Malta in favour of closing hybrid loan mismatch loophole

Malta agrees on closing a tax loophole referred to as hybrid loan mismatch. At the last ECOFIN Meeting which took place on 6th May 2014, Malta only disagreed with the wording of the amending directive, but not the object of the Parent Subsidiary Directive.

As explained by the Minister for Finance in his intervention in the ECOFIN meeting on 6th May 2014:



“We fully agree that profits which have benefited from a deduction in the Member State of the subsidiary ought not to escape taxation in the Member State of the Parent and that of the Permanent Establishment (Subsidiary). Malta, like all other Member States had already agreed in the Code of Conduct Group to address this issue.


Indeed, we have supported the Presidency in its approach of splitting the adoption of this proposal, with a view to fast track a rapid agreement on this aspect. Let me be clear therefore that Malta equally shares the view that this “hybrid loan mismatch” loophole ought to be closed as quickly as possible.”

The Parent Subsidiary Directive, like the other tax directives in force, are not taxing instruments. Consequently, the Maltese Government believes that the same objective could be achieved with a wording which, whilst achieving the same aim, better respects Member State`s competence in this area.

Malta’s preferable option of wording is the one that most safeguards Member States competence in this area.

To this effect, the Government is currently seeking legal advice which while safeguarding Malta’s interests would achieve the aim of the amending directive, that of closing a tax loophole.



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Wednesday, 04 June 2014


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