GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE OF INFORMATION FOR TAX PURPOSES

Peer Review Report Phase 2 Implementation of the Standard in Practice
MALTA

Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: Malta 2013
PHASE 2: IMPLEMENTATION OF THE STANDARD IN PRACTICE

November 2013 (reflecting the legal and regulatory framework as at March 2013)

This work is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the OECD or of the governments of its member countries or those of the Global Forum on Transparency and Exchange of Information for Tax Purposes. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
Please cite this publication as: OECD (2013), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: Malta 2013: Phase 2: Implementation of the Standard in Practice, OECD Publishing. http://dx.doi.org/10.1787/9789264202696-en

ISBN 978-92-64-20268-9 (print) ISBN 978-92-64-20269-6 (PDF)

Series: Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews ISSN 2219-4681 (print) ISSN 2219-469X (online)

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© OECD 2013

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TABLE OF CONTENTS – 3

Table of Contents

About the Global Forum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Information and methodology used for the peer review of Malta . . . . . . . . . . . . . 9 Overview of Malta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Recent developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 Compliance with the Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 A. Availability of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 A.1. Ownership and identity information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 A.2. Accounting records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 A.3. Banking information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 B. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 B.1. Competent Authority’s ability to obtain and provide information . . . . . . . . 76 B.2. Notification requirements and rights and safeguards. . . . . . . . . . . . . . . . . . 85 C. Exchanging Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 C.1. Exchange-of-information mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 C.2. Exchange-of-information mechanisms with all relevant partners . . . . . . . . 97 C.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 C.4. Rights and safeguards of taxpayers and third parties. . . . . . . . . . . . . . . . . 100 C.5. Timeliness of responses to requests for information . . . . . . . . . . . . . . . . . .101

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4 – TABLE OF CONTENTS Summary of Determinations and Factors Underlying Recommendations. . . .111 Annex 1: Jurisdiction’s Response to the Review Report . . . . . . . . . . . . . . . . . .115 Annex 2: List of All Exchange of Information Mechanisms . . . . . . . . . . . . . . .116 Annex 3: List of All Laws, Regulations and Other Material Received. . . . . . 123 Annex 4: People Interviewed During On-Site Visit . . . . . . . . . . . . . . . . . . . . . 124

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ABOUT THE GLOBAL FORUM – 5

About the Global Forum
The Global Forum on Transparency and Exchange of Information for Tax Purposes is the multilateral framework within which work in the area of tax transparency and exchange of information is carried out by over 120 jurisdictions, which participate in the Global Forum on an equal footing. The Global Forum is charged with in-depth monitoring and peer review of the implementation of the international standards of transparency and exchange of information for tax purposes. These standards are primarily reflected in the 2002 OECD Model Agreement on Exchange of Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax Convention on Income and on Capital and its commentary as updated in 2004. The standards have also been incorporated into the UN Model Tax Convention. The standards provide for international exchange on request of foreseeably relevant information for the administration or enforcement of the domestic tax laws of a requesting party. Fishing expeditions are not authorised but all foreseeably relevant information must be provided, including bank information and information held by fiduciaries, regardless of the existence of a domestic tax interest. All members of the Global Forum, as well as jurisdictions identified by the Global Forum as relevant to its work, are being reviewed. This process is undertaken in two phases. Phase 1 reviews assess the quality of a jurisdiction’s legal and regulatory framework for the exchange of information, while Phase 2 reviews look at the practical implementation of that framework. Some Global Forum members are undergoing combined – Phase 1 and Phase 2 – reviews. The Global Forum has also put in place a process for supplementary reports to follow-up on recommendations, as well as for the ongoing monitoring of jurisdictions following the conclusion of a review. The ultimate goal is to help jurisdictions to effectively implement the international standards of transparency and exchange of information for tax purposes. All review reports are published once adopted by the Global Forum. For more information on the work of the Global Forum on Transparency and Exchange of Information for Tax Purposes, and for copies of the published review reports, please refer to www.oecd.org/tax/transparency and www.eoi-tax.org.

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EXECUTIVE SUMMARY – 7

Executive Summary
1. This report summarises the legal and regulatory framework for transparency and exchange of information in Malta as well as the practical implementation of that framework. The international standard which is set out in the Global Forum’s Terms of Reference to Monitor and Review Progress Towards Transparency and Exchange of Information, is concerned with the availability of relevant information within a jurisdiction, the competent authority’s ability to gain timely access to that information, and in turn, whether that information can be effectively exchanged with its exchange of information (EOI) partners. 2. Malta is an archipelago in the Mediterranean Sea and a member of the European Union. It is an international shipping center and has sought to afford a location for international financial services. 3. The legal and regulatory framework for exchange of information in Malta is in place. Ownership and identity information as well as accounting information is maintained by all relevant entities to the standard. In addition, much information must be filed with the government authorities, in particular the tax authorities and the commercial register. Full banking information is available in Malta, including records of all transactions. In practice, information has been found to be available in all instances for EOI purposes. 4. The Maltese authorities have broad access to information for exchange of information purposes pursuant to the income tax laws, including bank and accounting information. Adequate rights and safeguards are in place that are compatible with effective exchange of information. The Maltese authorities have not experienced any difficulties in practice in accessing information required for EOI purposes. 5. Malta has committed to the international standards of transparency and effective exchange of information and has a broad network of EOI instruments with 82 jurisdictions, covering all relevant partners. This includes three Tax Information Exchange Agreements and 67 Double Tax Conventions, almost all of which conform to the international standard in all respects. These EOI agreements sufficiently protect the confidentiality of

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8 – EXECUTIVE SUMMARY
information received and provide for appropriate rights and safeguards. Malta continues to expand its network of agreements and, in October 2012, Malta signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (Multilateral Convention). Through this EOI network, Malta effectively exchanges information upon request with its EOI partners as well as automatically under the EU Savings Directive 48/2003/EC and, since 1 January 2013, also under the EU Council Directive 2011/16/EU on Administrative Cooperation in the Field of Taxation. 6. Malta’s exchange of information responsibilities lie with the International Tax Unit, which forms part of the Inland Revenue Department, under the Ministry for Finance. Malta has in place appropriate organisational processes and resources to ensure effective exchange of information in practice. Since 2009, the Maltese EOI team has improved their efficiency in replying to requests for information. During the three year period under review (July 2009 – June 2012), Malta received and responded to 81 EOI requests from 22 partners. On a total of 81 requests, Malta was in a position to provide a final response within 90 days in 26 cases (32%), between 91 and 180 days in another 38 cases (47%), and between 181 days and one year in an additional 15 cases (19%). The remaining two cases (2%) were processed in more than one year. Overall, the feedback from peers was positive and some EOI partners of Malta praised its clear and coherent communication during the course of a request as well as the quality of its co-operation and speed response times. However, one of Malta’s main exchange partners commented on the lack of consistency in providing updates. 7. Malta has been assigned a rating 1 for each of the 10 essential elements as well as an overall rating. The ratings for the essential elements are based on the analysis in the text of the report, taking into account the Phase 1 determinations and any recommendations made in respect of Malta’s legal and regulatory framework and the effectiveness of its exchange of information in practice. On this basis, Malta has been assigned the following ratings: Compliant for elements A.3, B.1, B.2, C.1, C.2, C.3, C.4 and C.5, and Largely Compliant for elements A.1 and A.2. In view of the ratings for each of the essential elements taken in their entirety, the overall rating for Malta is Largely Compliant. 8. A follow up report on the steps undertaken by Malta to answer the recommendation made in this report should be provided to the PRG within twelve months after the adoption of this report.

1.

This report reflects the legal and regulatory framework as at the date indicated on page 1 of this publication. Any material changes to the circumstances affecting the ratings may be included in Annex 1 to this report.

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INTRODUCTION – 9

Introduction
Information and methodology used for the peer review of Malta
9. The assessment of the legal and regulatory framework of Malta and the practical implementation and effectiveness of this framework was based on the international standards for transparency and exchange of information as described in the Global Forum’s Terms of Reference, and was prepared using the Global Forum’s Methodology for Peer reviews and Non-Member Reviews. The assessment has been conducted in two stages: Phase 1 assessed Malta’s legal and regulatory framework for the exchange of information as at January 2012, while Phase 2, performed at May 2013 in relation to a three year period (July 2009 through June 2012), looked at the practical implementation of that framework, as well as any amendments made to the legal and regulatory framework since the Phase 1 review. 10. The assessment was based on the laws, regulations, and exchangeof-information mechanisms in force or effect as at March 2013. It reflects Malta’s responses to the Phase 1 and Phase 2 questionnaires, supplementary questions, other materials supplied and explanations provided by Malta during the onsite visit that took place from 28-30 November 2012 in Attard, Malta, and information supplied by partner jurisdictions. During the onsite visit, the assessment team met with officials and representatives of the Inland Revenue Department (IRD), Tax Compliance Unit (TCU), Malta Financial Service Authority (MFSA), Malta Stock Exchange, Financial Intelligence Analysis Unit (FIAU), Registrar for Legal Persons and Notarial Council. A list of all those interviewed during the onsite visit is attached to this report at Annex 4. 11. The Phase 1 and Phase 2 assessments were conducted by assessment teams which consisted of two assessors and a representative of the Global Forum Secretariat. During the Phase 1 review, these were: Ms. Melisande Kaaij, Senior Policy Advisor, Ministry of Finance, the Netherlands; Mr. Colin Chew Koo Chung, Director, Investigation and Forensics Division, Inland Revenue Authority of Singapore and Ms. Amy O’Donnell of the Global Forum Secretariat. The assessment team examined the legal and regulatory framework for transparency and exchange of information and relevant

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10 – INTRODUCTION
exchange-of-information mechanisms in Malta. During the Phase 2 review, the assessment team was composed of: Ms. Melisande Kaaij, Senior Policy Advisor, Ministry of Finance of the Netherlands; Mr. Colin Chew Koo Chung, Director, Compliance Service-Enforcement Division, Inland Revenue Authority of Singapore; and Mrs. Renata Fontana of the Global Forum Secretariat. The Terms of Reference break down the standards of transparency and 12. exchange of information into 10 essential elements and 31 enumerated aspects under three broad categories: (A) availability of information; (B) access to information; and (C) exchanging information. This review assesses Malta’s legal and regulatory framework and the implementation and effectiveness of this framework against these elements and each of the enumerated aspects. In respect of each essential element a determination is made regarding Malta’s legal and regulatory framework that either: (i) the element is in place, (ii) the element is in place but certain aspects of the legal implementation of the element need improvement, or (iii) the element is not in place. These determinations are accompanied by recommendations for improvement where relevant. In addition, to reflect the Phase 2 component, recommendations are made concerning Malta’s practical application of each of the essential elements and a rating of either: (i) compliant, (ii) largely compliant, (iii) partially compliant, or (iv) non-compliant is assigned to each element. An overall rating is also assigned to reflect Malta’s overall level of compliance with the standards. 13. The ratings assigned in this report were adopted by the Global Forum in November 2013 as part of a comparative exercise designed to ensure the consistency of the results. An expert team of assessors was selected to propose ratings for a representative subset of 50 jurisdictions. Consequently, the assessment teams that carried out the Phase 1 and Phase 2 reviews were not involved in the assignment of ratings. These ratings have been compared with the ratings assigned to other jurisdictions for each of the essential elements to ensure a consistent and comprehensive approach. The assignment of ratings was also conducted at a different time from those reviews, and the circumstances may have changed in the meantime. Readers should consult Annex 1 for information on changes that have occurred.

Overview of Malta
14. Malta is an archipelago in the centre of the Mediterranean Sea, lying south of Sicily and east of Tunisia. The territories of Malta comprise the Island of Malta, the Island of Gozo and the other islands of the Maltese Archipelago, including the territorial waters thereof. Only its three largest islands are inhabited: Malta, Gozo and Comino. Its total area is 316 square kilometres. Maltese and English are the official languages of Malta, but Italian is 15. also widely spoken. Its population is 412 970. Malta achieved independence

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INTRODUCTION – 11

from the United Kingdom in 1964 and established its Constitution then, which has since been modified. Malta became a member of the European Union on 1 May 2004 and adopted the euro as its currency in 2008. 16. Malta is a republic with a parliamentary system of government. The Constitution of Malta establishes three branches of government: the legislative, executive and judiciary. The executive branch consists of the President of Malta, who is appointed by resolution of the House of Representatives and serves a five year term without possibility of re-election. Its unicameral House of Representatives is elected by direct universal 17. suffrage to serve for a five year term. It has exclusive jurisdiction to enact all main and subsidiary legislation, including tax laws. Prior to its publication and coming into force, each legislative act must go through a number of parliamentary procedures. A bill is then presented to the President of Malta for his assent and published in the Government Gazette, thus becoming a Parliamentary Act. The European Court of Justice may determine whether a Maltese law is in accordance with the EU treaty and with other EU legislation. A Cabinet of Ministers, one of whom is the Prime Minister, is appointed in accordance with the Constitution and includes a Minister for Finance. Malta’s judiciary is independent and consists of Superior and Inferior 18. Courts. The Superior Courts are made up of the Constitutional Court, Court of Appeal and the Civil Court. The Inferior Courts include Court of Magistrates for the Island of Malta and Court of Magistrates for the Islands of Gozo and Comino. The judges of the Superior Courts and magistrates of the Inferior Courts are appointed by the President acting in accordance with the advice of the Prime Minister. Several tribunals fall within the category of Inferior Courts, such as the Financial Services Tribunal, which acts as a court and has jurisdiction to review actions under financial services laws (i.e. the Banking Act, Central Bank Act, Financial Institutions Act). The Administrative Review Tribunal has jurisdiction to review administrative acts, including cases involving tax assessments. 19. Malta’s legal system is a mixed one, largely based on civil law, but with English law influences, particularly in commercial and financial law. Where there is a lacuna in an area of the law having its origins in the law of the UK, the Common Law of the UK is referred to in order to interpret or fill it. Although the doctrine of precedent from Common Law was not inherited, Maltese judgements usually have a persuasive effect. Since Malta commenced the process of joining the EU in 1994, EU law has been the major external influence in the development of Maltese legislation. 20. The Maltese Constitution is the supreme law of the land, followed by Acts of Parliament (known also as primary legislation). Laws passed by Parliament need to be in conformity with full respect for human rights,

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12 – INTRODUCTION
generally accepted principles of international law and Malta’s international and regional obligations in particular those assumed by the Treaty of Accession to the European Union. Malta has a comprehensive legal infrastructure with five main codes of law, namely: the Criminal Code, the Code of Police Laws, the Code of Organisation and Civil Procedure, the Commercial Code and the Civil Code. Primary legislation may enable and delegate power to Ministers to issue Regulations known as subsidiary legislation. By virtue of Article 10 of the Interpretation Act, subsidiary legislation is valid and has effect provided that it is lawfully made in accordance with the power that is conferred in the primary legislation. Implicit in the fact that this constitutes subsidiary legislation, it needs to be made in accordance with the power that is conferred in the primary legislation. Legislation, whether primary or subsidiary, needs to be passed through Parliament and is published by the Government Gazette. Authorities, like the Malta Financial Services Authority, on the other hand, may be empowered by Primary Legislation to make by-laws which usually take the form of an order or prohibition that are binding.

The Maltese Economy
21. Malta’s economy is based on international trade and business. Its GDP for 2012 was EUR 6.5 billion. 2 With limited domestic and natural resources, its economy depends on foreign trade, manufacturing and tourism. Tourism accounts for a significant percentage of Malta’s GDP. Transhipment and maritime services and financial services are also important to Malta’s economy. Since its establishment in 1973 Malta’s shipping register has grown to be the 2nd largest in Europe and the 8th largest in the world according to the European Commission. Since the passage of the Malta Financial Services Authority Act in 1988 Malta has sought to provide a location for international financial services activities. Film production is also a growing industry. In addition there is a strong manufacturing base for high value-added products like electronics and pharmaceuticals. After tourism, manufacturing represents the next most significant percentage of GDP.

Financial Services
22. Malta has a significant financial services industry, which has grown significantly in the past three years. The financial services sector consists of credit and financial institutions, the insurance and insurance intermediaries business, investment services, collective investment schemes and pension and retirement funds. The collective funds industry has grown gradually in Malta. The total number of new funds from 2004 to December 2012 amounted to 851, of which 298 were surrendered (essentially the license granted by the MFSA was relinquished by the fund). The net asset value of funds domiciled in Malta
2. www.nso.gov.mt/statdoc/document_file.aspx?id=3453.

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INTRODUCTION – 13

is EUR 8.3 billion as at the end of December 2012. There are also 164 collective funds not domiciled in Malta. 3 Malta opened a stock exchange in 1992. 23. All financial services in Malta are regulated, monitored and supervised by the Malta Financial Services Authority (MFSA). The MFSA may issue Rules regulating the procedures and duties of those licensed, authorised or supervised by it and may issue directives in writing which license holders must comply with. The Registry of Companies forms part of the MFSA. As at March 2013, the MFSA was responsible for regulating 26 credit and 24 financial institutions, 119 investment services companies and 57 insurance companies, among other entities and organisations. 4 24. In addition, since it was set up in 2002, the Financial Intelligence Analysis Unit (FIAU) has been responsible for supervising all persons carrying out a relevant activity or a relevant financial business, with a view to combating money laundering and funding of terrorism. Both the MFSA and the FIAU fall within the structure of the Ministry for Finance, but they are independent agencies and enjoy full autonomy in their operational activities. 25. The Central Bank of Malta oversees and regulates the operation of domestic payment systems, along with any form of cash or security transaction, whether domestic or cross border and no person can operate or participate in this system without approval and authorisation by the Central Bank. However, the Central Bank does not have a direct supervisory function with respect to financial institutions. 26. The government in Malta is very welcoming to foreign investment and foreigners may own 100% of businesses in almost all sectors. There are more than 200 foreign companies with manufacturing operations in Malta. 5 There are also incentives which are administered by the Malta Enterprise Corporation. Incentives do not depend on whether a company exports or not, and include investment tax credits for projects that are approved a priori by the Malta Enterprise Corporation in writing, initial investment aid in respect of qualifying companies and special provisions for small businesses and incentives related to training and job creation. The Malta Enterprise Corporation was launched in 2004 and is tasked with attracting foreign direct investment into the island and providing the necessary support and assistance to businesses operating on the islands to improve their international competitiveness. It operates under an Executive Chairman and Board of Directors appointed by the Minister for the Economy, Investment and Small Business.
3. 4. 5. http://mfsa.com.mt/pages/viewcontent.aspx?id=270. http://mfsa.com.mt/Files/Publications/Statistics/Licences’%20Statistics/Statistical%20 Tables%20-%201st%20Quarter%202013.pdf. According to Malta Enterprise, the agency responsible for the promotion of foreign investment and industrial development in Malta.

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14 – INTRODUCTION
27. Professions relevant to the financial sector, such as notaries, lawyers, accountants and auditors are regulated in Malta. Notaries are regulated by the Notarial Council. The Committee for Advocates and Legal Procurators under the Commission for Administration of Justice Act investigates misconduct by lawyers. The Chamber of Advocates also acts to uphold ethics and professionalism among lawyers. The Accountancy Board investigates cases of professional misconduct and other disciplinary proceedings among accountants and auditors.

Taxation
28. The tax system in Malta is historically based on UK law and English Case law is used to interpret the tax laws in Malta whenever there are words and expressions that are not known to the law of Malta but are known to the English legislation. Such reference is allowed insofar as is necessary to give effect to the income tax legislation. Currently, the two main legislative sources of tax law are the Income Tax Act and the Income Tax Management Act (collectively, the Income Tax Acts). 29. Any person (whether a natural or legal person) who is both domiciled and resident in Malta is subject to tax on a worldwide basis. A company incorporated in Malta is considered to be resident and domiciled in Malta. A company incorporated outside Malta is considered resident in Malta only if the management and control of the company is exercised in Malta. The term “management and control” is not defined in Maltese tax law, however Malta advises that in practice in order to establish that management and control is in Malta, the Inland Revenue Department would take into account whether the board meetings of the company are held in Malta, whether general meetings are held in Malta, and whether any other decisions of the company are taken except at meetings in Malta. 6 If a foreign company is treated as resident in Malta because it is controlled and managed in Malta it will be subject to tax on income arising in Malta and foreign income (excluding capital gains) received in Malta. The same applies to individuals who are resident but not domiciled in Malta. The statutory rate of tax for corporations is 35% and for individuals the rates are progressive, ranging from 15-35%. 30. Malta has a full imputation system of taxation. When a company distributes dividends out of profits on which it has already paid tax, the amount of credit or refund to which the shareholder is entitled depends on the nature
6. Other features typically present to give substance to a claim of residency are that the company’s financial records are held and maintained in Malta with the audited financial statements prepared and filed in terms of the principles enunciated in Maltese company law, the majority of the directors are physically present in Malta to attend board meetings and some of the directors are resident in Malta.

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INTRODUCTION – 15

and source of the income. Dividends paid out of trading income entitle a shareholder to a credit of 6/7 of tax paid, resulting in a net payment on corporate profits of around 5%. Distributions from passive income give rise to a credit of 5/7 of tax paid. When a company distributes profits on which it has not paid tax, it must withhold tax at a rate of 15%, although no withholding tax is due on dividends paid to non-resident shareholders. In addition, no tax is imposed on interest and royalties paid to a non-resident person, so long as the recipient is the beneficial owner of the income and does not carry on a trade or business through a permanent establishment in Malta. Income or gains from participating holdings in foreign companies are exempt from tax and there is no tax on gains realised from transfers of corporate securities by a non-resident, as long as the recipient is the beneficial owner of the gains and the securities are not held in a company whose assets consist principally of immovable property in Malta.

International Cooperation
31. Since Malta became a full member of the EU in 2004, EU legislation has become part of Maltese legislation. The extent to which EU legislation has an effect on Maltese law depends on whether the legislative instrument is a directive or regulation. As a member of the European Union, Malta is involved in the European common VAT system and as a consequence, in the VAT exchange of information that takes place under the EU regulation (EC) 1798/2003. 7 Malta also exchanges information automatically under the scope of the EU Savings Directive 48/2003/EC pursuant to which EU members (with the exception of Austria and Luxembourg), as well as other jurisdictions that are party to agreements, exchange data on an annual basis concerning the savings income received from Malta paying agents by taxpayers located abroad. 32. On 22 July 2011, Malta enacted the Cooperation with Other Jurisdictions on Tax Matters Regulations (Cooperation Regulations), which came into force on the date of publication (i.e. 22 July 2011). The Cooperation Regulations were enacted under enabling laws found in the Income Tax Acts and, as subsidiary legislation, they have the same force and effect as primary legislation. The Cooperation Regulations complement rules in other laws, particularly concerning the availability of ownership, identity and accounting information. Malta determined that the best way to implement its continued commitment to transparency (as expressed by the Terms of Reference created and used by the Global Forum) was to consolidate the relevant regulations in one piece of legislation so that affected persons are easily guided rather than having various pieces of legislation
7. A new regulation (EC) 904/2010 was adopted by the European Council on 14 October 2010 and will enter into force on 1 January 2012.

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16 – INTRODUCTION
relating to the same subject matter. Furthermore, the Cooperation Regulations also include the relevant implementation measures of EU Council Directive 2011/16/EU on Administrative Cooperation in the Field of Taxation, effective as of 1 January 2013. 33. Malta has a network of 67 double tax conventions (DTCs) and nine Protocols to existing DTCs containing EOI provisions, of which 63 DTCs and five Protocols are in force. Most recently, Malta signed tax information exchange agreements (TIEAs) with The Bahamas, Bermuda, and Gibraltar, all of which are in force. Twelve EOI agreements currently await signature or further negotiation, including ten DTCs and two TIEAs.

Recent developments
34. On 21 December 2012, the Cooperation Regulations were amended by Legal Notice 472 of 2012 to transpose into Malta’s domestic law the EU Council Directive 2011/16/EU on Administrative Cooperation in the Field of Taxation, in effect since 1 January 2013. This Directive also reflects a broader commitment toward transparency. 35. Since its Phase 1 review in 2012, Malta has signed a further seven EOI agreements and one Protocol to an existing DTC containing an EOI provision, bringing the total number of EOI agreements signed to 67. 8 In addition, a further ten EOI agreements have been brought into force since Malta’s Phase 1 review. 9 A complete list of the agreements which have been concluded by Malta is set out in Annex 2 to this report, including their dates of signature and entry into force. 36. In addition, Malta signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (Multilateral Convention) at the signing ceremony held in conjunction with the Cape Town Global Forum meeting, in October 2012. The Multilateral Convention was developed by the OECD and the Council of Europe but, since June 2011, it has been open to all countries. The updated Multilateral Convention, which incorporates internationally agreed standards for exchange of information in tax matters, is one of the most comprehensive multilateral instruments available for tax co-operation.
8. 9. The new EOI agreements signed by Malta comprise the TIEAs with The Bahamas and Gibraltar, the DTCs with Guernsey, India (new), Mexico, Norway (new DTC) and Saudi Arabia, and the Protocol to the DTC with South Africa. This includes the TIEAs with The Bahamas, Bermuda and Gibraltar and the DTCs with Bahrain, Hong Kong (China), Guernsey, Norway (new DTC), Saudi Arabia, Switzerland and Uruguay.

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COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 17

Compliance with the Standards

A. Availability of Information

Overview
37. Effective exchange of information requires the availability of reliable information. In particular, it requires information on the identity of owners and other stakeholders as well as information on the transactions carried out by entities and other organisational structures. Such information may be kept for tax, regulatory, commercial or other reasons. If the information is not kept or it is not maintained for a reasonable period of time, a jurisdiction’s competent authority may not be able to obtain and provide it when requested. This section of the report assesses the adequacy of Malta’s legal and regulatory framework on availability of information. It also assesses the implementation and effectiveness of this framework. 38. All companies are required to register and submit an annual return, which includes ownership information, to the Registrar of Companies. Upon registration with the Registrar of Companies, information is immediately forwarded to the Inland Revenue Department. All bodies corporate, whatever their type, constituted or incorporated outside Malta, which establish a branch or place of business within Malta or are resident for tax purposes in Malta are required to register in Malta with the Inland Revenue Department and in certain cases with other authorities depending on the type of entity. 39. The Cooperation Regulations under the income tax laws require all entities and trustees in Malta to maintain ownership and identity information. The definition of entity encompasses any body of persons that is resident in

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18 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION
Malta; is created under Maltese law; has a permanent establishment in Malta; is a property company or property partnership; or is required to be registered, licensed or otherwise authorised to conduct business in Malta. Therefore ownership and identity information is available on all relevant entities. 40. The requirement to maintain accounting records to the standard is found in the Income Tax Acts and the Cooperation Regulations made thereunder. Accounting standards are also found in the Companies Act, Commercial Code and Code of Conduct for Trustees. All relevant entities and trustees in Malta must maintain accounting records to the standard, including underlying documents, for a minimum of five years. In addition, all financial institutions must ensure that banking information is kept on all account holders in relation to their banking activity in Malta, which includes records of all transactions. 41. Compliance in respect of all entities’ obligations to maintain ownership, accounting and banking information is strictly monitored by the Maltese authorities, including the Registrar of Companies, the Inland Revenue Department, the Malta Financial Services Authority (MFSA), the Financial Intelligence Analysis Unit (FIAU), and other regulatory bodies. Such monitoring is carried out via routine checks, desktop audits and onsite inspections. Sanctions appear to be set at the appropriate level to ensure compliance with information keeping requirements and are regularly enforced in practice.

A.1. Ownership and identity information
Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities.

Companies (ToR A.1.1) Types of companies
42. Maltese law provides for the creation of limited liability companies, which, depending on the number of shareholders and their objects, can be either public or private. All companies are governed by the Companies Act. As at March 2013, there were 46 144 private companies and 142 public companies registered in Malta. Of the total number of private companies, 19 745 are registered as exempt private companies. 43. A private company’s founding documents, these being the memorandum and articles, must specifically restrict the right to transfer its shares, limit its members to fifty and prohibit any invitation to the public to purchase shares (Article 209(1) Companies Act). Private companies can have one member (single member companies).

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44. Private companies may also be exempt private companies. Such companies are exempt from the requirement that a person cannot be both a director and company secretary and from the prohibition of making loans to a director of the company (or its parent company) or to enter into any guarantee or provide any security in connection with a loan made to that person. In addition to the general restrictions for a private company, the memorandum or articles of association of an exempt private company must also prohibit any body corporate from holding shares (except when the body corporate is itself an exempt private company), prohibit bodies corporate from acting as directors of the company and prohibit any of the directors from being a party to an arrangement whereby the policy of the company is capable of being determined by persons other than the directors, members or share holders of the company. An exempt private company may also be set up as a single member company. 45. Public companies typically have more than 50 shareholders and have greater disclosure requirements than private companies. In addition, Societas Europea (or SEs) can be formed pursuant to EU 46. law. As at March 2013, there were five SEs registered in Malta. SEs are public limited companies regulated by EU Council Regulation (EEC) No.2157/2001 on Statute for a European Company. Therefore, any requirements applicable to public limited companies apply equally to SEs.

Company ownership and identity information required to be provided to government authorities
47. Companies, both public and private, are formed pursuant to the Companies Act by entering a memorandum of association which, except in the case of private single member companies, must be subscribed to by at least two persons. The Companies Act sets out specific information which the memorandum must contain (Article 69, Companies Act). This includes the following: • • • • • • whether the company is public or private; name and residence of each of the subscribers; name of the company; registered office in Malta of the company; objects of the company; amount of its share capital with which it proposes to be registered, divided into shares of a fixed amount, the number of shares taken up by each of the subscribers and the amount paid in respect of each share. Where the share capital is divided into different classes of shares, the rights attaching to the shares of each class;

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• number of directors, the name and residence of the first directors and, where any of the directors is a body corporate, the name and registered or principal office of the body corporate and the name of the first person or persons vested with its representation; and name and residence of the first company secretary.

Information filed with Registrar
48. Every company must register with the Registrar of Companies. A company is constituted once a Memorandum is entered into and a certificate of registration indicating an identification number is issued by the Registrar of Companies. The Registrar of Companies is part of the MFSA and all registered information and documentation is available to the public. 49. Every company must file an annual return with the Registrar on the anniversary of its registration each year. The annual return form requires a summary of the share capital of the company, a list of past and present members (shareholders), the names and address of the directors and the company secretary (Seventh Schedule, Companies Act). The Registrar of Companies forwards the registration information to the Inland Revenue Department; therefore every company that registers with the Registrar of Companies is also automatically registered for tax purposes. The Inland Revenue Department then issues the company a nine digit tax identification number. 50. Companies must keep a share register of their members (see below), and in addition, when a share is transferred in a private company, the company must deliver to the Registrar a notice of the transfer stating the name and address of the transferee within 14 days of the transfer being registered with the company. The company has this information because a transfer cannot take place without the company’s acceptance. Once the company accepts a transfer of shares, the transfer must be done in writing (Article 118(1), Companies Act) and the buyer must pay a stamp duty on the transfer. This written instrument must be submitted to the company. If the company is not informed of the transfer, it is not obliged to recognise the new shareholder or to accord any rights to the shareholder. 51. In the case of a share transmitted by reason of death, the name and address of the persons entitled to the shares must be registered with the company within one month from the date on which the share is transmitted (Article 120, Companies Act). For single member companies that become so by the acquisition of all of their shares by one person, the company must deliver to the Registrar of Companies within 14 days a notice specifying this fact and stating the name and residence of the member (Article 212, Companies Act). The same applies when a company ceases to be a single member company.

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In practice
52. Registration obligations for companies are presided over by the Registrar of Companies. Except for listed public companies and investment companies with variable share capital (see Regulated entities below), all domestic companies (private or non-listed public companies) are subject to the same registration obligations. The Registrar of Companies has issued a guide specifying the requirements that must be met in order for the registration to be effective. 10 53. All the information of company registrations is available at the website of the Registrar of Companies. 11 Companies must file their annual returns electronically and notify the Registrar of Companies about ownership changes within 14 days, by filing a Form T – Notice of Share Transfer. Compliance monitoring is carried out by the Registrar of Companies via routine checks and desktop audits and, on occasion, it has received letters from directors or shareholders informing it that the company had failed to file a notice of share transfer. 54. Ownership information submitted upon registration and any subsequent changes notified to the Registrar of Companies are publically available at the website of the Registrar of Companies, for a fee. The Registrar of Companies keeps these records indefinitely, as a matter of practice. The Inland Revenue Department is automatically notified about the registration of new companies. With regard to subsequent changes in ownership information, an updating process is systematically carried out every three months by which the Inland Revenue Department is informed of all changes to shareholding of companies that are registered with the Registry of Companies. Furthermore, the Inland Revenue Department has direct access to the Registry of Companies’ database at any given time, free of charge.

Information filed with Tax Authority
55. All companies that are incorporated under Maltese law (and therefore are resident in Malta), or are foreign companies having a place of business and are registered as an oversea company (i.e. have a branch in Malta), have their management and control in Malta (i.e. are resident in Malta), or conduct any economic or commercial activity in Malta but do not fall into any of the above categories, must register for tax purposes with the Inland Revenue Department irrespective of any obligation to register with the Registrar of Companies. This requirement is implicit in the fact that all such companies must file an annual tax return pursuant to Article 10 of the Income Tax Management Act, whether

10. 11.

http://registry.mfsa.com.mt/otherPDFs/ROCGuide.pdf. http://registry.mfsa.com.mt/.

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they have taxable income or not, and the annual return requires a tax identification number, which can only be obtained by registering. 56. The annual tax return must include ownership information, which includes the name of the shareholders, the tax identification number and the number and class of shares held and would also include any change in ownership (S.L. 372.09, Income Tax (Form of Return for a Company or Corporate Undertaking), Schedule A). Along with its return, a company must also submit the records which are required to be kept under the Act, these being: in the case of companies registered in Malta, a balance sheet and profit and loss account with an audited report, and in the case of foreign companies not registered in Malta, records of the company’s activities in Malta. The Income Tax Acts require that documents be kept for a minimum 57. of nine years from the year that the relevant acts (such as transactions, acts and operations of the entity) took place. This also applies to any person acting in an agency or fiduciary capacity (including nominees), lawyers, notaries and other independent legal professionals, accountants, auditors, tax advisors, company service providers, persons licensed to carry on investment business and stockbrokers when any of these people are acting in a professional capacity in relation to any such information or records that s/he holds in the carrying on of a business (Regulations 4 and 5, Cooperation Regulations). According to Malta, it is the practice of the Registry of Companies and the Inland Revenue Department to retain ownership information indefinitely.

In practice
58. The Registrar of Companies and the Inland Revenue Department keep separate databases. Information concerning newly registered companies is automatically passed on by the Registrar of Companies to the Inland Revenue Department, at which point a nine digit tax identification number is given. Furthermore, ownership information, including changes thereto that are notified to the Registrar of Companies, is automatically updated to the tax database every three months. In any case, information that is notified to the Registrar of Companies is freely and directly accessible by the Inland Revenue Department from the Registry of Companies website. 59. All companies registered with the Inland Revenue Department must file a tax return containing ownership information with respect to all shareholders of the company, including multiple changes throughout the tax year. According to the Maltese authorities, approximately 90% of the annual tax returns pertaining to corporate taxpayers are electronically filed by their tax

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representatives. 12 However, there is no automatic matching system in place for cross-checking the ownership information filed with the Registrar of Companies with the ownership information included in the annual tax return. Liquidated companies are required to file an annual tax return even if they remained operational for a single day. During the review period, the compliance rate with tax return filing obligations in respect of active companies 13 averaged at 71% (see section A.1.6 Enforcement provisions to ensure availability of information below). 60. Compliance monitoring is carried out by the Inland Revenue Department via routine checks, desktop audits and onsite inspections. Tax audits are carried out in cases identified in reports issued by the Risk Analysis Unit and there is no fixed frequency in relation to these tax audits. During the review period, the total number of tax audits amounted to 257, including both desktop audits and onsite inspections. Irregularities were found in 130 cases that were audited, further to which EUR 0.94 million and EUR 0.25 million in additional taxes and interests respectively were collected, excluding cases which have been investigated but which are still under appeal.

Company ownership and identity information required to be held by companies
61. All companies must keep a register of members, which must include (Article 123, Companies Act): • names and addresses of the members (shareholders) and the shares held by each, distinguishing each share by its number (when applicable), along with the amount paid on each share; the date when each person was entered into the register as a member; and the date when each person ceases to be a member.

• •
12.

13.

Applications to the electronic lodgement service are done on a voluntary basis at the website of the Inland Revenue Department (www.ird.gov.mt/services/eservices/eservices.aspx). Every company applying for this service is provided with its own personalised tax return. The personalised e-Return incorporates, besides other details, the names of directors and shareholders according to the Registrar of Companies, the income tax payments for the tax year and a specific key unique to the company. This includes the tax returns filed by limited liability companies, oversea companies, limited partnerships the capital of which is divided into shares, cooperatives, foundations and trusts which elect to be treated as companies. This compliance rate averaged at 81% over the same period in respect of active domestic limited liability companies with a foreign involvement.

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62. In addition to their duties under the Companies Act to keep a register of members, public companies listed on the stock exchange in Malta are also subject to the Listing Rules issued by the MFSA. 14 63. The Cooperation Regulations were issued pursuant to the Income Tax Act and build upon the requirements in the income tax laws. The Cooperation Regulations provide that all “entities” must keep updated information that identifies their owners and the level and type of their respective ownership stake in the entity. The term “entity” includes any body of persons that are: 1) resident in Malta, 2) created under Maltese law, 3) have a permanent establishment in Malta, 4) a property company, or 5) required to be registered, to be licensed, or otherwise authorised to conduct business in Malta (Regulation 2, Cooperation Regulations). Further, the definition of the term “body of persons” is in the Income Tax Act and includes any body corporate. Consequently all companies must keep updated ownership information. 64. The information must be updated and documented within 14 days from the date the entity was notified or from the date it becomes aware of a change in ownership. For a company, owner means the legal owner, but when the legal owner acts on behalf of another person, the legal owner must keep the information that identifies the person on whose behalf s/he acts (Regulation 4). Identity information on an individual includes the full name and surname; passport, ID or tax identification number; or, if not available, the date and place of birth and the address of residence. For persons that are not individuals, it includes the name, date of inception or incorporation and the registered address (Regulation 4(5), Cooperation Regulations).

In practice
65. Upon listing, all public companies are required to set up electronic book entry registers of holders thereof within the Malta Stock Exchange’s Central Securities Depository. These registers constitute the definitive authentic record of holders entitled to the securities and they are continually updated, as necessary, upon settlement of transfers taking place. Issuers enjoy direct remote electronic access to the updated registers issued by them as at close
14. The Listing Rules define shareholder as any natural or legal person who holds, directly or indirectly, shares in its own name for its own account, shares in its own name but on behalf of another, or depositary receipts, in which case the holder of the depositary receipts is considered the shareholder of the underlying shares represented by the depositary receipts. If voting rights are attached to a share, any shareholder who acquires or disposes of shares at certain thresholds (5, 10, 15, 20, 25, 30, 50, 75 and 90%) must notify the company. In addition, the Rules also require that a listed company include in its annual report direct and indirect shareholdings that represent greater than 5% of the share capital.

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of business of the relevant settlement day. Any security transfer remaining unreported or unsettled has no effect at law. Customer due diligence checks are regularly conducted and records thereof kept by licensed stockbrokers, who are in turn subject to anti-money laundering obligations and on-going supervision by the MFSA and the FIAU (see section A.3 Banking Information below).

Regulated Entities
66. Maltese law also provides for investment companies, which can be either a public or private company and can either have a variable (SICAV) or fixed (INVCO) share capital. SICAVs, which are known as open ended investment companies, are by far the dominant form of investment companies in Malta. They are subject to specific regulations issued by the MFSA. INVCOs have specific rules on distribution and capitalisation and may be retirement funds (Article 194, Companies Act). None of the INVCO’s holdings in companies that are not INVCO’s can represent more than 15% of the value of the investing company’s investments (Article 194(6)(b), Companies Act). The shares of an INVCO must be listed on an exchange market for the company to be able to make any distribution (Article 194(4)(a), Companies Act). As at March 2013, there were 223 investment companies in Malta (all SICAVs, being 210 public and 13 private investment companies), none of which are INVCOs. 67. SICAVs may have two types of members, i.e. shareholders and unit holders. Unlike other domestic companies, a SICAV is not required to provide details of its past and present members in the annual return sent to the Registrar of Companies, but only the share capital of the company and the number of shares issued (Art. 84(8), Companies Act). Nevertheless, like all domestic companies, SICAVs must keep a register of members including updated identity information concerning their owners (Regulation 2, Cooperation Regulations and Article 123, Companies Act). 68. Protected cell companies (PCCs) carrying on the business of insurance have been possible in Malta since 2004 with the enactment of the Companies Act (Cell Companies Carrying on Business of Insurance) Regulations which made it possible for a company to be formed or constituted or converted into a cell company and to create within itself one or more cells for the purposes of segregating and protecting the cellular assets of the company (Regulation 2, Companies Act (Cell Companies Carrying on Business of Insurance) Regulations). In 2010, a new legal framework enabled the establishment of Incorporated Cell Companies (ICCs) under Maltese law (Companies Act (Incorporated Cell Companies Carrying on Business of Insurance) Regulations), 15 which came into effect on 1st February 2011.
15. SL 386.13.

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69. Both PCCs and ICCs are limited to the business of insurance as defined under the Insurance Business Act 16 or of captive insurance in terms of the Insurance Business (Companies Carrying on Business of Affiliated Insurance) Regulations of 2003. As of March 2013, there were seven PCCs (constituting of 18 cells) and two recognised ICCs (constituting of three cells) in Malta. 17 70. In a PCC, assets are segregated into protected cells, although the PCC remains a single legal entity. By contrast, an incorporated cell in an ICC has a separate legal personality and is treated as a separate company. Both PCCs and ICCs are required to file separate tax returns for each cell. 71. As they are created under the Companies Act, both PCCs and ICCs are subject to the requirements of the Companies Act. In the case of PCCs, the PCC itself is obliged to keep the register of members and indicate the owners of the PCC. The owners of the PCC are the owners of the cells (not necessarily each and every cell is owned by all the owners of the PCC). Furthermore the share capital of the PCC is the collective share capital of all the cells together. The directors of the PCC are obligated to keep cellular assets separate and separately identifiable from non-cellular assets and cellular assets attributable to each cell separate and separately identifiable from cellular assets attributable to other cells. In addition, the directors must keep separate records, accounts, statements and other documents for each cell distinctly (Regulation 10). 72. In the case of ICCs, each cell is a separate limited liability company with separate legal personality, and therefore needs to register with the Registrar of Companies (Regulation 10). It is therefore subject to the requirements under the Companies Act in this regard, and each cell is obliged to keep a register of members and each incorporated cell must file a separate annual return (Regulation 15).

In practice
73. All financial services in Malta are regulated, monitored and supervised by the MFSA through offsite and onsite supervision. Offsite supervision involves monitoring through the examination and analysis of the financial and other documentation which need to be submitted periodically to the MFSA. Licence holders are usually subject to quarterly and annual reporting obligations, but their frequency may be increased to monthly reporting obligations, if appropriate. Onsite supervision involves carrying out compliance visits at the offices of persons authorised by the MFSA, the frequency and length of
16. 17. Chapter 403, Laws of Malta. http://mfsa.com.mt/Files/Publications/Statistics/Licences’%20Statistics/Statistical%20 Tables%20-%201st%20Quarter%202013.pdf.

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which may vary according to size and risk level exposure. The MFSA supervisory unit conducts routine visits or, where particular concerns arise with respect to license holders, it conducts targeted visits. In general, investment companies are inspected at least every two years and onsite inspections can take up to one week. 74. Within the MFSA, the Securities and Markets Supervision Unit (SMSU) is responsible for supervising SICAVs and INVCOs. Maltese SICAVs are administrated by recognised fund administrators, who must be licensed by the MFSA and, together with the SICAVs themselves, are subject to antimoney laundering legislation, regular reporting obligations and compliance visits by the SMSU. Identity information concerning the SICAVs’ unit holders is received and kept by their respective recognised fund administrators. The unit buyers must disclose their identity when filling in the application form which is part of the offering memorandum or prospectus. In addition, when units are transferred, the intermediaries must notify the recognised fund administrators and disclose the identity of the transferees. During the review period, the SMSU carried on compliance visits at the offices of three SICAVs. In addition, the MFSA and the FIAU carried out various joint onsite examinations, one of which concerned a recognised fund administrator in 2011. There is no practical experience with regards to INVCOs as none have been established to date. 75. Insurance businesses established in Malta through PCCs or ICCs are supervised by the Insurance and Pensions Supervision Unit (IPSU) at the MFSA. As part of the registration and licensing process at the MFSA, these companies must submit identity information concerning their main officers, directors and shareholder and, in the event of any changes, they must notify the licensing unit at the MFSA. Both the company (PCC or ICC) and each cell must be approved individually by the MFSA. Changes in ownership of the company (PCC or ICC) and each cell must be notified to the MFSA. During the review period, the IPSU carried on compliance visits at the offices of two PCCs and, in addition, two cells of a PCC. From the compliance visits performed during this period, one undertaking had its licence suspended and is now in liquidation. 76. After a licence holder is notified of the MFSA’s decision to impose a penalty or administrative sanction, the MFSA is legally required to publish this notice on its website, which remains posted for two, five, ten years or indefinitely, depending on the seriousness of the infringement. 18 As of February 2013, six cases were posted on the MFSA’s website concerning sanctions imposed on one PCC and five SICAVs (either directly on the company or on their directors), but none of them concerned irregularities
18. http://mfsa.com.mt/pages/AdministrativeMeasuresPenalties.aspx.

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or deficiencies in the availability of ownership information. According to the MFSA, the reputational risk related to the publication of a penalty or administrative sanction is often more dissuasive than the penalty or administrative sanction itself. In practice, the general compliance level regarding obligations to maintain ownership information by regulated companies is very good due to the effective application of penalties combined with their publication by the MFSA.

Foreign companies
77. The Companies Act also applies to all bodies corporate, whatever their type, constituted or incorporated outside Malta that establish a branch or place of business within Malta. The Companies Act refers to such a company as an “oversea company”. Oversea companies may perform any type of business that may legally be undertaken in Malta. An oversea company may establish a branch in Malta by setting up a place of business in Malta and notifying the Registrar of Companies (Article 384, Companies Act). Branches do not have a legal personality separate from that of the foreign company, nor do they have to reincorporate in Malta. As at March 2013, there were 449 branches of foreign companies in Malta.

Information filed with Registrar
78. An oversea company that establishes a branch in Malta must deliver to the Registrar of Companies an authentic copy of its charter, statute, memorandum and articles constituting the company, together with a list of the directors and company secretary, or the person vested with the administration and representation of the company, within one month of opening the branch. Where such person is an individual, the list must include the individual’s name, address, nationality and business occupation. Where such person is a body corporate, the list must include its corporate name and the address of its registered office. An oversea company must also deliver to the Registrar of Companies a return containing the following (Art. 385, Companies Act): • • name under which the branch or place of business is carrying on its activities, where this is different from the name of the oversea company; address of the branch and where more than one branch or place of business has been established there shall be indicated the address of the principal branch or place of business; activities to be carried out; and names and addresses of one or more individuals in Malta authorised to represent the company and the extent of such person’s authority.

• •

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79. Unless the articles of the company already provide this information, the information required to be submitted to the Registrar of Companies also includes the legal form of the company and the identity of the register in which the oversea company is registered and its registration number. If any change is made in the company’s charter, statutes, memorandum or articles, its directors, company secretary or person with the authority to act for the company, or the names or addresses of the people authorised to represent the company, such changes must be filed with the Registrar of Companies within one month of the change (Article 386, Companies Act).

In practice
80. The availability at the Registrar of Companies of information that identifies the owners of oversea companies will generally depend on whether the laws of the jurisdiction in which the company is formed requires this information (and changes thereto) to be included in the charter, statute, memorandum and articles of the company. All information submitted upon registration and any subsequent changes notified to the Registrar of Companies are publically available at the website of the Registrar of Companies, for a fee. The Registrar of Companies keeps these records indefinitely, as a matter of practice, and carries out compliance monitoring via routine checks and desktop audits. As in the case of domestic companies, information concerning newly registered oversea companies is automatically passed on by the Registrar of Companies to the Inland Revenue Department, at which point a nine digit tax identification number is given. Furthermore, if any changes to ownership information are notified to the Registrar of Companies, this is systematically updated to the tax database every three months. In any case, information that is notified to the Registrar of Companies is freely and directly accessible by the Inland Revenue Department on the Registrar of Companies website.

Information filed with Tax Authority
81. Under the tax laws, a company that is incorporated under foreign law but managed and controlled in Malta, or is neither incorporated nor managed and controlled in Malta but has income arising in Malta, must register for tax purposes and file an annual return in the same way as a domestic company (see paragraph 52 above). Oversea companies that are registered with the Registrar of Companies, because they have a branch, are automatically registered for tax purposes and must file an income tax return even if the income is not subject to tax in Malta (S.L. 372.09, Income Tax (Form of Return for a Company or Corporate Undertaking), Schedule A). Such registration and tax filing obligations include ownership information, including any change in ownership. Along with its return, a company must also submit the records which are required to be kept under the Act. For companies registered in

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Malta, this includes a balance sheet and profit and loss account with an audited report. Companies not resident in Malta must instead submit records of the company’s activities in Malta. Such companies would include those that are not incorporated in Malta or not managed and controlled in Malta but which have income arising in Malta. 82. Foreign companies clearly fall within the definition of “entity” in the Cooperation Regulations, which includes any body of persons either resident in Malta, with a permanent establishment in Malta or registered, licensed or otherwise authorised to conduct business in Malta (Regulation 2, Cooperation Regulations). These requirements cover all foreign companies resident in Malta for tax purposes. Foreign companies are therefore required to maintain ownership information in the same way as a domestic company (see Company Ownership Information Required to be Held by Companies section, above), meaning that the foreign company itself is required to keep updated information that identifies its owners and the level and type of their respective ownership stake.

In practice
83. Foreign incorporated companies with a relevant nexus to Malta by virtue of residence (management and control) or source (income arising in Malta) must be registered with the Inland Revenue Department. In addition, oversea companies with a place of business in Malta are automatically registered with the Inland Revenue Department upon registration at the Registrar of Companies. All these foreign companies must file an annual tax return, whether they have taxable income or not, containing ownership information with respect to all shareholders of the company, including multiple changes throughout the tax year. Compliance monitoring is carried out by the Inland Revenue Department via routine checks and desktop audits. During the review period, the Risk Analysis Unit did not signal any significant risks so as to merit the audit of any oversea company.

Nominees
84. Prior to the coming into force of the Trusts and Trustees Act, there were two regimes in place: (i) that related to licensed nominee companies whose activities were limited to providing nominee shareholdings, and (ii) companies holding a warrant to act as a nominee company. Upon the coming into force of the Trusts and Trustees Act, in 2004, no further licences to act as a licensed nominee companies were granted and the licence of such licensed nominee companies expired upon the lapse of two years from the coming into force of the Trusts and Trustees Act (Article 35). Pursuant to Act No. XIII of 2004, as from 2004, no new warrants could be issued to

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companies to provide nominee services and the function of those nominee companies already in existence at the time was limited solely to acting as liquidator to companies already in liquidation. Consequently, since 2004, nominee companies cannot accept any new business and are in the process of being wound up. As at March 2013, there were in Malta (i) no licensed nominee companies, and (ii) 19 nominee companies which are still in the process of being wound up. 85. Ownership information on shares held by nominees is available in Malta by virtue of the Anti-Money Laundering legislation (AML/CFT laws). Under the AML/CFT laws, any person acting as a nominee shareholder or providing for another person to act as a nominee shareholder is subject to the AML/CFT laws and therefore required to undertake customer due diligence measures (Regulation 4, Prevention of Money Laundering and Funding of Terrorism Regulations). This is the case whether or not the nominee is acting by way of business. Customer due diligence measures include identifying the beneficial owner and taking reasonable measures to verify the identity, such that the person knows who the beneficial owner is and takes reasonable measures to understand the entity’s ownership and control structure (Regulation 7(1) (b), Prevention of Money Laundering and Funding of Terrorism Regulations). 86. “Beneficial owner” is defined in the AML/CFT laws as the natural person(s) who ultimately own or control the customer and/or on whose behalf the transaction is being conducted. In the case of a body corporate, the beneficial owner includes any natural persons who: • ultimately owns or controls, whether directly or indirectly, more than 25% of the shares or voting rights of the company other than a company that is listed on a regulated market (that is subject to disclosure requirements); or a person who exercises control over the management of the body corporate.

87. In addition, the Cooperation Regulations provide that where a legal owner acts on behalf of another person in any stage in the ownership chain, including as a nominee, the nominee must keep information that identifies the person for whom he or she acts. This obligation is imposed on the nominee and so applies whether the nominee holds the shares in a foreign or domestic company. Ownership and identity information includes the full name and address or residence, passport, ID or tax identification number or date and place of birth in the case of an individual. In the case of persons who are not individuals, it includes the name, date of inception or incorporation and the registered address. Therefore, ownership and identity information on shares held by nominees would be available, consistent with the international standard.

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In practice
88. Until the process of winding up of existing nominee companies is completed, the MFSA will continue to supervise these companies and renew their license only in relation to the functions of liquidator to companies already in liquidation, whereupon their license must be immediately surrendered to the MFSA and cancelled. The FIAU will continue to monitor these nominee companies with respect to their AML/CFT obligations and the Inland Revenue Department with regard to their obligations to maintain ownership and identity information under the Cooperation Regulations.

Conclusion
89. All companies are required to register and submit an annual return with the Registrar of Companies. In addition, all companies, including those incorporated outside Malta which establish a branch or place of business within Malta or are resident in Malta, are required to register in Malta with the Inland Revenue Department and submit an annual return which includes ownership information. Finally, the Cooperation Regulations require that all companies, including foreign companies that are managed and controlled in Malta, keep updated information that identifies their owners. The Regulations also require nominees to retain updated ownership information on any person for whom he or she acts. Therefore, ownership and identity information for companies is available, consistent with the international standard. 90. In practice, when the Maltese competent authority receives an exchange of information (EOI) request concerning company ownership information, he will first consult the databases that are directly accessible and, if the requested information is not at his disposal, he will request it from the person under investigation or third parties. During the three-year period under review (July 2009-June 2012), 24 out of 81 EOI requests received by the Maltese competent concerned company ownership information, none of which concerned foreign companies. In relation to these 24 EOI requests, the Maltese competent authority 91. had the requested information at his disposal in 13 cases by consulting the Inland Revenue Department’s tax databases, while in 18 cases information was also obtained from the Maltese Registry of Companies’ database. In six cases, the Maltese competent authority sought ownership information directly from the taxpayer and in five cases ownership information was also sought from third parties. In some of these cases, information for a particular request was obtained from different sources. In all of these cases, 19 the requested

19.

There was one EOI request received prior to July 2009 where the company in question had been liquidated in November 2006 and struck off in 2009, and beneficial

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information was provided and the Maltese competent authority experienced no difficulties in retrieving company ownership and identity information.

Bearer shares (ToR A.1.2)
92. Bearer shares are not provided for under Maltese law and do not exist in Malta. Share warrants to bearer are possible, however, under the Companies Act for public companies and only if the company’s Memorandum or Articles of Association authorise it (Article 121, Companies Act). 93. If a public company is not listed and issues share warrants to bearer it must inform the Registrar of Companies. This obligation arises under Article 103 of the Companies Act, which requires a company to submit a return to the Registrar each time it makes an allotment of shares. If a company fails to make this return it is considered to be in default and every officer of the company who is in default is liable to a penalty of EUR 465.87, and, for each day the default continues, to a further penalty of EUR 23.29. 94. According to Malta, the Registrar has never been informed of any share warrants to bearer. Further, the Cooperation Regulations imposed an obligation on public companies to notify the competent authority in Malta by 22 August 2011 if they had in fact issued share warrants. The competent authority received no such notifications and therefore concluded that no share warrants were issued. 95. From the date of enactment of the Cooperation Regulations onward (July 2011), a company that issues warrants in accordance with the Companies Act must inform the Competent Authority in Malta within 14 days from the date of the issue. Such companies must keep a register with information that identifies the owners of the share warrants. The Maltese Tax Administration notified all public companies informing them of the obligation to notify the Competent Authority. Failure to comply with the requirements of this notice falls under the penalty provisions found in Article 50 of the Tax Management Act, which includes a fine of EUR 23 to EUR 10 000 and up to EUR 200 per day the default continues. A person who is in possession of a share warrant is not entitled to any rights in relation to the warrant unless the company has the information that identifies such person. A transfer of a share warrant is not valid unless the company has been informed of the transfer within 14 days (Regulation 4(3)(b)).

owner records were not maintained. Under the tax laws in force at that time, the maintenance of such records was not required, as it is under the current tax rules.

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In practice
96. During the onsite visit, the Maltese authorities explained that share warrants to bearer may be issued by a very restricted number of companies, i.e. only non-listed public companies which are explicitly authorised to do so by the Memorandum or Articles of Association. When issuing new shares, including share warrants to bearer, the company needs to notify the Registrar of Companies about the names and addresses of the allottees by filing a Form H – Return of Allotments of Shares. 97. In the Registrar of Companies’ experience, there is no record of such an issuance of share warrants to bearer and this had been confirmed since the enactment of the Cooperation Regulations. The Inland Revenue Department wrote to each of these 312 public companies in existence at the time, which could potentially issue share warrants to bearer, informing them about their new disclosure obligations under the Cooperation Regulations and enquiring about the issuance of share warrants to bearer. The Inland Revenue Department received no positive responses indicating that these companies had issued shares warrants to bearer. 98. The new reporting regime established by the Cooperation Regulations remains untested in practice, since no share warrants to bearer have been issued since these rules were enacted. The Maltese authorities have indicated, and feedback from peers has confirmed, that there were no requests for ownership information involving bearer shares during the three-year review period. Nevertheless, Malta should closely monitor the issuance of share warrants to bearer on an ongoing basis and ensure that ownership information is effectively available for EOI purposes in practice.

Partnerships (ToR A.1.3) Types of partnerships
99. There are both limited partnerships (LPs) in Malta and partnerships en nom collectif (general partnerships). Both general and limited partnerships have a separate legal personality. General partnerships, of which there are 919 in Malta as at March 2013, may be formed by two or more partners and the partnership has a separate and distinct legal personality. All the partners are ultimately jointly and severally liable for all the obligations of the partnership. 100. By contrast, the limited partners of a limited partnership, of which there are 72 in Malta as at March 2013, are only liable up to their unpaid (if any) contribution. LPs must have at least one general partner, who is jointly and severally liable. At least one of the general partners must be either an individual or a body corporate which has its obligations guaranteed by the unlimited and joint and several liability of one or more of its members. An LP

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also has a separate and distinct legal personality from its partners. LPs can be ordinary, where the contribution of the partners is equal to the proportion of their interest, and LPs where the contributions are divided into shares. In the latter case, the provisions relating to shares of a company would apply (see Companies section above) to the extent that they are not inconsistent with the limited partnership provisions of the Companies Act. For tax purposes, an LP the capital of which is divided into shares is treated like a company (Article 2, Income Tax Act).

Ownership and identity information required to be provided to government authorities Information filed with Registrar
101. Both general and limited partnerships formed under Maltese law must file a deed of partnership with the Registrar of Companies and are issued a certificate of registration (Article 13, Companies Act). The deed must state the name and residence of each of the first founding partners, the registered office in Malta of the partnership, the contribution of each of the partners and the object of the partnership (Article 14, Companies Act). For an LP, the deed must distinguish between limited and general partners (Article 4(a), Tenth Schedule to the Companies Act). 102. Both general partnerships and LPs must notify the Registrar of Companies in writing within one month when a partner (either general or limited) begins or ceases to be a partner. For new partners, the notice must specify the name and residence of the partner (Article 19, Companies Act). For an LP the capital of which is divided into shares, the partner vested with the administration or representation of the partnership must deliver a printed copy of the amended deed to the Registrar of Companies within 14 days of the alteration (Article 66(4), Companies Act). 103. A partnership may alter or add to the deed of partnership by means of a resolution, which needs to be filed for registration with the Registrar of Companies in order for such resolution to be effective. This also applies where a partner ceases to be a partner or where a person whose name does not appear in the deed of partnership or in any alteration or addition thereto becomes a partner of an already existing partnership. In such cases, a notice to that effect, specifying the name and residence of any new partner, needs to be delivered to the Registrar of Companies for registration within one month by the partner or partners having the administration or representation of the partnership. 104. The following partnerships must make an annual return: general partnerships or LPs the capital of which is not divided into shares where all

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of the partners have unlimited liability and partnerships or firms constituted or incorporated outside Malta which are comparable to a company or LP the capital of which is divided into shares. The return must specifically include a summary of the share capital, list of past and present members, particulars of directors and the company secretary (Seventh Schedule, Companies Act).

In practice
105. All partnerships are subject to the same registration obligations, and the number of registered partnerships has been decreasing overtime. Similar to companies, partnerships must also file their annual returns and notify the Registrar of Companies about ownership changes within one month, by filing a Form A – Notification of appointment of or cessation to be a partner. Compliance monitoring is carried out by the Registrar of Companies via routine checks and desktop audits. 106. All registered information and documentation is available to the public (for a fee) at the website of the Registrar of Companies 20 and these records are kept indefinitely, as a matter of practice. Partnerships do not receive a tax identification number upon registration at the Registrar of Companies since their registration is not automatically notified to the Inland Revenue Department.

Information filed with Tax Authority
107. LPs the capital of which is divided into shares are automatically registered with the Inland Revenue Department as is the case with companies. LPs the capital of which is not divided into shares and general partnerships that are engaged in a trade or business must separately register with the Inland Revenue Department, as the process is not automatic as in the case of companies. Like companies, the partnership is then given a nine-digit tax registration number. 108. LPs with capital divided into shares are treated like a company for tax purposes, and therefore subject to the same requirements as companies under the Income Tax Acts, including the requirement to file tax returns. Such return is identical to the return required for companies, and therefore includes information on the partner’s identities. 109. All other partnerships are transparent for tax purposes; the income of the partnership is assigned to the partners and must be included on each partner’s individual income tax return (Article 27(1), Income Tax Management Act). The partnership itself must also file an income tax return (Article 27(2), Income Tax Management Act). When the partnership includes a resident
20. http://registry.mfsa.com.mt/.

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partner, the resident partner whose name appears first on the partnership deed has a duty to deliver the partnership return. The return must include the names and addresses of each of the partners and the income to which each partner was entitled that year. When the partnership does not have any resident partners, the return must be completed and delivered by the attorney, agent, or manager of the partnership resident in Malta.

In practice
110. All partnerships must file a tax return with the Inland Revenue Department, in addition to each partner’s individual income tax return, whether deriving taxable income or not in a particular year. Partnerships’ tax returns are manually submitted to the Inland Revenue Department on paper and contain ownership information with respect to all partners, including changes throughout the year. The compliance rate with tax return filing obligations in respect of “other categories” of taxpayers, including partnerships (other than limited partnerships the capital of which is divided into shares) and associations, averaged at 82% over the last three years. Partnerships are transparent entities (i.e. no tax is levied at the level of the partnership) and, as such, they are not audited by the Inland Revenue Department. However, whenever a taxpayer that is a partner in a partnership is audited, the partnership itself is audited in turn. Over the last three years, it is estimated that 5% of all individuals that underwent a tax audit were partners in a partnership.

Ownership and identity information held by the partnership
111. All partnerships fall within the definition of an “entity” under the Cooperation Regulations and therefore must keep updated information that identifies their owners as well as the level and type of their ownership stake in the partnership. This information must be updated within 14 days of any change. For an individual, such information includes the full name and address of the partner’ residence; passport, ID or tax identification number; and date and place of birth (if no number is available). For persons that are not individuals, it includes the name, date of incorporation and the registered address of the entity. In any case the partnership must know who its partners are in order to complete its annual tax return.

Foreign partnerships
112. Foreign partnerships with income, deductions or credits for tax purposes in Malta or carrying on a business in Malta, “whether corporate or unincorporated and whether vested with separate legal personality or not”, fall within the definition of “body of persons” and, therefore, fall within the scope of the Income Tax Acts (Article 2, Income Tax Act). For tax purposes,

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they are treated as general partnerships under the income tax laws and they are required to register with the Inland Revenue Department. 113. In addition, foreign partnerships with income, deductions or credits for tax purposes in Malta or carrying on a business in Malta clearly fall within the definition of “entity” in the Cooperation Regulations, which includes any body of persons either resident in Malta, with a permanent establishment in Malta or registered, licensed or otherwise authorised to conduct business in Malta (Regulation 2, Cooperation Regulations). They are, therefore, required to maintain ownership information in the same way as domestic partnerships.

Conclusion
114. Both general and limited partnerships must register with the Registrar of Companies and also with the Inland Revenue Department if engaged in a trade, business, profession or vocation in Malta. In addition, all partnerships are subject to the Cooperation Regulations and therefore required to maintain ownership and identity information on all of the partners. There were no EOI requests for ownership information involving partnerships or partners during the three-year review period.

Trusts (ToR A.1.4) Types of trusts
115. Express trusts can be created under Maltese law either orally or in writing and come into existence when a trustee holds property for the benefit of the beneficiaries (Art. 3, Trust and Trustees Act). The MFSA is the competent authority in relation to trusts and does not keep a trust register. By virtue of the enactment of the Convention on the Law Applicable to Trusts and on their Recognition, recognition of a trust is not dependent on registration. If a trust has income attributable to it, the trustee needs to register for tax purposes since a tax return needs to be filed with the Inland Revenue Department. Subsequently, there is no further requirement to register with any other authority. As at March 2012, there were 140 trusts registered with the Inland Revenue Department.

Regulated activities
116. The Trust and Trustees Act defines a trustee as the person or persons holding property or in whom property is vested for the benefit of another person (Article 2, Trust and Trustees Act). Both individuals and companies may act as trustees. A trustee must be authorised by the MFSA if s/he acts as a trustee of a trust and does any one of the following: received or is entitled to

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remuneration for acting as a trustee; does so on a regular and habitual basis; or holds him/herself out to be a trustee (Article 43(1), Trust and Trustees Act). This is the case whether all or part of the trust property is in Malta. Therefore, all trustees, except for certain non-professional trustees, must be authorised by the MFSA no matter where the trust was formed or whether all or part of the trust property is in Malta (Article 43(1), Trust and Trustees Act). Such authorisation is subject to the satisfaction of certain conditions provided for in the Trust and Trustees Act. As at March 2013, there are 107 limited liability companies authorised to act as a trustee or co-trustee in terms of Article 43(3) of the Trusts and Trustees Act. An additional 20 limited liability companies have a restricted authorisation to provide fiduciary services which do not include that of acting as trustee. As at March 2013, there are no individuals authorised to provide trustee services. 117. In order for a company to be authorised to act as a trustee, its object must include the possibility of acting as a trustee and the object cannot be incompatible with the provision of trustee services. In addition, it must have at least three directors who are approved persons, it must establish adequate systems for maintaining proper records of identity and residence of beneficiaries, the dealings and the assets in connection with trusts and compliance with applicable law, and every person having a direct or indirect interest must be an approved person. When the trust is not constituted in Malta, it must be constituted or incorporated in an approved jurisdiction (Article 43(4)(i), Trust and Trustees Act). 118. For an individual to be authorised, s/he must be a Maltese resident, an approved person and must have established adequate systems for maintaining proper records of the identity and residence of beneficiaries and of the dealings and the assets of trusts. An “approved person”, for both a corporate and individual trustee, is a person with a good reputation who possesses experience and qualifications in financial, fiduciary, accounting or legal services and who is approved by the MFSA as fit and proper to carry out the duties of a trustee (Article 45(5), Trust and Trustees Act). 119. Authorisation to act as a trustee is not required where a trustee is carrying out an activity for which it is already licensed. This excludes persons licensed under the Banking Act, Investment Services Act, Insurance Business Act, or a person with a license for banking or insurance issued by an approved jurisdiction from the requirement to be authorised. An approved jurisdiction must be approved by the MFSA. 21
21. While there is no public list identifying approved jurisdictions, the MFSA, when determining whether a jurisdiction is reputable, refers to the definition in the Prevention of Money Laundering and Financial Terrorism Act which defines a reputable jurisdiction as “any country having appropriate legislative measures for the

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120. Non-professional trustees are referred to as “private trustees” pursuant to the Trust and Trustees Act and may act without authorisation from the MFSA (Article 43A, Trusts and Trustees Act). A trustee must be either authorised or private, otherwise s/he cannot act as a trustee in Malta. A private trustee is a person who is related to the settlor or has known the settlor for at least 10 years and in both cases is not paid for the services, does not hold him/herself out as a trustee to the public and does not act habitually as a trustee in relation to more than five settlors at any time.

In practice
121. Trustees (other than private trustees) are regulated, monitored and supervised by the MFSA through offsite and onsite supervision. The Authorisation Unit of the MFSA is responsible for reviewing and processing applications for authorisation to conduct financial services business, license of entities under the Trusts and Trustees Act and approval of persons nominated as directors of authorised corporate trustees. During 2012, the MFSA exercised moral suasion in at least four cases to convince the persons concerned to withdraw their applications as they did not satisfy the necessary requirements. In addition, a director of a corporate trustee resigned, due to pressure exercised by the MFSA, after being implicated in a case involving criminal proceedings. 122. Offsite supervision includes the review of the written procedures of the licence holders, which are requested during compliance visits and any other forms or documents utilised. During the compliance visits, the MFSA reviews a sample of files to determine how the licensed entity is operating in practice and how it deals with complaints from parties to the trust relationship. Trustees are also required to have a documented business interruption recovery plan dealing with all their critical functions. Furthermore, the MFSA also conducts business reviews with licence holders. During these reviews, the MFSA conducts interviews with the directors of the licensed entities to determine whether the operations of the licence holder are adequate. 123. One of the requirements applicable to persons authorised in terms of the Trusts and Trustees Act to provide trustee and other fiduciary services is that such licence holders must have as a minimum written procedures in place, with respect to the functions they are authorised to provide, to satisfy
prevention of money laundering and the funding of terrorism, taking into account that country’s membership of or any declaration or accreditation by any international organisation recognised as laying down internationally accepted standards for the prevention of money laundering and for combating the funding of terrorism, and which supervises natural and legal persons subject to such legislative measures for compliance therewith”. Malta advises that MFSA would review the FATF and MONEYVAL statements which are issued regularly.

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the requirement of “adequate system”. The written procedures should include details of the operations of the licence holder and the administration functions undertaken by staff members. The verification of “adequate systems” is usually undertaken by the MFSA during compliance visits where an interview with two directors is held to understand the operations of the licensed entity and the volume of business. The purpose of such interview is to verify, e.g. whether proper due diligence is being completed with respect to clients both at the time when the business relationship is entered into and the ongoing due diligence monitoring.

Information provided to government authorities
124. Where at least one of the trustees of a trust is a person resident in Malta, tax is payable on any income attributed to the trust (Article 27B(1), Income Tax Act). Such income is the aggregate of any relevant income (including capital gains) which has accrued to or is derived by a trustee of a trust from property which was settled in the trust or was acquired in the administration of the trust. Income includes both Maltese and foreign-source income as Article 4(1) of the Income Tax Act refers to income “accruing or derived from Malta or elsewhere”. Income attributable to a trust that is not distributed to beneficiaries is taxable in the hands of the trustee (Article 27C, Income Tax Act). 125. A trustee, whether professional or non-professional, holding property in trust must register and file tax returns with the Inland Revenue Department when two cumulative conditions are met, i.e. at least one of the trustees of a trust is a person resident in Malta and there is income attributable to such trust.Therefore, these registration and filing obligations do not cover express trusts created under Maltese law but exclusively administrated by non-resident trustees. In addition, when there is no income attributable to the trust, the trust is not taxable in Malta, although the trustee is still subject to the requirements in the Cooperation Regulations (see paragraph 125 below). In registering a trust for income tax purposes, the trustee must provide 126. a copy of the written trust instrument, details of the settlor, including his/her income tax number (when applicable) and details of the beneficiaries, including the income tax numbers (where applicable) (Schedule 1, Trusts (Income Tax) Regulations). Upon registration, a trust is given a nine digit tax registration number. The annual tax return in relation to a trust must include any changes in the details filed at registration, including the new name of the trust, persons that are no longer resident trustees, and new resident trustees. While the disclosure in the annual tax return of the identity of settlors and beneficiaries and any change in beneficiaries is optional, this identity information must be kept by all trustees under the Cooperation Regulations (see paragraph 125 below).

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In practice
127. Trusts’ tax returns (Form Trust 04) are manually submitted to the Inland Revenue Department on paper and, as a rule, they only contain limited ownership information concerning the trust, i.e. the name and income tax identification number of persons who ceased to be or who became Maltese resident trustees in a given fiscal year. The compliance rate with tax return filing obligations in respect of “other categories” of taxpayers, including trusts (other than those trusts that elect to be treated as companies), averaged at 82% over the last three years. Compliance monitoring is carried out by the Inland Revenue Department via routine checks and desktop audits. Given the number of trusts registered so far, and since the Risk Analysis Unit did not identify any high risk situations involving trusts, no tax audit has as yet been carried out concerning these arrangements.

Information kept by the trustee
128. The Cooperation Regulations provide that trustees of trusts established under the laws of Malta or who are resident in Malta “shall take all reasonable measures to ensure that updated information is kept that identifies the settlor, other trustees and beneficiaries of express trusts (whether the proper law of such trusts is that of Malta or elsewhere)” (Cooperation Regulations, Reg. 4(4)(a)). In addition, a person that is established under the laws of Malta or that is resident in Malta and entrusted with the administration of an express trust (whether the trust is established under Maltese or foreign law) has the same obligation (Regulation 4(4)(b)). The identity information includes (for an individual) the name; passport, ID or tax identification number; date and place of birth if no number is available; and address of residence; and (for an entity) the name, date of inception or incorporation and the registered address (Reg. 4(5)). 129. The Maltese authorities interpret “reasonable measures” within the context of the following requirements: (i) the obligation that this information must be kept up to date (and the practical issues this may involve); (ii) the provisions of Regulation 3 of the Cooperation Regulations which provides that the regulations “apply in order to ensure the effective cooperation with other jurisdictions on tax matters where arrangements that enable such cooperation are in place and shall be interpreted accordingly”; (iii) the provisions of Regulation 4(12) of the Cooperation Regulations that require that such updated information is to be kept in a way that it may be submitted without difficulty to the Commissioner; and (iv) the provisions of the Code of Conduct for Trustees (see below). 130. The MFSA issued a Code of Conduct for Trustees that applies to both authorised trustees in terms of the Trusts and Trustees Act and to persons who are not required to obtain authorisation but are nonetheless acting

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as trustees (Code of Conduct, Paragraph 2). Pursuant to Article 52(1) of the Trusts and Trustees Act, the Code is binding on trustees. 131. The Code requires that a trustee be fully aware of the objects of the trust and must be satisfied that it is being established for a lawful purpose. Trustees must have full knowledge of the trust arrangement and must retain a copy of all the records pertaining to the trust business in their files, have adequate policies and procedures in place to ensure that they know the identity of the co-trustees, custodians, each settlor, protector, enforcer and, where appropriate, the principal beneficiaries to the fullest extent possible. Although there is no definition of “principal beneficiaries”, Malta advises that the term is interpreted to mean beneficiaries that are individually appointed either through the terms of the trust deed or arrangement, or (in the case of a discretionary trust having a class of potential beneficiaries), those persons are individually appointed by the trustee as beneficiaries. Therefore, for purposes of the Code of Conduct, this requirement includes the identification of all beneficiaries. 132. The trustee should have information on their personal circumstances and residence. This information must be kept up to date. They must also verify the source of all assets and be satisfied that they are not of illicit origin (Code of Conduct page 7-8). The Code of Conduct for Trustees requires trustees to keep and preserve the required records in Malta. The records must include such records as are appropriate for the trustee’s functions and as required by any applicable law and will enable the provision of information to persons interested in trusts and entitled to the information on a timely basis. In addition to the above requirements under the Cooperation Regula133. tions and the Code of Conduct for trustees, the AML/CFT laws require that a person providing trustee services, regardless of whether or not they are authorised under the Trusts and Trustees Act, is deemed to be carrying out a relevant activity (Regulation 2, Prevention of Money Laundering and Funding of Terrorism Regulations) and therefore must take due diligence measures to identify the customer. This applies to both professional and nonprofessional trustees. The AML/CFT laws define beneficial owner as “the natural person who ultimately owns or controls the customer and in the case of a legal entity or arrangement which administers and distributes funds, the beneficial owner includes: (a) where the beneficiaries have been determined, a natural person who is the beneficiary of at least 25% of the property of the legal entity or arrangement; (b) where the beneficiaries have not yet been determined, the class of persons in whose main interest the legal entity or arrangement is set up or operates;

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(c) a natural person who controls at least 25% of the property of the legal entity or arrangement (Article 2, Prevention of Money Laundering and Funding of Terrorism Regulations).

In practice
134. In Malta, all ownership record keeping obligations fall upon the individual or corporate trustee. Trustees authorised by the MFSA are subject to a continuous supervision process through regular reporting obligations and onsite inspections. Offsite supervision is performed through monthly or quarterly reporting obligations, but the frequency of these obligations may be increased if appropriate. These trustees must notify the MFSA of any issues that arise with respect to the trust, even if the issue is disputed by the trustee. In such cases, the MFSA normally conducts focused inspections. During the review period, 21 onsite examinations were independently or jointly carried out by the MFSA and/or the FIAU. 135. Private trustees are not supervised but they may be sanctioned for failure to comply with their AML/CFT obligations, such as reporting suspicious transactions to the FIAU. In most cases, the Maltese authorities will not be aware of their identities and, in practice, no sanctions have been imposed on private trustees to date. Certain family trusts, however, have corporate trustees in addition to private trustees, depending on the volume of the funds and complexity of the investments. In such instances, the corporate trustees must keep records concerning the private trustees and their identity will, therefore, be known to the Maltese authorities.

Conclusion
136. Ownership information on trusts, including the settlor and beneficiaries, is available in Malta for trusts established under Maltese law as well as foreign trusts with a trustee resident in Malta pursuant to the Cooperation Regulations which requires that a trustee keep such information. In addition, although trusts are not required to be registered in Malta unless they have income tax liability, all trustees, with the exception of private trustees, must be authorised by the MFSA and all trustees are subject to the AML/ CFT laws. Where a trust is created under the laws of Malta but has no other connection with Malta, there may be no information about the trust available in Malta. 137. In practice, when the Maltese competent authority receives an EOI request concerning trust ownership information, he will first consult the databases that are directly accessible and, if the requested information is not at his disposal, he will request it directly from the person under investigation or the trustee. During the three-year period under review (July 2009-June

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2012), the Maltese authorities received one EOI request concerning trust ownership information, which was obtained directly from the taxpayer. In addition, when dealing with six EOI requests on ownership of other entities, it transpired that information relating to beneficiaries of trusts involved in such entities was useful to the requesting authorities. In these cases, identity information concerning such beneficiaries of trusts was also provided. The Maltese competent authority experienced no difficulties in retrieving the trust ownership and identity information, and the requested information was provided in a timely manner.

Foundations (ToR A.1.5)
138. Foundations can be formed under Maltese law pursuant to the Civil Code and may be either private foundations, established for a private benefit, or purpose foundations, established exclusively for a charitable, philanthropic or other lawful social purpose. As at March 2013, there were 34 private foundations and 102 purpose foundations registered with the Registrar for Legal Persons. The MFSA also authorised seven individuals to act as administrators of private foundations, as at March 2013. 139. A foundation may only be established to carry on commercial activities when it is used as a collective investment vehicle (subject to the necessary authorisations from MFSA), as a vehicle for a securitisation transaction, when it is endowed with commercial property or is a passive owner of a profit making enterprise, franchise, trademark or other asset which gives rise to income. 140. A foundation may have one or more founders and designated administrator(s). The administrators may be juridical persons, as long as they have at least three directors. The terms of the foundation may provide for the establishment of a foundation council consisting of at least one member or for the office of a protector with similar functions, but such provisions are not mandatory (Art. 37, Civil Code). If there is a council it must have at least one member with no restrictions on residence (Article 37(1), Civil Code). Private foundations must have beneficiaries, either specifically identifiable or as a group. If no beneficiaries are identifiable, the foundation is deemed to be for the private benefit of the founders. The founder of a foundation may also be a beneficiary. A foundation may establish segregated cells in order to achieve a par141. ticular purpose within each cell (Article 20(1), Second Schedule, Civil Code). A segregated cell exists when it is formally established either by the statute of the foundation at its creation or subsequently by the administrators pursuant to a power vested in them by the statute. A segregated cell is not a legal person, but does have its own distinct name or designation (Article 20(3)). The assets of the cell must be segregated from all other assets of the foundation and are held and administered separately and distinct accounts must

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be maintained in relation to each cell. The existence or termination of each cell must be disclosed in the reports and accounts of the foundation (Article 20(6)). For ownership information purposes (see below), the laws as applicable to the foundation apply to each cell.

Information provided to the Registrar
142. A foundation may only be constituted by virtue of a notarial deed. If a foundation is constituted inter vivos, it must be done by means of a public deed, whereas if a foundation is constituted testamentary, it needs to be done by means of a will which will not necessarily be public (Article 29(1)), Second Schedule, Civil Code). Therefore, the services of a notary are mandatory every time a foundation is constituted. Since 2005, notaries who perform relevant activities qualify as subject persons under the AML/CFT laws and consequently subject to the FIAU’s supervision, in addition to the Notary Council’s supervision. Notaries are, therefore, required to carry out customer due diligence measures prior to establishing a business relationship and to identify founders, administrators and beneficiaries whenever a (public or private) foundation is formed or when there are any changes thereto (Article 2, Prevention of Money Laundering and Funding of Terrorism Regulations). 143. The administrators of the foundation must register the foundation by submitting various documents to the Registrar for Legal Persons within three months of the foundation’s formation (Article 30, Second Schedule, Civil Code). For a private foundation, these include an authenticated copy of the deed creating the foundation and a note of reference identifying the founder (Art. 31(1)(b), Second Schedule, Civil Code). For a purpose foundation, an authenticated copy of the instrument creating the foundation that clearly states the purpose of the foundation is required (Art. 32(1)). When a foundation (either public or private) is created by public deed, a copy of the deed must be delivered to the Registrar (Art. 31(3)). The deed of a foundation (either purpose or private) must state the following in order for the foundation to be a valid legal entity (Art. 29(4), Second Schedule, Civil Code): • • • • name of the foundation which must include the word “foundation” and its registered address in Malta; purpose or object; assets with which it was formed; composition of the board of administration and the names of the first administrators (if appointed). If administrators are non-residents of Malta, the name and address of a person resident in Malta who has been appointed to act as a local representative in Malta; legal representative;

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• •

term for which it is established (if any); and the endowment of money or property worth at least EUR 1 164.69.

The identity of the founders will be indicated in the deed constituting 144. the foundation itself (Art. 26, Notarial Profession and Notarial Archives Act). The notary is required by the Notarial Profession and Notarial Archives Act to personally identify the founder and indicate his/her identification information on the deed and is also subject to the AML/CFT laws and must carry out customer due diligence. 145. When a private foundation is created by public deed, the Notary publishing the deed must deliver a note of enrolment to the Director of the Public Registry within 15 days from the date of the deed, containing the date, nature of the act and designation of the founder (Art. 50(9), Notary Act). However, the deed of the foundation may specifically exempt the Notary from registering the note but only if the exemption is stipulated in the deed of the foundation and the administrator is a person who is either authorised or not required to be authorised to act as an administrator for a private foundation (Art. 50(9)). In such cases, the identity of the founder will still be known and indicated in the deed of the foundation. 146. The identity of the beneficiaries does not have to be disclosed to the Registrar upon registration, but their names must be in a written statement made to the Notary and signed by the founder. When the foundation is created by public deed, the beneficiary statement does not have to be part of the public deed, but must be authenticated by a Notary Public who publishes the deed of foundation (Art. 29(6), Second Schedule, Civil Code). In this case, the statement may be kept by the administrator. If the Beneficiary Statement is attached to the public deed, then it is conserved by the Notary who is bound to keep it private and confidential. 147. Where there is any change to the purpose of the foundation or the appointment of an additional founder, there must be an additional public deed registered with the public registry and kept by the relevant notary (Art. 32(2)). Any change of registered address, change in administrator or person vested with legal representation or the local representative of the foundation, in the cases where the administrators are not resident in Malta, must be notified to the Registrar for Legal Persons within 14 days from the date of resolution or decision. Although no penalties are provided for failure to comply with this obligation, other remedial actions are available to the founders or other interested parties, such as change or removal of the administrator for negligence or recourse to the Courts (see section A.1.6 Enforcement provisions to ensure availability of information below). 148. Founders may add to the assets of the foundation, in which case the administrators must notify any change in assets to the Registrar within three months of such change. For cash endowments, a certified copy of the relative bank deposit statement must be included and filed with the Registrar

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for Legal Persons (Article 34(3)). This applies to both private and purpose foundations equally. For private foundations, the founders may amend the deed and add or remove beneficiaries. While the founder may freely amend the deed and substitute or add beneficiaries, the Registrar for Legal Persons needs to be notified. When a purpose foundation’s statute is amended, the administrator of the foundation must notify the Registrar within 14 days of the change and deliver a copy of the amended document (Regulation 5, Civil Code (Second Schedule)(Notifications and Forms) Regulations). 149. The Registrar for Legal Persons may require any additional information from any person that it deems necessary for the foundation’s registration. However, for private foundations, this cannot include a copy of the statement of beneficiaries, although the MFSA could request this (proviso to Article 31(9), Second Schedule, Civil Code).

In practice
150. Even though the MFSA does not regulate foundations, it is responsible for the regulation and supervision of administrators of private foundations, who are subject to AML/CFT laws. Administrator are responsible for the registration of the foundations and they must also ensure the availability of ownership and identity information concerning the foundations, including a copy of the beneficiary statement. The Maltese authorities advised that, during the review period, there were no cases where an administrator failed to apply for the registration of a private foundation with the Registrar for Legal Persons within the three-month deadline established by law. 151. While information concerning founders and administrators is disclosed to the Registrar for Legal Persons, information concerning beneficiaries must be kept confidential by the notary. Nevertheless, notaries must ensure the availability of this identity information and are subject to both offsite and onsite monitoring by the FIAU. Offsite monitoring consists in the examination of documents and information periodically or spontaneously requested by the FIAU from subject persons, including notaries. In 2012, an obligation to submit an annual report to the FIAU was imposed for the first time on all subject persons, including notaries, and the level of compliance in the first year was approximately 71%. According to the FIAU, these reporting obligations will be upheld more strictly in 2013, particularly with regard to subject persons who failed to comply with them in 2012. The annual compliance report is an important tool for offsite monitor152. ing and provides adequate information for risk-based assessments to be carried out for the purpose of determining which persons or entities should be subject to an onsite examination. During the onsite examinations, the FIAU assesses the adequacy of the subject person’s internal controls, risk assessment and

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risk management systems, customer due diligence, record keeping and other AML/CFT obligations, through file reviews and onsite interviews. As regards notaries, no onsite visits were carried out by the FIAU for AML/CFT purposes during the last three years; however, onsite visits in respect of notaries are planned to be carried out during 2013.

Information provided to the tax authorities
153. Foundations in Malta are treated in the same manner as a company that is resident and domiciled in Malta for tax purposes, and are subject to the same tax rules. Tax is payable on the foundation’s profits and distributions are treated as dividends distributed to shareholders. The administrator of a foundation is required to keep all records, submit all returns and documents and to pay tax in the same way as required by a company (Regulation 3, Foundations (Income Tax) Regulations). A foundation can also elect to be taxed as a trust by submitting a notice in writing to the Commissioner (Regulation 4). 154. All foundations that are liable to tax in Malta must register with the Inland Revenue Department and are given a nine digit tax identification number. Upon registration, the foundation must submit a copy of the certificate of registration and a copy of the written instrument establishing or evidencing the foundation. Where a foundation elects to be taxed as a trust, details relating to the name and income tax ID numbers of the founder(s) need to be indicated in the registration form, while disclosure of the name and income tax numbers of the beneficiary(ies) is optional. For tax purposes, foundations must have at least one resident administrator whose contact details must be indicated in the registration form. Tax regulations do not distinguish between local and foreign foundations and there are not different registration requirements.

In practice
155. Foundations are taxed as companies by default. As a matter of practice, the Inland Revenue Department requests ownership and identity information concerning the foundation’s founders, administrators and beneficiaries upon its registration. It is the obligation of the administrator of such newly registered foundation to notify the Inland Revenue Department about the registration of a new foundations or subsequent changes to information provided upon registration. Furthermore, the Inland Revenue Department may request ownership information from the Registrar’s database. 156. All foundations registered with the Inland Revenue Department must file a tax return containing ownership information with respect to all beneficiaries (equivalent to shareholders) and administrators (equivalent to directors) of the foundation, including multiple changes throughout the tax year. However, foundations are not required to include identity information

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concerning their founder in the annual tax return. In practice, foundations and companies use the same tax returns and the Maltese tax authorities provide instructions on how foundations should use these forms via regular and direct contacts with the taxpayers. According to the Maltese authorities, approximately 90% of the annual tax returns pertaining to corporate taxpayers are electronically filed by their tax representatives. There is no automatic matching system in place for cross-checking the 157. ownership information filed in the Registrar for Legal Persons with the ownership information included in the annual tax return. Compliance monitoring with tax filing obligations is carried out by the Inland Revenue Department via routine checks and desktop audits. Given the number of foundations registered so far, and since the Risk Analysis Unit did not identify any high risk situations involving such foundations, no tax audits have as yet been carried out.

Information kept by the foundation itself
158. Maltese foundations must maintain information identifying their owners, which must be updated no later than 14 days from the date the foundation is notified or becomes aware of any change (Regulation 4(1), Cooperation Regulations). The term “owners” is defined to include the founders, administrators, members of the supervisory council and the beneficiaries (where applicable), as well as any other person with the authority to represent the foundation (Regulation 4(1)(b)). The information required to identify an individual is the full name and address, passport, ID or tax ID number, and date of place of birth (if no numbers available) of the individual concerned. For non-individuals, the information required includes the name, date of inception/incorporation and a registered address. 159. The same nine year requirement to retain ownership information applies as for other entities. This also covers the notary when acting in a professional capacity in relation to any such information or records that s/he holds in the carrying on of the business (Regulation 4(13), Cooperation Regulations). 160. Additionally, all original public deeds of constitution of foundations, deeds of enrolment of status as well as statements of compliance and any other public deeds must be kept in the records of the publishing notaries and must eventually be submitted to the Notarial Archives for preservation (Article 55, Notarial Profession and Notarial Archives Act). As a matter of practice, these records are kept indefinitely.

Conclusion
161. Ownership and identity information on the founders, administrators, supervisory council and beneficiaries of foundations would be available,

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as the foundation is required by the Cooperation Regulations, among other things, to maintain such information. There were no EOI requests for ownership information involving foundations during the three-year review period.

Other relevant entities and arrangements
162. Cooperatives and associations are also possible under Maltese law. As at March 2013 there were 49 associations and 68 cooperatives registered in Malta. 163. Cooperative societies are legal persons governed by the Cooperative Societies Act, made up of a minimum of seven members and can be formed for any lawful purpose. Cooperatives are autonomous, independent organisations controlled by their members. The administration of a cooperative is supervised by the Cooperatives Board, whose main function is to guide, assist and manage the cooperative. Every cooperative must register its statute, including any amendment to the statute with the Co-operatives Board. It must also submit annual financial statements. Both the registration and the financial statements are available publicly, and the registration is published in the Government Gazette. 164. Cooperatives are required to keep records of their transactions and affairs, and must also do all things necessary to ensure that all payments from their accounts are correctly made and properly authorised and that adequate control is maintained over the assets of, or in the custody of, the society and the expenditures incurred by it. Cooperatives are considered to be companies for the purposes of income tax legislation and have identical annual return and registration requirements (see Companies section above). However, a cooperative’s income is exempt from tax (Article 12(1)(q), Income Tax Act). Ownership information is publically available (Article 12, Co-operative Societies Act). 165. In practice, all information provided by cooperatives upon their registration or upon notification of subsequent changes is reviewed by the Co-operatives Board and held at its office. Although this information is not available online, it is possible to have access to this data through the Co-Operatives Board’s office. The Co-operatives Board is responsible for the surveillance of the performance of the members and officials of the cooperative, and it conducts must desktop compliance monitoring to ensure that every cooperative functions according to the law. Over the last three years, there were seven infringements, all of which pertained to 2012, and penalties were applied to six of these infringements. 166. Cooperatives registered with the Inland Revenue Department must file a tax return containing ownership information with respect to all members (equivalent to shareholders) and officials (equivalent to directors) of the cooperative, including changes throughout the tax year. However, the Inland

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Revenue Department is not automatically notified by the Co-operatives Board about the registration of a new cooperative or subsequent changes to information provided upon registration, nor does the Inland Revenue Department have direct access to the Co-operatives Board’s database. Given that cooperatives represent a low risk since their income is exempt from income tax, cooperatives are not subject to full scale audits but their tax returns are still desktop audited. During the last three years, no onsite inspections were conducted by the Inland Revenue Department. 167. An association is made up of three or more persons, with assets and liabilities separate and distinct from its members, administrators and beneficiaries (Art. 27(1), Second Schedule, Civil Code). Civil partnerships are a form of association. Associations do not have to register with the Registrar for Legal Persons, but if they wish to be vested with legal personality they must do so (Art. 3(1)). 168. The agreement establishing an association must be in writing and will be null if it is not. This agreement must state: its name, registered address in Malta, its purpose, the method by which membership is granted, composition of the board of administration and names of the first administrators, manner in which administrators are elected/removed, legal representation, if administrators are non-residents, the name and address of a person resident in Malta who has been appointed to act as the local representative of the association in Malta, among other things (Article 49(2), Second Schedule, Civil Code). For associations that register, an authenticated copy of the constitutive instrument must be filed with the Registrar for Legal Persons. In addition, a list of members is submitted upon registration, but this information is not updated in the event of subsequent changes. As a matter of practice, these records are kept indefinitely. 169. An association can be created by public deed, but does not have to be. When the association is created by a public deed, an authentic copy of the deed must be delivered by either the administrators or the Notary publishing the deed at registration (Art. 51(2)). In practice, civil partnerships are generally established by a public or private deed before a notary. Since 2005, notaries who perform relevant activities qualify as subject persons under the AML/CFT laws and consequently subject to the FIAU’s supervision, in addition to the Notary Council’s supervision (see section A.1.5 Foundations above). Under the AML/CFT obligations, they are required to carry out customer due diligence measures prior to establishing a business relationship and to identify members and administrators whenever an association is established by a public or private deed or when there are any subsequent changes thereto (Article 2, Prevention of Money Laundering and Funding of Terrorism Regulations). 170. Associations (including civil partnerships) are treated as a body of persons for income tax purposes, therefore they have the same tax treatment as

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general partnerships under the income tax laws (see section A.1.3. Partnerships above for general requirements). Associations are not required to register with the Inland Revenue Department, unless they have income that is chargeable to tax under the Income Tax Act. In addition, because the definition of “entities” in the Cooperation Regulations includes any body of persons, and this term is defined in the Income Tax Act, the parent act of these Regulations, as any body corporate, including a company and any fellowship, society or other association of persons whether corporate or unincorporated and whether vested with legal personality or not (Article 2, Income Tax Act), the ownership and identity requirements in these Regulations would apply to both cooperatives and associations. Therefore, ownership and identity requirements are consistent with the international standard and would be available for these entities.

Conclusion
171. Ownership and identity information concerning cooperatives and associations is available, as these entities are required by the Cooperation Regulations to maintain such information. During the onsite visit, the Maltese authorities indicated, and feedback from peers has confirmed, that there were no EOI requests for ownership information involving cooperatives or associations during the three-year review period.

Enforcement provisions to ensure availability of information (ToR A.1.6)
172. Jurisdictions should have in place effective enforcement provisions to ensure the availability of information, one such possibility among others being sufficiently strong compulsory powers. Penalties under Maltese law are found in the Income Tax Acts, the Cooperation Regulations and the AML/ CFT laws for entities generally, and there are also specific penalties depending on the laws governing each entity.

Income Tax Acts
173. The compliance rate with tax return filing obligations in respect of active companies in the last three years averaged 71%. This includes the tax returns filed by limited liability companies, oversea companies, limited partnerships the capital of which is divided into shares, cooperatives, foundations and trusts which elect to be treated as companies. In particular, the compliance rate with tax return filing obligations in respect of active domestic limited liability companies with a foreign involvement averaged at 81% over the last three years. This compliance rate averaged at 82% over the same period in respect of “other categories” of taxpayers, consisting of partnerships (other than limited

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partnerships the capital of which is divided into shares), trusts (other than those trusts that elect to be treated as companies) and associations. A taxable entity (company, partnership, trust or foundation) that fails to 174. submit a tax return annually must pay a penalty, which begins at EUR 50 if it is filed within 6 months, up to EUR 1 500 if its filed more than 60 months late (Schedule to the Income Tax Act). In addition, a person who does not comply with a notice, request or demand note under the Income Tax Act or who fails to answer any question lawfully put to him/her can be guilty of an offense and fined between EUR 23 and EUR 10 000 and an additional EUR 200 for each day the offense continues after conviction. There were no infringement proceedings in respect of taxable entities that failed to submit their tax return and did not comply with a notice, request or demand note under the Income Tax Act. Penalties imposed on taxable entities that did not file the annual tax return amounted to EUR 3.7 million over the last three years. The Cooperation Regulations require an entity to keep updated infor175. mation on ownership and identity. Where information is not provided, or is not provided in a timely manner to the Tax Authorities because the information was not kept or properly updated as required by the Cooperation Regulations, the person that had the duty of keeping or updating the information is liable to a penalty of EUR 1 000 (Regulation 6(3), Cooperation Regulations). In practice, these sanctions have not yet been applied, as no irregularities have been identified since the Cooperation Regulations entered into force in 2011. It is, therefore, recommended that Malta should continue to ensure that its monitoring and enforcement powers are sufficiently exercised in practice to support the legal requirements established by the Cooperation Regulations, which ensure the availability of ownership and identity information in all cases.

AML/CFT laws
176. Under the AML/CFT laws, when a subject person carries out customer due diligence measures in an established business relationship, but doubts arise about the veracity or adequacy of the previously obtained customer identification or changes have occurred in the circumstances surrounding the business relationship, the customer due diligence measures must be repeated (Regulation 7(7), Prevention of Money Laundering and Funding of Terrorism Regulations). A subject person who contravenes this obligation is subject to an administrative penalty of not less than EUR 250 to 2 500 without the possibility of recourse to a court hearing (Regulation 7(12), Prevention of Money Laundering and Funding of Terrorism Regulations). 177. The FIAU is responsible for the monitoring of all subject persons for compliance with their obligations under the AML/CFT laws and to cooperate and liaise with supervisory authorities to ensure such compliance

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(Article 16(1)(c), Prevention of Money Laundering and Funding of Terrorism Act). The FIAU employs 13 officers, including two legal officers and four compliance officers, and the staff complement is expected to increase further in 2013. Onsite AML/CFT examinations are carried out on a risk-sensitive basis, either by the FIAU’s compliance section, or by supervisory authorities acting on the FIAU’s behalf, or by both the FIAU and other supervisory authorities acting jointly. The level of sanctions imposed depends on a number of factors such as the severity of the contravention, the frequency and degree of cooperation with the supervisory authorities, the undertaking of remedial action to address the shortcomings, the actual exposure to money laundering or financing of terrorism risks caused by the breach, any previous infringements as well as other criteria. During 2010-12, a total of 80 onsite examinations were carried out to 178. corporate services providers, trusts and fiduciary companies, including ten focused visits independently carried out by the FIAU, 31 visits jointly carried out by the MFSA and the FIAU, and a further 39 visits carried out by the MFSA on behalf of the FIAU. Over the review period, 75 written reprimands and a number of pecuniary sanctions ranging from EUR 250 to EUR 5 500 were imposed by the MFSA and the FIAU on subject persons (including trustees, corporate service providers and credit institutions) for failure to comply with their AML/CFT obligations, including fail to provide information to the FIAU upon request, to submit their annual compliance report, to perform adequate customer due diligence measures, and to maintain beneficial ownership information. 22 The vast majority (72) of these reprimands were imposed due to failure by subject persons to submit the relevant reports to the FIAU, as required by the Implementing Procedures since 2011.

Companies
179. Both public and private companies are required to keep a register of members which must include both share and share warrants. The penalty for failure to keep a register of members is, for every officer of the company who is in default, a penalty of EUR 465.87, and a further penalty of EUR 23.29 for each day during which the default continues (Article 123(4), Companies Act and Eleventh Schedule, Companies Act).
22. According to the 2012 mutual evaluation report adopted by the Committee of experts on the evaluation of anti-money laundering measures and the financing of terrorism (MONEYVAL) on 6 March 2012, even though the level of fines appears to be proportionate and dissuasive, the lack of sanctions applied in practice gave rise to concerns over its effectiveness (see paragraphs 10, 35, 599, 744). Nevertheless, a broader range of sanctions is provided for under the Maltese legal and regulatory frameworks, which effectiveness has not been considered under that report.

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180. Companies are also required to register with the Registrar of Companies. Although there is no specific monetary penalty for failure to register, an unregistered company cannot be said to have come into existence and therefore would not enjoy limited liability under the Companies Act (Article 68). Furthermore, all persons that carry on business or enter into agreements in the name of or on behalf of a “company” in respect of which a certificate of registration has not been issued under the Companies Act, or before the date indicated in the certificate of registration as the date on which the company comes into existence, shall, unless otherwise agreed, be personally and jointly and severally liable for their dealings with third parties entered into by them in the aforementioned capacity (Article 78(1), Companies Act). If default is made in complying with this obligation, every officer of the company who is in default will be liable to a penalty of EUR 2 329.37, and, to a further penalty of EUR 46.59 for every day during which the default continues (Article 184, Companies Act). 181. When there is a transfer of shares in a company, a company is required to register the change with the Registrar of Companies within 14 days. If a company fails to register such changes, every officer including the director, manager or secretary, is liable to a penalty of EUR 465.87 plus EUR 23.29 for each day it continues. 182. When a company ceases to be a company its name is struck from the register of companies. The liquidator of the company must keep all of the documents of the company for ten years from the date of the publication of the company’s name being stricken from the register. If the liquidator fails to comply with this, he/she is liable to a penalty of EUR 1 164.69 (Article 342(2), Companies Act). 183. An oversea company that fails to comply with registration requirements and obligations to registration of alterations is liable to a default penalty of EUR 465.87 and a further penalty of EUR 23.29 for each day the offence continues. 184. Over the last three years, the total amount of fines collected by the Registrar of Companies with respect to all entities registered there (including domestic and oversea companies) for failure to comply with filing and notification in changes of ownership obligations was approximately EUR 45 000. According to the Maltese authorities, these sanctions are applied on a regular basis, even for short delays in providing updated ownership information, and they relate to a much broader range of deficiencies other than a failure to register or update ownership information.

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Partnerships
185. Partnerships must notify the Registrar in writing within one month from when a partner begins or ceases to be a partner or of any change to the deed (Article 19, Companies Act). Failure to do so results in a penalty of EUR 465.87 and a further penalty of EUR 23.29 for each day the offence continues. The penalty for carrying on business as a partnership without registering is EUR 2 329.37 (Article 10, Companies Act). Although the Second Schedule to the Civil Code is silent in respect of specific monetary penalties concerning civil partnerships (and associations in general), they are subject to the Cooperation Regulations and therefore the penalties described at above would apply. 186. For limited partnerships whose capital is divided into shares, where the deed is altered or any additions are made to it, the partner vested with the administration or representation of the partnership must deliver a printed copy of the amended deed to the registrar within 14 days of the alteration (Article 66(4), Companies Act). The penalty for failure to do so is that every partner responsible for the administration of the partnership who is in default is liable to a penalty of EUR 465.87 and an additional EUR 23.29 for each day the default continues. 187. In the case of a general partnership or a limited partnership (not divided into shares) that must file an annual return pursuant to the Companies Act, the penalty for failure to do so is, EUR 2 329.37 as well as a penalty of EUR 46.59 for each day the default continues for every officer of the company who is in default. 188. An LP that qualifies as collective investment scheme and therefore must maintain a register of partners and fails to maintain these documents at the registered office of the partnership, both the partnership and each general partner are liable to a penalty of EUR 465.87 and a penalty of EUR 23.29 for each day the offence continues. 189. According to the Registrar of Companies, the total amount of fines collected in the last three years with respect to all registered entities (including partnerships) for failure to comply with filing and notification in changes of ownership obligations was approximately EUR 45 000. The Maltese authorities have advised that these sanctions are applied on a regular basis, even for short delays in providing updated ownership information, and they relate to a much broader range of deficiencies other than a failure to register or update ownership information.

Trusts
190. The penalty for a trustee who fails to comply with any of the requirements of the Trusts and Trustees Act is, on conviction, liable to a fine of

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up to EUR 466 000 or to a term of imprisonment up to four years, or both (Article 51(6)). A trustee that contravenes or fails to comply with an authorisation, directive, obligation or other requirement made by the MFSA may be liable for an administrative penalty of up to EUR 93 174.94 (Article 51(7)). Between 2009 and 2012, the MFSA formally sanctioned three persons 191. authorised under the Trusts and Trustees Act. In the first case, the sanction amounted to an administrative fine of EUR 12 500 and the restriction of the licence for various breaches of the Trusts and Trustees Act, including a failure to keep proper accounting records. In the second case, another licence holder was penalised with an administrative fine of EUR 1 000 for various breaches of the Trusts and Trustees Act, including a failure to keep proper ownership records and conduct customer due diligence. In the third case, the license holder was reprimanded for failing to properly safeguard client records and for failing to keep the MFSA fully informed, in writing, of certain material issues concerning some clients.

Foundations
192. When a foundation (private or purpose) is not registered within the prescribed three month period, the persons responsible for such registration are liable to a penalty of EUR 232.94 each (Article 31(10), Second Schedule, Civil Code). According to the Registrar for Legal Persons, there were no cases during the last three years where it was established that this deadline had not been met. Therefore, the reputational risk to which an administrator is exposed due to a breach of registration requirements appears to be more coercive than the penalty or administrative sanction itself. Although no penalties are provided for failure to comply with the obligation to notify the Registrar about changes of founders or administrators within 14 days, other remedial actions are available to founders and other interested parties, such as removal or change of the administrator for negligence and recourse to the Courts. 193. After exhausting all applicable remedies within the organisation, any person who demonstrates an interest may apply to the Court with a request for removal of an administrator and the Court may issue such orders as it deems necessary (Articles 9(3) and 41, Second Schedule to the Civil Code). In addition, the Court may also make an order concerning inter alia the appointment or removal of an administrator, the submission of accounts and the conduct of the administrator (Article 43(2)(a)(ii) of the Second Schedule to the Civil Code). There have been instances where the Registrar for Legal Persons was notified of changes of administrators, but there is no obligation on the Registrar to request or on the part of the organisation to state the reason for such a change.

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Cooperatives and Associations
194. The statute of every cooperative must be registered with the Co-operatives Board, including any amendment to the statute. Failure to register a change of address with the Co-operatives Board exposes the co-operative to a penalty of EUR 116.47. Furthermore, every society must send an updated list of its members to the Co-Operatives Board at the end of December of each year, which list shall be open for inspection to the public at the office of the Board. The penalty for violation of this obligation exposes the co-operative to a penalty of EUR 116.47 and EUR 69.88 per month or part thereof. According to the Co-operatives Board, the total amount of fines col195. lected with respect to cooperatives in the last three years was approximately EUR 10 260. The Maltese authorities have advised that these sanctions are applied on a regular basis, even for short delays in providing updated ownership information, and they relate to a much broader range of deficiencies other than a failure to register or update ownership information. 196. For associations, although the Civil Code is silent with regard to specific monetary penalties concerning associations in general, associations are subject to the Income Tax Acts and the Cooperation Regulations and the penalties are the same as for other entities. In practice, the sanctions provided under the Cooperation Regulations have not yet been applied, as no irregularities have been identified since they entered into force in 2011.

Conclusion
197. A combination of enforcement measures are in force in Malta to ensure the availability of ownership and identity information in respect of companies, partnerships, trusts, foundations, cooperatives and associations. However, Malta should continue its efforts to ensure that its supervisory and enforcement powers are sufficiently exercised in practice to support the legal requirements established by the Cooperation Regulations, which ensure the availability of ownership and identity information in all cases. Maltese laws provide for a range of penalties, including monetary fines depending on the level of infraction and imprisonment in the more serious cases. In general, sanctions appear to be set at the appropriate level to ensure compliance with information keeping requirements and are regularly enforced in practice. 198. During the three year period under review, the Maltese authorities received one EOI request concerning trust ownership information, which was obtained directly from the taxpayer and provided to the requesting jurisdiction. In addition, when dealing with six requests on ownership of other entities it transpired that information relating to beneficiaries of trusts involved in such entities was useful to the requesting authorities. In these cases the information was also provided. In all 24 cases where ownership

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and identity information on companies was requested, it has been obtained and made available to the requesting jurisdiction. There were no EOI requests for ownership or identity information involving foundations, cooperatives, associations, partnerships or partners during the three-year review period. The Maltese competent authority experienced no difficulties in retriev199. ing and providing ownership information to its EOI partners. This is confirmed by the peers, who are generally satisfied with the responses provided by Malta, although some have expressed a concern with certain delays in receiving these responses (see section C.5.1 Responses within 90 days below).
Determination and factors underlying recommendations
Phase 1 determination The element is in place. Phase 2 rating Largely Compliant. Factors underlying recommendations The Cooperation Regulations, which came into force in July 2011, establish comprehensive requirements on the availability of ownership and identity information and penalties for noncompliance. However, the supervisory and enforcement powers to support these legal requirements are untested in practice. Recommendations Malta should continue its efforts to ensure that its supervisory and enforcement powers are sufficiently exercised in practice to support the legal requirements established by the Cooperation Regulations, which ensure the availability of ownership and identity information in all cases.

A.2. Accounting records
Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements.

General requirements (ToR A.2.1)
200. The Terms of Reference sets out the standards for the maintenance of reliable accounting records and the necessary accounting record retention period. It provides that reliable accounting records should be kept for all relevant entities and arrangements. To be reliable, accounting records should; (i) correctly explain all transactions, (ii) enable the financial position of the entity or arrangement to be determined with reasonable accuracy at any time; and (iii) allow financial statements to be prepared. Accounting records should

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further include underlying documentation, such as invoices, contracts, etc. and need to be kept for a minimum of five years.

Income Tax Acts
201. All relevant entities and trustees in Malta are required to keep accounting records to the international standard pursuant to the Cooperation Regulations, which require that entities and trustees keep reliable books of account that correctly explain all transactions of the entity, enable the financial position of the entity to be determined with reasonable accuracy at any time and allow the financial statements to be prepared. Where information has not been kept in the proper manner, resulting in information not being provided at all or in a timely manner, the person who has a duty to keep such information is liable to a penalty of EUR 1 000 (Regulation 6(3), Cooperation Regulations). In practice, these sanctions have not yet been applied, as no irregularities have been identified since the Cooperation Regulations entered into force in 2011. It is, therefore, recommended that Malta continue to ensure that its monitoring and enforcement powers are sufficiently exercised in practice to support the legal requirements established by the Cooperation Regulations, which ensure the availability of accounting information in all cases. 202. In addition to the requirements under the Cooperation Regulations, the Income Tax Acts require that every person carrying on a trade, business, profession or vocation must keep proper and sufficient records of his income and expenditure to enable his income and allowable deductions to be readily ascertained (Article 19(1), Income Tax Management Act). The required records must include proper accounts with respect to: (a) all sums of money received or expended and the matters with regard to the receipt or expenditure takes place; and (b) all sales, purchases or services rendered, as well as any other transaction, act, or operation pertaining to the trade, business, profession or vocation. 203. The entity must also keep a profit or loss account or an equivalent annual statement as well as a statement of the assets and liabilities as on the date the annual accounts are made, or a balance sheet (Article 19(2), Income Tax Management Act). Any person who contravenes or fails to comply with any of the provisions of the Income Tax Acts or any rules made thereunder is guilty of an offence and, unless another punishment is specifically provided by the Income Tax Acts, this person is liable on conviction to a fine between EUR 23 and EUR 116 (Article 49, Income Tax Management Act). In addition, if this obligation is not complied with, the taxpayer would not be able to submit a valid tax return and, therefore, penalties ranging from EUR 58 and EUR 465 are triggered under Article 51 of the Income Tax Management Act.

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204. Under the Income Tax Acts, a trustee may opt to have the income attributable to a trust taxed as if it were a company. In this case, the accounting records required to be kept by a trustee are the same as for a company (Article 27D(1)(c), Income Tax Act). In addition the Cooperation Regulations provide that a trustee must ensure in all cases (i.e. whether the above-mentioned option is taken or not) that the conditions for reliable books of account outlined above are met (Regulation 4(13), Cooperation Regulations). In practice, these sanctions have not been applied yet, as no irregularities have been identified since the Cooperation Regulations entered into force in 2011. Malta should continue to ensure that its monitoring and enforcement powers are sufficiently exercised in practice to support the legal requirements imposed on trustees by the Cooperation Regulations, which ensure the availability of accounting information in all cases. 205. For domestic purposes, the Inland Revenue Department carries out approximately 120 tax audits per year and the level of compliance with record-keeping obligations is good. According to the Maltese authorities, non-compliant taxpayers which are usually domestic entities carrying on small local businesses which are unaware of their record-keeping obligations. In addition to these general requirements, there are specific requirements depending on the type of entity, outlined below.

Companies Act
206. Additional accounting requirements for both companies and partnerships in Malta are found in the Companies Act. The Companies Act requires that companies and partnerships the capital of which is divided into shares keep proper accounting records with regard to: (a) all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place; (b) the assets and liabilities of the company; (c) if the company’s business involves dealing in goods: statements of stocks held by the company at the end of each accounting period of the company; all statements of stock takings from which any such statement of stocks has been prepared and, except in the case of goods sold by way of ordinary retail trade, statements of all goods sold and purchased showing the goods and the buyers and sellers in sufficient detail to enable all these to be identified (Article 163(1), Companies Act). 207. Records are considered to have satisfied the requirements of the Companies Act if they are sufficient to explain and show the company’s

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transactions such that they “disclose with reasonable accuracy, at any time, the financial position of the company at that time; and enable the directors to ensure that any balance sheet and profit and loss account prepared under company law comply with the requirements of such legislation” (Article 162(2), Companies Act). For failure to comply with any the accounting requirements of the Companies Act (as further described in the following paragraphs), the penalty, upon conviction, is a fine of up to EUR 11 646.87 for every officer of the company. If an officer can show that s/he acted diligently and that the default was excusable, s/he can avoid the conviction and penalty (Article 163(6), Companies Act). 208. The Companies Act also requires that directors file annual financial statements and that parent companies file consolidated accounts. These statements must include a profit and loss statement, balance sheet, notes to the accounts, and anything else required under the relevant accounting standards adopted in Malta. 23 Smaller entities are subject to simplified annual financial statement requirements pursuant to the General Accounting Principles for Smaller Entities Act (GAPSE). These standards can be used by companies that generally have fewer than 250 employees, assets below EUR 17.5 million, revenue below EUR 35 million, are not publicly traded, and are not financial institutions. 209. All companies’ accounts must be audited in accordance with generally accepted auditing standards and a report must be made to the company’s members. The auditor’s report must state whether the accounts have been properly prepared in accordance with the Companies Act, and in particular whether they give a true and fair view of the state of affairs of the company (Article 179, Companies Act). 210. LPs that are expressly limited to the collective investment of their funds must maintain accounting records under the Companies Act that are: sufficient to show and explain the partnership’s transactions; disclose with reasonable accuracy, at any time the partnership’s financial position at that time; enable the general partners to ensure that the partnership’s balance sheet and profit and loss account are prepared properly and in accordance with generally accepted accounting principles and practice in accordance with any relevant enactment for the time being in force in Malta; contain day to day entries of all sums of money received and expended by the partnership

23.

These include International Accounting Standards (IAS), International Financial Reporting Standards (IFRS) and related Interpretations (SIC-IFRIC interpretations), which standards and related interpretations are issued or adopted by the International Accounting Standards Board (IASB). These rules are contained in subsidiary legislation to Malta’s Accountancy Profession Act and the Accountancy Profession (Accounting and Auditing Standards) Regulations.

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and the matters in respect of which the receipt and expenditure takes place; and a record of the assets and liabilities of the partnership. The general partners of every limited partnership must prepare indi211. vidual accounts for each accounting period comprising a balance sheet at the last day of the accounting period to which they refer, a profit and loss account for the same period, the notes to the accounts and any other financial statements which may be required by generally accepted accounting principles and practice (Art. 14(2), Tenth Schedule (Article 66A, Companies Act). These individual accounts must give a true and fair view of the partnership’s assets, liabilities, financial position and profit or loss. The accounting records and returns of such partnerships must also disclose, with reasonable accuracy, the financial position of the business of the partnership at intervals not exceeding six months (Item 13(6), Tenth Schedule, Companies Act). These accounts must be kept by the partnership for a minimum of 10 years. 212. Companies and partnerships are required to file their annual financial accounts with the Registrar of Companies, which are kept indefinitely, as a matter of practice. This information is publically available at the Registrar of Companies, for a fee. The Inland Revenue Department has direct access to the Registry of Companies’ database, free of charge. Compliance monitoring is carried out by the Registrar of Companies via routine checks and desktop audits. 213. The total amount of fees collected by the Registrar of Companies in the last three years was EUR 5 150 000, but no statistics are kept concerning the number of cases where deficiencies were identified concerning a failure to keep or to file accounting records. According to the Maltese authorities, these sanctions are applied on a regular basis, even for short delays in providing accounting information, and they relate to a much broader range of deficiencies other than a failure to keep or file proper accounting records.

Commercial Code
214. The Commercial Code’s accounting requirements apply to all traders and acts of trade done by any person, even though not a trader (Article 2, Commercial Code). Trader is further defined as any person who, by profession, exercises acts of trade in his own name (Article 4). This includes commercial partnerships, but not companies and partnership en commandite the capital of which is divided into shares as record keeping for these is regulated by the Companies Act. All traders must keep books, letters, invoices and telegrams they receive. The books consist of the following: • waste-book: with evidence of every commercial transaction a trader makes, along with the conditions or terms to which the transaction is subject (Article 14);

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journal: must show the day-by-day transactions concluded by the trader, along with debts, credits, negotiations, acceptances and endorsements of bills (Article 15); cash-book: must show in detail, daily sums received and paid out, balanced at least once per month (Article 16); inventory book: yearly inventory with a description and value of the whole estate, assets and liabilities along with their nature and origin, with a balance showing profits and losses (Article 17). ledger: must show and accurate and up-to-date record of transactions classified as personal and impersonal accounts that may be used to draw and true and correct picture of the state of affairs of the business at any time (Article 19).

• •

215. Civil partnerships, which are a form of association (see paragraphs 164-167 above) must have at least one administrator responsible for keeping records. These must include records of all assets and liabilities along with all income and expenditures of the partnership for the annual financial period (Second Schedule, Civil Code). In addition, if the civil partnership meets the definition of “trader” under the Commercial Code it is also subject to those accounting obligations. There are no penalties contemplated in the Second Schedule in cases of non-compliance with this obligation. Nevertheless, additional accounting record-keeping obligations and sanctions are provided for under the Cooperation Regulations, which are also applicable to civil partnerships (see section Income Tax Acts above).

Trusts and Trustees Act
216. In addition to the accounting requirements under the Income Tax Acts and the Cooperation Regulations, trustees that are resident in Malta must keep accounting records pursuant to the Trust and Trustees Act and the Code of Conduct for Trustees, which is issued by the MFSA. The Code of Conduct for Trustees applies to both trustees authorised by the Trusts and Trustees Act and to persons who are not required to obtain authorisation according to the Act but are acting as trustees (Code of Conduct, paragraph 2). The Code of Conduct is binding on trustees. 217. Under the Trust and Trustees Act, trustees must keep accurate records of their trusteeship (Article 21(4), Trust and Trustees Act). A trustee also has a duty to provide full and accurate information as to the state and amount of the trust property including the accounts of the trust, within a reasonable time of receiving a request in writing to that effect (Article 29(1), Trust and Trustees Act). This information must be provided to the following: the Court; subject to the terms of the trust, the settlor; the protector of the trust; and subject to the

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terms of the trust, any beneficiary of the trust who is of full age and capacity, or if a minor, to his lawful guardian or representative. 218. Any person who contravenes or fails to comply with any of the provisions of the Trusts and Trustees Act, or contravenes or fails to comply with any authorisation, condition, obligation, requirement, directive or order made or given under any of the provisions of the Trusts and Trustees Act, is guilty of an offence and liable, on conviction, to a fine not exceeding EUR 466 000 or to a term of imprisonment not exceeding four years, or to both such fine and imprisonment (Articles 51(1) and 51(6), Trusts and Trustees Act). In addition, where a trustee contravenes or fails to comply with any of the conditions imposed in an authorisation issued by the MFSA, or contravenes or fails to comply with any directive, obligations or other requirement made or given by the MFSA, an administrative penalty may be imposed by the MFSA not exceeding EUR 150 000 for each infringement or failure to comply, as the case may be (Article 51(7), Trusts and Trustees Act). During the last four years, the MFSA has formally sanctioned three persons authorised under the Trusts and Trustees Act. In one instance, the sanction amounted to the imposition of an administrative penalty of EUR 12 500 and restriction of licence, for various breaches of the Trusts and Trustees Act, including the failure to keep proper accounting records. 24 219. In addition, the Code of Conduct which applies to all trustees, requires that trustees keep and preserve appropriate records in Malta, which must at least include records that are appropriate for their functions as a trustee and enable the trustee to provide information to those with an interest in the trust and who are entitled to the information on a timely basis. Financial records that can be used for trust audits and the thorough and satisfactory supervision of the trust activity must also be maintained. The records must be sufficient to enable the trust to comply with any notification and reporting requirements (Paragraph 9.6, Code of Conduct). 220. In practice, the Securities and Markets Supervision Unit within the MFSA is responsible for the supervision of trustees and other fiduciaries through offsite and onsite supervision. Offsite supervision includes the review of the written procedures of the licence holders, which are requested during compliance visits, and any other forms or documents utilised. Compliance visits to trustees and other fiduciaries usually commence with an interview with two directors or senior officials of the licence holder. During compliance visits a sample of files is reviewed to, inter alia, determine how the licence holder is operating in practice, e.g. whether funds are duly segregated and what accounting and other records (including underlying documents) are held. Furthermore, the MFSA also conducts business reviews with licence holders,
24. http://mfsa.com.mt/pages/AdministrativeMeasuresPenalties.aspx.

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conducting interviews with the directors of the licensed entity to determine whether the operations of the licence holder are adequate. During 2011 and 2012, 20 onsite examinations involving trusts and fiduciaries were conducted by the MFSA. As agents of the FIAU these visits also included reviewing the internal procedures from an AML/CFT perspective.

Civil Code
221. Foundations are subject to the accounting requirements in the Civil Code. Pursuant to the Civil Code, administrators must keep records of all assets and liabilities and income and expenditures of the foundation for annual financial periods (Article 10(1), Second Schedule, Civil Code). A beneficiary has a right to inquire about the conduct of the administration and the administrators must provide full and accurate information about the state and the amount of the foundation property, including the accounts of the foundation (Art. 38(1), Second Schedule, Civil Code). There are no penalties contemplated in the Second Schedule in cases of non-compliance with this obligation. Nevertheless, additional accounting record-keeping obligations and sanctions are provided for under the Cooperation Regulations, which are also applicable to foundations (see section Income Tax Acts above). 222. In practice, these accounting records are kept by the foundation’s administration and they are not provided to the Registrar for Legal Persons. Private foundations may be revoked by their founders. Upon voluntary dissolution, the administrators are responsible for the rendering of accounts (Article 10, Second Schedule, Civil Code). The Registrar for Legal Persons has to check whether all requirements for dissolution are fulfilled, including record-keeping obligations by the administrators. Thus, in practice, the Registrar for Legal Persons monitors private foundations’ compliance with their record-keeping obligations upon their voluntary dissolution.

Cooperative Societies Act
223. Cooperatives are required to keep accounts that conform to the standards of the International Accounting Standards of the Committee of the International Federation of Accountants, which are incorporated into Maltese law by the Accountancy Profession Act (Article 48(5), Cooperative Societies Act). The accounts must also be audited and a financial statement prepared. A penalty of EUR 116.47 applies for failure to do so. Every cooperative must submit annual financial statements to the Co-operatives Board, which oversees their compliance with the Cooperative Societies Act and respective record-keeping obligations.

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Underlying documentation (ToR A.2.2)
224. The Cooperation Regulations require that all entities keep accounting books and records that include underlying documents, such as invoices and contracts. The underlying documents must also reflect the details of all sums of money received and expended and the matters in respect of which the receipt and expenditure takes place, all sales and purchases and other transactions and the assets and liabilities of the relevant entity so that financial statements (if required) can be prepared and audited. 225. Entities subject to the income tax laws also have requirements to retain underlying documents to the international standard. Under the Income Tax Management Act, records required to be kept include underlying documents “as may be appropriate in the circumstances” (Article 19(4)). For a company registered in Malta, the documents include the balance sheet and profit and loss account drawn up pursuant to the Companies Act along with the report from the certified public auditor. A company not resident in Malta must keep the same documents, but these must refer to the company’s activities in Malta (Article 19(4), Income Tax Management Act). 226. In addition to the above, the entity must also keep bank statements and passbooks (Article 14, Income Tax Management Act) as well as any statements, accounts, computations or other documents that may be necessary to enable the taxpayer’s income and deductions or tax payable to be readily ascertained because they can be required to be produced at any time. It must also keep wage sheets and payroll records in order to substantiate any deductions taken (Article 23(12), Income Tax Management Act). An entity that owns immoveable property in Malta must also keep an account of all proceeds and expenditures relating to transfers of the property that would be subject to the property transfer tax.

Document retention (ToR A.2.3)
227. Under the Income Tax Management Act and the Cooperation Regulations, records that are required to be kept must be retained for a period not less than nine years from the completion of the transaction, acts, or operations to which they relate (Article 19(5)). All persons (this includes all entities – companies, partnerships, foundations, associations, cooperatives and trustees) are subject to the same requirement. 228. The Companies Act requires that companies, limited partnerships expressly limited to the collective investment of its funds and commercial partnerships keep accounting records for ten years from the date the last entry was made (Article 163(5)). Failure to keep such records for the ten year period results in a fine for every officer of the company who is in default of EUR 1 164.69 (Article 163(7), Companies Act). If default is made

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in complying with this obligation, the partnership and each general partner will be liable to a penalty of EUR 1 164.09 (Item 13(7), Tenth Schedule, Companies Act). 229. Where the name of a company is struck off the register, the liquidator is obliged to keep the accounts, accounting records and documents of the company for a period of ten years from the date of publication of the striking of the company’s name from the register. If the liquidator fails to comply with this obligation he shall be liable to a penalty of EUR 1 164.69. “Officer” in relation to a company includes a director, manager or company secretary. For foundations, the Civil Code requires that all accounts are held for 230. 10 years after the relevant annual period to which they refer (Article 10(3), Second Schedule, Civil Code). There are no penalties contemplated in the Second Schedule in cases of non-compliance with this obligation.

Conclusion
231. All relevant entities in Malta are required to keep accounting records to the international standard pursuant to the Cooperation Regulations, which require that entities keep reliable books of account that correctly explain all transactions of the company, enable the financial position of the company to be determined with reasonable accuracy at any time and allow the financial statements to be prepared. These accounting records include underlying documents, such as invoices and contracts, and must be retained for a minimum of nine years. 232. Over the three year period under review (July 2009 – June 2012), the Maltese authorities received 65 EOI requests concerning accounting information. In relation to these requests, in 59 cases information was obtained directly from the Inland Revenue Department database, while in 30 cases information was also obtained from the Registry of Companies’ database. In addition, accounting information was sought from the taxpayer in 24 cases and from third parties in three cases. In some of these cases, information for a particular request was obtained from different sources. The information requested included information on books of account, annual returns, statements of solvency, and financial statements. Except in two cases, the Maltese competent authority experienced no difficulties in retrieving and providing accounting information to its EOI partners. This is confirmed by the peers, who are generally satisfied with the information provided by Malta, although sometimes its provision is delayed (see also section C.5.1 Responses within 90 days below). 233. There were, however, two EOI requests concerning accounting information related to two companies that had been liquidated and struck off the Maltese Register of Companies. Such accounting information was not provided as there was no obligation to keep such information during the period relevant to the EOI requests. The Cooperation Regulations, which were brought into

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force in July 2011, introduced additional record-keeping requirements in line with the international standard and effectively removed the possibility of such an occurrence. Nevertheless, Malta should continue its efforts to ensure that its supervisory and enforcement powers are sufficiently exercised in practice to support the legal requirements established by the Cooperation Regulations, which ensure the availability of accounting information in all cases.
Determination and factors underlying recommendations
Phase 1 determination The element is in place. Phase 2 rating Largely Compliant. Factors underlying recommendations The Cooperation Regulations, which came into force in July 2011, establish comprehensive requirements on the availability of accounting information and penalties for non-compliance. However, the supervisory and enforcement powers to support these legal requirements are untested in practice. Recommendations Malta should continue its efforts to ensure that its supervisory and enforcement powers are sufficiently exercised in practice to support the legal requirements established by the Cooperation Regulations, which ensure the availability of accounting information in all cases.

A.3. Banking information
Banking information should be available for all account-holders.

Record-keeping requirements (ToR A.3.1)
234. Banking information should be available for all account holders and should include all records pertaining to the accounts as well as to related financial and transactional information. The Financial Institutions Act provides that financial institution business cannot be transacted in Malta by a company that is not licensed under the Act. Similarly, banking business cannot be carried on in Malta by a company unless it is issued a license under the Banking Act by the MFSA. As at March 2013, the MFSA was responsible for regulating 26 credit and 24 financial institutions, 119 investment services companies and 57 insurance companies, among other entities and organisations. 235. The requirement for banks to retain records of all transactions is found in the Cooperation Regulations, which are issued pursuant to the Income Tax Acts. Banks and other financial institutions that are either:

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resident in Malta, created under Maltese law, have a permanent establishment in Malta, or are required to be licensed in order to conduct business in Malta fall within the definition of “entities” according to the Cooperation Regulations (Regulation 2). The Regulations require that banks ensure that banking information is kept on all account holders in relation to their banking activity in Malta (Regulation 4(11)). The regulation goes on to define “banking information” to include “all records pertaining to the accounts as well as to related financial and transactional information”. The penalty for failure to provide information because it has not been properly kept or updated as required is EUR 1 000, unless the default was due to a reasonable excuse. Under the Cooperation Regulations, any banking information that is required to be kept under the provisions of Article 19 of the Income Tax Management Act is to be retained for a minimum of nine years from the end of the year in which the relevant transactions took place. In other cases, banking information is to be kept for a minimum of five years from the end of the year in which the relevant transactions took place (Regulation 4(13)). 236. In addition to the Cooperation Regulations, another source of the requirement to maintain bank information is found in the Prevention of Money Laundering and Funding of Terrorism Regulations (S.L. 373.01) as the law covers “any business of banking”. Specifically, any business of banking or any business of an electronic money institution 25 carried on by a person or institution that is for the time being authorised or required to be authorised. It also includes any activity of a financial institution carried on by a person who is authorised or required to be authorised under the Financial Institutions Act. 237. As subject persons for AML/CFT purposes, banks and other financial institutions are required to retain documents and information for use in any investigation or an analysis of possible money laundering or funding of terrorism (Article 13(1), Prevention of Money Laundering and Funding of Terrorism Regulations). Subject persons who do not maintain or apply recordkeeping procedures are guilty of a criminal offence and liable, on conviction, to a fine not exceeding EUR 50 000 or to imprisonment for a term not exceeding two years, or to both such fine and imprisonment (Regulation 4(5), Prevention of Money Laundering and Funding of Terrorism Regulations).

25.

Electronic money institution means any person, other than a credit institution, which issues means of payment in the form of electronic money, such that the value represented by a claim on the issuer issuing such money is stored on an electronic devise, issued on receipt of funds of an amount not less in value than the monetary value issued and accepted as a means of payment by undertakings other than the issuer. The licence of such institution is restricted to issuing of electronic money (Article 2(5), Banking Act).

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In practice
238. The MFSA acts as the prudential supervisor for all banks and other financial institutions in Malta, conducting their continuous supervision through regular reporting obligations and onsite inspections. Banks are subject to monthly or quarterly reporting obligations, but the MFSA may increase the frequency of these obligations to reporting on a daily basis, depending on the circumstances. In addition, the MFSA’s bank supervisory unit conducts periodic onsite inspections of banks and other financial services, the frequency and length of which may vary according to size and risk level exposure. In general, banks are subject to onsite inspections every six months, but certain banks with a large volume of domestic activities are visited every quarter or every month, and these visits take up to one week. 239. The purpose of onsite supervision is to enable the MFSA to review compliance with policies and procedures (e.g. client identity and transaction record keeping, segregation of assets, etc.), as well as the processes that management has put into place to monitor and control key risks in the business. During onsite supervision, the MFSA interviews members of management and staff and reviews a selection of individual client files. A review of compliance with “know your customer” and record keeping requirements, in relation to the Prevention of Money Laundering Act, the Prevention of Money Laundering Regulations, and the Prevention of Money Laundering Guidance Notes forms part of all of the onsite supervision. 240. The Financial Intelligence Analysis Unit (FIAU) was set up in 2002 and is responsible for supervising all subject persons, including banks and other financial institutions, with respect to their compliance with obligations provided under the AML/CFT laws (Article 16, Prevention of Money Laundering and Funding of Terrorism Act). In fulfilling this duty, the FIAU follows internal compliance procedures for off-site monitoring, as well as onsite examinations carried out on a risk-sensitive basis. In addition, the FIAU also organises training programmes and issues guidelines for subject persons (Implementing Procedures – Part I, 26 as amended on 4 February 2013) and for the banking sector (Implementing Procedures – Part II, 27 as amended on 19 February 2013), as part of their preventive measures to ensure compliance with AML/CFT obligations. 241. Specifically with regards to the financial sector, there is cooperation between the MFSA and the FIAU concerning the onsite supervision, i.e. the MFSA also supervises AML/CFT compliance on behalf of the FIAU, as
26. 27. www.fiumalta.org/library/PDF/04.02.2013%20-%20Implementing%20Procedures. pdf. www.fiumalta.org/library/PDF/19.02.2013%20-%20Implementing%20Procedures%20 Part%20II%20(2nd%20Version).pdf.

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part of its broader prudential onsite inspection. Therefore, coordination between the MFSA and the FIAU at the beginning of the calendar year is an essential step for the purpose of planning onsite inspections during the year. The MFSA then submits compliance reports to the FIAU, after which a final report is drawn up by the FIAU’s compliance section in which subject persons are informed of any remedial action deemed necessary. On occasion, the FIAU conducts onsite inspections on its own or jointly with the MFSA. 242. During the last three years, a total of five onsite examinations to financial and credit institutions were jointly carried out by the MFSA and the FIAU, in addition to four onsite examinations independently carried out by the MFSA and two onsite examinations independently carried out by the FIAU. According to its 2011 Annual Report, 28 the FIAU also issued two written warnings, the first one to a credit institution for the lack of consideration of AML/CFT risks on establishing a correspondent banking relationship with another credit institution situated in a non-reputable jurisdiction and the second one to an investment services company for not complying with its own internal reporting procedures drawn up in accordance with the Prevention of Money Laundering and Funding of Terrorism Regulations. Cooperation between the MFSA and the FIAU is contemplated in the AML/ CFT laws and will be further supplemented by a memorandum of understanding which the authorities intend to entering into. 243. The MFSA is obliged to make public all sanctions and penalties it imposes on banks and other financial institutions, after notifying the institution of its decision to impose such penalties or administrative sanctions. The MFSA’s notice remains posted on its website for two, five, ten years or indefinitely, depending on the seriousness of the infringement. 29 According to the MFSA, the reputational risk related to the publication of penalty or administrative sanction is often more compelling than the penalty or administrative sanction itself. As a consequence, the general compliance level regarding obligations to maintain ownership information by regulated companies is very good in practice. 244. In 2009 and 2010, the MFSA suspended or revoked the licenses of two financial institutions due to circumstances affecting their beneficial owners or majority shareholders. In 2011, the MFSA imposed administrative penalties of approximately EUR 373 000 on a Maltese bank due to the violation of a number of provisions of the Investment Services Guidelines and the Investment Services Rules, including failure to maintain sufficient records. In 2012, the same bank was penalised by the MFSA with an administrative penalty exceeding EUR 200 000 due, among other infringements, to failure
28. 29. www.fiumalta.org/library/PDF/Annual%20Report%202011.pdf. http://mfsa.com.mt/pages/AdministrativeMeasuresPenalties.aspx.

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to maintain appropriate records in relation to transactions carried out on behalf of clients. 30

Conclusion
245. The combination of the AML/CFT laws as well as the regulatory regime for all licensed banks and other financial institutions ensures that all records pertaining to accounts as well as related financial and transactional information are available in Malta. In practice, penalties and administrative sanctions are actively enforced by the MFSA and the FIAU where supervised entities are found to be in breach of their regulatory and/or AML/CFT information keeping requirements. These obligations result in Malta being able to provide banking information to its exchange of information partners when requested. 246. Over the three year period under review, the Maltese authorities received 13 EOI request concerning banking information, of which information was obtained directly from the taxpayer in eight cases and from third parties (i.e. banks) in the other five cases. The information requested related to bank information, including account statements, signatory authorisation, instructions given by account holder to the bank for the operation of the accounts, paying-in and disbursement slips, written remittance orders, detailed records of deposits and withdrawals, and wire transfers. In practice, the Maltese competent authority experienced no difficulties in retrieving banking information and the requested information was provided in all cases in a timely manner.
Determination and factors underlying recommendations
Phase 1 determination The element is in place. Phase 2 rating Compliant.

30.

http://mfsa.com.mt/pages/AdministrativeMeasuresPenalties.aspx.

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B. Access to Information

Overview
247. A variety of information may be needed in a tax enquiry and jurisdictions should have the authority to obtain all such information. This includes information held by banks and other financial institutions as well as information concerning the ownership of companies or the identity of interest holders in other persons or entities, such as partnerships and trusts, as well as accounting information in respect of all such entities. This section of the report examines whether Malta’s legal and regulatory framework gives the authorities access powers that cover the right types of persons and information and whether rights and safeguards would be compatible with effective exchange of information. It also assesses the effectiveness of this framework in practice. 248. The Maltese authorities have broad powers to access information, including ownership and identity information as well as accounting records, pursuant to the Income Tax Acts and this power can be used to obtain information for exchange of information (EOI) purposes. These powers apply whether Malta could access the information for its own tax purposes or not. Malta also has sufficient compulsory powers in place in order to compel information, including fines and imprisonment. 249. There are no bank secrecy provisions in Malta’s laws that would impede access to bank information pursuant to a request for information under a treaty. Further, the attorney-client privilege standards that would apply to information pursuant to an EOI request is found in the Cooperation Regulations and is identical to the standard found in the OECD Model. 250. Rights and safeguards, including notification requirements with exceptions in specific cases, are in place that would not unduly delay or impede exchange of information. 251. In practice, the Maltese competent authority has direct and unrestricted access to tax databases where most of the requested information is readily available. Direct access to the database of the Registrar of Companies also facilitates the collection of information. In addition, information may

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be sought from other government agencies, the person under investigation and third parties in possession or control of the requested information. Information is generally produced within the 30 day timeframe given by the Maltese competent authority. In the vast majority of the cases, the requested information was provided to the requesting party within 180 days.

B.1. Competent Authority’s ability to obtain and provide information
Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information).

The Maltese competent authority
252. The competent authority in Malta for information exchange for international tax purposes is “the Minister responsible for finance or his authorised representative” as provided in the Cooperation Regulations (Regulation 8). The authorised representative is the competent official that has been identified as such and whose name and designation are published on the website of the Inland Revenue Department. 31 The current authorised representative is the Director General (Legal and International) within the Inland Revenue Department that forms part of the Ministry for Finance and he is the sole point of contact for foreign administrations wishing to request information from Maltese Tax Authorities in connection with direct taxation. 253. The management and administration of all EOI requests, received or sent, is centralised at the International Tax Unit managed by the Director General (Legal and International) within the Inland Revenue Department. Since 1994, a team fully dedicated to handling EOI in the field of direct taxation (EOI team) has been set up within the International Tax Unit to: (i) process all incoming and outgoing EOI requests; (ii) issue common guidance in relation to EOI requests; (iii) manage a centralised contact point for EOI in order to ensure the smooth provision of replies to incoming requests for information; and (iv) draft legislation in relation to EOI and for the implementation of EOI agreements or directives. As at April 2013, the EOI team comprises five people, including the Director, International Taxation and four other officials.

31.

www.ird.gov.mt/international/cad.aspx.

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Ownership and identity information (ToR B.1.1); accounting records (ToR B.1.2); and use of information gathering measures absent domestic tax interest (ToR B.1.3)
254. Competent authorities should have the power to obtain and provide information held by banks, other financial institutions, and any person acting in an agency or fiduciary capacity including nominees and trustees, as well as information regarding the ownership of companies, partnerships, trusts, foundations, and other relevant entities including, to the extent that it is held by the jurisdiction’s authorities or is within the possession or control of persons within the jurisdiction’s territorial jurisdiction, ownership information on all such persons in an ownership chain. 32 Competent authorities should also have the power to obtain and provide accounting records for all relevant entities and arrangements. 33 255. Pursuant to the Income Tax Management Act, the Commissioner of Inland Revenue in Malta has broad powers to access information as often as s/he deems necessary. This includes “such information as may be necessary in order to provide information, including documents, to foreign tax authorities where arrangements between Malta and the respective State or its tax authorities exist for the reciprocal exchange of information for tax purposes” (Article 10A(1)). The statute specifically provides that the powers apply even if the Commissioner could not collect the relevant information for the purposes of Malta’s income tax acts (Article 10A(2)). The term “arrangements” is defined in the Cooperation Regulations to include: any agreement, convention, protocol or EU Directive pursuant to which Malta may cooperate on tax matters with another jurisdiction through the exchange of information and any administrative agreement or MOU reached between the competent authority of Malta and another jurisdiction with which an arrangement is in place, provided that it is not contrary to the arrangement (Regulation 2). 256. • • • The Commissioner’s power to access information includes the power to: require a person to complete and deliver any return specified in the notice; summon any person the Commissioner has reason to believe is able to give information required for the purpose of the request, to attend before him and to examine such person under oath or otherwise; require any person to produce for examination any books, documents, accounts (including bank statements, passbooks and other bank documents) and any other documents which the Commissioner may require or a copy or extract thereof;

32. 33.

See OECD Model TIEA Article 5(4). See JAHGA Report paragraphs 6 and 22.

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• • require any person to give information by means of written statements; require any person to authenticate in an appropriate form any document or copy of a document prepared or held by that person or an extract thereof; require any person to confirm on oath any declaration made by him or any document prepared by him; require any person to provide information, documents or written statements in such other form as the Minister may prescribe (Art. 10A(4), Income Tax Management Act).

• •

257. The Cooperation Regulations elaborate on and strengthen these requirements by providing that the Commissioner’s powers should be interpreted so as to give the widest possible powers to obtain and provide information to the competent authorities of jurisdictions with which Malta has an arrangement. In this respect, the Commissioner may use any information-gathering powers granted under the Income Tax Acts in order to obtain the information requested, notwithstanding that the information may not be required for purposes of the Income Tax Acts in Malta (Regulation 5(2), Cooperation Regulations). Such powers include those under the Income Tax Management Act to require the production of information (above), as well as the Commissioner’s audit powers under Article 24C, or powers to access the premises under Article 20 (below). 258. When information is held by a person or entity subject to the AML/ CFT laws, the competent authority may recover the information either directly from that person or it may require the Financial Intelligence Analysis Unit (FIAU, which is the competent authority in Malta for AML/CFT matters) to provide the information if it is held by the FIAU.

Information gathering measures in practice
259. The collection of information to respond to an EOI request for information is solely entrusted to the EOI team. Most of the information requested is accessible from the databases available to the members of the EOI team. The EOI team has direct and unrestricted access to any documents that are submitted electronically to the Inland Revenue Department (e.g. most income tax returns). Direct access to the database of the Registrar of Companies also facilitates the collection of ownership and accounting information concerning companies and partnerships. 260. Any request for information or documentation which is not readily available to the EOI team, may be obtained directly by the EOI team from public sources, any other unit within the Inland Revenue Department (e.g. relating to documents submitted manually or through regular mail), or other government

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agencies, including the Malta Financial Services Authority (MFSA), the Registrar of Companies, the FIAU and the Registrar for Legal Persons. 261. When information is sought from other units within the Inland Revenue Department or the MFSA, the normal accepted practice is to send an informal enquiry for its production, and the requested information is normally delivered very quickly. Requests to other governmental bodies are usually done through letters addressed to the director of the particular department or unit, specifying the 30 day timeframe for the production of the information, pursuant to Article 10A, Income Tax Management Act. During the three-year period under review (July 2009 – June 2012), no enforcement action was necessary as information was always obtained by the competent authority in a timely manner. 262. In addition, the EOI team may request the information directly from the person under investigation and/or third parties (e.g. service provider, trustee or bank) in possession or control of the requested information. This is usually done when the information is not available to the EOI Team (e.g. where copies of contracts or invoices are requested) and provided that the requesting authority does not specify in its request that the taxpayer should not be informed. Procedurally, the Commissioner must notify in writing the person from whom the information is being requested (Article 10A(1), Income Tax Management Act). Notification must either be served on a person individually or be sent by registered mail to the person’s last known business or private address. In some instances, the competent authority has sought the help of the Tax Compliance Unit to gather information from the person under investigation. 263. In the notice for production of information, the recipient is given 30 days to meet the competent authority’s request (Article 10 A, Income Tax Management Act). Under the three-year review period, the competent authority never experienced any delays when information was sought from banks. There were some cases, however, where the requested person or third party applied for an extension of this deadline due to some difficulties they encountered in procuring the requested information (e.g. it was kept outside of Malta). The Maltese competent authority has, in exceptional cases, granted an extension of up to two weeks. Based on Regulation 4(12) of the Cooperation Regulations, such extensions were granted when the competent authority was satisfied that the requested extension was reasonable and that information would be provided within the proposed extended deadline. In practice, the extended deadline has always been adhered to without the need to use any enforcement measures, and this has not led to undue delays. 264. When requesting information, the Maltese competent authority drafts its request in a very specific manner and avoids open ended questions as much as possible. Information concerning a request that is normally disclosed

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to third parties consists of: the name; identification number; date of birth and residential address of the subject of the request; the relevant EOI instrument (and identification of such instrument); the relevant information that is being requested and the time limit given to reply to the request for information. There were instances where less information was provided, e.g. a request for information made on the basis of a bank account number only. The sanctions in case of non-compliance and the legal basis for such a request also form part of the request. As soon as a reply is received, its contents are matched with the orig265. inal letter of request and, where appropriate, the documentation provided is thoroughly checked to make sure it satisfies the requirements of the requesting authority. During the three-year review period, the EOI team had one case where the information or documentation provided did not fully satisfy the request made by the competent authority. Even in this case, the requested information was later provided in a timely manner and to the satisfaction of the Maltese competent authority. If useful to ensure that the EOI request is properly answered, a meeting may be held between the person holding the information and the EOI team member responsible for the case. 266. If during the collection of information the need arises for a tax audit to be carried out (e.g. when complex cases are involved, or when interviews or access to premises would be needed), or the competent authority of the requesting state requests a tax audit, the case is referred to the Tax Compliance Unit, within the Ministry for Finance. This unit deals with in depth tax audits and its members are bound by the same tax secrecy rules as the EOI team. For domestic purposes, the Tax Compliance Unit carries out approximately 120 tax audits per year and the level of compliance with record-keeping obligations is good. Non-compliant taxpayers which are unaware of their record-keeping obligations are usually domestic entities carrying on small local businesses. 267. As of April 2013, there has only been one EOI case where a tax audit was required, and the Tax Compliance Unit was involved in gathering information, by organising interviews with and/or investigations of the relevant persons in possession or control of the requested information. When requesting the Tax Compliance Unit’s assistance to gather information, the EOI team indicates the date by which the information is required, particularly in urgent cases.

Compulsory powers (ToR B.1.4)
268. Malta has compulsory powers in place, including penalties for failure to provide information, pursuant to the Income Tax Management Act and the Cooperation Regulations. Every person who fails to comply with the

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requirements of a notice, intimation, request or demand note given or made to him/her or served under the Income Tax Act, fails to answer a notice issued under the Act or fails to answer any question lawfully put without sufficient cause is guilty of an offence punishable, on conviction, by a fine of from EUR 23 to EUR 10 000 and up to an additional EUR 200 for each day the default continues (Article 50, Income Tax Management Act). 269. When a person fails to comply with a request for information made by the Commissioner in relation to a request made by a treaty partner, the requested person is liable to a penalty of EUR 200 where information is not submitted within the time limit specified in the Commissioner’s request and EUR 50 for each day the default existed, not to exceed EUR 10 000 (Regulation 6(1), Cooperation Regulations). 270. Further, where such failure persists for 183 days from the date of the original request from the Commissioner, when the Commissioner has sent a reminder, criminal penalties may apply, and the person is deemed to have wilfully, with intent to evade or assist another person to evade tax under the Income Tax Acts, made use of a fraud, art or contrivance. The same is true where the information submitted is found to be incorrect in such a way that is misleading or false (Regulation 6(2), Cooperation Regulations). The penalty for this, on conviction before a court of magistrates, is a fine of EUR 700 to EUR 3 500 or a fine of EUR 6 000 to EUR 10 000, depending on the offence committed. In addition to the fines, a requested person who has either failed to comply with a request made by the Commissioner for longer than 183 days or the information submitted is found to be incorrect, may be liable to imprisonment for up to six months (Article 52(1), Income Tax Management Act). 271. The Commissioner also has powers to access businesses or professional premises in order to inspect any books, documents, accounts, etc. and may have full and free access to any property or other assets whose value is required to be determined for the purposes of the act (Art. 20, Income Tax Management Act).

Compulsory powers in practice
272. As of April 2013, the EOI team has not encountered any cases where information had to be kept but the person required to be in possession or control of the information refused to provide it, disputed the obligation to keep it or asserted that he/she did not hold it, e.g. because it was located outside Maltese territory. However, should the EOI team encounter such cases, the competent authority would serve the requested person with a second letter and, if the requested information were not provided within the timeframe stipulated in the competent authority’s first letter, the requested person would be served with a reminder.

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273. If no positive response was received, the requested person would be liable to fines or criminal penalties, as described in Regulation 6 of the Cooperation Regulations and Article 52(1) of the Income Tax Management Act. If the requested person still refuses to comply with the competent authority’s request, legal action could be taken against the requested person, pursuant to Article 50 of the Income Tax Management Act. The introduction of penalties under the Cooperation Regulations further strengthened the compulsory powers already available to the competent authority under other tax acts, by allowing the imposition of sanctions regardless of legal action. In practice, these enforcement powers have not been exercised for EOI purposes during the three-year period under review, as the requested information has always been available and obtained by the competent authority in a timely manner. 274. Prior to the three-year period under review, the competent authority has only encountered one case where information was required to be kept but the record retention period had expired and one case where information was not required to be kept under the laws in force in Malta at that time. The competent authority was still able to request information pursuant to Article 10A of the Income Tax Management Act. As the record keepers did not reply within the timeframe stipulated in the competent authority’s first letter, a reminder was served. However, the Maltese competent authority could not compel the requested persons to provide the requested information or documentation, as they were not legally required to keep it. This deficiency has since been rectified by the Cooperation Regulations, which were brought into force in July 2011. As of April 2013, there were no administrative rulings or judicial decisions in Malta that affected in practice the enforcement of these access powers for EOI purposes.

Secrecy provisions (ToR B.1.5)
275. Jurisdictions should not decline on the basis of its secrecy provisions (e.g. bank secrecy, corporate secrecy) to respond to a request for information made pursuant to an exchange of information mechanism.

Bank secrecy
276. Some of Malta’s laws contain provisions that would protect bank secrecy, however, these provisions are overridden in the laws themselves, and therefore bank secrecy would not impede Malta’s ability to exchange information. Specifically, the Income Tax Management Act provides that no request for information can be made to certain “licensed persons” unless the request concerns their own personal tax liability. The definition of licensed persons includes licensees under the Banking Act, the Insurance Business Act, the Investment Services Act, or the Financial Markets Act (Article 17).

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According to the Income Tax Management Act, the Commissioner can only request this information in cases related to tax evasion. 277. However, the access powers in Article 10A of the Act (discussed above) expressly override any secrecy requirement when the information is necessary in order to provide information to foreign tax authorities where there is an exchange of information agreement between the parties. Therefore, Article 10A would apply notwithstanding any restriction relating to the disclosure of information. Furthermore, Regulation 5(1) of the Cooperation Regulations makes it clear that the provisions of Article 10A are to be interpreted to give the widest possible powers in order to obtain and provide information. The Banking Act provides that no person, including past and present 278. officers or agents of a bank, shall disclose any information relating to the affairs of a bank or its customers which s/he has acquired in the performance of his duties under the Act and its regulations. However, there is an exception when authorised to do so under a provision of any law or to enable the Central Bank of Malta or the competent authority, as the case may be, to satisfy their respective obligations arising under Malta’s international commitments (Article 34(2), Banking Act). Therefore, this does not serve to restrict access to bank information. 279. For financial institutions generally, the Financial Institutions Act provides that past or present officers or agents of a financial institution, shall not disclose any information relating to the affairs of that institution or of its customers that is acquired in the performance of their duties. However, there is an exception when the employee is either authorised to do so under the Act, or when lawfully required to do so by any court or provision of any law (Section 25(2), Financial Services Act). 280. The Professional Secrecy Act provides that when employees and officers of financial and credit institutions become the depositaries of any secret confided in them that is secret because of their office, they cannot be compelled to give information to the public authority unless there is a law that requires them to do so (Article 3(1)). Disclosing of a secret is treated as a criminal offence (Article 257, Criminal Code). However, the Commissioner’s access powers under Article 10A of the Income Tax would override this, as the Article specifically provides that the Commissioner’s power apply “notwithstanding any obligation to secrecy or confidentiality or to any other restriction relating to the disclosure of information.” Further, the Cooperation Regulations provide that the Commissioners powers under the income tax acts are to be interpreted as widely as possible. In addition, the Cooperation Regulations specifically provide that the 281. Commissioner’s access powers are to be interpreted as widely as possible and

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apply irrespective of any legal obligation that may be imposed on a person to maintain secrecy of information. In this respect, the Regulations state that the Commissioner has the power to obtain and provide information that is held by or is in the possession or control of any of the following persons: banks and other financial institutions; insurance companies; persons acting in an agency or fiduciary capacity including nominees and trustees; lawyers, notaries and other independent legal professionals, real estate agents, accountants, auditors, tax advisors, company service providers, people licensed to carry on the investment business, stockbrokers, companies, collective investment schemes partnerships, foundations and any other body of persons, the stock exchange in Malta and any regulatory authority or body in Malta (Regulation 5(1), Cooperation Regulations).

Attorney-client privilege
282. Maltese law includes protections for information subject to attorneyclient privilege. Specifically, the Cooperation Regulations have a provision that is very similar to the OECD Model TIEA and states that no person may be requested to provide information that would disclose any trade, business, industrial or commercial secret, or information which is the subject of attorney client privilege or information the disclosure of which would be contrary to public policy. The Regulations further define “information which is the subject of attorney client privilege” as confidential communications between a client and a lawyer or other legal representative produced for the purposes of seeking or providing legal advice or for the purposes of use in existing or contemplated legal proceedings (Proviso to Regulation 5(1)). This is consistent with the international standard.

Secrecy provisions in practice
283. The Maltese authorities and their EOI partners have indicated that no cases have occurred in practice where information could not be obtained because the holder of the information (lawfully or not) made a secrecy claim. In respect of legal professional privilege, the Maltese authorities indicated that assertions of attorney-client privilege rarely arise in Malta and any assertions of legal professional privilege raised to date have never been with regard to information sought for EOI purposes (see also section C.4 Right and safeguards of taxpayers and third parties below).
Determination and factors underlying recommendations
Phase 1 determination The element is in place.

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Phase 2 rating Compliant.

B.2. Notification requirements and rights and safeguards
The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information.

Not unduly prevent or delay exchange of information (ToR B.2.1)
284. Rights and safeguards should not unduly prevent or delay effective exchange of information. 34 For instance, notification rules should permit exceptions from prior notification (e.g. in cases in which the information request is of a very urgent nature or the notification is likely to undermine the chance of success of the investigation conducted by the requesting jurisdiction). 285. Malta has rights and safeguards in its Cooperation Regulations, including a notification requirement. Upon receipt of a valid request, the competent authority in Malta must notify the person (or his/her authorised representative) that such person is the subject of a request for exchange of information (Regulation 7(1)). This must take place regardless of whether the Maltese tax authorities are already in possession of the information. The Regulations state “on receipt” but do not stipulate a specific time period within which such notification is to take place. 286. There are exceptions to the notification requirement in the following cases: • • where the requesting authority has specifically requested that no such notification is made; where the competent authority in Malta determines that the request is of a highly urgent nature and that notification could delay the forwarding of information requested; or where the competent authority in Malta determines that such notification is reasonably expected to jeopardise the relevant investigation or audit being carried out in the relevant jurisdiction.

The Regulations also provide that any determination made by the com287. petent authority in Malta cannot be questioned in any appeal by any person.

34.

See OECD Model TIEA Article 1.

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The Income Tax Acts and Regulations do not give the right to oppose or challenge the provision of information to the requested party (Regulation 7(1)).

Notification requirements, rights and safeguards in practice
288. Malta advised that in practice such notification is done as soon as possible, and therefore the process is not delayed. When an EOI request concerns a Maltese resident person or a person with a place of business in Malta, a notification is sent to the last known Maltese address available in the tax database of the Inland Revenue Department. For practical reasons, Maltese competent authority does not notify persons that are not resident in Malta when a Maltese address is not available. As of April 2013, an exception to the notification requirement has been applied with respect to one EOI request of a highly urgent nature. The Maltese competent authority has also indicated that no practical difficulties have been experienced in Malta with regard to the notification requirement or any other rights and safeguards, such as appeal rights.
Determination and factors underlying recommendations
Phase 1 determination The element is in place. Phase 2 rating Compliant.

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C. Exchanging Information

Overview
289. Jurisdictions generally cannot exchange information for tax purposes unless they have a legal basis or mechanism for doing so. This section of the report examines whether Malta has a network of information exchange that would allow it to achieve effective exchange of information in practice. A jurisdiction’s practical capacity to effectively exchange information relies both on having adequate mechanisms in place as well as an adequate institutional framework. 290. Malta has a network of 67 DTCs and three TIEAs developed over almost four decades. It continues to negotiate new agreements and to update old agreements through Protocols and new treaties. In October 2012, Malta signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (Multilateral Convention), broadening its network of EOI instruments to cover a total of 82 jurisdictions. Through this EOI network, Malta effectively exchanges information upon request with all its relevant partners. 291. As a member of the European Union, Malta is involved in the European common VAT system and therefore the VAT exchange of information that takes place under the EU regulation (EC) 1798/2003. 35 Malta also exchanges information automatically under the scope of the EU Savings Directive 48/2003/EC pursuant to which EU members (with the exception of Austria and Luxembourg), as well as other jurisdictions that are party to agreements, exchange data on an annual basis concerning the savings income received from Malta paying agents by taxpayers located abroad. Malta also exchanges information under the scope of the EU Council Directive 2011/16/EU of 15 February 2011 on Administrative Cooperation in the Field of Taxation, in effect since 1 January 2013, which replaced the EU Mutual Assistance Directive 77/799/EEC. Since 1 January 2013, Malta can exchange information to the standard with Austria and Luxembourg on the basis of the EU Council Directive 2011/16/EU.
35. Regulation (EC) 904/2010 was adopted by the European Council on 14 October 2010 and entered into force on 1 January 2012.

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292. Malta’s agreements generally provide for exchange of information to the standard. These agreements cover all relevant partners (any jurisdiction who has asked to enter into an EOI agreement) as well as Malta’s significant economic partners. Each of its agreements contains a confidentiality provision that conforms to the standard, and its domestic laws adequately protect the confidentiality of information received as well as the rights and safeguards of taxpayers and third parties. In practice, all information exchanged and related documentation regarding EOI requests is physically stored in locked cabinets in the competent authority’s office and electronic files are stored on a separate area of the IT system which can only be accessed by the EOI team. 293. Malta has in place appropriate organisational processes and resources to ensure effective exchange of information in practice. All EOI requests are handled by the EOI team that forms part of the International Tax Division within the Inland Revenue Department. The Director General (Legal and International) and four other officials are fully dedicated to service EOI requests. Internal monitoring of EOI requests with the EOI guidance handbook and the EOI database resulted in a streamlined process to obtain information which allows the Maltese competent authority to keep its EOI partners informed. 294. Since 2009, the Maltese EOI team improved their efficiency in replying to the requests for information. Under the three-year review period (July 2009 – June 2012), Malta received 81 EOI requests from 22 partner jurisdictions. On a total of 81 requests, Malta was in a position to provide a final response within 90 days in 26 cases (32%), between 91 and 180 days in another 38 cases (47%), and between 181 days and one year in an additional 15 cases (19%). The remaining two cases (2%) were processed in more than one year. Overall, the feedback from peers was positive and some EOI partners of Malta praised its clear and coherent communication during the course of a request as well as the quality of its cooperation and speed in response times. However, one of Malta’s main exchange partners commented on the lack of consistency in providing status updates and others expressed a concern with certain delays in receiving responses.

C.1. Exchange-of-information mechanisms
Exchange of information mechanisms should allow for effective exchange of information.

295. Pursuant to article 76(1) of the Income Tax Act, the Minister responsible for Finance declares by order that international agreements containing mechanisms of exchange of information (EOI agreements) have effect in Malta, notwithstanding anything in this or any other enactment. Therefore, according to the hierarchy of legal norms, EOI agreements take precedence over domestic legislation. Concluding EOI agreements is a high priority in Malta and this is evidenced by the rapid expansion of its network over the past few years, in particular by the signature of the Multilateral Convention at the end of 2012.

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296. The competent authority in Malta for information exchange for international tax purposes is “the Minister responsible for Finance or his authorised representative” as provided in the Cooperation Regulations (Regulation 8). The authorised representative is the competent official that has been identified as such and whose name and designation are published on the website of the Inland Revenue Department. 36 297. The current authorised representative is the Director General (Legal and International) within the Inland Revenue Department that forms part of the Ministry for Finance and he is the sole point of contact for foreign administrations wishing to request information from Maltese Tax Authorities in connection to direct taxation. Regular contact with other exchange of information partners is mainly done through the EU Common Communication Network (CCN) in case of European Union Member States and by registered mail and secure e-mail in the case of other treaty partners.

Other forms of exchange
298. Whilst this report is focused on the terms of its EOI agreements and practices concerning the exchange of information on request, it is noted that Malta also exchanges information automatically under the EU Savings Directive 48/2003/EC pursuant. Out of 27 EU members, 25 (with the exception of Austria and Luxembourg), as well as other eight jurisdictions that are party to agreements, 37 automatically exchange data on an annual basis concerning the savings income of EU resident taxpayers having accounts located abroad. The prescribed information, which is provided automatically, includes the name and address of the account holder and other identifying information, the name and address of the agent making the payment, the account number and details, the amount of the payment and the nature of the payment. 299. In addition, Malta is in a position to exchange further information on an automatic basis under the EU Council Directive 2011/16/EU of 15 February 2011 on Administrative Cooperation in the Field of Taxation, in effect since 1 January 2013. Furthermore, Malta will also be able to exchange information automatically under the Multilateral Convention signed in October 2012, as soon as it is ratified and brought into force.
36. 37. www.ird.gov.mt/international/cad.aspx. The Channel Islands of Jersey and Guernsey, the Isle of Man and some of the dependent or associated territories of the Netherlands and the United Kingdom in the Caribbean took a commitment in the form of written agreements between each of them and each of the EU Member States. Eight of these jurisdictions provide automatic exchange of information under such agreements: Aruba, Anguilla, the British Virgin Islands, the Cayman Islands, Guernsey, Isle of Man, Montserrat and Turks and Caicos Islands.

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Foreseeably relevant standard (ToR C.1.1)
300. The international standard for exchange of information envisages information exchange to the widest possible extent. Nevertheless, it does not allow for “fishing expeditions”, i.e. speculative requests for information that have no apparent nexus to an open inquiry or investigation. The balance between these two competing considerations is captured in the standard of “foreseeable relevance” which is included in paragraph 1 of Article 26 of the OECD Model Tax Convention set out below: “The competent authorities of the contracting states shall exchange such information as is foreseeably relevant to the carrying out of the provisions of this Convention or to the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the contracting states or their political subdivisions or local authorities in so far as the taxation thereunder is not contrary to the Convention. The exchange of information is not restricted by Articles 1 and 2.” 301. Of the agreements signed by Malta, those concluded since 2009 generally use the term “foreseeably relevant”, whereas the agreements concluded by Malta prior to 2009 instead use the terms “necessary” or “as may be relevant”. The commentary on Article 26 of the Model Convention considers that the terms “necessary” or “relevant” mean the same thing for exchange of information purposes as the expression “foreseeably relevant”. Malta interprets its treaties in accordance with the OECD Commentary and therefore, these treaties may be recognised as conforming to the standard with regard to foreseeable relevance. 302. Malta’s DTC with Malaysia is specifically limited to exchange of information for purposes of the convention and therefore would not extend to all foreseeably relevant information. During the onsite visit, the Maltese authorities advised that the renegotiation of this DTC is ongoing. 303. The Maltese authorities have advised that they have not declined any request for information received in the three-year period under review on the basis that the requested information was not foreseeably relevant, which is confirmed by feedback received from peers. Additional information or clarifications have been sought in a limited number of cases and they have not caused delays. This can be largely attributed to the close cooperation between the Maltese competent authority and its EOI partner jurisdictions.

In respect of all persons (ToR C.1.2)
304. For exchange of information to be effective it is necessary that a jurisdiction’s obligation to provide information is not restricted by the residence or nationality of the person to whom the information relates or by the

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residence or nationality of the person in possession or control of the information requested. For this reason, the international standard for exchange of information envisages that exchange of information mechanisms will provide for exchange of information in respect of all persons. 305. Of the agreements signed by Malta to date, the majority specifically are not restricted by Article 1, meaning that exchange of information is possible in respect of all persons. Treaties with Austria, Bulgaria, Canada, India, Isle of Man, Libya, Norway, Pakistan, Tunisia and the UK, do not contain specific language to say that the treaty is not restricted by Article 1; however, these treaties all extend to exchange of information for purposes of implementing the domestic laws of the states, and to the extent that the domestic laws apply to residents and non-residents alike, the exchange of information provisions apply to all persons. In practice, the Maltese authorities have advised, and feedback from peers has confirmed, that no issues have arisen regarding the jurisdictional scope of these EOI agreements with respect to EOI requests concerning residents of either of the contracting states or residents of other third party jurisdictions. 306. Malta’s DTC with Malaysia does not contain specific language to say that it is not restricted by Article 1. As discussed in section C.1.1 above, the treaty is specifically limited to exchange of information for purposes of the convention, does not extended to the domestic laws of the contracting states and the scope of the treaty applies to residents of one or both contracting states. Therefore, Malta cannot exchange information under this treaty in respect of all persons. It is recommended that Malta update this agreement to conform to the international standard. Malta advises that this treaty is currently being renegotiated.

Obligation to exchange all types of information (ToR C.1.3)
307. Jurisdictions cannot engage in effective exchange of information if they cannot exchange information held by financial institutions, nominees or persons acting in an agency or a fiduciary capacity. Both the OECD Model Convention and the Model TIEA, which are the authoritative sources of the standards, stipulate that bank secrecy cannot form the basis for declining a request to provide information and that a request for information cannot be declined solely because the information relates to an ownership interest. 308. Malta’s TIEAs with The Bahamas, Bermuda and Gibraltar contain Article 5(4)(a) and (b) from the Model TIEA which provides that information held by banks, financial institutions, agents and fiduciaries must be exchanged as well as information regarding ownership. The terms of these TIEAs therefore meet the international standard in this regard. 309. As most of Malta’s DTCs were concluded before the update of the OECD Model Tax Convention in 2005, they generally do not contain a provision corresponding to Article 26(5), which was introduced at that update. Of

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Malta’s 67 DTCs, 28 DTCs 38 contain a provision equivalent to Article 26(5) of the OECD Model, which allows for exchange of bank information. However, the absence of this provision does not automatically create restrictions on the exchange of information held by banks, other financial institutions, nominees, agents and fiduciaries, as well as ownership information. The Commentary to Article 26(5) of the OECD Tax Model Convention indicates that while paragraph 5 represents a change in the structure of the Article, it should not be interpreted as suggesting that the previous version of the Article did not authorise the exchange of such information. Malta’s domestic laws allow it to access and exchange the information covered by Article 26(5) of the OECD Tax Model Convention even in the absence of such provision in the DTC. 310. Of those that do not specifically contain a provision that mirrors Article 26(5) of the OECD Tax Model Convention, the DTCs with Australia, Barbados, Canada, Denmark, Germany, Hungary, India, the Netherlands, Qatar, and the UK nonetheless allow for exchange of bank information, as neither Malta nor any of these jurisdictions contains restrictions in its domestic laws. Malta’s DTCs with Austria and Luxembourg do not contain Article 26(5) 311. of the OECD Tax Model Convention or its equivalent and both Austria and Luxembourg have restrictions in their domestic laws that prevent them from exchanging bank information. Malta cannot exchange bank information to the standard with Austria and Luxembourg under these DTCs. In November 2011, Malta signed a Protocol containing an EOI provision to the standard with Luxembourg, but it is not yet in force. Nevertheless, since 1 January 2013, Malta can exchange information to the standard with Austria and Luxembourg on the basis of the EU Council Directive 2011/16/EU on Administrative Cooperation in the Field of Taxation. Malta’s DTCs with Malaysia, Lebanon and Singapore have similar limi312. tations because of domestic laws restrictions found in these partner jurisdictions and therefore these DTCs are not to the standard either. In November 2009, Malta signed a Protocol containing an EOI provision to the standard with Singapore, but it is not yet in force. 39 Such restriction may also exist in other jurisdictions
38. DTCs with Bahrain, Belgium (Protocol), China (new DTC), France (Protocol), Georgia, Germany (Protocol), Guernsey, Hong Kong (China), India (new DTC), Isle of Man, Ireland, Israel, Italy (Protocol), Jersey, Luxembourg (Protocol), Mexico, Norway (new DTC), Poland (Protocol), Russian Federation (new DTC), San Marino, Saudi Arabia, Singapore (Protocol), South Africa (Protocol), Spain, Switzerland, Turkey, United States and Uruguay. Malta and Singapore have completed the internal procedures required by their laws for the entry into force of the Protocol and Third Party Notes were exchanged through official diplomatic channels respectively on 23 April 2013 and 29 May 2013. It is envisaged that the Protocol will enter into force by the end of June 2013.

39.

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which have not yet been reviewed and with which Malta has concluded a DTC. It is, therefore, recommended that Malta continue to update all its DTCs to remove this potential limitation and bring these Protocols into force expeditiously. 313. Malta’s DTC with Spain, specifically restricts exchange of bank information to the cases of tax fraud and is therefore more restrictive than the standard. However, as EU member countries, Malta and Spain can nonetheless exchange bank information to the standard, in particular under the EU Council Directive 2011/16/EU of 15 February 2011 on Administrative Cooperation in the Field of Taxation, in effect since 1 January 2013. 314. There has been no issue in practice with exchanging information held by banks, financial institutions, agents and fiduciaries. At least one peer reported requesting ownership information concerning a trust and another peer reported requesting banking information from Malta, which was provided without issue in all cases.

Absence of domestic tax interest (ToR C.1.4)
315. The concept of “domestic tax interest” describes a situation where a contracting party can only provide information to another contracting party if it has an interest in the requested information for its own tax purposes. An inability to provide information based on a domestic tax interest requirement is not consistent with the international standard. Contracting parties must use their information gathering measures even though invoked solely to obtain and provide information to the other contracting party. Malta’s TIEAs with The Bahamas, Bermuda and Gibraltar are identi316. cal to Article 5(2) of the Model TIEA and provides that information shall be exchanged without regard to whether a jurisdiction needs it for its own tax purposes. The terms of these TIEAs, therefore, meet the international standard in this regard. 317. Of Malta’s 67 DTCs, 40 28 DTCs contain Article 26(4), which provides for exchange of information without regard to whether a jurisdiction needs it for its own tax purposes. However, the absence of a similar provision in a DTC does not, in principle, create restrictions on EOI provided there is no domestic tax interest impediment to exchange information in the case of either contracting party (see item 19.6 of the Commentary to Article 26(4) of
40. DTCs with Bahrain, Belgium (Protocol), China (new DTC), France (Protocol), Georgia, Germany (Protocol), Guernsey, Hong Kong (China), India (new DTC), Isle of Man, Ireland, Israel, Italy (Protocol), Jersey, Luxembourg (Protocol), Mexico, Norway (new DTC), Poland (Protocol), Russian Federation (new DTC), San Marino, Saudi Arabia, Singapore (Protocol), South Africa (Protocol), Spain, Switzerland, Turkey, United States and Uruguay.

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the OECD Model Tax Convention). Of those that do not specifically contain this provision, treaties with Austria, Australia, Barbados, Canada, Denmark, Hungary, India, Malaysia, the Netherlands, Qatar and the UK allow for exchange of information without a domestic tax interest restriction in its domestic laws. In practice, no issue has ever arisen regarding domestic tax interest in relation to any of Malta’s EOI arrangements. 318. Malta’s DTC with Singapore does not contain a provision equivalent to Article 26(4) of the OECD Tax Model Convention and Singapore has restrictions in its domestic laws that prevent it from using its domestic information gathering measures, regardless of a domestic tax interest, and from exchanging information under this DTC. Although there are no restrictions in Malta’s domestic law, such restrictions may exist in other jurisdictions with which Malta has an agreement but which has not yet been reviewed by the Global Forum. Malta signed Protocols containing EOI provisions to the standard with Singapore (2009) but this Protocol is not yet in force. 41 It is recommended that Malta continue to update all its DTCs to remove this potential limitation and bring these Protocols into force expeditiously.

Absence of dual criminality principles (ToR C.1.5)
319. The principal of dual criminality provides that assistance can only be provided if the conduct being investigated (and giving rise to an information request) would constitute a crime under the laws of the requested country if it had occurred in the requested country. In order to be effective, exchange of information should not be constrained by the application of the dual criminality principle. There are no limiting dual criminality provisions in any of Malta’s agreements. In practice, no request has been turned down on this basis during the period under review.

Exchange of information in both civil and criminal tax matters (ToR C.1.6)
320. Information exchange may be requested both for tax administration purposes and for tax prosecution purposes. The international standard is not limited to information exchange in criminal tax matters but extends to information requested for tax administration purposes (also referred to as “civil tax matters”).

41.

Malta and Singapore have completed the internal procedures required by their laws for the entry into force of the Protocol and Third Party Notes were exchanged through official diplomatic channels respectively on 23 April 2013 and 29 May 2013. It is envisaged that the Protocol will enter into force by the end of June 2013.

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321. Only one of Malta’s agreements, its DTC with Spain, limits exchange of information to criminal tax matters. Specifically, the Malta-Spain DTC limits exchange of information to cases of “tax fraud” (as discussed in C.1.3 above). However, as discussed above, as EU member countries, Malta and Spain can exchange information to the standard, in particular under the EU Council Directive 2011/16/EU of 15 February 2011 on Administrative Cooperation in the Field of Taxation, in effect since 1 January 2013. In addition, Malta and Spain are signatories to the Multilateral Convention. 322. During the three-year review period, Malta received five requests including an indication that the information requested related to criminal tax matters. In practice, the Maltese competent authority has provided information in response to all EOI requests for civil and criminal tax matters. In Malta, the process of exchanging information is the same, whether related to criminal tax matters or civil tax matters.

Provide information in specific form requested (ToR C.1.7)
323. Exchange of information mechanisms should allow for the provision of information in specific form requested (including depositions of witnesses and production of authenticated copies of original documents) to the extent possible. Four of Malta’s agreements, its DTC with the US and the TIEAs with The Bahamas, Bermuda and Gibraltar contain specific references to the form of information, providing that if specifically requested by a treaty partner, the other partner shall provide information in the form of depositions of witnesses and authenticated copies of unedited original documents (including books, papers, statements, records, accounts and writings. The other DTCs neither provide for nor restrict the form of information that can be provided. 324. The Maltese authorities have advised that they have provided information in specific form requested in the three-year period under review, which is confirmed by feedback received from peers.

In force (ToR C.1.8)
325. Exchange of information cannot take place unless a jurisdiction has exchange of information arrangements in force. Where exchange of information agreements have been signed the international standard requires that jurisdictions must take all steps necessary to bring them into force expeditiously. 326. Ten EOI agreements have been brought into force since Malta’s Phase 1 review. 42 The majority of Malta’s EOI agreements are currently in
42. This includes the TIEAs with The Bahamas, Bermuda and Gibraltar and the DTCs with Bahrain, Guernsey, Hong Kong (China), Norway (new DTC), Saudi

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force, with the exception of its four most recent Protocols with Belgium, Luxembourg, Singapore and South Africa, and five new DTCs with India, Israel, Mexico, Russia Federation and Turkey. 327. Of Malta’s five DTCs and four Protocols that are not yet in force, the DTCs with India, Mexico and Russian Federation and the Protocol with South Africa were signed less than one year ago. The DTCs with Israel and Turkey and the Protocol with Luxembourg where signed in 2011, the Protocol with Belgium was signed in 2010, while the Protocol with Singapore was signed in 2009. 43 328. In Malta, signature of an agreement is sufficient and a treaty does not have to go through Parliament to come into force. Therefore, Malta advises that while ratification has taken a long time in some cases, the cause of the delay did not necessarily stem from Malta’s internal processes.

In effect (ToR C.1.9)
329. For information exchange to be effective the parties to an exchange of information arrangement need to enact any legislation necessary to comply with the terms of the arrangement. 330. Pursuant to article 76(4) of the Income Tax Act, the Minister responsible for Finance may make rules for carrying out the provisions of EOI agreements. In particular, the Minister responsible for Finance may make rules in relation to: (a) the availability of applicable information; (b) the access to applicable information; (c) the mechanism of exchange of information; (d) appropriate rights and safeguards; and (e) enforcement provisions (including applicable penalties). As discussed in section B, Malta currently has the legislative and regulatory framework in place to give effect to its agreements. Furthermore, since the Phase 1 review, the Cooperation Regulations were amended to include the relevant implementation measures of EU Council Directive 2011/16/EU on Administrative Cooperation in the Field of Taxation, effective as of 1 January 2013.

43.

Arabia, Switzerland and Uruguay. Malta and Singapore have completed the internal procedures required by their laws for the entry into force of the Protocol and Third Party Notes were exchanged through official diplomatic channels respectively on 23 April 2013 and 29 May 2013. It is envisaged that the Protocol will enter into force by the end of June 2013.

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Determination and factors underlying recommendations
Phase 1 determination The element is in place. Phase 2 rating Compliant.

C.2. Exchange-of-information mechanisms with all relevant partners
The jurisdictions’ network of information exchange mechanisms should cover all relevant partners.

331. Ultimately, the international standard requires that jurisdictions exchange information with all relevant partners, meaning those partners who are interested in entering into an information exchange arrangement. Agreements cannot be concluded only with counterparties without economic significance. If it appears that a jurisdiction is refusing to enter into agreements or negotiations with partners, in particular ones that have a reasonable expectation of requiring information from that jurisdiction in order to properly administer and enforce its tax laws it may indicate a lack of commitment to implement the standards. 332. Malta has a large treaty network, covering all of its significant partners, including regional partners, EU member countries and its main trading partners. Malta’s main trading partners are within the EU, and are primarily Italy, France, the UK and Germany. Its treaty partners include: every EU member country, 31 of 34 OECD member countries and 11 of 15 non-EU G20 member countries. Malta recently signed TIEAs with The Bahamas, Bermuda and Gibraltar, 333. as well as DTCs with Guernsey, India, Mexico and Russian Federation. In addition, Malta is negotiating new TIEAs, DTCs and Protocols to existing DTCs containing EOI provisions with nine other jurisdictions. 334. Malta continues to expand its network of agreements and, in October 2012, Malta signed the Multilateral Convention, broadening its network of EOI instruments to cover a total of 82 jurisdictions. Through this EOI network, Malta effectively exchanges information upon request with all its relevant partners. 335. Comments were sought from the jurisdictions participating in the Global Forum, and in the course of preparation of this report, no jurisdiction advised that Malta had refused to negotiate or enter into an EOI agreement.

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Determination and factors underlying recommendations
Phase 1 determination The element is in place Factors underlying recommendations Recommendations Malta should continue to develop its EOI network with all relevant partners Phase 2 rating Compliant.

C.3. Confidentiality
The jurisdictions’ mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received.

Information received: disclosure, use, and safeguards (ToR C.3.1); all other information exchanged (ToR C.3.2)
336. Governments would not engage in information exchange without the assurance that the information provided would only be used for the purposes permitted under the exchange mechanism and that its confidentiality would be preserved. Information exchange instruments must therefore contain confidentiality provisions that spell out specifically to whom the information can be disclosed and the purposes for which the information can be used. In addition to the protections afforded by the confidentiality provisions of information exchange instruments countries with tax systems generally impose strict confidentiality requirements on information collected for tax purposes. 337. All of Malta’s treaties contain a confidentiality provision that conforms to the standard. In addition, Malta has provisions in its domestic laws that reinforce this confidentiality provision. Specifically, the Income Tax Management Act provides that every person who has an official duty or who is employed in the administration of the Income Tax Acts must regard and deal with all documents and information relating to the Income Tax Acts or copies thereof as secret and confidential and every person must make an oath to this effect (Article 4(1)). In addition, a person who is appointed under or employed in carrying 338. out the provisions of the Income Tax Acts cannot be required to disclose to any court, tribunal, Board or committee of enquiry, anything learned in the performance of his/her duties under the Act. There are however, exceptions in the following cases:

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• • •

When necessary for the purpose of carrying into effect the provisions of the Income Tax Acts; or for the purpose or in the course of a prosecution for any offence committed against any of the provisions of the Income Tax Acts; or for the disclosure to any authorised representative of any other Government of such information as is required to be disclosed in terms of any arrangement between Malta and other States or their tax authorities providing for the reciprocal exchange of information for tax purposes.

339. The penalty for any person who communicates or attempts to communicate information contained in the documents outlined above is guilty of an offence and on conviction liable to a fine of from EUR 232 to EUR 2 325, or to imprisonment for up to 6 months or both (Article 53, Income Tax Management Act).

Confidentiality obligations and procedures in practice
340. The handling and management of EOI requests and processes are solely entrusted to the EOI team. In practice, the EOI team has exclusive access to physical and electronic files containing EOI requests and related documentation, as well as to the EU Common Communication Network (CCN) mailbox. Before an individual is chosen to become a member of the EOI team, various matters are taken into consideration. Apart from experience and academic qualifications, factors such as proper conduct in dealing with information and documents and conduct in general during their time of service are taken into account. Feedback on these aspects may be obtained both from their superiors and colleagues. The Maltese competent authority did not have cases where information received by the competent authority from an EOI partner was made public. 341. When information is sought from other units within the Inland Revenue Department or the MFSA, the normal accepted practice is to send an informal enquiry for its production. In addition, the EOI team may request the information directly from the person under investigation and/or third parties (e.g. service provider, trustee or bank) in possession or control of the requested information. When requesting information, the Maltese competent authority drafts its request in a very specific manner and avoids open ended questions as much as possible. The Maltese competent authority only discloses the minimum amount of information which is necessary for obtaining the requested information. As a matter of practice, information concerning a request that is normally disclosed to third parties consists of: the name; identification number; date of birth and residential address of the subject of the request; the relevant EOI instrument (and identification of such instrument);

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the relevant information that is being requested and the time limit given to reply to the request for information. There were instances where less information was provided, e.g. a request for information made on the basis of a bank account number only. It is noted that there are no legal requirements as to the minimum amount of information to be disclosed. 342. If during the collection of information the need arises for a tax audit to be carried out, or the competent authority of the requesting state requests a tax audit, the case is referred to the Tax Compliance Unit, within the Ministry for Finance. Where an EOI request requires action from the tax audit team within the Tax Compliance Unit, e.g. in carrying out an investigation or interview, then the persons within that unit will also have access to EOI requests and related documentation, operating under instructions from the Maltese competent authority. Like the EOI team members, all members of the tax audit team need to swear a declaration under oath to regard all documents and information relating to the Income Tax Acts as secret and confidential. 343. All documents relating to information exchange are physically stored in locked cabinets in the competent authority’s office, while soft copies thereof and other electronic files are kept in a separate area of the IT system, which can only be accessed by the EOI team. Following formal approval by the Maltese competent authority, special access rights are granted to each individual that is a member of the EOI team in order to access this area of the IT system. The competent authority’s office as well as the office of the rest of the EOI team are both situated in premises which are under continuous surveillance.
Determination and factors underlying recommendations
Phase 1 determination The element is in place. Phase 2 rating Compliant.

C.4. Rights and safeguards of taxpayers and third parties
The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties.

Exceptions to requirement to provide information (ToR C.4.1)
344. The international standard allows requested parties not to supply information in response to a request in certain identified situations where an issue of trade, business or other legitimate secret may arise. Among other reasons,

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an information request can be declined where the requested information would disclose confidential communications protected by the attorney-client privilege. Attorney-client privilege is a feature of the legal systems of many countries. All of Malta’s DTCs contain a provision equivalent to Article 26(3) of 345. the OECD Model Convention and therefore respect the rights and safeguards of taxpayers and third parties. In addition, the Cooperation Regulations contain a provision that states that no person may be requested to provide information that would disclose a trade, business, commercial or industrial secret or information which is the subject of attorney client privilege or information, the disclosure of which would be contrary to public policy (Regulation 5(1)). As discussed in section B.1.5, the attorney client privilege standard in Malta defines such information as confidential communications between a client and a lawyer or other legal representative produced for the purposes of seeking or providing legal advice or for the purposes of use in existing or contemplated legal proceedings. 346. The Maltese authorities have indicated that no cases have occurred in practice where the requested information related to a trade, business, commercial or industrial secret or the disclosure of which would be contrary to public policy. In respect of legal professional privilege, the Maltese authorities have indicated that assertions of attorney-client privilege rarely arise in Malta and any assertions of legal professional privilege raised to date have never been with regard to information sought for EOI purposes. Peers have not raised any issues in relation to rights and safeguards of taxpayers and third parties.
Determination and factors underlying recommendations
Phase 1 determination The element is in place. Phase 2 rating Compliant.

C.5. Timeliness of responses to requests for information
The jurisdiction should provide information under its network of agreements in a timely manner.

347. The management and administration of all EOI requests, received or sent, is centralised at the International Tax Unit managed by the Director General (Legal and International) within the Inland Revenue Department. Since 1994, a team fully dedicated to handling EOI in the field of direct taxation has been set up within the International Tax Unit to: (i) process all incoming and

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outgoing EOI requests; (ii) issue common guidance in relation to EOI requests; (iii) manage a centralised contact point for EOI in order to ensure the smooth provision of replies to incoming requests for information; and (iv) draft legislation in relation to EOI and for the implementation of EOI agreements or directives. As at April 2013, the International Tax Unit comprises five people, including the Director General (Legal and International) and four other officials.

Responses within 90 days (ToR C.5.1)
348. In order for exchange of information to be effective it needs to be provided in a timeframe which allows tax authorities to apply the information to the relevant cases. If a response is provided but only after a significant lapse of time the information may no longer be of use to the requesting authorities. This is particularly important in the context of international cooperation as cases in this area must be of sufficient importance to warrant making a request. None of Malta’s agreements contain a provision for the response time 349. for the treaty. However, under the Cooperation Regulations, the Competent Authority in Malta must confirm receipt of a request no later than seven working days from its receipt (Regulation. 9). Within one week of receipt, the Competent Authority must notify the requesting authority of any deficiencies in the request and the need for any additional information.

In practice
350. In the three year period under review, Malta has received 81 EOI requests from 22 different partner jurisdictions, of which the most significant, in terms of the number of requests received are France and Sweden. Regular contact with EOI partners is mainly by regular mail and e-mail or, in case of European Union Member States, through the EU Common Communication Network (CCN). Telephone contact is also used where necessary. In addition, the competent authority and the EOI team participate in various multilateral meetings with competent authorities of other jurisdictions, including the annual meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes, as well as bilateral meetings particularly within the EU context through the Fiscalis Programme. 351. When the Maltese competent authority receives a request for information it is considered as a new case and given a reference number accordingly, irrespective of whether one piece of information is requested or more. When the Maltese competent authority receives a further communication relating to an existing request for information which contains further details on the case and further questions (e.g. in relation to different years), the second letter is considered as a separate case and given a separate reference number. This practice does not apply should the foreign competent authority request

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clarification regarding Malta’s response to its original EOI request. In such a case, when the feedback from the foreign competent authority is received, it is given the same reference number as the original letter received. 352. Since 2009, the Maltese EOI team has improved their efficiency in replying to requests for information. On a total of 81 requests received during the period under review, Malta was in a position to provide a final response within 90 days in 26 cases (32%), with another 38 cases (47%) being processed between 91 and 180 days, and 15 cases (19%) processed between 181 days and one year. The remaining two cases (2%) were processed in more than one year. The response time starts running from the date that the EOI request is received by the Maltese competent authority, and only stops once a final reply has been sent to the requesting jurisdiction. Further details can be found in the table below.
Response times for requests received during 3 year review period
Jul-Dec 2009 nr. Total number of requests received* (a+b+c+d+e) Full response**: ≤ 90 days ≤180 days (cumulative) ≤1 year (cumulative) (a) 1 year+ Declined for valid reasons Failure to obtain and provide information requested Requests still pending at end of the review period (b) % 2010 nr. % 2011 nr. % Jan-Jun 2012 Total Average nr. % nr. % 100% 32% 79% 98% 2% 0% 0% 0%

9 100% 14 100% 39 100% 19 100% 81 0 0% 5 36% 14 36% 7 37% 26 64 2 0 0 0 2 22% 11 79% 34 87% 17 89% 1 0 0 11% 0% 0% 0% 1 0 0 0 7% 0% 0% 0% 0 0 0 0 0% 0% 0% 0% 0 0 0 0 0% 0% 0% 0%

8 89% 13 93% 39 100% 19 100% 79

(c) 0 (d) (e)

* Malta counts each written request from an EOI partner as one EOI request even where more than one person is the subject of an inquiry and/or more than one piece of information is requested. ** The time periods in this table are counted from the date of receipt of the request to the date on which the final and complete response was received.

353. Due to technical issues, the Maltese EOI team were only instructed and given access to the CCN on 1 July 2011. However, 27 requests for information were sent by EOI partner from the European Union to the Maltese competent authority through CCN before the EOI team had access to it and, in most cases, these requests for information were not followed up by the requesting jurisdictions. In a limited number of cases where the foreign

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competent authority sent a note through regular mail, action was taken immediately by the Maltese competent authority. Thus, a backlog of requests was created which took some time before it could be cleared. Concerns were expressed by some EOI partners with certain delays in 354. receiving responses from the Maltese competent authority. Malta established an internal administrative guidance based on the Cooperation Regulations in force since July 2011, providing timeframes for each key step in the internal and external processing of requests and retrieval of information in order to respond to requests in a timely manner (see section C.5.2 Organisational process and resources below for more details). With respect to EOI requests received in 2012, the Maltese authorities have stated that two cases were processed in more than 180 days as they involved a substantial volume of documents that had to be procured from Maltese companies. Although progress is noticed for the last year under review, Malta should ensure that the new internal deadlines are respected to enable it to respond to EOI requests in a timely manner, and consider further what measures could be taken to shorten the response time. Some peer inputs indicated that Malta does not always provide status 355. updates on requests which are not responded to within 90 days. The Maltese competent authority admitted that this was not carried out in a systematic way in the past. However, Regulation 9(4) of the Cooperation Regulations introduced a legal obligation whereby the Maltese competent authority must provide foreign competent authorities with status updates, if the requested information cannot be provided within three months, and every three months until the matter is settled. Since June 2012, when Malta implemented the system developed on the legal timeframes provided in the Cooperation Regulations to assist in this obligation, Malta has systematically been sending status updates to the requesting jurisdictions. The timelines for sending status updates are monitored via the EOI database (see also C.5.2 Organisational process and resources below). Except for one of Malta’s main EOI partners, all the other peers confirmed that Malta provided status updates in a consistent manner since June 2012.

Organisational process and resources (ToR C.5.2)
356. It is important that a jurisdiction have appropriate organisational processes and resources in place to ensure a timely response.

Organisational process
357. The EOI team has drawn up a general EOI guidance handbook for internal use only, entitled “Manual on the Implementation of Exchange of Information Provisions for Tax Purposes – Exchange of Information on Request”. This EOI guidance handbook is based on the OECD’s “Manual on

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the Implementation of Exchange of Information Provisions for Tax Purposes” and relevant domestic legislation, and it serves as the primary instruction material for the members of the EOI team and audit personnel. 358. A software in the format of an EOI database has been developed by the International Tax Unit specifically to ease the management and improve the level of monitoring of the EOI request flow, ensuring that all the timing requirements found in Cooperation with Other Jurisdictions on Tax Matters Regulations are met. The EOI database shows, at any point in time, what requests for information are pending and at what stage of the EOI process. 359. As soon as a communication is received by the competent authority, either through regular mail or through CCN, the competent authority delegates the case to a member of the EOI team to assist him with any necessary action in compiling the information requested. At this stage the EOI team member registers the case by giving it a reference number and then enters the communication details on the EOI database, as well as his/her initials. This is done to ensure an appropriate audit trail. The EOI requests are then entered into the EOI database, divided into 360. seven fields according to the stages of the EOI process. Each field shows how many days are pending for each request before the deadline lapses for that particular stage. These seven fields are as follows: (i) Acknowledgement to be sent to foreign competent authority within seven working days of the date of receipt of a request (i.e. stamp date) (Regulations 9(1), Cooperation Regulations); (ii) Validation of the request for information received, within one week of the stamp date (Regulation 9(2), Cooperation Regulations); (iii) Notification of the foreign competent authority when the Maltese Competent Authority does not have all the requested information available, within one month of the stamp date (Regulation 9(5), Cooperation Regulations); (iv) Partial/Full Information available to the EOI team must be sent immediately to the foreign competent authority, and not later than two months from the stamp date (Regulation 9(3), Cooperation Regulations); (v) Information not already in the EOI team’s hands must be obtained from third parties, by giving a 30 day deadline for the person in possession or control of the information or documentation to provide it, or granting an extension of the deadline in exceptional cases (Article 10A, Income Tax Management Act);

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(vi) Status update to be sent to the foreign competent authority when the request for information has not yet been settled after three months from the stamp date (Regulation 9(4), Cooperation Regulations); (vii) Final reply to be sent to the foreign competent authority no later than six months from the stamp date (Regulation 9(3), Cooperation Regulations). 361. Once an EOI request is received, it is screened to make sure that it meets all the relevant requisites and presents no deficiencies (e.g. lack of signature by the foreign competent authority). In particular, the foreseeable relevance standard is checked to ensure that all domestic means were used in the requesting jurisdiction before the EOI request was sent to Malta. In the process of reviewing whether the request is valid and complete, 362. the EOI team member also considers whether there are grounds for declining the request (e.g. information is protected by the attorney client privilege). Where the EOI team member has reason to believe that there are sufficient grounds on which a request may be declined, the matter is discussed with the competent authority. Before formally declining the request, the Maltese competent authority always engages with the foreign competent authority to seek clarifications. In practice, additional information or clarifications have been sought in a limited number of cases and they have not caused delays. 363. After the validation of the EOI request, the EOI team member checks whether all the information requested is readily available to the EOI team or may be procured in a matter of a few days from other sources, e.g. another section within the Inland Revenue Department, or whether he/she can provide only partial information at that stage. The distinction in the availability of information is important because it triggers different deadlines depending on the circumstance. 364. The EOI team member enters on the EOI database the date when a person is contacted for the required information (if any) and the date when the documents or information requested are received. The person in possession or control of the information is given a 30 day deadline to provide the requested information or documentation (Article 10A, Income Tax Management Act). In exceptional cases, if the person asks the competent authority for an extension of the deadline and the competent authority approves the extension, the EOI team member records this extension in the EOI database accordingly. 365. The EOI database is also updated with the date when the competent authority notifies the person concerning whom the request is made (or his authorised representative). If the notification is not served, the EOI team member indicates on the EOI database the legal provision according to which

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an exception to the prior notification requirement applies (Regulation 7, Cooperation Regulations). 366. If the exchange of information case has not been settled after three months from stamp date, the competent authority must give the foreign authority an update on the affairs of the case (Regulation 4, Cooperation Regulations). Unless otherwise agreed to between the two relevant competent authorities, the competent authority must provide the requesting jurisdiction with a final response letter containing the requested information not later than six months from the stamp date (Regulation 9(3), Cooperation Regulations). Finally, the entry in the status field of the EOI database shows whether (a) the case has been settled and closed, or whether (b) the foreign competent authority has dropped the case.

Performance measure
367. The EOI database is also utilised for statistical purposes. A number of different statistical reports can be drawn up for any period of time, as follows: (i) Number of requests received by the EOI team: statistics can be derived as to how many EOI requests have been received, for any period of time and from any requesting jurisdiction. (ii) Work in progress and completion of exchanges of information: two reports are drawn monthly, listing how many exchanges of information have been worked upon but not yet closed and how many requests have been completed during the month. (iii) Time required for completing requests for information: statistics can be drawn as to the average time that it takes to complete a request, for any period of time and from any requesting jurisdiction. 368. The EOI database is regularly checked to ensure that each stage of the EOI process for each request for information is settled before its particular deadline lapses, and statistical reports are usually drawn up on a monthly basis. Hence the EOI team can analyse its strengths and weaknesses and plan to improve its EOI system.

Resources
369. The EOI team which handles the management of the exchanges of information is made up of five officers: the Director General (Legal and International), who is also the authorised representative of the competent authority, together with four other officials. The team consists of three qualified accountants, a lawyer and a graduate in Banking and Finance. The EOI

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team may draw on the experience and expertise of other personnel employed within the Ministry for Finance according to the need, in specific cases, e.g. if a tax audit is required, members of the tax audit team will be involved. Apart from having a lawyer within the EOI team, in complicated cases the team may draw on the services of the Maltese Attorney General Office for legal advice. 370. When joining the EOI team, new officers do not undergo any formal training programme in respect of exchanges of information. However they do receive carefully planned on the job training and are closely monitored by senior staff during their initiation period. During this period they are encouraged to familiarise themselves with the EOI database and with the EOI guidance handbook entitled “Manual on the Implementation of Exchange of Information Provisions for Tax Purposes – Exchange of Information Request”, as well as with the confidentiality obligations under the Income Tax Management Act. A member of the EOI team attended a course on exchange of information organised by the OECD and held in Vienna (Austria) in November 2012. 371. The EOI team has access to and uses several databases to assist it in replying to EOI requests. Most of these databases are held by the Inland Revenue Department. In addition, the EOI team has also access to the Maltese Registry of Companies’ database and to the Common Database used by the Department of Civil Registration, in the case of individuals. 372. The financing for the EOI team is received from the Ministry for Finance, in that the salaries and other logistical resources such as computers, etc. are financed through the Ministry. Under the current set-up and given the number of requests currently received and submitted, the resources available to the EOI team are sufficient for the present and for the foreseeable future.

Conclusion
373. The EOI team is adequately staffed with appropriately qualified and trained personnel who are each responsible for the execution of all exchange of information requests. The EOI team has adequate financial and technical resources dedicated to exchange of information. The general EOI guidance handbook and well as the EOI database ensure that a streamlined, efficient and responsive procedure is in place to facilitate the exchange of information in practice. While progress is noticed for the last year under review, some peers expressed concerns with the lack of consistency in providing status updates and other expressed a concern with certain delays in receiving responses. 374. Although delays have been experienced on occasion, mainly due to technical problems in the CCN, several peers commented on the high quality of the responses. It can, therefore, be concluded that Malta has both

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the appropriate organisational processes and adequate resources in place to ensure that exchange of information takes place in an efficient manner and that timely responses are received. However, it is recommended that Malta ensure that the new internal deadlines established by the Cooperation Regulations are respected in practice, to enable it to respond to EOI requests in a timely manner, and consider further what measures could be taken to shorten the response time.

Absence of restrictive conditions on exchange of information (ToR C.5.3)
375. Exchange of information should not be subject to unreasonable, disproportionate or unduly restrictive conditions. There are no aspects of Malta’s exchange of information agreements that appear to impose restrictive conditions on exchange of information. Malta’s domestic laws and procedures have generally been aligned to allow for the exchange of information without restrictive conditions in practice.
Determination and factors underlying recommendations
Phase 1 determination This element involves issues of practice that are assessed in the Phase 2 review. Accordingly no Phase 1 determination has been made. Phase 2 rating Compliant. Factors underlying recommendations Malta’s competent authority was in some instances unable to respond to international exchange of information requests in a timely manner during the earlier part of the period under review, but the situation greatly improved during 2011 and 2012 with the introduction of internal administrative guidance to streamline the process and reduce internal delays. Recommendations Malta should monitor the implementation of the internal administrative guidance recently introduced to ensure that answers to EOI requests are made in a timely manner in all cases.

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Phase 2 rating Compliant. Factors underlying recommendations During the three years under review, Malta did not always provide an update or status report to its EOI partners within 90 days when it was unable to provide a substantive response within that time. The monitoring of requests has nonetheless improved more recently, with the introduction of a new monitoring system via the EOI database. Recommendations Malta should monitor the new system put in place to provide status updates to EOI partners within 90 days to ensure that it operates effectively.

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Summary of Determinations and Factors Underlying Recommendations

Determination

Factors underlying recommendations

Recommendations

Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities (ToR A.1) Phase 1 determination: The element is in place. Phase 2 rating: Largely Compliant. The Cooperation Regulations, which came into force in July 2011, establish comprehensive requirements on the availability of ownership and identity information and penalties for non-compliance. However, the supervisory and enforcement powers to support these legal requirements are untested in practice. Malta should continue its efforts to ensure that its supervisory and enforcement powers are sufficiently exercised in practice to support the legal requirements established by the Cooperation Regulations, which ensure the availability of ownership and identity information in all cases.

Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements (ToR A.2) Phase 1 determination: The element is in place.

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Factors underlying recommendations The Cooperation Regulations, which came into force in July 2011, establish comprehensive requirements on the availability of accounting information and penalties for non-compliance. However, the supervisory and enforcement powers to support these legal requirements are untested in practice.

Determination Phase 2 rating: Largely Compliant.

Recommendations Malta should continue its efforts to ensure that its supervisory and enforcement powers are sufficiently exercised in practice to support the legal requirements established by the Cooperation Regulations, which ensure the availability of accounting information in all cases.

Banking information should be available for all account-holders (ToR A.3) Phase 1 determination: The element is in place. Phase 2 rating: Compliant. Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information) (ToR B.1) Phase 1 determination: The element is in place. Phase 2 rating: Compliant. The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information (ToR B.2) Phase 1 determination: The element is in place. Phase 2 rating: Compliant. Exchange of information mechanisms should allow for effective exchange of information (ToR C.1) Phase 1 determination: The element is in place. Phase 2 rating: Compliant.

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SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS – 113

Determination

Factors underlying recommendations

Recommendations

The jurisdictions’ network of information exchange mechanisms should cover all relevant partners (ToR C.2) Phase 1 determination: The element is in place. Phase 2 rating: Compliant. The jurisdictions’ mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received (ToR C.3) Phase 1 determination: The element is in place. Phase 2 rating: Compliant. The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties (ToR C.4) Phase 1 determination: The element is in place. Phase 2 rating: Compliant. The jurisdiction should provide information under its network of agreements in a timely manner (ToR C.5) This element involves issues of practice that are assessed in the Phase 2 review. Accordingly no Phase 1 determination has been made. Malta should continue to develop its EOI network with all relevant partners

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Factors underlying recommendations Malta’s competent authority was in some instances unable to respond to international exchange of information requests in a timely manner during the earlier part of the period under review, but the situation greatly improved during 2011 and 2012 with the introduction of internal administrative guidance to streamline the process and reduce internal delays. During the three years under review, Malta did not always provide an update or status report to its EOI partners within 90 days when it was unable to provide a substantive response within that time. The monitoring of requests has nonetheless improved more recently, with the introduction of a new monitoring system via the EOI database.

Determination Phase 2 rating: Compliant.

Recommendations Malta should monitor the implementation of the internal administrative guidance recently introduced to ensure that answers to EOI requests are made in a timely manner in all cases.

Malta should monitor the new system put in place to provide status updates to EOI partners within 90 days to ensure that it operates effectively.

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Annex 1: Jurisdiction’s Response to the Review Report 44
Malta agrees with the content of the report.

44.

This Annex presents the jurisdiction’s response to the review report and shall not be deemed to represent the Global Forum’s views.

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Annex 2: List of All Exchange of Information Mechanisms

EU law
• EU Council Directive 2011/16/EU of 15 February 2011 on Administrative Cooperation in the Field of Taxation and repealing EU Council Directive 77/799/EEC of 19 December 1977, which entered in force on 1 January 2013. The current EU members, covered by this Council Directive, are: Austria, Belgium, Bulgaria, Cyprus, 45 Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom; and EU Council Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the form of interest payments. This Directive aims to ensure that savings income in the form of interest payments generated in an EU member state in favour of individuals or residual entities being resident of another EU member state are effectively taxed in accordance with the fiscal laws of their state of residence. It also aims to ensure exchange of information between member states.

45.

Footnote by Turkey: The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Turkey shall preserve its position concerning the “Cyprus issue”. Footnote by all the European Union Member States of the OECD and the European Commission: The Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.

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List of bilateral and multilateral agreements
List of EOI agreements signed by Malta as at January 2013, including Double Tax Conventions (DTCs), Protocols to existing DTCs containing EOI provisions (DTC Protocols), Tax Information Exchange Agreements (TIEAs), the EU Council Directive 2011/16/EU (EU Directive) and the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAC). The EOI agreements listed below do not limit, nor are they limited by, provisions contained other EOI arrangements between the same parties concerned or other instruments which relate to co-operation in tax matters. The chart of signatures and ratification of the Multilateral Convention is available at www.oecd.org/document/14/0,3746,en_2649_33767_2489998_1_1_1_1,00. html.
Jurisdiction 1 2 3 4 5 6 7 8 Albania Argentina Australia Austria Azerbaijan Bahamas, The Bahrain Barbados Type of EoI arrangement DTC MAC MAC DTC MAC DTC EU Directive 2011/16/EU MAC (Original) TIEA DTC DTC DTC DTC Protocol 9 Belgium MAC EU Directive 2011/16/EU 10 11 12 Bermuda Brazil Bulgaria TIEA MAC DTC EU Directive 2011/16/EU Date signed 2 May 2000 1 Mar 2013 3 Nov 2011 9 May 1984 3 Nov 2011 29 May 1978 15 Feb 2011 26 Mar 2003 18 Jan 2012 12 Apr 2010 5 Dec 2001 28 Jun 1974 19 Jan 2010 4 Apr 2011 15 Feb 2011 24 Nov 2011 3 Nov 2011 23 Jul 1986 15 Feb 2011 Date entered into force 23 Nov 2000 Not in force 1 Jan 2013 20 May 1985 1 Dec 2012 13 Jul 1979 1 Jan 2013 1 Oct 2004 30 Oct 2012 28 Feb 2012 19 Jun 2002 3 Jan 1975 Not in force Not in force 1 Jan 2013 5 Nov 2012 Not in force 1 Jan 1988 1 Jan 2013

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Type of EoI arrangement DTC MAC DTC MAC MAC DTC DTC 18 Cyprus 46 EU Directive 2011/16/EU DTC 19 Czech Republic MAC EU Directive 2011/16/EU DTC 20 Denmark 21 Egypt MAC EU Directive 2011/16/EU DTC DTC 22 Estonia EU Directive 2011/16/EU DTC 23 Finland MAC EU Directive 2011/16/EU DTC DTC Protocol 24 France MAC EU Directive 2011/16/EU 25 Georgia DTC MAC Date entered into force 20 May 1987 Not in force 25 Aug 2011 Not in force Not in force 22 Aug 1999 11 Aug 1994 1 Jan 2013 6 Jun 1997 Not in force 1 Jan 2013 30 Dec 1998 1 Jun 2011 1 Jan 2013 7 Apr 2001 22 Jan 2003 1 Jan 2013 30 Dec 2001 1 Jun 2011 1 Jan 2013 1 Oct 1979 1 Jun 2010 1 Apr 2012 1 Jan 2013 30 Dec 2009 1 Jun 2011

Jurisdiction 13 14 15 16 17 Canada China Colombia Costa Rica Croatia

Date signed 25 Jul 1986 3 Nov 2011 23 Oct 2010 23 May 2012 1 Mar 2012 21 Oct 1998 22 Oct 1993 15 Feb 2011 21 Jun 1996 26 Oct 2012 15 Feb 2011 13 Jul 1998 27 May 2010 15 Feb 2011 20 Feb 1999 3 May 2001 15 Feb 2011 30 Oct 2000 27 May 2010 15 Feb 2011 25 Jul 1977 29 Aug 2008 27 May 2010 15 Feb 2011 23 Oct 2009 3 Nov 2011

46. See previous note.

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ANNEXES – 119

Jurisdiction

Type of EoI arrangement DTC DTC Protocol

Date signed 8 Mar 2001 17 Jun 2010 3 Nov 2011 15 Feb 2011 10 Jul 2012 24 Jan 2012 13 Oct 2006 21 Feb 2012 15 Feb 2011 5 Dec 2012 12 Mar 2012 8 Nov 2011 6 Aug 1991 15 Feb 2011 23 Sep 2004 27 May 2010 8 April 2013 28 Sep 1994 26 Jan 2012 3 Nov 2011 14 Nov 2008 30 Jun 2011 15 Feb 2011 23 Oct 2009 28 Jul 2011 16 Jul 1981 13 Mar 2009 27 May 2010 15 Feb 2011

Date entered into force 27 Dec 2001 19 May 2011 Not in force 1 Jan 2013 Not in force 1 Apr 2012 30 Aug 2008 Not in force 1 Jan 2013 Not in force 10 Mar 2013 18 Jul 2012 29 Nov 1992 1 Jan 2013 19 Apr 2006 1 Feb 2012 Not in force 8 Feb 1995 1 Jun 2011 Not in force 15 Jan 2009 Not in force 1 Jan 2013 26 Feb 2010 Not in force 8 May 1985 24 Nov 2010 1 Mar 2012 1 Jan 2013

26 Germany

MAC EU Directive 2011/16/EU

27 Ghana 28 Gibraltar 29 Greece 30 Guatemala 31 Guernsey 32 Hong Kong, China 33 Hungary 34 Iceland

MAC TIEA DTC MAC EU Directive 2011/16/EU MAC DTC DTC DTC EU Directive 2011/16/EU DTC MAC DTC DTC MAC MAC DTC MAC EU Directive 2011/16/EU DTC DTC DTC DTC Protocol

35 India 36 Indonesia 37 Ireland

38 Isle of Man 39 Israel

40 Italy

MAC EU Directive 2011/16/EU

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Type of EoI arrangement MAC DTC DTC DTC MAC DTC DTC 46 Latvia 47 Lebanon EU Directive 2011/16/EU DTC DTC DTC 49 Lithuania EU Directive 2011/16/EU DTC 50 Luxembourg 51 52 Malaysia Mexico DTC Protocol EU Directive 2011/16/EU DTC DTC MAC MAC DTC DTC DTC 56 Netherlands 57 New Zealand 58 Norway 59 Pakistan MAC EU Directive 2011/16/EU MAC DTC MAC DTC Date entered into force Not in force 19 Jul 2010 13 Oct 2010 21 Mar 1998 1 Jul 2012 19 Mar 2004 24 Oct 2000 1 Jan 2013 10 Feb 2000 20 May 2010 2 Feb 2004 1 Jan 2013 14 Feb 1996 Not in force 1 Jan 2013 1 Sep 2000 Not in force 1 Sep 2012 1 Mar 2012 23 Sep 2009 15 Jun 2007 9 Nov 1977 Not in force 1 Jan 2013 Not in force 14 Feb 2013 1 Jun 2011 20 Dec 1975

Jurisdiction 41 42 Japan Jersey

Date signed 3 Nov 2011 25 Jan 2010 16 Apr 2009 25 Mar 1997 27 May 2010 24 Jul 2002 22 May 2000 15 Feb 2011 23 Feb 1999 28 Dec 2008 17 May 2001 15 Feb 2011 29 Apr 1994 30 Nov 2011 15 Feb 2011 3 Oct 1995 17 Dec 2012 27 May 2010 27 Jan 2011 4 Nov 2008 26 Oct 2001 18 May 1977 27 May 2010 15 Feb 2011 26 Oct 2012 30 Mar 2012 27 May 2010 8 Oct 1975

43 Jordan 44 Korea, Republic of 45 Kuwait

48 Libya

53 Moldova 54 Montenegro 55 Morocco

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Jurisdiction

Type of EoI arrangement DTC DTC Protocol

Date signed 7 Jan 1994 6 Apr 2011 9 Jul 2010 15 Feb 2011 26 Jan 2001 27 May 2010 15 Feb 2011 26 Aug 2009 30 Nov 1995 15 Oct 2012 15 Feb 2011 24 Apr 2013 3 Nov 2011 3 May 2005 10 Sep 2009 4 Jan 2012 9 Sep 2009 21 Mar 2006 20 Nov 2009 7 Sep 1999 8 Oct 2002 27 May 2010 15 Feb 2011 16 May 1997 24 Aug 2012 3 Nov 2011 8 Nov 2005 11 Mar 2011 15 Feb 2011

Date entered into force 24 Nov 1994 22 Nov 2011 1 Oct 2011 1 Jan 2013 5 Apr 2002 Not in force 01 Jan 2013 9 Dec 2009 16 Aug 1996 Not in force 1 Jan 2013 Not in force Not in force 19 Jul 2005 15 Feb 2010 1 Dec 2012 16 Jun 2010 29 Feb 2008 28 June 2013 20 Aug 2000 12 Jun 2003 1 Jun 2011 1 Jan 2013 12 Nov 1997 Not in force Not in force 12 Sep 2006 1 Jan 2013 1 Jan 2013

60 Poland

MAC EU Directive 2011/16/EU DTC

61

Portugal

MAC EU Directive 2011/16/EU DTC DTC MAC EU Directive 2011/16/EU DTC MAC DTC DTC Protocol DTC DTC DTC DTC Protocol* DTC DTC MAC EU Directive 2011/16/EU DTC DTC Protocol MAC DTC

62 Qatar 63 Romania

64 Russian Federation 65 San Marino 66 Saudi Arabia 67 Serbia 68 Singapore 69 Slovakia 70 Slovenia

71

South Africa

72 Spain

MAC EU Directive 2011/16/EU

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Type of EoI arrangement DTC 73 74 75 76 Sweden Switzerland Syrian Arab Republic Tunisia MAC EU Directive 2011/16/EU DTC DTC DTC MAC DTC MAC MAC DTC DTC 80 United Kingdom MAC EU Directive 2011/16/EU DTC MAC DTC Date entered into force 3 Feb 1996 1 Sep 2011 1 Jan 2013 6 Jul 2012 16 Oct 2000 31 Dec 2001 Not in force Not in force Not in force Not in force 18 May 2007 27 Mar 1995 1 Oct 2011 1 Jan 2013 23 Nov 2010 Not in force 13 Dec 2012

Jurisdiction

Date signed 9 Oct 1995 27 May 2010 15 Feb 2011 25 Feb 2011 22 Feb 1999 31 May 2000 16 Jul 2012 14 Jul 2011 3 Nov 2011 27 May 2010 13 Mar 2006 12 May 1994 27 May 2010 15 Feb 2011 8 Aug 2008 27 May 2010 11 Mar 2011

77 Turkey 78 79 Ukraine United Arab Emirates

81

United States

82 Uruguay

* Entered into force after May 2013 and, therefore, not included in the analysis under element C.1.8 of this Report.

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Annex 3: List of All Laws, Regulations and Other Material Received
Banking Act Central Bank Act Financial Institutions Act Malta Financial Services Authority Act Commission for the Administration of Justice Act Commercial Code Civil Code Income Tax Act Income Tax Management Act Companies Act Companies Act (Cell Companies Carrying on Business of Insurance) Regulations Companies Act (Incorporated Cell Companies Carrying on Business of Insurance) Regulations Insurance Business Act Trust and Trustees Act Investment Services Act Notarial Professional and Notarial Archives Act Co-operative Societies Act VAT Act General Accounting Principles for Smaller Entities Act Accounting Professions Act Professional Secrecy Act Cooperation with Other Jurisdictions on Tax Matters Regulations (Cooperation Regulations)

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Annex 4: People Interviewed During On-Site Visit

Inland Revenue Department (IRD)
Director General Director General (Legal and International) (competent authority) Director, Operations Member of DTA Negotiating Team Members of EOI Unit

Tax Compliance Unit (TCU)
Tax officer

Malta Financial Service Authority (MFSA)
Chairman

Malta Stock Exchange
Deputy General Manager

Financial Intelligence Analysis Unit (FIAU)
Director Officer

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ANNEXES – 125

Registry for Companies
Registrar

Registry for Legal Persons
Registrar Officer

Notarial Council
Vice-President

PEER REVIEW REPORT – PHASE 2 – MALTA © OECD 2013

ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
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OECD PUBLISHING, 2, rue André-Pascal, 75775 PARIS CEDEX 16 (23 2013 31 1 P) ISBN 978-92-64-20268-9 – No. 60823 2013-01

Global Forum on Transparency and Exchange of Information for Tax Purposes

PEER REVIEWS, PHASE 2: MALTA
This report contains a “Phase 2: Implementation of the Standard in Practice” review, as well as revised version of the “Phase 1: Legal and Regulatory Framework” review already released for this jurisdiction. The Global Forum on Transparency and Exchange of Information for Tax Purposes is the multilateral framework within which work in the area of tax transparency and exchange of information is carried out by 120 jurisdictions, which participate in the Global Forum on an equal footing. The Global Forum is charged with in-depth monitoring and peer review of the implementation of the international standards of transparency and exchange of information for tax purposes. These standards are primarily reflected in the 2002 OECD Model Agreement on Exchange of Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax Convention on Income and on Capital and its commentary as updated in 2004. The standards have also been incorporated into the UN Model Tax Convention. The standards provide for international exchange on request of foreseeably relevant information for the administration or enforcement of the domestic tax laws of a requesting party. Fishing expeditions are not authorised but all foreseeably relevant information must be provided, including bank information and information held by fiduciaries, regardless of the existence of a domestic tax interest or the application of a dual criminality standard. All members of the Global Forum, as well as jurisdictions identified by the Global Forum as relevant to its work, are being reviewed. This process is undertaken in two phases. Phase 1 reviews assess the quality of a jurisdiction’s legal and regulatory framework for the exchange of information, while Phase 2 reviews look at the practical implementation of that framework. Some Global Forum members are undergoing combined – Phase 1 and Phase 2 – reviews. The Global Forum has also put in place a process for supplementary reports to follow-up on recommendations, as well as for the ongoing monitoring of jurisdictions following the conclusion of a review. The ultimate goal is to help jurisdictions to effectively implement the international standards of transparency and exchange of information for tax purposes. All review reports are published once approved by the Global Forum and they thus represent agreed Global Forum reports. For more information on the work of the Global Forum on Transparency and Exchange of Information for Tax Purposes, and for copies of the published review reports, please refer to www.oecd.org/tax/transparency and www.eoi-tax.org.
Consult this publication on line at http://dx.doi.org/10.1787/9789264202696-en. This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical databases. Visit www.oecd-ilibrary.org for more information.

ISBN 978-92-64-20268-9 23 2013 31 1 P

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