The Consolidated Group (Income Tax) Rules, 2019 were introduced in the midst of June of 2019 in Malta by the Legal Notice 110 of 2019 and came into effect for companies who have its financial period starting on 1 January 2019 or later. 

This is an optional regime and the group of companies that are willing to apply will be constituted by the “principal taxpayer” and the “transparent subsidiaries”, considered a “fiscal unit” for income tax purpose.

Some requirements are essentials, such as all companies must have the same accounting year. Also, the principal taxpayer needs to be a company registered in Malta and hold at least 95% and any two of these three rights: 1) voting rights; 2) any profits available for distribution; and 3) any assets of the subsidiary company available for distribution; of the transparent subsidiary.

After that, the principal taxpayer will assume the responsibilities and obligations according to the ITA of its transparent subsidiaries and the later will have its responsibilities and obligations interrupted. To exemplify, when there is the responsibility to pay tax or to submit the income tax return, the principal taxpayer will be accountable for this.

These changes will support the income tax calculations, reporting of group companies and other group matters easier, once all income, outgoings and expenses derived by transparent companies shall be considered incurred by the principal taxpayer. The same will happen with the transactions occurred between principal taxpayer and transparent subsidiaries, which are not going to be considered.

When any income or gains is derived by a transparent subsidiary who is not resident in Malta, this income will be attributable to a permanent establishment of the principal taxpayer situated outside Malta; and where any income or gains derived by a transparent subsidiary not resident in Malta arising in Malta, the principal taxpayer will be considered responsible.

The range of the income tax grouping rule is not restricted to any specific sector or industry and as said before, will help the fiscal unit in its organization and reports.