Groups Regulations, 2024

L.N. 32 of 2024

INCOME TAX ACT

(CAP. 123)

European Union Global Minimum Level of Taxation for

Multinational Enterprise Groups and Large-Scale Domestic

Groups Regulations, 2024

IN EXERCISE of the powers conferred by articles 52B and 96 of

the Income Tax Act, the Minister responsible for finance has made the

following regulations:-

First Part

General Provisions

(1) The title of these regulations is the European Union Citation, scope

Global Minimum Level of Taxation for Multinational Enterprise and

commencement.

Groups and Large-Scale Domestic Groups Regulations, 2024.

(2) These regulations transpose the provisions of Council

Directive (EU) 2022/2523 of 14 December 2022 laying down rules on

ensuring a global minimum level of taxation for multinational

enterprise groups and large-scale domestic groups in the Union.

(3) These regulations shall be deemed to have come into force

on 31 st December 2023 and shall be applicable in respect of fiscal

years beginning from 31 st December 2023.

(1) As a result of the election taken in terms of Article Applicability.

50(1) of Council Directive (EU) 2022/2523 of 14 December 2022, for

a maximum period of six (6) consecutive fiscal years beginning from

31st December 2023, these regulations shall be limited to the

provisions contained in Chapters I, VIII, IX and X, which have been

established as the minimum measures which are of relevance to ensure

the proper functioning of the system of global minimum level of

taxation for multinational enterprise groups and large-scale domestic

groups, as laid down in the said Directive.

(2) These regulations shall apply to constituent entities located

in Malta that are members of an multinational enterprise group or of a

large-scale domestic group as defined in regulation 3 which has an

annual revenue of seven hundred and fifty million euro (€750,000,000)

or more, including the revenue of the excluded entities referred to in

sub-regulation (4), in its ultimate parent entity’s consolidated financial

statements in at least two (2) of the four (4) fiscal years immediately

preceding the tested fiscal year.

(3) Where one (1) or more of the four (4) fiscal years referred

to in sub-regulation (2) is longer or shorter than twelve (12) months,

the revenue threshold referred to in that sub-regulation shall be

adjusted proportionately for each of those fiscal years.

(4)

These regulations shall not apply to the following excluded

entities

(a) a government entity, an international organisation, a

non-profit organisation, a pension fund, an investment fund that

is an ultimate parent entity or a real estate investment vehicle

that is an ultimate parent entity;

(b) an entity where at least ninety-five percent (95%) of

the value of the entity is owned by one (1) or more entities

referred to in paragraph (a), directly or through one (1) or several

excluded entities, except pension services entities, and that

(i) operates exclusively, or almost exclusively, to

hold assets or invest funds for the benefit of the entity or

entities referred to in paragraph (a); or

(ii) exclusively carries out activities ancillary to

those performed by the entity or entities referred to in

paragraph (a);

(c) an entity where at least eighty-five percent (85%) of

the value of the entity is owned, directly or through one (1) or

several excluded entities, by one (1) or more entities referred to

in paragraph (a), except pension services entities, provided that

substantially all of its income is derived from dividends, equity

gains or equity losses that are excluded from the computation of

the qualifying income or loss in accordance with Article 16(2)(b)

and (c) of Council Directive (EU) 2022/2523 of 14 December

2022 laying down rules on ensuring a global minimum level of

taxation for multinational enterprise groups and large-scale

domestic groups in the Union.

(5) Notwithstanding the provisions of sub-regulation (4), the

filing constituent entity may make an election, in accordance with

regulation 6(1), not to treat an entity referred to in sub-regulation

(4)(b) and (c) as an excluded entity.

In these regulations, unless the context otherwise requires

"acceptable

financial

accounting

standard"

means

International Financial Reporting Standards (IFRS or IFRS as

adopted by the Union pursuant to Regulation (EC) No 1606/2002

of the European Parliament and of the Council(8)) and the

generally accepted accounting principles of Australia, Brazil,

Canada, the Member States of the European Union, the Member

States of the European Economic Area, Hong Kong (China),

Japan, Mexico, New Zealand, the People’s Republic of China,

the Republic of India, the Republic of Korea, Russia, Singapore,

Switzerland, the United Kingdom and the United States of

America;

"authorised financial accounting standard" means, in

respect of an entity, a set of generally acceptable accounting

principles permitted by an authorised accounting body in the

jurisdiction where that entity is located; for the purposes of this

definition, "authorised accounting body" means the body with

legal authority in a jurisdiction to prescribe, establish or accept

accounting standards for financial reporting purposes;

"Commissioner" means the Commissioner for Tax and

Customs;

"consolidated financial statements" means

(a) the financial statements prepared by an entity in

accordance with an acceptable financial accounting

standard, in which the assets, liabilities, income, expenses

and cash flows of that entity and of any entities in which it

has a controlling interest are presented as those of a single

economic unit;

(b) for groups defined in paragraph (b) of the

definition of "group", the financial statements prepared by

an entity in accordance with an acceptable financial

accounting standard;

(c) the financial statements of the ultimate parent

entity described in paragraphs (a) or (b) that are not

prepared in accordance with an acceptable financial

accounting standard and that have been subsequently

adjusted to prevent any material competitive distortions;

and

(d) where the ultimate parent entity does not

prepare financial statements as described in paragraphs (a),

(b) or (c), the financial statements that would have been

prepared if the ultimate parent entity were required to

prepare such financial statements in accordance with

(i) an

acceptable

financial

accounting

standard; or

(ii) another financial accounting standard,

and provided such financial statements have been

adjusted to prevent any material competitive

distortions;

"constituent entity" means

(a) any entity that is part of an MNE group or of a

large-scale domestic group; and

(b) any permanent establishment of a main entity

that is part of an MNE group referred to in paragraph (a);

"constituent entity-owner" means a constituent entity that

owns, directly or indirectly, an ownership interest in another

constituent entity of the same MNE group or large-scale

domestic group;

"controlled foreign company tax regime" means a set of tax

rules, other than a qualified IIR, under which a direct or indirect

shareholder of a foreign entity, or the main entity of a permanent

establishment, is subject to taxation on its share of part or all of

the income earned by that foreign constituent entity, irrespective

of whether that income is distributed to the shareholder;

"controlling interest" means an ownership interest in an

entity whereby the interest holder

(a) is required to consolidate the assets, liabilities,

income, expenses and cash flows of the entity on a line-by-

line basis, in accordance with an acceptable financial

accounting standard; or

(b) would have been required to consolidate the

assets, liabilities, income, expenses and cash flows of the

entity on a line-by-line basis if the interest holder had

prepared consolidated financial statements

Provided that a main entity is deemed to hold the

controlling interests in its permanent establishments;

"designated filing entity" means the constituent entity,

other than the ultimate parent entity, that has been appointed by

the MNE group or large-scale domestic group to fulfil the filing

obligations set out in regulation 5 on behalf of the MNE group or

the large-scale domestic group;

"disqualified refundable imputation tax" means any tax,

other than a qualified imputation tax, accrued or paid by a

constituent entity that is

(a) refundable to the beneficial owner of a dividend

distributed by such constituent entity in respect of that

dividend or creditable by the beneficial owner against a tax

liability other than a tax liability in respect of such

dividend; or

(b) refundable to the distributing company upon

distribution of a dividend to a shareholder.

For the purposes of this definition, a "qualified imputation

tax" means a covered tax accrued or paid by a constituent entity,

including a permanent establishment, that is refundable or

creditable to the beneficial owner of the dividend distributed by

the constituent entity or, in the case of a covered tax accrued or

paid by a permanent establishment, a dividend distributed by the

main entity, to the extent that the refund is payable or the credit

is provided

(a) by a jurisdiction other than the jurisdiction

which imposed the covered taxes;

(b) to a beneficial owner of the dividend that is

subject to tax at a nominal rate that equals or exceeds the

minimum tax rate on the dividend received under the

domestic law of the jurisdiction which imposed the covered

taxes on the constituent entity;

(c) to an individual who is the beneficial owner of

the dividend and tax resident in the jurisdiction which

imposed the covered taxes on the constituent entity and

who is subject to tax at a nominal rate that equals or

exceeds the standard tax rate applicable to ordinary

income; or

(d) to a governmental entity, an international

organisation, a resident non-profit organisation, a resident

pension fund, a resident investment entity that is not part of

the MNE group or the large-scale domestic group, or a

resident life insurance company to the extent that the

dividend is received in connection with resident pension

fund activities and is subject to tax in a similar manner as a

dividend received by a pension fund

Provided that for the purposes of paragraph (d)

(i) a non-profit organisation or pension fund is

resident in a jurisdiction if it is created and managed in that

jurisdiction;

(ii) an investment entity is resident in a jurisdiction

if it is created and regulated in that jurisdiction;

(iii) a life insurance company is resident in the

jurisdiction in which it is located;

"eligible distribution tax system" means a corporate income

tax system that

(a) imposes income tax on profits only when those

profits are distributed or deemed to be distributed to

shareholders, or when the company incurs certain non-

business expenses;

(b) imposes tax at a rate equal to, or in excess of,

the minimum tax rate; and

(c)

was in force on or before 1 July 2021;

"entity" means any legal arrangement that prepares separate

financial accounts or any legal person;

"European Union Global Minimum Tax Directive" means

Council Directive (EU) 2022/2523 of 14 December 2022 on

ensuring a global minimum level of taxation for multinational

enterprise groups and large-scale domestic groups in the Union;

"excluded entity" means any entity specified in regulation

2(4);

"filing constituent entity" means an entity filing a top-up

tax information return in accordance with regulation 5;

"fiscal year" means the accounting period with respect to

which the ultimate parent entity of an MNE group or of a large-

scale domestic group prepares its consolidated financial

statements or, if the ultimate parent entity does not prepare

consolidated financial statements, the calendar year;

"flow-through entity" means an entity to the extent it is

fiscally transparent with respect to its income, expenditure, profit

or loss in the jurisdiction where it was created unless it is tax

resident and subject to a covered tax on its income or profit in

another jurisdiction. A flow-through entity is deemed to be

(a) a tax-transparent entity with respect to its

income, expenditure, profit or loss to the extent that it is

fiscally transparent in the jurisdiction in which its owner is

located;

(b) a reverse hybrid entity with respect to its

income, expenditure, profit or loss to the extent that it is not

fiscally transparent in the jurisdiction in which its owner is

located;

For the purposes of this definition a "fiscally transparent

entity" means an entity whose income, expenditure, profit or loss

is treated by the laws of a jurisdiction as if it were derived or

incurred by the direct owner of that entity in proportion to its

interest in that entity. An ownership interest in an entity or a

permanent establishment that is a constituent entity shall be

treated as held through a tax transparent structure if that

ownership interest is held indirectly through a chain of tax

transparent entities. A constituent entity that is not tax resident

and not subject to a covered tax or a qualified domestic top-up

tax based on its place of management, place of creation or

similar criteria shall be treated as a flow-through entity and a tax

transparent entity in respect of its income, expenditure, profit or

loss, to the extent that

(a) its owners are located in a jurisdiction that

treats the entity as fiscally transparent;

(b) it does not have a place of business in the

jurisdiction where it was created; and

(c) the income, expenditure, profit or loss is not

attributable to a permanent establishment;

"governmental entity" means an entity that meets all the

following criteria

(a) it is part of, or wholly owned by, a government,

including any political subdivision or local authority

thereof;

(b) it does not carry on a trade or business and has

the principal purpose of

(i)

fulfilling a government function; or

(ii) managing or investing that government’s

or jurisdiction’s assets through the making and

holding of investments, asset management, and

related investment activities for that government’s or

jurisdiction’s assets;

(c) it is accountable to a government on its overall

performance, and provides annual information reporting to

that government; and

(d) its assets vest in a government upon dissolution

and, to the extent it distributes net earnings, such net

earnings are distributed solely to that government with no

portion of its net earnings inuring to the benefit of any

private person;

"group" means

(a) a collection of entities which are related

through ownership or control as defined by the acceptable

financial accounting standard for the preparation of

consolidated financial statements by the ultimate parent

entity, including any entity that may have been excluded

from the consolidated financial statements of the ultimate

parent entity solely based on its small size, on materiality

grounds or on the grounds that it is held for sale; or

(b) an entity that has one (1) or more permanent

establishments, provided that it is not part of another group

as defined in paragraph (a);

"intermediate parent entity" means a constituent entity that

owns, directly or indirectly, an ownership interest in another

constituent entity in the same MNE group or large-scale

domestic group and that does not qualify as an ultimate parent

entity, a partially-owned parent entity, a permanent

establishment or an investment entity;

"international organisation" means any intergovernmental

organisation, including a supranational organisation, or wholly-

owned agency or instrumentality thereof that meets all the

following criteria

(a)

it is comprised primarily of governments;

(b) it has in effect a headquarters or substantially

similar agreement with the jurisdiction in which it is

established, for example arrangements that entitle the

organisation’s offices or establishments in that jurisdiction

to privileges and immunities; and

(c) law or its governing documents prevent its

income inuring to the benefit of private persons;

"investment entity" means

(a)

an investment fund or a real estate investment

vehicle;

(b) an entity that is at least ninety-five percent

(95%) owned directly by an entity referred to in paragraph

(a) or through a chain of such entities and that operates

exclusively or almost exclusively to hold assets or invest

funds for their benefit; or

(c) an entity where a minimum of eighty-five

percent (85%) of the value of the entity is owned by an

entity referred to in paragraph (a), provided that

substantially all of its income is derived from dividends,

equity gains or equity losses that are excluded from the

computation of the qualifying income or loss for the

purposes of the European Union on Global Minimum Level

of Tax Directive;

"investment fund" means an entity or arrangement that

meets all the following conditions

(a) it is designed to pool financial or non-financial

assets from a number of investors, some of which are non-

connected;

(b) it invests in accordance with a defined

investment policy;

(c) it allows investors to reduce transaction,

research and analytical costs or to spread risk collectively;

(d) it is primarily designed to generate investment

income or gains, or protection against a particular or

general event or outcome;

(e) its investors have a right to return from the

assets of the fund or income earned on those assets, based

on the contribution they made;

(f) it, or its management, is subject to the

regulatory regime, including appropriate anti-money

laundering and investor protection regulation, for

investment funds in the jurisdiction in which it is

established or managed; and

(g) it is managed by investment fund management

professionals on behalf of the investors;

"large-scale domestic group" means any group of which all

constituent entities are located in Malta;

"low-taxed constituent entity" means

(a) a constituent entity of an MNE group or of a

large-scale domestic group that is located in a low-tax

jurisdiction; or

(b) a stateless constituent entity that, in respect of a

fiscal year, has qualifying income and an effective tax rate

which is lower than the minimum tax rate;

"low-tax jurisdiction" means, in respect of an MNE group

or a large-scale domestic group in any fiscal year, a Member

State or a third-country jurisdiction in which the MNE group or

the large-scale domestic group has a qualifying income and is

subject to an effective tax rate which is lower than the minimum

tax rate;

"main entity" means an entity that includes the financial

accounting net income or loss of a permanent establishment in its

financial statements;

"material competitive distortion" means, in respect of the

application of a specific principle or procedure under a set of

generally acceptable accounting principles, an application that

results in an aggregate variation of income or expense of more

than seventy-five million euro (€75,000,000) in a fiscal year as

compared to the amount that would have been determined by

applying the corresponding principle or procedure under

International Financial Reporting Standards (IFRS or IFRS as

adopted by the Union pursuant to Regulation (EC) No 1606/

2002);

"minimum tax rate" means fifteen percent (15%);

"multinational enterprise group" or "MNE group" means

any group that includes at least one (1) entity or permanent

establishment which is not located in the jurisdiction of the

ultimate parent entity;

"net book value of tangible assets" means the average of

the beginning and end values of tangible assets after taking into

account accumulated depreciation, depletion and impairment, as

recorded in the financial statements;

"non-profit organisation" means an entity that meets all the

following criteria

(a) it is established and operated in its jurisdiction

of residence

(i) exclusively for religious, charitable,

scientific, artistic, cultural, athletic, educational or

other similar purposes; or

(ii) as a professional organisation, business

league, chamber of commerce, labour organisation,

agricultural or horticultural organisation, civic league

or an organisation operated exclusively for the

promotion of social welfare;

(b) substantially all the income from the activities

mentioned in paragraph (a) is exempt from income tax in

its jurisdiction of residence;

(c) it has no shareholders or members who have a

proprietary or beneficial interest in its income or assets;

(d) the income or assets of the entity may not be

distributed to, or applied for the benefit of, a private person

or non-charitable entity other than

(i) pursuant to the conduct of the entity’s

charitable activities;

(ii) as payment of reasonable compensation

for services rendered or for the use of property or

capital; or

(iii) as payment representing the fair market

value of property which the entity has purchased; and

(e) upon termination, liquidation or dissolution of

the entity, all of its assets are to be distributed to or revert to

a non-profit organisation or to the government, including

any governmental entity, of the entity’s jurisdiction of

residence or any political subdivision thereof;

(f) it does not carry on a trade or business that is

not directly related to the purposes for which it was

established;

"non-qualified refundable tax credit" means a tax credit

that is a not a qualified refundable tax credit but that is

refundable in whole or in part;

"OECD Model Rules" means the Tax Challenges Arising

from the Digitalisation of the Economy – Global Anti-Base

Erosion Model Rules (Pillar Two) approved on 14 December

2021 by the OECD/G20 Inclusive Framework on BEPS;

"ownership interest" means any equity interest that carries

rights to the profits, capital or reserves of an entity or of a

permanent establishment;

"parent entity" means an ultimate parent entity which is not

an excluded entity, an intermediate parent entity or a partially-

owned parent entity;

"partially-owned parent entity" means a constituent entity

that owns, directly or indirectly, an ownership interest in another

constituent entity of the same MNE group or large-scale

domestic group, and for which more than twenty percent (20%)

of the ownership interest in its profits is held, directly or

indirectly, by one (1) or several persons that are not constituent

entities of that MNE group or large-scale domestic group and

that does not qualify as an ultimate parent entity, a permanent

establishment or an investment entity;

"pension fund" means

(a) an entity that is established and operated in a

jurisdiction exclusively or almost exclusively to administer

or provide retirement benefits and ancillary or incidental

benefits to individuals where

(i) that entity is regulated as such by that

jurisdiction or one (1) of its political subdivisions or

local authorities; or

(ii) those benefits are secured or otherwise

protected by national regulations and funded by a

pool of assets held through a fiduciary arrangement or

trustor to secure the fulfilment of the corresponding

pension obligations against a case of insolvency of

the MNE group and large-scale domestic group;

(b)

a pension services entity;

"pension services entity" means an entity that is established

and operated exclusively or almost exclusively to invest funds

for the benefit of entities referred to in paragraph (a) of the

definition of "pension fund" or to carry out activities that are

ancillary to the regulated activities referred to in paragraph (a) of

the definition of "pension fund", provided that the pension

services entity forms part of the same group as the entities

carrying out those regulated activities;

"permanent establishment" means

(a) a place of business or a deemed place of

business located in a jurisdiction where it is treated as a

permanent establishment in accordance with an applicable

tax treaty, provided that such jurisdiction taxes the income

attributable to it in accordance with a provision similar to

Article 7 of the OECD Model Tax Convention on Income

and Capital, as amended;

(b) if there is no applicable tax treaty, a place of

business or a deemed place of business located in a

jurisdiction which taxes the income attributable to such

place of business on a net basis in a manner similar to

which it taxes its own tax residents;

(c) if a jurisdiction has no corporate income tax

system, a place of business or a deemed place of business

located in such jurisdiction that would be treated as a

permanent establishment in accordance with the OECD

Model Tax Convention on Income and Capital, as

amended, provided that such jurisdiction would have had

the right to tax the income that would have been

attributable to the place of business in accordance with

Article 7 of that Convention; or

(d) a place of business or a deemed place of

business that is not described in paragraphs (a) to (c)

through which operations are conducted outside the

jurisdiction where the entity is located, provided that

such jurisdiction exempts the income attributable to

such operations;

"qualified domestic top-up tax" means a top-up tax that is

implemented in the domestic law of a jurisdiction provided that

such jurisdiction does not provide any benefits that are related to

those rules, and that

(a) provides for the determination of the excess

profits of the constituent entities located in that jurisdiction

in accordance with the rules laid down in the European

Union Global Minimum Tax Directive or, as regards third-

country jurisdictions, the OECD Model Rules and the

application of the minimum tax rate to those excess profits

for the jurisdiction and the constituent entities in

accordance with the rules laid down in the European Union

Global Minimum Tax Directive or, as regards third-country

jurisdictions, the OECD Model Rules; and

(b) is administered in a way that is consistent with

the rules laid down in the European Union Global

Minimum Tax Directive or, as regards third-country

jurisdictions, the OECD Model Rules;

"qualified IIR" means a set of rules that is implemented in

the domestic law of a jurisdiction, provided that such jurisdiction

does not provide any benefits that are related to those rules, and

that is

(a) equivalent to the rules laid down in the

European Union Global Minimum Tax Directive or, as

regards third-country jurisdictions, the OECD Model

Rules, in accordance with which the parent entity of an

MNE group or of a large-scale domestic group computes

and pays its allocable share of top-up tax in respect of the

low-taxed constituent entities of that group;

(b) administered in a way that is consistent with the

rules laid down in the European Union Global Minimum

Tax Directive or, as regards third-country jurisdictions,

with the OECD Model Rules;

"qualified refundable tax credit" means

(a) a refundable tax credit designed in such a way

that it is to be paid as a cash payment or a cash equivalent

(which for these purposes includes by way of discharge

against a liability to a tax which is not a covered tax) to a

constituent entity within four years from the date when the

constituent entity is entitled to receive the refundable tax

credit under the laws of the jurisdiction granting the credit;

or

(b) if the tax credit is refundable in part, the portion

of the refundable tax credit that is payable as a cash

payment or a cash equivalent (which for these purposes

includes by way of discharge against a liability to a tax

which is not a covered tax) to a constituent entity within

four (4) years from the date when the constituent entity is

entitled to receive the partial refundable tax credit

Provided that a qualified refundable tax credit does

not include any amount of tax creditable or refundable pursuant

to a qualified imputation tax or a disqualified refundable

imputation tax;

"qualified UTPR" means a set of rules implemented in the

domestic law of a jurisdiction, provided that such jurisdiction

does not provide any benefits that are related to those rules, and

that

(a) is equivalent to the rules laid down in the

European Union Global Minimum Tax Directive or, as

regards third-country jurisdictions, the OECD Model

Rules, in accordance with which a jurisdiction collects its

allocable share of top-up tax of an MNE group that was not

charged under the IIR in respect of the low-taxed

constituent entities of that MNE group;

(b) is administered in a way that is consistent with

the rules laid down in the European Union Global

Minimum Tax Directive or, as regards third-country

jurisdictions, the OECD Model Rules;

"qualifying income or loss" means the financial accounting

net income or loss of a constituent entity adjusted in accordance

with the rules established in with Chapters III, VI and VII of the

European Union Global Minimum Tax Directive;

"real estate investment vehicle" means a widely held entity

that holds predominantly immovable property and that is subject

to a single level of taxation, either in its hands or in the hands of

its interest holders, with at most one (1) year of deferral;

"top-up tax" means the top-up tax computed for a

jurisdiction or a constituent entity pursuant to Article 27 of the

European Union Global Minimum Tax Directive;

"ultimate parent entity" means

(a) an entity that owns, directly or indirectly, a

controlling interest in any other entity and that is not

owned, directly or indirectly, by another entity with a

controlling interest in it; or

(b) the main entity of a group as defined in

paragraph (b) of the definition of "group".

(1) For the purposes of these regulations, an entity other

than a flow-through entity shall be determined to be located in the

jurisdiction where it is considered to be resident for tax purposes based

on its place of management, its place of creation or similar criteria

Provided that where it is not possible to determine the

location of an entity other than a flow-through entity based on this sub-

regulation, it shall be deemed to be located in the jurisdiction where it

was created.

(2) A flow-through entity shall be considered to be stateless,

unless it is the ultimate parent entity of an MNE group or of a large-

scale domestic group or it is required to apply an IIR in accordance

with Articles 5, 6, 7 and 8 of the European Union Global Minimum

Tax Directive, in which case the flow-through entity shall be deemed

to be located in the jurisdiction where it was created.

(3) (a) A permanent establishment as defined in paragraph

(a) of such definition under regulation 3 shall be determined to be

located in the jurisdiction where it is treated as a permanent

establishment and is liable to tax under the applicable tax treaty.

(b) A permanent establishment as defined in paragraph

(b) of such definition under regulation 3 shall be determined to

be located in the jurisdiction where it is subject to net basis

taxation based on its business presence.

(c) A permanent establishment as defined in paragraph

(c) of such definition under regulation 3 shall be determined to

be located in the jurisdiction where it is situated.

(d) A permanent establishment as defined in paragraph

(d) of such definition under regulation 3 shall be considered to be

stateless.

(4) (a) Where a constituent entity is located in two (2)

jurisdictions and those jurisdictions have an applicable tax treaty, the

constituent entity shall be deemed to be located in the jurisdiction

where it is considered to be resident for tax purposes under that tax

treaty.

(b) Where the applicable tax treaty requires that the

competent authorities reach a mutual agreement on the deemed

residence for tax purposes of the constituent entity, and no

agreement is reached, sub-regulation (5) shall apply.

(c) Where there is no relief for double taxation under the

applicable tax treaty due to the fact that a constituent entity is

resident for tax purposes in both contracting parties, sub-

regulation (5) shall apply.

(5) (a) Where a constituent entity is located in two (2)

jurisdictions and those jurisdictions do not have an applicable tax

treaty, the constituent entity shall be deemed to be located in the

jurisdiction which charged the higher amount of covered taxes for the

fiscal year.

(b) For the purpose of computing the amount of covered

taxes referred to in paragraph (a), the amount of tax paid in

accordance with a controlled foreign company tax regime shall

not be taken into consideration.

(c) If the amount of covered taxes due in the two (2)

jurisdictions is the same or zero (0), the constituent entity shall

be deemed to be located in the jurisdiction where it has the

higher amount of substance-based income exclusion computed

on an entity basis in accordance with Article 28 of the European

Union Global Minimum Tax Directive.

(d) If the amount of the substance-based income

exclusion in the two (2) jurisdictions is the same or zero (0), the

constituent entity shall be considered to be stateless, unless it is

an ultimate parent entity, in which case it shall be deemed to be

located in the jurisdiction where it was created.

(6) Where, as a result of applying sub-regulations (4) and (5), a

parent entity is located in a jurisdiction where it is not subject to a

qualified IIR, it shall be deemed to be subject to the qualified IIR of

the other jurisdiction, unless an applicable tax treaty prohibits the

application of such rule.

(7)

Where a constituent entity changes its location in the

course of a fiscal year, it shall be deemed to be located in the

jurisdiction where it was deemed to be located under this regulation at

the beginning of that fiscal year.

Second Part

Administrative Provisions

(1) For the purposes of this regulation, the following

definitions shall apply

"designated local entity" shall mean the constituent entity

of an MNE group or of a large-scale domestic group that is

located in Malta and has been appointed by the other constituent

entities of the MNE group or large-scale domestic group located

in Malta to file the top-up tax information return or submit the

notifications in accordance with this regulation on their behalf;

"qualifying competent authority agreement" shall mean a

bilateral or multilateral agreement or arrangement between two

(2) or more competent authorities that provides for the automatic

exchange of annual top-up tax information returns.

(2) A constituent entity located in Malta shall file a top-up tax

information return with the Commissioner, in accordance with sub-

regulation (5)

Provided that such return may be filed by a designated local

entity on behalf of the constituent entity

Provided further that such return shall be on such form and

in such manner as the Commissioner may require.

(3) Notwithstanding the provisions of sub-regulation (2), a

constituent entity shall not have the obligation to file a top-up tax

information return with the Commissioner if such return has been

filed, in accordance with the requirements set out in sub-regulation (5),

(a) the ultimate parent entity located in a jurisdiction that

has, for the reporting fiscal year, a qualifying competent

authority agreement in effect with Malta; or

(b) the designated filing entity located in a jurisdiction

that has, for the reporting fiscal year, a qualifying competent

authority agreement in effect with Malta.

(4) Where sub-regulation (3) applies, the constituent entity

located in Malta, or the designated local entity on its behalf, shall

notify the Commissioner of the identity of the entity that is filing the

top-up tax information return as well as the jurisdiction in which it is

located

Provided that such notification shall be made to the

Commissioner on such form and in such manner as the Commissioner

shall determine.

(5) The top-up tax information return shall be filed in a

standard template and include the following information with respect

to the MNE group or large-scale domestic group

(a) identification of the constituent entities, including

their tax identification numbers, if any, the jurisdiction in which

they are located and their status under these regulations;

(b) information on the overall corporate structure of the

MNE group or large-scale domestic group, including the

controlling interests in the constituent entities held by other

constituent entities;

(c)

the information that is necessary in order to compute

(i) the effective tax rate for each jurisdiction and

the top-up tax of each constituent entity;

(ii)

the top-up tax of a member of a joint venture

group;

(iii) the allocation of top-up tax under the IIR and

the UTPR top-up tax amount to each jurisdiction; and

(d) a record of the elections made in accordance with

these regulations.

(6) Notwithstanding the provisions of sub-regulation (5),

where a constituent entity is located in Malta with an ultimate parent

entity located in a third-country jurisdiction that applies rules which

have been assessed as equivalent to these regulations pursuant to

regulation 13, the constituent entity or the designated local entity shall

file a top-up tax information return containing the following

information

(a) all information that is necessary for the application of

Article 8 of the European Union Global Minimum Tax Directive,

including

(i)

identification of all the constituent entities in

which a partially-owned parent entity located in Malta

holds, directly or indirectly, an ownership interest at any

time during the fiscal year and the structure of such

ownership interests;

(ii) all information that is necessary to compute the

effective tax rate of the jurisdictions in which a partially-

owned parent entity located in Malta holds ownership

interests in constituent entities identified under paragraph

(i) and the top-up tax due; and

(iii) all information that is relevant for that purpose

in accordance with Articles 9, 10 or 11 of the European

Union Global Minimum Tax Directive;

(b) all information that is necessary for the application of

Article 13 of the European Union Global Minimum Tax

Directive, including

(i) identification of all the constituent entities

located in the ultimate parent entity jurisdiction and the

structure of such ownership interests;

(ii) all information that is necessary in order to

compute the effective tax rate of the ultimate parent entity’s

jurisdiction and its top-up tax due; and

(iii) all information necessary for the allocation of

such top-up tax based on the UTPR allocation formula set

out in Article 14 of the European Union Global Minimum

Tax Directive;

(c) all information that is necessary for the application of

a qualified domestic top-up tax by any Member State that has

made the election to apply such a top-up tax, in accordance with

Article 11 of the European Union Global Minimum Tax

Directive.

(7) (a) The top-up tax information return referred to in sub-

regulations (5) and (6) shall be filed with the Commissioner no later

than fifteen (15) months after the last day of the reporting fiscal year;

(b) Any relevant notifications in terms of this regulation

shall be filed with the Commissioner no later than twelve (12)

months after the last day of the reporting fiscal year.

(1) Where applicable, the elections referred to in

regulation 2(7) and Articles 16(3), (6), and (9), 42 and 43 of the

European Union Global Minimum Tax Directive shall be valid for a

period of five (5) years, starting from the year in which the election is

made. The election shall be renewed automatically unless the filing

constituent entity revokes the election at the end of the five (5) year

period. A revocation of the election shall be valid for a period of five

(5) years, starting from the end of the year in which the revocation is

made.

(2) Where applicable, the elections referred to in Articles

16(7), 22(1)(b), 25(1), 28(2), 30(1) and 40(1) of the European Union

Global Minimum Tax Directive shall be valid for a period of one (1)

year. The election shall be renewed automatically unless the filing

constituent entity revokes the election at the end of the year.

(3) The elections referred to in regulation 2(7) and Articles

16(3), (6), (7), (9), 22(1)(b), 25(1), 28(2), 30(1), 40(1), 42 and 43 of

the European Union Global Minimum Tax Directive shall be made to

the tax administration of the Member State in which the filing

constituent entity is located

Provided that such election shall be made to the

Commissioner on such form and in such manner as the Commissioner

shall determine.

(1) Where a constituent entity located in Malta or the Administrative

designated local entity on its behalf fails to file the top-up tax penalties.

information return with the Commissioner in terms of regulation 5(2)

within the time stipulated in regulation 5(7)(a) it shall be liable to an

administrative penalty of

(a)

two hundred euro (€200); and

(b) one hundred euro (€100) for every day during which

the default existed

Provided that this administrative penalty shall not exceed in

total twenty thousand euro (€20,000).

(2) Where a constituent entity located in Malta or the

designated local entity on its behalf fails to report the information

required to be reported in terms of regulation 5(5) in a complete and

accurate manner, it shall be liable to an administrative penalty of

(a)

two hundred euro (€200); and

(b) fifty euro (€50) for every day during which the

default existed

Provided that this administrative penalty shall not exceed in

total five thousand euro (€5,000).

(3) Where a constituent entity located in Malta or the

designated local entity on its behalf fails to notify the Commissioner of

the identity of the entity that is filing the top-up tax information return

as well as the jurisdiction in which it is located in terms of regulation

5(4) within the time stipulated in regulation 5(7)(b) it shall be liable to

an administrative penalty of

(a)

two hundred euro (€200); and

(b) fifty euro (€50) for every day during which the

default existed

Provided that this administrative penalty shall not exceed in

total five thousand euro (€5,000).

(4) Where the designated local entity fails to notify the

Commissioner of the start of the initial phase of the MNE group’s

international activity in terms of regulation 10(5) within the time

stipulated therein it shall be liable to an administrative penalty of

(a)

two hundred euro (€200); and

(b) fifty euro (€50) for every day during which the

default existed

Provided that this administrative penalty shall not exceed in

total five thousand euro (€5,000).

Third Part

Transition Rules

(1) For the purposes of this regulation, a "transition year

for a jurisdiction" shall mean the first fiscal year in which an MNE

group or a large-scale domestic group falls within the scope of the

European Union Global Minimum Tax Directive in respect of that

jurisdiction.

(2) (a) When determining the effective tax rate for a

jurisdiction in a transition year, and for each subsequent fiscal year, the

MNE group or a large-scale domestic group shall take into account all

the deferred tax assets and deferred tax liabilities reflected or disclosed

in the financial accounts of all the constituent entities in a jurisdiction

for the transition year.

(b)

Deferred tax assets and deferred tax liabilities shall

be taken into account at the lower of the minimum tax rate and

the applicable domestic tax rate. However, a deferred tax asset

that has been recorded at a tax rate lower than the minimum tax

rate may be taken into account at the minimum tax rate if the

taxpayer is able to demonstrate that the deferred tax asset is

attributable to a qualifying loss.

(c) The impact of any valuation adjustment or accounting

recognition adjustment with respect to a deferred tax asset shall

be disregarded.

(3) Deferred tax assets arising from items excluded from the

computation of qualifying income or loss in accordance with Chapter

III of the European Union Global Minimum Tax Directive shall be

excluded from the computation referred to in sub-regulation (2) when

such deferred tax assets are generated in a transaction that takes place

after 30 th November 2021.

(4) In the case of a transfer of assets between constituent

entities after 30 th November 2021 and before the commencement of a

transition year, the basis in the acquired assets, other than inventory,

shall be based upon the disposing constituent entity’s carrying value of

the transferred assets upon disposal with deferred tax assets and

liabilities determined on that basis.

(1) For the purpose of applying Article 28(3) of the Transitional

European Union Global Minimum Tax Directive, the value of five relief

substance-based

percent (5%) shall be replaced, for each fiscal year beginning from income

exclusion.

31 st December of the following calendar years, with the values set out

in the following table

Year

%

9.8

9.6

9.4

9.2

8.2

7.4

6.6

5.8

(2) For the purpose of applying Article 28(4) of the European

Union Global Minimum Tax Directive, the value of five percent (5%)

shall be replaced, for each fiscal year beginning from 31 st December of

the following calendar years, with the values set out in the following

table

Year

%

7.8

7.6

7.4

7.2

6.6

6.2

5.8

5.4

(1) The top-up tax due by an ultimate parent entity

located in Malta in accordance with Article 5(2) of the European

Union Global Minimum Tax Directive, or by an intermediate parent

entity located in Malta in accordance with Article 7(2) of the European

Union Global Minimum Tax Directive when the ultimate parent entity

is an excluded entity, shall be reduced to zero (0)

(a) in the first five (5) years of the initial phase of the

international activity of the MNE group, notwithstanding the

requirements laid down in Chapter V of the European Union

Global Minimum Tax Directive;

(b) in the first five (5) years, starting from the first day of

the fiscal year in which the large-scale domestic group falls

within the scope of these regulations for the first time.

(2) Where the ultimate parent entity of an MNE group is

located in a third-country jurisdiction, the top-up tax due by a

constituent entity located in Malta in accordance with Article 14(2) of

the European Union Global Minimum Tax Directive shall be reduced

to zero (0) in the first five (5) years of the initial phase of the

international activity of that MNE group, notwithstanding the

requirements laid down in Chapter V of the European Union Global

Minimum Tax Directive.

(3) (a) An MNE group shall be considered to be in the initial

phase of its international activity if, for a fiscal year

(i) it has constituent entities in no more than six (6)

jurisdictions; and

(ii) the sum of the net book value of the tangible

assets of all the constituent entities of the MNE group

located in all jurisdictions other than the reference

jurisdiction does

not

exceed

fifty

million

euro

(€50,000,000).

(b) For the purposes of sub-regulation (1)(a)(ii),

"reference jurisdiction" shall mean the jurisdiction in which the

constituent entities of the MNE group have the highest total

value of tangible assets in the fiscal year in which the MNE

group originally falls within the scope of the European Union

Global Minimum Tax Directive. The total value of tangible

assets in a jurisdiction shall be the sum of the net book values of

all tangible assets of all the constituent entities of the MNE

group that are located in that jurisdiction.

(4) (a) The period of five (5) years referred to in sub-

regulation (1)(a) and in sub-regulation (2) shall start from the

beginning of the fiscal year in which the MNE group originally falls

within the scope of the European Union Global Minimum Tax

Directive.

(b) For MNE groups that are within the scope of the

European Union Global Minimum Tax Directive when this came

into force, the five (5) year period referred to in sub-regulation

(1)(a) shall start on 31 st December 2023.

(c) For MNE groups that are within the scope of the

European Union Global Minimum Tax Directive when this came

into force, the five (5) year period referred to in sub-regulation

(2) shall start on 31 st December 2024.

(d) For large-scale domestic groups that are within the

scope of these regulations when these come into force in terms of

regulation 1(2), the five (5) year period referred to in sub-

regulation (1)(b) shall start on 31 st December 2023.

(5) The designated filing entity referred to in regulation 5

which is located in Malta shall inform the Commissioner of the start of

the initial phase of the MNE group’s international activity by no later

than twelve (12) months after the last day of the reporting fiscal year

Provided that such notification shall be made to the

Commissioner on such form and in such manner as the Commissioner

shall determine.

(1) An ultimate parent entity of an MNE group located in Election for a

Malta shall nominate a designated filing entity in any other Member delayed

application of

State other than Malta and which Member State has not elected for a the

UTPR.

delayed application of the IIR and UTPR in terms of Article 50(1) of

the European Union Global Minimum Tax Directive or, if the MNE

group has no constituent entity in another Member State, in a third-

country jurisdiction that has, for the reporting fiscal year, a qualifying

competent authority agreement in effect with Malta.

(2) Pursuant to sub-regulation (1), the constituent entities

located in Malta shall provide the designated filing entity with

information necessary to comply with Article 44(5) of the European

Union Global Minimum Tax Directive and shall be exempted from the

filing obligation referred to in regulation 5(2)

Provided that notwithstanding the above exemption, the

constituent entities located in Malta shall be required to provide the

notification as required under regulation 5(4).

(3) The UTPR percentage as computed in terms of Article

14(5) of the European Union Global Minimum Tax Directive for Malta

shall be deemed to be zero (0) for the fiscal year.

Notwithstanding the provisions of regulation 5(7), the top-

up tax information return and the notifications referred to in regulation

5 shall be filed with the Commissioner no later than eighteen (18)

months after the last day of the reporting fiscal year that is the

transition year referred to in regulation 8.

Fourth Part

Final Provisions

The legal framework implemented in the domestic law of a

third-country jurisdiction shall be considered to be equivalent to a

qualified IIR set out in Chapter II of the European Union Global

Minimum Tax Directive, and shall not be treated as a controlled

foreign company tax regime, if it fulfils the following conditions

(a) it enforces a set of rules in accordance with which the

parent entity of an MNE group shall compute and pay its

allocable share of top-up tax in respect of the low-taxed

constituent entities of the MNE group;

(b) it establishes a minimum effective tax rate of at least

fifteen percent (15%) below which a constituent entity is

considered to be low-taxed;

(c) for the purpose of computing the minimum effective

tax rate, it only allows the blending of income of entities located

within the same jurisdiction;

(d) for the purpose of computing a top-up tax under the

equivalent qualified IIR, it provides for relief for any top-up tax

that was paid in a Member State in application of the qualified

IIR and for any qualified domestic top-up tax set out in the

European Union Global Minimum Tax Directive; and

(e) is included in the list of third-country jurisdictions

that have implemented a legal framework in their domestic law

which is considered to be equivalent to a qualified IIR in

conformity with the conditions laid down in paragraphs (a) to

(d), such list being referred to in Article 52(2) of the European

Union Global Minimum Tax Directive.

Notwithstanding the procedures laid down in regulation Bilateral

5(6), any agreement concluded between the European Union and third- agreement

simplified

country jurisdictions whose legal frameworks have been assessed as reporting

obligations.

equivalent to a qualified IIR in accordance with regulation 13, and

which agreement provides for a framework for simplifying the

reporting procedures laid down in such agreement, shall be applicable.

€2.52