IMF Urges Malta to Expedite Implementation of Global Minimum Tax

The International Monetary Fund (IMF) has recommended that Malta accelerate its adoption of the OECD’s global minimum tax on multinational corporations, warning that delays may result in lost tax revenues to jurisdictions implementing the measure sooner.

The recommendation followed the IMF’s official visit to Malta on November 18 to assess the country’s economic progress. While Malta’s corporate tax rate stands at a headline figure of 35%, the nation has opted to defer implementing the OECD’s Pillar Two framework for up to six years, as allowed under the EU’s Pillar Two Directive.

The OECD’s global minimum tax regime mandates a 15% corporate tax rate for multinational corporations with revenues exceeding €750 million ($793 million). Despite this framework being a global initiative to curb tax base erosion, Malta has adopted a cautious stance.

“While Malta’s wait-and-see approach – by deferring the implementation of pillar two – allows for adaptation to international developments, it risks ceding revenue to other jurisdictions that adopt the directive sooner,” the IMF cautioned.

Recommendations for Malta

To address potential revenue risks, the IMF emphasized that Malta should swiftly create and disseminate a comprehensive roadmap for its corporate income tax policy. This roadmap should account for the treatment of both foreign and domestic companies and align with anticipated clarifications from the European Commission on Qualified Refundable Tax Credits (QRTCs).

“The timely introduction of well-designed QRTCs under pillar two is crucial,” the IMF stated, highlighting the importance of clarity and readiness as global implementation of the tax regime progresses.

In addition to urging tax policy reforms, the IMF acknowledged Malta’s advancements in strengthening the operational independence of the Malta Tax and Customs Administration. The organization also praised enhancements to the authority’s governance framework but called for further developments.

Key Priorities for Malta’s Tax Authority

The IMF recommended that Malta’s tax authority complete the establishment of a dedicated large taxpayer office, adopt a modern compliance and risk management strategy, and roll out updated IT systems to better manage tax processes and enforcement.

Broader Context

Malta’s deferred implementation of pillar two is not unique, as other European countries have faced scrutiny over their progress. In October, the European Commission referred Spain, Cyprus, Poland, and Portugal to the Court of Justice of the EU for failing to notify their Pillar Two measures.

As the global tax landscape evolves, Malta’s ability to balance its strategic approach with international obligations will be critical to maintaining fiscal stability and competitiveness.

By fLEXI tEAM