Malta updates tax guidance on notional interest deduction

Malta’s Commissioner for Revenue on August 8 announced that tax guidelines on the notional interest deduction have been updated.

Malta’s notional interest deduction is designed to align the tax treatment of the cost of holding equity, where dividends are not deductible, with the cost of holding debt, where interest is deductible.

This is achieved by allowing Malta entities to take deductions for notional interest amounts on equity.

The new guidance clarifies how to determine the reference rate, the process for claiming the deduction, the amount deductible, carryforwards, and other matters.