The NID is governed by the Income Tax Act and Subsidiary Legislation 123.176 (Legal Notice 37 of 2018). It became effective from the Year of Assessment 2018.
- Type of Deduction: A Notional Interest Deduction (NID) based on risk capital.
- Definition of Risk Capital: Paid-up share capital, share premium, and other equity contributions.
- Calculation: Risk capital multiplied by NID reference rate (Malta Government Stocks yield + 5% premium).
- Deemed interest income: When NID is claimed, shareholders or partners are deemed to have received corresponding interest income for tax purposes.
- Required: Shareholder approval before application.
Interaction with other Maltese tax rules
a) Transfer Pricing Rules:
Malta’s Transfer Pricing Rules (Subsidiary Legislation 123.207) apply to cross-border arrangements between associated enterprises for basis years commencing on or after 1 January 2024. A grandfathering provision exempts arrangements entered into before 1 January 2024, provided they are not materially altered. All arrangements will fall within scope from basis years starting on or after 1 January 2027.
b) Interest Limitation Rules (ATAD):
Malta implemented the EU Anti-Tax Avoidance Directive (ATAD) through Subsidiary Legislation 123.187. The interest limitation rule applies from basis years starting on or after 1 January 2019. Exceeding borrowing costs are deductible only up to 30% of tax-adjusted EBITDA, subject to a €3 million de minimis threshold and certain exemptions. Importantly, Notional Interest Deduction is not treated as borrowing cost and therefore does not reduce the interest capacity available for actual debt financing under ATAD rules.
Anti-Abuse Provisions: General anti-avoidance rules and specific anti-abuse provisions may apply to prevent artificial arrangements aimed at securing unwarranted tax advantages.
How we can help
At Chetcuti Cauchi Advocates, our Tax Practice combines technical expertise with a practical, business-oriented approach to help clients navigate Malta’s evolving tax landscape. We advise on corporate and international tax planning, ensuring compliance while optimising tax efficiency for businesses, high-net-worth individuals, and family offices.
Our services include:
Tax advisory: Assessing eligibility, requirements, and preparing election notices to the Commissioner for Tax and Customs.
Corporate Structuring & Cross-Border Tax Planning: Designing tax-efficient structures for multinational groups, holding companies, and investment vehicles.
Transfer Pricing & Substance Compliance: Ensuring alignment with OECD standards and Maltese regulations.
Tax Risk Management & Dispute Resolution: Representing clients in audits, investigations, and litigation before Maltese tax authorities.
Personal & Family Tax Planning: Advising on succession, wealth preservation, and relocation strategies.
With decades of experience and a multidisciplinary team, we deliver tailored solutions that balance legal compliance with strategic tax optimisation. For personalised assistance, contact our Tax Team
