New Notional Interest Deduction Rules: Level Playing Field For Equity And Debt Financing

Malta has enacted Notional Interest Deduction Rules in October, 2017 which will apply in respect of income derived from basis year 2017 onwards by Maltese companies, Maltese partnerships, and permanent establishments in Malta of foreign companies (the "Qualifying Entities").

Rationale

The rationale behind these rules is to enable deductions to be claimed by such Qualifying Entities for notional interest deemed to have been incurred on their "equity", thereby bringing about a more level playing field on the tax front for equity financing when compared to debt financing. Such Qualifying Entities could already claim a deduction for tax purposes in respect of any debt financing costs incurred by them.