Group structuring : a tax perspective

Abstract

Purpose: The purpose of this study is to analyse the tax implications that are considered within a corporate group. The study is focused towards the possible benefits and/or drawbacks of tax provisions with regards to group structures. The decision making process of group structuring based on tax considerations is also analysed. A consideration of recommendations from practitioners and improvements in the taxation of group structures is also investigated. Design: An analysis of the identified tax provisions in relation to corporate group structures and intra-group dealings is addressed so as to gain an overview of the tax management within corporate groups. Open ended semi-structured Interviews were held with tax practitioners as well as high ranking officials at the Commissioner for Revenue to gain insight on the applicability, importance and intentions behind the relation of taxation and corporate groups. Findings: The study ascertains that Malta’s tax law has areas of focus geared towards corporate groups which derive a tax saving or tax deferral benefit. Such tax provisions towards group structures discreetly appear to result in a common style of corporate structuring within a group. However due to the dynamic structure of a corporate group, several gaps within legislation were identified and a number of criticisms are given in this regard. Conclusions: It is noted that tax considerations although not fundamental to group structures, high levels of importance are still given in mitigating tax by way of structuring a corporate group. It is imperative for the CFR to implement a definitive system that accommodates for newer business models that are being exercised by corporate groups. Value: This study is of value to all those stakeholders who are involved in taxation matters in relation to corporate group structures. As group structures hold importance in positive contributions towards the local economy, the study seeks out to understand the tax position that corporate groups are facing in the Maltese economy.