Malta will not be immediately introducing a new minimum tax rate for companies agreed in the OECD, Finance Minister Clyde Caruana announced on Monday.

Caruana said in the Budget speech that EU countries can delay the introduction of the new 15% minimum tax by up to six years.

The rules apply to companies that have a global income of more than €750 million.

This is expected to impact around 660 multi-national companies that have a base in Malta. It is estimated that these companies employ some 20,000 people.

Caruana said given the six-year derogation, it does not pay Malta to introduce the new tax rules next year.

Although all companies in Malta pay a headline tax rate of 35%, the government offers foreign-owned companies a 6/7ths refund on their tax dues in Malta.

This means that foreign-owned companies can reduce their effective tax rate to just 5%.

The refund system has long angered other EU countries, who feel it unfairly drains taxes that should have been paid in the home country, where the real economic activity takes place, rather than in Malta.

Tax harmonisation has long been a bone of contention around Europe, with many smaller states in the bloc arguing that a one-size-fits-all approach to taxation makes it impossible for them to compete with their larger counterparts.