Issues applicable to taxation of insurance business and products under Maltese law

Abstract

This thesis aims to examine issues applicable to taxation of insurance business and products under Maltese law. Chapter 1 serves as a foundation on which the thesis is developed and it focuses on outlining the Maltese corporate tax regime providing an examination of the salient tax provisions that regulate the imposition of income tax. Issues such as chargeable income, jurisdiction to tax, tax deductions, tax exemptions, tax accounting and tax refund system are examined. Reference is also made to tax imposed on capital gains. Chapter 2 deals with the provisions of Article 27 of the Income Tax Act regulating the tax treatment of insurance business, highlighting the differences between general business and long-term business carried out by resident and non-resident insurance companies. To give a complete picture of the insurance industry in Malta, an analysis follows with respect to the tax treatment of the various entities forming part of this industry. Chapter 3 analyses the tax implications of various insurance products that are available on the Maltese market, which examination differentiates between general insurance products and long-term insurance products. The latter as opposed to the former can have underlying investments linked to them, which can affect their tax treatment. Chapter 4 completes the tax examination of insurance under Maltese law as it treats the Value Added Tax and Stamp duty implications on insurance services. The issue of whether insurance services should be treated as exempt supplies for VAT purposes or should become chargeable is questioned. A complete overview of the Duty on Documents and Transfers Act provisions relating to insurance policies follows in this Chapter. Due to the international aspect of the insurance industry, this study would be incomplete without an international dimension. In fact, Chapter 5 focuses on issues 3 affecting taxation of cross-border insurance profits. An analysis of the double taxation relief systems applicable under Maltese law is undertaken. The concept of permanent establishment is discussed and develops into an analysis of the manner in which business profits attributable to insurance establishments set up in foreign jurisdictions are to be established. This analysis is done all in the context of the OECD Model Tax Convention on Income and on Capital, which forms the basis of Malta's double tax treaty network. This will give a better understanding of the Maltese tax regime for international entities, which in turn should facilitate their decision-making in considering Malta as a prime location for investment. For the Maltese insurance industry to keep on growing as part of the financial services sector, constant improvements to tax legislation affect Accordingly, at the end of this thesis, I highlight possible reforms in tax laws which may aid the further development of the insurance industry in Malta.