As a result of the transposition into Maltese law of the Council Directive (EU) 2016/1164 of 12 July 2016 laying down rules against tax avoidance practices that directly affect the functioning of the internal market (‘ATAD’). The Malta Institute of Taxation is organising a series of seminars dedicated to fully exploring the mechanics and impact of ATAD on the Maltese income tax system. These rules shall enter into force with effect from January 2019 (with the exception of the rule on Exit taxation which shall enter into force with effect from January 2020).
Focusing on the interest limitation rule (Article 4 ATAD)
In an effort to reduce their global tax liability, groups of companies have increasingly engaged in base erosion and profit shifting through excessive interest payments. The interest limitation rule is necessary to discourage such practices by limiting the deductibility of taxpayers’ exceeding borrowing costs, it is therefore necessary to fix a ratio for deductibility which refers to a taxpayer’s taxable earning s before interest, tax, depreciation and amortisation (EBITDA).