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ARTICLE · 31 MAY 2018

Notional Interest Deduction (NID) Rules

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By virtue of Legal Notice 37 of 2018, the Maltese government introduced the Notional Interest Deduction (NID) Rules.

MaltaTax
Jonathan Abela
Jonathan Abela
Josef Cardona
Josef Cardona
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By virtue of Legal Notice 37 of 2018, the Maltese government introduced the Notional Interest Deduction (NID) Rules. Traditionally, businesses operating in Malta finance their operation via debt, given that interest is a deductible taxable expense. On the other hand, equity funded business do not have a corresponding deduction and hence the NID aims to equate the tax treatment of debt and equity by allowing the deduction of a notional interest over equity.

The amount of notional interest available for deduction is calculated annually on the amount of risk capital. Adherence to the NID Rules is optional and undertakings claiming the NID should not be able to benefit from the refundable tax credit system on the same profits.

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