Income Tax Consolidation in Malta

2026 Update

Income Tax Consolidation has been available in Malta since its introduction through Legal Notice 110 of 2019, being the Consolidated Group (Income Tax) Rules, 2019. The rules came into force with effect from Year of Assessment 2020 in relation to fiscal units having accounting periods commencing in calendar year 2019 and subsequent years.

As at 2026, the fiscal unit regime remains available under the same legislative framework, with official guidance from the Malta Tax and Customs Administration (MTCA) clarifying eligibility, registration, timelines, and certain technical aspects of the rules.

A parent company may elect to form a Fiscal Unit with one or more qualifying subsidiaries, provided that the statutory conditions are met. In particular, the parent company must, in the year prior to the year of assessment in which the election is made, satisfy any two of the following criteria in relation to the subsidiary:

• 95% of the voting rights
• 95% entitlement to profits available for distribution to the ordinary shareholders
• 95% entitlement to assets on liquidation available for distribution to the ordinary shareholders on a winding up

Official MTCA guidance further clarifies that, in order to join or form part of a fiscal unit, a company must be a 95% subsidiary of its parent company at the end of the year preceding the year of assessment in which the election is made, and the companies forming part of the fiscal unit must have coterminous accounting periods.

This regime applies exclusively to Income Tax and should not be confused with VAT Grouping, which is governed separately under article 5(6) of the VAT Act and the Value Added Tax (Registration as a Single Taxable Person) Regulations (Subsidiary Legislation 406.21). Under the VAT grouping rules, two or more legal persons established in Malta may apply to be registered as a single taxable person where they are bound to each other by financial, organisational and economic links, and at least one applicant is a taxable person licensed or recognised under the legislation listed in those regulations.

Election and Administrative Requirements

To form a Fiscal Unit, the registration is made through the online profile of the principal taxpayer as accessed from the income tax portal.

The official guidance clarifies the following administrative requirements and conditions:

• A company seeking to join or form part of a fiscal unit should have no outstanding balances due and no outstanding filings required under the Income Tax Acts, the Value Added Tax Act and the Final Settlement System Rules, subject to the clarifications set out in the guidance.
• The companies forming part of the fiscal unit must have coterminous accounting periods.
• The companies joining the fiscal unit must be represented by the same registered tax representative as that of the principal taxpayer for income tax return purposes.
• Where approval of holders of equity shares not owned directly or indirectly by the parent company is required under the rules, that approval should be maintained by the principal taxpayer and made available if requested by the tax authorities.
• Where a company that is not resident in Malta forms part of a fiscal unit and acts as principal taxpayer, it must satisfy the relevant Maltese registration requirements, including the appointment of a fiscal representative in Malta in the case of a foreign principal taxpayer.

Fiscal Unit Election: 2026 Deadline

The official MTCA guidance provides that the principal taxpayer is granted a 6‑month period in order to register a fiscal unit, starting from the morrow of the financial period end, but not before 1 August of the calendar year of the financial period end. For following years of assessment, the principal taxpayer is also granted a 6‑month period to inform the tax authorities of any changes to the composition of the fiscal unit for the applicable year of assessment, with that period likewise starting from the morrow of the financial period end, but not before 1 August of the calendar year of the financial period end.

Following the lapse of that 6‑month period, the principal taxpayer may not add or remove subsidiary companies to or from the fiscal unit, except in limited cases where a structural change has occurred and a request is made in writing to remove an existing transparent subsidiary.

For companies with a 31 December 2025 year end, the election to form a fiscal unit for YA 2026 must be submitted by 30 June 2026.

Computation of Chargeable Income

The official MTCA guidance confirms that the treatment of carried-forward balances depends on the circumstances and is not uniform in all cases.

In particular, the guidance states:

• For a transparent subsidiary that is not a 100% subsidiary, either all balances are transferred to the principal taxpayer or all balances are kept in abeyance; there can be no mix of partly transferred and partly suspended balances.
• Any unabsorbed notional interest deduction balance existing at the level of a subsidiary at the end of the basis year preceding entry into the fiscal unit is to be kept in abeyance upon joining the fiscal unit.
• The total tax account balances of transparent subsidiaries, excluding the Untaxed Account, are added to the tax account balances of the principal taxpayer, subject to the detailed rules set out in the guidance.
• Any dividend distributed by a transparent subsidiary from profits derived while it forms part of the fiscal unit is to be made from that subsidiary’s Untaxed Account, and the relevant withholding tax obligations remain applicable.
• The nature of income brought to charge in the name of the principal taxpayer remains the same as determined at the level of the individual members of the fiscal unit, and the deductibility of expenses is assessed accordingly.
• Where income is derived by a transparent subsidiary that is not resident in Malta, the guidance explains that such income is treated as attributable to a permanent establishment of the principal taxpayer situated outside Malta, with further clarification in the guidance regarding the application of arm’s length principles in certain situations.
• In respect of income subject to Rule 6(2), the guidance states that no refunds in terms of Article 48(4) and 48(4A) of the Income Tax Management Act may be claimed by members of the fiscal unit or their shareholders.

Compliance, Reporting & Audit Requirements

The Consolidated Group (Income Tax) Rules are supplemented by official guidance on Rule 11, which deals with consolidated audited accounts.

Where consolidated audited accounts are prepared solely for the purposes of complying with Rule 11, the principal taxpayer may avail itself of certain exclusions identified in the official guidance, including:

• exclusion of the statement of cash flows;
• exclusion of comparative information for the first year of fiscal unity; and
• exclusion of the items listed in Annex 1 from the notes to the consolidated audited accounts.

More generally, the MTCA explains that tax guidelines set out the Commissioner for Tax and Customs’ interpretation of legislation and the way the department applies the law in practice, and that, subject to certain statutory conditions and restrictions, such guidelines may have the force of law.

Professional Guidance

Malta’s fiscal unit regime can offer significant planning advantages, but its application depends on the precise ownership structure, accounting period alignment, tax account balances, compliance position and, where relevant, cross-border tax treatment.

Engaging a qualified tax advisor can help ensure that the statutory conditions are satisfied and that the fiscal unit is assessed and implemented in line with the latest official rules and guidance. For assistance with Malta taxation or establishing a Fiscal Unit, contact our team on +356 2258 2000 or submit an enquiry for a consultation.

*This article is for information purposes only and should not be construed as legal or tax advice.