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:

  • Voting rights

  • Rights to profits available for distribution

  • Rights to assets available for distribution on winding up 

• 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.