The new tax accounts with regards to profit allocations, distributions and related flows : a critical analysis and the effects on companies and their shareholders

Abstract

Malta has been promoted in recent years as a competitive financial services centre and this was due mostly to the tax regime that incentivised cross-border activities and promoted trade with non-residents. Following Malta's accession in the European Union, our fiscal regime has been put under scrutiny and several aspects of it had to change since it was concluded that these constituted state aid and were thus distorting Europe's Single Market. The amendments that were brought about by EU pressures however were not the only changes that took place and several other amendments were enacted in both the Income Tax Act and the Income Tax Management Act. This dissertation examines these changes, focusing mainly on those aspects that will mostly affect the company having to adhere with the rules of the new corporate tax system and their shareholders. These areas include tax accounting and profit allocations, dividend distributions and refunds of tax. Thus, beyond giving an explanation of what the rules that govern these areas concern, the study will go a step further and assess their impact on companies and also on their shareholders who were nonetheless affected by the amendments. Overall, the study will evaluate whether the changes that took place and the rules that were introduced are in fact beneficial for companies and shareholders and whether these amendments will continue to enhance the competitive position that Malta enjoys as a centre for international business.