Almost 20 large foreign companies may have to start paying three times as much tax as they do now once Malta is forced to introduce a new minimum corporate tax rate in 2023, according to sources working on the island’s taxation game plan.
Government sources said that between 18 and 20 international companies, which employ thousands of people in lucrative industries such as gaming and corporate services, could see their tax exposure increased from five to 15 per cent.
This would come into force in January 2023, when Malta is expected to be forced to adopt a global minimum tax rate imposed by the Organisation of Economic Cooperation and Development (OECD).
One high-level source said that some of these employers have already indirectly indicated that they would consider shutting down their local operations if their tax exposure was tripled.
However, another source was adamant that no employers have signalled any plans to leave the country.
The new rates are an OECD bid to clamp down on countries like Malta competing to offer the lowest rates.
The rates will also apply to companies with annual revenues in excess of €750 million.
The OECD estimates that this will generate around €130 billion in additional global tax revenues annually.
According to Finance Ministry estimates, the local companies that would be impacted by the new fiscal rules fork out €50 million to €60 million in taxes every year between them.
Malta has already signed up to the principle of an OECD minimum rate, which should be drafted into law next year for implementation at the start of the following.
Government sources said the matter was recently discussed when ministers met at the Auberge de Castille for their weekly cabinet meeting.
While Malta has agreed to the OECD plan, the matter is still up for discussion at the EU level, where the island is hoping to negotiate for “carve-outs and concessions” that could limit the island’s exposure, the sources said.
Shifting investment focus
According to cabinet sources, the government is already shifting its foreign direct investment focus towards attracting international companies that do not make the €750 million revenue threshold set by the OECD.
“We will have to direct our efforts towards attracting these sorts of companies now,” the source said.
“The ones that make just under the threshold. Not that we haven’t already been doing this but it has now become even more of a priority."
Malta has one of the highest statutory corporate tax rates in the world, taxing 35 per cent of end-year company profits.
However, the island attracts foreign investment by offering overseas companies a series of rebates and benefits that allows them to bring their corporate tax rate down to an effective five per cent.