The most notable reform is the introduction of a formal out-of-court settlement mechanism. This allows taxpayers to voluntarily settle outstanding liabilities through an agreement with the Commissioner for Tax and Customs or the Director of Social Security, depending on the case.
Key features of this mechanism include:
This mechanism offers businesses and individuals with irregularities a chance to regularise their affairs, but with significantly higher financial consequences. Previously, settlements were informal and penalties less severe. Now, even without criminal prosecution, the financial risk of non-compliance is at an all-time high.
New criminal offences for breaching tax agreements
The Criminal Code has been updated to penalise breaches of tax settlement agreements:
- Fraudulent breach: If a taxpayer fraudulently violates a settlement agreement, they face up to 4 years imprisonment or a fine of up to €2,500,000, or both.
- Unjustified breach: Even non-fraudulent failure to comply without reasonable cause is an offence, punishable by up to 2 years imprisonment or a fine of up to €500,000, or both.
- Proceeds of crime: Gains from a fraudulent breach are considered proceeds of crime, allowing the government to apply asset-freezing and confiscation laws.
Harmonised enforcement across Maltese tax laws
The Act harmonises enforcement procedures across various revenue laws, giving the Commissioner consistent powers to investigate and settle cases involving income tax, VAT, stamp duty, and social security contributions. This streamlines the process and strengthens the government’s ability to tackle fiscal evasion.
Conclusion
This legislative reform introduces a structured and transparent pathway for resolving tax irregularities in Malta. By formalising settlement procedures and aligning enforcement across fiscal laws, the Act encourages voluntary compliance while preserving accountability. Taxpayers now have clearer options to regularise their affairs, supported by defined processes and legal safeguards. Businesses and individuals are advised to review their positions and engage proactively with the new framework to ensure alignment with national tax obligations.
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