Ireland, Malta Close ‘Single Malt’ Tax Avoidance Structure

Ireland, Malta Close ‘Single Malt’ Tax Avoidance Structure

The author is Alex Hunter, Editor, TP News. He oversees and updates the publication and also  regularly writes news stories about transfer pricing and international tax law. Alex is reachable at editor@transferpricingnews.com  


Ireland and Malta have agreed to close the “Single Malt” – an aggressive tax planning structure in which some multinational corporations use a company incorporated in Ireland but tax-resident in Malta.

The Competent Authority Agreement – entered into as per the provisions of Article 24 (mutual agreement procedure) of the Ireland-Malta tax treaty – makes it clear that it is not the purpose of the Ireland-Malta tax treaty to enable an aggressive tax planning structure referred to as the “Single Malt.”

Double non-taxation

In Ireland, companies incorporated in the country are considered tax residents.

In Malta, companies managed and controlled from Malta are considered tax residents. Additionally, where companies resident (but not incorporated) in Malta are in receipt of income that is not received in Malta, such income is not subject to tax in Malta.

As such, where payments are made by an Irish-resident company to an Irish-incorporated company managed and controlled from Malta, and such payments are not received in Malta, double non-taxation could arise. This is because the payments are tax-deductible in Ireland but are not subject to tax in Malta as they are not received in Malta.

The Competent Authority Agreement

The Competent Authorities have agreed that the tax treaty’s deeming of a company – incorporated in Ireland but managed and controlled in Malta – to be resident in Malta only, does not serve the purposes of the Double Taxation Convention and is not “for those purposes.”

Accordingly, such an Irish-incorporated company will be resident in Ireland and the relevant payments to it will come within the charge to Irish corporation tax.

The Agreement will be effective as soon as the BEPS Multilateral Convention is in effect for both Ireland and Malta. Ireland intends to complete its ratification process in relation to the BEPS Convention by January 2019.

Ireland’s Finance Minister welcomes agreement

Welcoming the Agreement, Finance Minister Paschal Donohoe said: “While I am confident that US tax reform has already significantly reduced the concerns around the Single Malt structure, I had asked officials to examine any further bilateral action that may be needed.”

“I am pleased that this Agreement has been reached, which should eliminate any remaining concerns about such structures. This is another sign of Ireland’s commitment to tackling aggressive tax planning, as set out in Ireland’s Corporation Tax Roadmap.”

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