What is a Fiscal Unit in Malta
The Fiscal Unit regime was introduced by the Consolidated Group (Income Tax) Rules, 2019 — effective from financial periods starting in 2019 (first relevant assessments 2020). Under the regime, a parent company and one or more of its subsidiaries can elect to be treated as a single taxpayer for income tax purposes.
The parent company (the “principal taxpayer”) submits one consolidated tax return on behalf of the whole group. The subsidiaries become “transparent entities”.
Key Conditions to Form a Fiscal Unit
To qualify for a fiscal unit:
-
The parent company must be a company registered in Malta.
-
The parent must hold at least 95% of any two of the following rights in each subsidiary:
-
All companies in the proposed fiscal unit must have the same accounting period (financial year-end). There must be no outstanding tax or VAT liabilities or filing obligations before joining.
-
A company cannot belong to more than one fiscal unit at the same time.
What Happens When a Fiscal Unit Is Formed
-
All taxable income (or losses), gains, expenses, allowances, etc., of the subsidiaries are attributed to the principal taxpayer.
-
Transactions between members of the fiscal unit are generally disregarded for tax purposes (i.e. intra-group transfers don’t create separate taxable events), except for certain exceptions — notably, transfers of immovable property in Malta or transfers of shares in property companies.
-
If a subsidiary is non-resident (foreign), its income may still be consolidated — typically treated as income of a “permanent establishment” of the principal taxpayer abroad (depending on substance and structure) under certain conditions.
-
The principal taxpayer must prepare consolidated financial statements (balance sheet and profit & loss) annually covering all the entities in the fiscal unit.
-
Only the principal taxpayer submits an income tax return. The transparent subsidiaries are exempt from filing their own returns while part of the fiscal unit.
-
The whole group (principal + subsidiaries) is jointly and severally liable for any tax, interest, or additional tax due.
What Are the Benefits of a Fiscal Unit
-
Lower effective corporate tax rate: Under Malta’s standard system, companies are taxed at 35%, and overseas shareholders normally get a 6/7ths tax refund — effectively reducing the post-refund tax rate to ~5%.
-
Immediate tax efficiency & better cash flow: With fiscal unity, the 5% effective rate becomes immediate — there’s no need to wait for refund processing (which can take 6–9 months under the normal refund system).
-
Administrative simplicity: Only one tax return for the group, fewer filings, and consolidated financial statements reduce compliance burden and time/cost.
-
Simplified intra-group structuring: Intra-group transactions (management fees, dividends, interest, royalties, etc.) are ignored for income tax purposes — simplifying transfer-pricing issues and intra-group cash flows.
-
Flexibility for international groups: Even non-Maltese subsidiaries can sometimes be included (depending on structure), offering an attractive consolidation mechanism for international corporate groups.