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International Tax in 2025 - What is at stake?

3rd February 2025

Benjamin Zammit McKeon

Author:

3rd February 2025

If the past few weeks offer any indication of what lies ahead for international tax in 2025, it promises to be an active year marked by both anticipated and unforeseen reforms. Geopolitical dynamics will play a pivotal role in shaping tax policy changes, with tensions already brewing between the EU’s commitment to implementing the OECD’s Pillar Two framework and the U.S. government’s withdrawal of support, coupled with potential retaliatory measures. For multinational businesses, the primary challenges will centre on navigating an increasingly uncertain global tax environment and managing growing compliance demands, such as enhanced transfer pricing regulations and additional Directives on Administrative Cooperation (‘DAC’).


𝐏𝐢𝐥𝐥𝐚𝐫 𝐓𝐰𝐨: 𝐆𝐥𝐨𝐛𝐚𝐥 𝐌𝐢𝐧𝐢𝐦𝐮𝐦 𝐓𝐚𝐱 𝐑𝐚𝐭𝐞 𝐨𝐟 𝟏𝟓%

In September 2023, Malta elected to delay the application of the three primary rules of the Pillar Two directive: (i) the Qualified Domestic Minimum Top-Up Tax (‘QDMTT’), (ii) the Income Inclusion Rule (‘IIR’) and (iii) the Undertaxed Profit Rule (‘UTPR’). This deferral option can be made for six consecutive years (subject to Malta having no more than twelve ultimate parent entities of groups within the directive’s scope), with no intention or updates from the Maltese government to revise such election so far. Meanwhile, the Maltese government has been monitoring closely global developments in the area with work on generating new grants and Qualified Refundable Tax Credits (‘QRTCs’) currently in discussion with the European Commission – more information is expected to be circulated during 2025.

It is important to note the geopolitical landscape of the Pillar Two implementation. Malta is one of five EU Member States exercising the option to defer the implementation, alongside Estonia, Latvia, and Lithuania deferring all rules until 2029, while Slovakia selectively implemented only a domestic top-up tax in 2024. By 2025, it is anticipated that the majority (if not all) of the remaining EU Member States will have adopted some or all the rules, with other international jurisdictions already following suit.

This evolving landscape will provide greater clarity on how these rules function in practice and how multinational groups respond to the additional taxes imposed. However, all of this will be subject to further debate now that the Trump Administration has effectively opted-out of Pillar Two, even proposing retaliatory measures to increase tax rates on U.S. income to affected persons from those countries that have the “extraterritorial and discriminatory” taxes enacted (the UTPR being specifically mentioned).


𝐓𝐚𝐱 𝐂𝐨𝐦𝐩𝐥𝐢𝐚𝐧𝐜𝐞 𝐚𝐧𝐝 𝐓𝐞𝐜𝐡𝐧𝐨𝐥𝐨𝐠𝐲: 𝐓𝐡𝐞 𝐅𝐮𝐭𝐮𝐫𝐞 𝐨𝐟 𝐓𝐚𝐱 𝐀𝐝𝐦𝐢𝐧𝐢𝐬𝐭𝐫𝐚𝐭𝐢𝐨𝐧

Tax compliance in 2025 will be increasingly intertwined with technology, driving greater efficiency and transparency but also raising questions about costs, resource allocation, fairness, and data security. The integration of advanced technologies into tax compliance systems has accelerated in recent years, reshaping how governments and businesses approach tax reporting and enforcement.

Governments have made substantial investment to combat tax abuse, evasion, and money laundering. In Malta, these efforts are focused on developing improved, centralised tax platforms, incorporating artificial intelligence into the platforms, and promoting real-time tax reporting in line with EU initiatives. Additionally, expanding transfer pricing obligations (with Malta companies falling within the thresholds must comply as from this year, based on 2024 data) and the automated exchange of information between jurisdictions provide tax authorities with more robust data sets for analysis, further enhancing their ability to address tax evasion.

All of these will present opportunities for businesses to enhance their capabilities, such as efficiently managing large volumes of data, aligning with diverse national standards across jurisdictions, allocating resources strategically to ensure compliance, and leveraging advanced tax reporting tools and software for improved outcomes.


𝐆𝐥𝐨𝐛𝐚𝐥 𝐓𝐚𝐱 𝐑𝐞𝐬𝐢𝐝𝐞𝐧𝐜𝐲: 𝐅𝐨𝐫𝐞𝐢𝐠𝐧 𝐆𝐨𝐯𝐞𝐫𝐧𝐦𝐞𝐧𝐭𝐬 𝐒𝐡𝐢𝐟𝐭 𝐢𝐧 𝐑𝐞𝐬𝐢𝐝𝐞𝐧𝐜𝐞 𝐏𝐨𝐥𝐢𝐜𝐲

Last year we saw the U.K. Government eliminate the concept of domicile status from its tax system, replacing it with a new residence-based regime. This shift aims to make the U.K. internationally competitive, focusing on attracting the best talent and investment to the country. However, the potential tax leakage for individuals (and ultimately, businesses) will be substantial. Similarly in 2024, other countries such as Portugal, have reformed long-standing residence schemes moving away from investment-based residence to substance and economic based residence criteria.

In the U.S., a proposed bill seeks to introduce a residence-based system of taxation for U.S. citizens living overseas, thus replacing the current framework that subjects all U.S. citizens to income tax regardless of their country of residence. This has been further reiterated by the U.S. President to end double taxation of U.S. citizens.

What’s next?

How will individuals and businesses plan for 2025? What factors should be considered when relocating to a tax-friendly jurisdiction? What additional benefits can individuals and their families gain? Planning a change in residence in 2025 will be a complex process but evaluating proven and reputable jurisdictions is a critical first step.

Malta’s remittance basis of taxation offers significant advantages. Key benefits include taxing foreign income only when remitted to Malta, comparatively lower tax rates, and the exemption of foreign capital gains, even if received in or remitted to Malta. An important consideration for families is that Malta does not have inheritance or gift taxes, whilst only imposing a stamp duty upon the inheritance of shares in Malta companies or immovable property situated in Malta.

Additionally, the remittance basis has a proven track record of providing greater flexibility and stability for long-term residents since it does not have a termination date, and it only provides for a yearly minimum tax to be paid of €5,000. Coupled with several residency programs tailored to different categories of individuals, Malta also offers a robust and stable financial, legal, regulatory, and fiscal framework. These features make Malta the go-to jurisdiction for individuals seeking to relocate from foreign jurisdictions.


𝐅𝐢𝐧𝐚𝐥 𝐓𝐡𝐨𝐮𝐠𝐡𝐭𝐬: 𝐇𝐨𝐰 𝐜𝐚𝐧 𝐰𝐞 𝐡𝐞𝐥𝐩?

With numerous EU Directives being implemented, enforced, or debated within international forums, navigating the complexities of international taxation has become increasingly challenging. This is especially true for individuals and businesses facing cross-border concerns, as these issues are becoming more complex and costly to manage in terms of compliance and planning.

Malta offers a solid foundation for those looking for stability and efficiency in their tax planning during 2025. However, ensuring that your tax residency and international financial affairs are managed correctly is essential to optimising benefits and avoiding complications. With the right planning, you and your business can achieve long-term success in a changing global tax landscape.

Radix remains at the forefront of evolving global tax laws, offering tailored solutions that meet the unique needs of each client. We are equipped to address your cross-border taxation challenges, assist in strategic financial planning and be your go-to residency advisors.

Reach out to us for personalised support at info@radixmalta.com.

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