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 controlled foreign company rule (Article 7 ATAD)
Controlled foreign company (CFC) rules have the effect of re-attributing the income of a low-taxed controlled subsidiary to its parent company. Then, the parent company becomes taxable on this attributed income in the State where it is resident for tax purposes. Depending on the policy priorities of that State, CFC rules may target an entire low-taxed subsidiary, specific categories of income or be limited to income which has artificially been diverted to the subsidiary.