Areas of Strength

• Malta’s tax administration is undergoing a modernisation process, building on a relatively good performance in terms of digitalisation. The Malta Tax and Customs Administration (MTCA) is enhancing its technological capacities for better data management and analysis, including by employing Artificial Intelligence (AI) tools. E-filing rates for corporate income taxation (CIT) and personal income taxation (PIT) are slightly above the EU average and, in the case of PIT e-filing, increasing. In addition, the MTCA pre-fills PIT tax returns. The MTCA also provides a variety of online tools and services, and the level of taxpayers’ satisfaction on the support for filing tax returns is among the highest in the EU.

Areas for Improvement

• Malta has a large VAT compliance gap. While Malta has recently been taking measures to increase the efficiency of the tax administration and tackle tax non-compliance, the VAT compliance gap remains large and is the second highest in the EU. The implementation of the VAT in the Digital Age (ViDA) package should support VAT compliance by improving VAT collection in particular in important areas for the Maltese economy, such as short-term tourism rentals and ride-sharing platforms.
• Malta does not currently perform CIT and PIT gap estimation, although it is contributing to EU initiatives in this area. Malta is not among the EU Member States that officially estimate or publish national tax gaps, besides the participation in the EU VAT gap exercise, but it is participating in the EU TADEUS/FISCALIS project to improve tax gap estimations. Measuring tax gaps could provide valuable insights into compliance levels and enforcement effectiveness, also taking into account that the size of the shadow economy in Malta is estimated to be higher than the EU average.
• Malta could enhance fiscal transparency and accountability by systematically reporting on - and evaluating - tax expenditures. There is no indication of tax expenditure reporting by the Maltese authorities. The International Monetary Fund (IMF) has repeatedly recommended Malta to publish estimates of the revenue losses associated with both existing and newly introduced tax expenditures, which would also support an assessment of their effectiveness. In addition, some features of the Maltese corporate tax system may result in a large gap between statutory and effective CIT rates.

Tax Complexity

Malta ranks 3^rd out of the 27 Member States in the Tax Complexity Index (TCI), where a higher rank corresponds to lower tax complexity. The TCI is based on the Global MNC Tax Complexity Project, a joint research project of Deborah Schanz (LMU Munich) and Caren Sureth-Sloane (Paderborn University). The TCI 2024 places Malta 9^th among the Member States with regards to Tax Framework Complexity, and 3^rd with regards to Tax Code Complexity. This suggests a strong performance of the country both in terms of the tax processes carried out by the tax authorities (notably in the area of payment and filling, according to the authors), and in terms of the structure of the tax regulations (particularly in the area of depreciation, according to the authors).

The full Commission Staff Working Document of the Mind the Gap Report - Challenges and opportunities for tax compliance and tax expenditure in the EU regarding Malta can be found here.

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