Advance Revenue Rulings

Advance Revenue Rulings

With a view to providing taxpayers with certainty and assurance as to their proper Malta tax treatment or the proper Malta tax treatment of certain transactions, the Malta Income Tax Act authorises the local tax authorities to issue advance revenue rulings confirming certain prescribed matters including, inter alia:

  1. that domestic general anti-abuse provisions would not apply in respect of a transaction to be implemented for bona fide commercial reasons;
  2. that a company’s equity shareholding in a subsidiary which was acquired (or which may be acquired) for the furtherance of the former company’s business and not as trading stock for the purposes of a trade would qualify for treatment as a ‘participating holding’ – thus typically allowing access to Malta’s participation exemption regime;
  3. the Malta tax treatment of any transaction which involves international business or concerns a financial instrument or other security.

Advance revenue rulings should be issued speedily (within 30 days once all relevant information is provided as required) and, significantly, they survive a change of underlying applicable legislation. In fact, once the local tax authorities issue an advance ruling, that ruling remains binding on the said authorities for a (renewable) period of 5 years from the date of issue or alternatively, for the lesser period of 2 years from the date of any relevant change of the relevant statutory provisions, whichever is the earlier.

Notwithstanding the aforesaid, taxpayers often opt to obtain informal guidance from the local tax authorities as to the proper Malta tax treatment of one or more transactions. Such informal guidance and the grant thereof has no basis in law although it is understood that the local tax authorities would consider themselves bound by the contents of any such informal guidance. Such guidance would not, however, survive a change of applicable legislation.

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