RSM Malta

Clarifications to the Consolidated Group Rules

The Office of the Commissioner for Revenue (“the CfR”) has issued a number of clarifications in relation to Subsidiary Legislation 123.189 Consolidated Group (Income Tax) Rules (“the Rules”). 

The Rules provide the possibility for a group of companies to elect to compute their chargeable income or losses on a collective basis provided that a parent company and its subsidiary have the same accounting year end and the parent meets at least two of the following criteria:

  • A holding of 95% of the subsidiary’s voting rights. 
  • An entitlement to 95% of profits available for distribution;
  • An entitlement to 95% of the subsidiary’s assets upon winding up.

The formation of a fiscal unit would effectively mean that the parent company, referred to by the Rules as “the principal taxpayer” would be responsible to file a single tax return covering itself and all its subsidiaries, hereinafter referred to as the “transparent entities”.  The currency in which the tax return of a fiscal unit shall be prepared would be based on the currency in which the share capital of the principal taxpayer is denominated. 

The guidelines clarify that upon the formation of a fiscal unit, the balances carried forward in the form of unabsorbed losses, capital allowances and tax credits on the books of a transparent entity as outlined above, cannot be partially transferred to the principal taxpayer.  In this regard, such balances should be retained by the transparent entity in entirety or else, transferred to the parent entity.  

The same is also applicable in the case of profits allocated to the tax accounts of transparent subsidiaries, other than the distributable profits allocated to the untaxed accounts.  Any distributable profits allocated to the transparent entities’ untaxed accounts which are not transferred to the principal taxpayer shall serve as reserves for future dividend payments by the said transparent entities.

Another clarification put forward by the CfR outlines that fiscal unity shall not affect the treatment of the deductibility of expenses incurred in the production of the fiscal unit’s income. 

Through the election to form a fiscal unit, it should be noted that transparent subsidiaries would still retain their obligations to file VAT returns and FSS documentation as outlined in the VAT Act and the Final Settlement System (FSS) Rules.

The CfR notified also that the submission deadline for the filing of the income tax return by the principal taxpayer for the Year of Assessment 2020 has been extended to the 28th of February 2021.

The tax settlement deadline of fiscal units not entitled to the eighteen month tax payment extension afforded to beneficiaries of a stamp duty exemption in terms of Article 47 of the Duty on Documents and Transfers Act has also been extended to the 28th of February 2021.


We invite you to reach out to us should you wish to discuss in further detail the guidelines issued by the CfR in respect of the Rules or their applicability to your group of companies.