malta Institute of Accountants, the Institute of Financial Services Practitioners and the Malta Institute of Taxation.
Publications
Consolidated Group (Income Tax) Rules
In 2019, Malta has introduced the Consolidated Group (Income Tax) Rules through Legal Notice 110 of 2019 whereby a parent company may opt to make an election for itself and all its subsidiaries in which it has 95% or more shareholding, to form a fiscal unit for income tax purposes as from year of assessment 2020.
What are the conditions of forming a fiscal unit?
In order for a fiscal unit to be formed, the parent company must be a company resident in Malta or carries on any activity in Malta. Moreover, it has to hold shares in another company and meet any two of the following conditions in the year prior to the year of assessment in which an election is made:
• it holds at least 95% of the voting rights in the subsidiary company
• it is beneficially entitled to at least 95% of any profits available for distribution to the ordinary shareholders of the subsidiary company
• it would be beneficially entitled to at least 95% of any assets of the subsidiary company available for distribution to its ordinary shareholders on a winding up.
Any 95% subsidiary must have its accounting period beginning and ending on the same dates as the accounting period of the parent company. Moreover, the rules imply that no company shall form part of more than one fiscal unit at any one time.
The parent company will be deemed the principal taxpayer while each 95% subsidiary will be considered as a transparent subsidiary. The principal taxpayer shall assume the rights, duties and obligations under the Income Tax Acts relative to that fiscal unit, while all the rights, duties and obligations of the other companies forming part of the fiscal unit will be suspended.
For each year, the principal taxpayer shall be required to prepare a consolidated balance sheet and consolidated profit and loss account covering all the companies in the fiscal unit which shall be accompanied by a report prepared by a certified public auditor. Moreover, the principal taxpayer shall file a self-assessment income tax return of the fiscal unit. The other companies forming part of the fiscal unit shall be exempted for income tax purposes from preparing audited financial statements and to file self-assessment income tax returns. However, the principal taxpayer and its transparent subsidiaries shall be jointly and severally liable for the payment of tax, additional tax and interest due by the fiscal unit.
How to calculate the chargeable income of a fiscal unit?
The chargeable income of a fiscal unit shall be computed as if such income was derived by the principal taxpayer and shall be chargeable to tax in the name of the principal taxpayer. All transactions occurring between two or more companies forming part of the fiscal unit shall be deemed not to have occurred subject to certain exclusions.
Any balances carried forward including tax credits carried forward together with the balance of any profits allocated to the tax accounts (excluding the untaxed account) of the 95% subsidiary shall be considered to be a balance of the principal taxpayer.
Any income or gains derived by a transparent subsidiary that is not resident in Malta shall be deemed to be attributable to a permanent establishment of the principal taxpayer situated outside Malta. Moreover, any interest held by a transparent subsidiary in any body of persons not forming part of the fiscal unit shall be deemed to be held directly by the principal taxpayer.
The rules also include that if a shareholder of a company within the fiscal unit is eligible to apply for a shareholders’ tax refund in terms of article 48(4) or 48(4A) of the Income Tax Management Act, such refund element will be reflected directly when calculating the tax charge of the fiscal unit.
Our services
If you have any queries or would like to determine whether your group of companies can opt to be treated as a fiscal unit in terms of the Consolidated Group (Income Tax) Rules, we are here to assist you. You can send an email to Mauro Magri, director of Magri & Associates Ltd, on mm@magriandassociates.com
Taxation of Malta Companies
Companies registered in Malta are considered to be resident and domiciled in Malta and are generally subject to tax on a worldwide basis at the standard corporate income tax rate of 35%. The Maltese tax system is based on the full imputation system of taxation accompanied by a tax refund mechanism whereby upon distribution of dividends, the shareholders can claim a tax refund of the Malta tax paid by the Maltese company subject to certain conditions.
Consolidated Group (Income Tax Rules)
In 2019, Malta has introduced the Consolidated Group (Income Tax) Rules through Legal Notice 110 of 2019 whereby a parent company may opt to make an election for itself and all its subsidiaries in which it has 95% or more shareholding, to form a fiscal unit for income tax purposes as from year of assessment 2020. The parent company will be deemed the principal taxpayer and the chargeable income and the tax due of the fiscal unit will be computed at the principal taxpayer’s level. If the parent company is eligible to apply for a shareholders’ tax refund, such refund element will be reflected directly when calculating the tax charge of the fiscal unit.
Participation Exemption Regime
The Maltese Income Tax Act provides for the application of a participation exemption regime, granting a tax exemption to Maltese companies on dividend income derived from participating holdings or permanent establishment and on capital gains derived from the disposal of participating holdings or permanent establishment subject to certain anti-avoidance provisions.
Double Taxation Relief
Malta has entered into more than 70 double taxation treaties with other jurisdictions which can provide double tax treaty relief to companies registered in Malta. There are also other types of double taxation reliefs that can be claimed namely being unilateral relief and flat rate foreign tax credit.
If you are interested in setting up a company in Malta or have any tax queries related to companies in Malta, please do not hesitate to contact us on mm@magriandassociates.com
Taxation of Individuals
Individuals resident and domiciled in Malta are taxed herein on a worldwide basis, that is, on all income and/or capital gains derived from Malta or elsewhere, at the progressive rates ranging from zero to thirty five percent depending on the annual chargeable income. On the other hand, individuals who are resident but not domiciled in Malta are taxed in Malta on a source and remittance basis of taxation, that is, on all income and/or capital gains generated from Malta and on foreign source income remitted to Malta. This implies that resident non-domiciled individuals are not subject to tax in Malta on foreign source income not remitted to Malta subject to certain conditions and on any foreign source capital gains whether remitted or not to Malta.
Minimum Tax for Resident not Domiciled Individuals
As from basis year 2018 (year of assessment 2019), Malta has introduced a minimum annual tax of €5,000 for individuals who are resident but not domiciled in Malta who derive income arising from foreign sources exceeding €35,000 in a calendar year. This new measure implies that resident not domiciled individuals will be subject to the annual minimum tax of €5,000 in Malta regardless of whether they remit or not the foreign source income to Malta. Through this measure, there were no changes in relation to the taxation of foreign source capital gains being derived by resident not domiciled individuals, which means that no income tax will be due in Malta on foreign source capital gains even if remitted to Malta.
The minimum tax liability includes any tax paid in Malta which has been withheld at source excluding tax on transfer of immovable property situated in Malta in terms of article 5A of the Income Tax Act. Moreover, such individuals are allowed to claim double taxation relief on any tax paid outside Malta in relation to the income remitted to Malta. In the case of married couples, the threshold of €35,000 is calculated on the total income of both spouses and the minimum tax of €5,000 applies to the couple.
The minimum tax mentioned above does not apply to those individuals who are beneficiaries of the Residence Programme, the Global Residence Programme, the Malta Retirement Programme, the Returned Migrants Scheme, the Residents Scheme and the High Net Worth Individuals Scheme.
Taxation of Non-Resident Individuals
Individuals who are not resident in Malta are taxed in Malta on a source basis of taxation, that is on any income arising in Malta, at the non-resident progressive rates ranging from zero to thirty five percent depending on the annual chargeable income.
If you would like additional information or have any queries in relation to taxation of individuals in Malta, please do not hesitate to contact us on mm@magriandassociates.com
Micro Invest Tax Credits
The Micro Invest Scheme which is administered by Malta Enterprise provides the opportunity for undertakings such as start-ups, family owned businesses and self-employed to obtain a tax credit on the eligible expenditure incurred to invest in their business. Undertakings can benefit from a tax credit until 31st December 2020 equivalent to 45% of eligible expenditure which can also be increased to 65% for those undertakings operating from Gozo. The maximum eligible tax credits claimable by each undertaking shall be capped at €50,000 over any period of 3 consecutive fiscal years. The capped amount can be increased to €70,000 for those undertakings who are operating from Gozo, registered as a Family Business and having more than 50% of the ownership attributed to female persons.
Eligibility
The Micro Invest scheme is eligible to undertakings which satisfy all of the following criteria:
1. The undertaking did not employ more than 50 persons on full time contract during the calendar year.
2. The annual turnover did not exceed €10 million in the fiscal year preceding the year in which the application is submitted.
3. As at the date of application, the undertaking (legal person) must employ at least 1 person.
4. The undertaking should be duly registered with the VAT Authority unless it is exempt from registering.
5. The undertaking is not engaged in activities specifically excluded under the de minimis regulations.
Eligible Costs
Undertakings eligible to apply for Micro Invest scheme can claim tax credits on the following qualifying expenditure:
• On the increase in wage cost that exceed 3%
• Furbishing and refurbishing of Business Premises
• Investment Costs
• Motor Vehicle Costs
Applications
Applications have to be submitted per calendar year covering the eligible expenditure and wages costs incurred during the previous year. The following are the deadlines to submit the Micro Invest application with Malta Enterprise per calendar year:
Claims for costs incurred in basis years
Initial Deadline for Self-Employed
Initial Deadline for Companies
Late Submissions
2018
27/03/2019
29/05/2019
11/12/2019
2019
25/03/2020
27/05/2020
16/12/2020
2020
24/03/2021
26/05/2021
15/12/2021
Upon approval of the application, Malta Enterprise will issue an Incentive Entitlement Certificate which shall be valid from that year of assessment unless the application is submitted late.
If you would like us to assist you with the application of Micro Invest with Malta Enterprise or have any queries in relation to the Micro Invest scheme, please do not hesitate to contact us on mm@magriandassociates.com
Highly Qualified Persons Rules
Through subsidiary legislation 123.126 ‘Highly Qualified Persons Rules’, Malta introduced a scheme whereby an individual, not domiciled in Malta, whose employment income exceeds €85,000 under a qualifying contract of employment from an eligible office, can apply with the Maltese Authorities so as to be recognised as a highly qualified person. The employment needs to be in the financial services sector, gaming sector, with an aerodrome licensed undertaking or in the assisted reproductive technology sector.
Eligible Office
The following are the positions that fall under the definition of eligible office in the respective sectors:
Sector
Positions
Eligible Office in the
Financial Services Sector,
Gaming Sector and
Undertakings holding an Air
Operators CertificateActuarial Professional
Aviation Continuing Airworthiness Manager
Aviation Flight Operations Manager
Aviation Ground Operations Manager
Aviation Training Manager
Chief Executive Officer
Chief Financial Officer
Chief Commercial Officer
Chief Insurance Technical Officer
Chief Investment Officer
Chief Operations Officer (including Aviation Accountable Manager)
Chief Risk Officer (including Fraud and Investigations Officer)
Chief Technology Officer
Chief Underwriting Officer
Head of Investor Relations
Head of Marketing (including Head of Distribution Channels)
Head of Research and Development; (including Search Engine Optimisation and Systems Architecture)
Portfolio Manager
Senior Analyst (including Structuring Professional)
Senior Trader/Trader
Odds Compiler Specialist
Eligible Office in an
Aerodrome Licensed
UndertakingChief Executive Officer
Eligible Office in the
Assisted Reproductive
Technology SectorEmbryologist
Responsible Person
Lead Quality Manager
Conditions
Individuals eligible for this scheme will have their employment income taxed at the reduced rate of 15% subject to the following conditions being met:
1. Employment income is derived through an employment contract subject to Maltese Legislation in respect of work or duties carried out in Malta, or in respect of any period spent outside Malta in connection with such work or duties
2. The individual is in possession of a valid travel document and has sickness insurance in respect of all risks normally covered for Maltese nationals for himself and his family members
3. The individual proves that he performs activities of an eligible office, is in possession of professional qualifications and has at least 5 years of professional experience
4. The individual is in receipt of stable and regular resources which are sufficient to maintain himself and his family members without recourse to the social assistance system in Malta
5. The applicant resides in an accommodation which meets the general health and safety standards in force in Malta
6. The individual has not benefitted from deductions available to investment services expatriates with respect to relocation costs and other deductions.
Conclusion
The reduced rate of 15% applies for a consecutive period of 5 years for EEA and Swiss nationals and for a consecutive period of 4 years for third country nationals. Every year the applicant would need to file a signed declaration endorsed by the competent authority together with the self-assessment income tax return by the tax return due date.
If you require any assistance with the application for a formal determination under the Highly Qualified Persons Rules or in relation to your personal tax return, please do not hesitate to contact us on mm@magriandassociates.com
Patent Box Regime (Deduction) Rules
With the enactment of subsidiary legislation 123.194 ‘Patent Box Regime (Deduction) Rules’, Malta introduced new rules applying to qualifying income derived as from 1 January 2019 from qualifying intellectual property. Such rules allow for a patent box regime deduction as per article 14(1)(p) of the Income Tax Act against income derived from qualifying intellectual property.
Qualifying Intellectual Property
The subsidiary legislation says that the following are considered as qualifying intellectual property:
• a patent or patents, and extensions of patent protection
• assets in respect of which protection rights are granted in terms of national, European or international legislation, including those relating to plants and genetic material and plant or crop protection products and orphan drug designations
• utility models
• software protected by copyright under national or international legislation
• in respect of a small entity other intellectual property assets as are non-obvious, useful, novel and having features similar to those of patents.
The legislation also implies that marketing-related intellectual property assets including brands, trademarks and trade names, shall not constitute qualifying intellectual property.
Qualifying Income
The deduction is claimable against income or capital gains derived from qualifying intellectual property which includes:
• Income that is derived from the use, enjoyment and employment of the qualifying intellectual property
• Royalty or similar income whether this is embedded in the consideration for the sale of goods and/or services
• Advances and similar income derived from the qualifying intellectual property;• Any sum paid for the grant of a licence or similar empowerment to exercise rights under qualifying intellectual property
• Compensation for infringements in respect of qualifying intellectual property whether such compensation is granted through judicial means or otherwise
• Gains on disposal of qualifying intellectual property and such other similar or related income as is derived from the qualifying intellectual property and as being calculated after deducting such expenditure, whether of a capital nature or otherwise, as is deductible from income derived from the qualifying intellectual property.
Calculation of Patent Box Regime Deduction
The Patent Box Regime (Deduction) Rules states that the deduction shall be calculated as follows:
Conditions
A deduction is claimable as per article 14(1)(p) of the Income Tax Act if the intellectual property falls under the definition of qualifying intellectual property, is approved as such by Malta Enterprise and it satisfies all of following conditions:
• the research, planning, processing, experimenting, testing, devising, designing, development or similar activity leading to the creation, development, improvement or protection of the qualifying intellectual property, shall be carried out wholly or in part by the beneficiary, solely or together with any other person or persons or in terms of cost sharing arrangements with other persons, whether these are resident in Malta or otherwise
• the beneficiary shall be the owner of the qualifying intellectual property or the holder of an exclusive license in respect of the qualifying intellectual property
• the qualifying intellectual property is granted legal protection in at least one jurisdiction
• the beneficiary maintains sufficient substance in terms of physical presence, personnel, assets or other relevant indicators, as is commensurate with the type and extent of activity being carried out in the relevant jurisdiction in respect of the qualifying intellectual property
• where the beneficiary is a body of persons, such beneficiary is specifically empowered to receive such income
• the beneficiary requests the Patent Box Regime deduction in computing his income or gains in his income tax return.
Our Services
If you own an intellectual property and would like to determine whether it falls under the definition of qualifying intellectual property in terms of the Patent Box Regime (Deduction) Rules, we advise you to get in contact with us on mm@magriandassociates.com. We can also assist you with the application to be recognised as a qualifying intellectual property with Malta Enterprise.
Services
Direct Tax Services
Corporate Tax Compliance
Tax Advisory
Group Restructuring
Succession Planning
Cross-Border Transactions
Mergers and Acquisitions
Division of Companies
Personal Tax & Other Services
Personal Tax Compliance
Self-Employed Package
Residence Programme
Global Residence Programme
Highly Qualified Persons
Liquidation Services
Payroll Services
Employers’ Registration
Employees’ Registration
Jobsplus Compliance Obligations
Residence Permits
Monthly Payroll
Payroll Advisory
Accounting and VAT Services
Bookkeeping Services
Management Accounts
VAT Registrations
VAT Compliance Services
VAT Advisory Services
Contact Us:
Mauro Magri B.Accty (Hons), Dip Tax, CPA, FIA, IFSP
Certified Public Accountant
Director
Magri & Associates Ltd
E-mail : mm@magriandassociates.com
Phone : +356 79883658
Skype : mmagri86
Address
Magri & Associates Ltd,
11, Balzan Valley,
Balzan,
BZN 1408,
Malta