Malta
This report analyses the implementation of the AEOI Standard in Malta with respect to the requirements of the AEOI Terms of Reference. It assesses both the legal frameworks put in place to implement the AEOI Standard and the effectiveness of the implementation of the AEOI Standard in practice.
The methodology used for the peer reviews and that therefore underpins this report is outlined in Chapter 2.
Overall findings
AEOI legal framework
Malta’s legal framework implementing the AEOI Standard is in place and is consistent with the requirements of the AEOI Terms of Reference. This includes Malta’s domestic legislative framework requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (CR1) and its international legal framework to exchange the information with all of Malta’s Interested Appropriate Partners (CR2).
Effectiveness of AEOI in practice
Malta’s implementation of the AEOI Standard is partially compliant with the requirements of the AEOI Terms of Reference to ensure the effectiveness of the AEOI Standard in practice. While Malta is on track with respect to exchanging the information in an effective and timely manner (CR2), there are significant issues with respect to ensuring that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures (CR1).
Overall rating in relation to the effectiveness in practice: Partially Compliant
General context
Malta commenced exchanges under the AEOI Standard in 2017.
In order to provide for Reporting Financial Institutions to collect and report the information to be exchanged, Malta:
introduced the Cooperation with Other Jurisdiction on Tax Matters (Amendment) Regulations, 2015; and
Under this framework Reporting Financial Institutions were required to commence the due diligence procedures in relation to New Accounts from 1 January 2016. With respect to Preexisting Accounts, Reporting Financial Institutions were required to complete the due diligence procedures on High Value Individual Accounts by 31 December 2016 and on Lower Value Individual Accounts and Entity Accounts by 31 December 2017.
Following the initial Global Forum peer review, Malta amended its legislative framework to address issues identified, effective from 1 January 2016.
With respect to the exchange of information under the AEOI Standard, Malta:
is a Party to the Convention on Mutual Administrative Assistance in Tax Matters and activated the associated CRS Multilateral Competent Authority Agreement in time for exchanges in 2017;
has in place European Directive 2011/16/EU on Administrative Cooperation in the Field of Taxation as amended by Directive 2014/107/EU; and
has in place European Union agreements with five European third countries.1
put in place two bilateral agreements.2
Table 1 sets out the number of Financial Institutions in Malta that reported information on Financial Accounts in 2021 as defined in the AEOI Standard (essentially because they maintained Financial Accounts for Account Holders, or that were related to Controlling Persons, resident in a Reportable Jurisdiction). It also sets out the number of Financial Accounts that they reported in 2021. In this regard, it should be noted that Malta requires the reporting of Financial Accounts based on a prescribed list of exchange partners and some accounts may be required to be reported more than once (e.g. jointly held accounts or accounts with multiple related Controlling Persons), which is reflected in the figures below. These figures provide key contextual information to the development and implementation of Malta’s administrative compliance strategy, which is analysed in the subsequent sections of this report.
Table 2 sets out the number of exchange partners to which information was successfully sent by Malta in the past few years (including where the necessary frameworks were in place, containing an obligation on Reporting Financial Institutions to report information, but no relevant Reportable Accounts were identified). These figures provide key contextual information in relation to Malta’s exchanges in practice, which is also analysed in subsequent sections of this report.
In order to provide for the effective implementation of the AEOI Standard, in Malta:
the International and Corporate Tax Unit of the Office of the Commissioner for Revenue (the tax authority) has the primary responsibility to ensure the effective implementation of the due diligence and reporting obligations by Reporting Financial Institutions and for exchanging the information with Malta’s exchange partners;
technical solutions necessary to receive and validate the information reported by Reporting Financial Institutions were put in place through the Commissioner for Revenue AEOI Portal, which allows for CRS XML Schema file upload and which validates the data files through a validation module; and
the Common Transmission System (CTS), and in the European Union (EU) the Common Communication Network (CCN), are used for the exchange of the information, along with the associated file preparation and encryption requirements.
It should be noted that the review of Malta’s legal frameworks implementing the AEOI Standard concluded with the determination that Malta’s domestic and international legal frameworks are In Place. This has been taken into account when reviewing the effectiveness of Malta’s implementation of the AEOI Standard in practice.
Findings and conclusions on the legal frameworks
The detailed findings and conclusions on the AEOI legal frameworks for Malta are below, organised per Core Requirement (CR) and sub-requirement (SR), as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Domestic legal framework: Jurisdictions should have a domestic legislative framework in place that requires all Reporting Financial Institutions to conduct the due diligence and reporting procedures in the CRS, and that provides for the effective implementation of the CRS as set out therein.
Malta’s domestic legislative framework is in place and contains all of the key aspects of the CRS and its Commentary requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (SRs 1.1 – 1.3). It also provides for a framework to enforce the requirements (SR 1.4).
SR 1.1 Jurisdictions should define the scope of Reporting Financial Institutions consistently with the CRS.
Malta has defined the scope of Reporting Financial Institutions in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.2 Jurisdictions should define the scope of Financial Accounts and Reportable Accounts consistently with the CRS and incorporate the due diligence procedures to identify them.
Malta has defined the scope of the Financial Accounts that are required to be reported in its domestic legislative framework and incorporated the due diligence procedures that must be applied to identify them in accordance with the CRS and its Commentary.
SR 1.3 Jurisdictions should incorporate the reporting requirements contained in Section I of the CRS into their domestic legislative framework.
Malta has incorporated the reporting requirements in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.4 Jurisdictions should have a legislative framework in place that allows for the enforcement of the requirements of the CRS in practice.
Malta has a legislative framework in place to enforce the requirements in accordance with the CRS and its Commentary.
CR2 International legal framework: Jurisdictions should have exchange relationships in effect with all Interested Appropriate Partners as committed to and that provide for the exchange of information in accordance with the Model CAA.
Malta’s international legal framework to exchange the information is in place, is consistent with the Model CAA and its Commentary and provides for exchange with all of Malta’s Interested Appropriate Partners (i.e. all jurisdictions that are interested in receiving information from Malta and that meet the required standard in relation to confidentiality and data safeguards) (SRs 2.1 – 2.3).
SR 2.1 Jurisdictions should have exchange agreements in effect with all Interested Appropriate Partners that permit the automatic exchange of CRS information.
Malta has exchange agreements that permit the automatic exchange of CRS information in effect with all its Interested Appropriate Partners.
SR 2.2 Such an exchange agreement should be put in place without undue delay, following the receipt of an expression of interest from an Interested Appropriate Partner.
Malta put in place its exchange agreements without undue delay.
SR 2.3 Jurisdictions should ensure that the exchange agreements in effect provide for the exchange of information in accordance with the requirements of the Model CAA.
Malta’s exchange agreements provide for the exchange of information in accordance with the requirements of the Model CAA.
Findings and conclusions in relation to effectiveness in practice
The detailed findings and conclusions in relation to effectiveness in practice of AEOI for Malta are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Effectiveness in practice: Jurisdictions should ensure that in practice Reporting Financial Institutions correctly implement the due diligence and reporting procedures, which includes a requirement for jurisdictions to have in place an administrative framework to ensure the effective implementation of the CRS.
Malta’s implementation of the AEOI Standard is partially compliant with respect to ensuring that Reporting Financial Institutions are correctly conducting the due diligence and reporting procedures. More specifically, while Malta is meeting expectations with respect to collaboration with its exchange partners to ensure effectiveness (SR 1.6), there are significant issues with respect to ensuring effectiveness in a domestic context, such as through having an effective administrative compliance framework and related procedures (SR 1.5). Malta should continue its implementation process to ensure its effectiveness, including by addressing the recommendations made.
SR 1.5 Jurisdictions should ensure that in practice Reporting Financial Institutions identify the Financial Accounts they maintain, identify the Reportable Accounts among those Financial Accounts, as well as their Account Holders, and where relevant Controlling Persons, by correctly conducting the due diligence procedures and collect and report the required information with respect to each Reportable Account. This includes having in place:
an effective administrative compliance framework to ensure the effective implementation of, and compliance with, the CRS. This framework should:
be based on a strategy that facilitates compliance by Reporting Financial Institutions and which is informed by a risk assessment in respect of the effective implementation of the CRS that takes into account relevant information sources (including third party sources);
include procedures to ensure that Financial Institutions correctly apply the definitions of Reporting Financial Institutions and Non-Reporting Financial Institutions;
include procedures to periodically verify Reporting Financial Institutions’ compliance, conducted by authorities that have adequate powers with respect to the reviewed Reporting Financial Institutions, with procedures to access the records they maintain; and
effective procedures to ensure that Financial Institutions, persons or intermediaries do not circumvent the due diligence and reporting procedures;
effective enforcement mechanisms to address non-compliance by Reporting Financial Institutions;
strong measures to ensure that valid self-certifications are always obtained for New Accounts;
effective procedures to ensure that each, or each type of, jurisdiction-specific Non-Reporting Financial Institution and Excluded Account continue to present a low risk of being used to evade tax; and
effective procedures to follow up with a Reporting Financial Institution when undocumented accounts are reported in order to establish the reasons why such information is being reported.
In order to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, Malta implemented some of the requirements in accordance with expectations. However, significant issues were identified. The key findings were as follows:
Malta has a strategy to ensure compliance with the AEOI Standard and has partially implemented this strategy. Once implemented, Malta’s compliance strategy should facilitate compliance and it appears to incorporate a credible approach to enforcement. A recent mandate was given to the tax authority to conduct onsite visits at Financial Institutions. Malta intends to keep its compliance strategy and risk assessment under review to ensure its effectiveness on an ongoing basis. However, Malta has not yet implemented many key aspects of its compliance plan, and has not yet conducted in-depth reviews, onsite visits or an inspection of records held by Reporting Financial Institutions. There does not appear to be a formalised plan or activity undertaken to ensure that the interaction between Malta’s AEOI and AML frameworks always results in reporting in accordance with the AEOI Standard.
Malta appears to have a well-developed plan to understand its population of Financial Institutions, including relevant non-regulated entities, utilising various relevant information sources, such as registers of regulated Financial Institutions, registers of trusts and the Foreign Financial Institution list for FATCA purposes. Malta intends to keep its understanding of its Financial Institution population up to date on a routine basis. Malta has commenced some of these activities on the verification of its Financial Institution population.
The institution responsible for implementing Malta’s compliance strategy appears to have the necessary powers to discharge its functions, although the adequacy of its resourcing is unclear. With respect to resourcing, Malta has assigned the equivalent of two full time staff to monitor and ensure compliance by Reporting Financial Institutions, which have access to IT systems and tools to conduct risk assessments. Malta’s plan to train the team responsible for conducting verification activities, such as audits, has been delayed due to the COVID-19 pandemic and attempts to carry out this training are back on track. Furthermore, activities to ensure that valid self-certifications are always obtained when required do not appear to be undertaken as part of a distinct and formalised policy.
It appears that Malta has the ability to effectively enforce the requirements, including through the application of dissuasive penalties and sanctions for non-compliance. However, it is unclear whether Malta is in a position to take effective action to address circumvention of the requirements if such circumvention is detected. It appears that effective action is commenced to follow up on undocumented accounts.
It is noted that Malta does not have a jurisdiction-specific list of Non-Reporting Financial Institutions or Excluded Accounts for ongoing monitoring.
Table 3 provides a summary of the specific activities undertaken, or that are planned to be undertaken, in relation to each of the key parts of the framework described above.
With respect to the Financial Account information collected and sent by Malta, the presence of the key data points of the Tax Identification Numbers and dates of birth appeared to be in line with most other jurisdictions, as did the level of undocumented accounts. More generally, many of the exchange partners that received a significant number of records from Malta indicated that they achieved a success rate when matching the information received from Malta with their taxpayer database that was broadly equivalent to, or better than, what they usually achieve.
Based on these findings it was concluded that Malta is partially meeting expectations in ensuring that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, including by having in place the required administrative compliance framework and related procedures. More specifically, significant issues have been identified, including with respect to implementing plans to carry out verification activities and ensuring that there is an appropriate scope of compliance activities. Malta should therefore continue its implementation process accordingly, including by addressing the recommendations made.
Malta should expand the scope of its risk assessment of the implementation of the AEOI Standard and use a range of information sources to identify, assess and understand the compliance risks related to Reporting Financial Institutions in Malta.
Malta should continue implementing its plan to identify all Reporting Financial Institutions and ensure that they report information as required.
Malta should commence activities to effectively verify that the information reported by Financial Institutions is complete and accurate.
Malta should develop and implement a formalised process to monitor and verify whether self-certifications have been obtained as required with a particular focus on the monitoring and verification of the collection of self-certifications where they are not obtained as part of the account opening procedures.
Malta should continue implementing its planned activities to follow up with Reporting Financial Institutions reporting undocumented accounts, including to understand the reason for it and to ensure they are correctly applying the definition.
Malta should develop and implement a policy that provides that, where circumvention is identified, action is taken to address it.
Malta should actively monitor the interaction between its AML framework and the CRS framework to ensure that the collection and reporting of information is always in accordance with the AEOI Standard, including requirements to identify Controlling Persons of a trust or similar legal arrangements in accordance with paragraphs 134, 135 and 136 of the Commentary on Section VIII.
SR 1.6 Jurisdictions should collaborate on compliance and enforcement. This requires jurisdictions to:
use all appropriate measures available under the jurisdiction’s domestic law to address errors or non-compliance notified to the jurisdiction by an exchange partner; and
have in place effective procedures to notify an exchange partner of errors that may have led to incomplete or incorrect information reporting or non-compliance with the due diligence or reporting procedures by a Reporting Financial Institution in the jurisdiction of the exchange partner.
In order to collaborate on compliance and enforcement, it appears that Malta implemented all of the requirements in relation to issues notified to them (i.e. under Section 4 of the MCAA or equivalent) in accordance with expectations. While no such notifications have yet been received, Malta has the necessary systems and procedures to process them as required. It also appears that Malta will notify its partners effectively of errors or suspected non-compliance it identifies when utilising the information received.
Based on these findings it was concluded that Malta is fully meeting expectations in relation to collaborating with its exchange partners to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures. Malta is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
CR2 Effectiveness in practice: Jurisdictions should exchange the information effectively in practice, in a timely manner, including by sorting, preparing, validating -and transmitting it in accordance with the AEOI Standard.
Malta’s implementation of the AEOI Standard is on track with respect to exchanging the information effectively in practice, including in relation to sorting, preparing and validating the information (SR 2.4), correctly transmitting the information in a timely manner (SRs 2.5 – 2.8) and providing corrections, amendments or additions to the information (SR 2.9). Malta is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
SR 2.4 Jurisdictions should sort, prepare and validate the information in accordance with the CRS XML Schema and the associated requirements in the CRS XML Schema User Guide and the File Error and Correction-related validations in the Status Message User Guide (i.e. the 50000 and 80000 range).
Four exchange partners highlighted particular issues with respect to preparation and format of the information sent by Malta (representing 5% of its partners). These generally related to the use of the same DocRefID in more than one file. More generally, seven (or 9%) of Malta’s exchange partners reported rejecting more than 25% of the files received, of which five (or 6%) reported rejecting more than 50% of files received, due to the technical requirements not being met. This is a relatively high amount when compared to other jurisdictions and it has increased over time. Malta has still not yet addressed the issues.
Based on these findings it was concluded that, overall, Malta is meeting expectations in relation to sorting, preparing and validating the information. It was also noted that there is room for improvement with respect to preparing and validating the files properly. Malta is therefore encouraged to continue its implementation process accordingly, including by addressing the recommendation made.
Malta should continue to work with its exchange partners to address the issues raised.
SR 2.5 Jurisdictions should agree and use, with each exchange partner, transmission methods that meet appropriate minimum standards to ensure the confidentiality and integrity of the data throughout the transmission, including its encryption to a minimum secure standard.
In order to put in place an agreed transmission method that meets appropriate minimum standards in confidentiality, integrity of the data and encryption for use with each of its exchange partners, Malta linked to the CTS and the CCN, which is used for exchanges within the EU.
Based on these findings it was concluded that Malta is fully meeting expectations in relation to agreeing and using appropriate transmission methods with each of its partners. Malta is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.6 Jurisdictions should carry out all exchanges annually within nine months of the end of the calendar year to which the information relates.
Feedback from Malta’s exchange partners did not raise any concerns with respect to timeliness of the exchanges by Malta and therefore with respect to Malta’s implementation of this requirement.
Based on these findings it was concluded that Malta is fully meeting expectations in relation to exchanging the information in a timely manner. Malta is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.7 Jurisdictions should send the information in accordance with the agreed transmission methods and encryption standards.
Feedback from Malta’s exchange partners did not raise any concerns with respect to Malta’s use of the agreed transmission methods and therefore with Malta’s implementation of this requirement.
Based on these findings it was concluded that Malta is fully meeting expectations in relation to sending the information in accordance with the agreed transmission methods and encryption standards. Malta is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.8 Jurisdictions should have the systems in place to receive information and, once it has been received, should send a status message to the sending jurisdictions in accordance with the CRS Status Message XML Schema and the related User Guide.
Ten exchange partners highlighted delays in the sending of status messages by Malta, representing 10% of its partners. This represents a relatively high proportion of partners. Malta has still not yet sent all of the status messages due to be sent in 2021 and is discussing the issues with its exchange partners.
Based on these findings it was concluded that Malta is partially meeting expectations in relation to the receipt of the information. However, significant issues have been identified, including with respect to sending status messages to partners in a timely manner following exchanges. Malta should continue its implementation process to ensure its ongoing effectiveness, including by addressing the recommendation made.
Malta should ensure it sends status messages to all of its exchange partners in a timely manner.
SR 2.9 Jurisdictions should respond to a notification from an exchange partner as referred to in Section 4 of the Model CAA (which may include Status Messages) in accordance with the timelines set out in the Commentary to Section 4 of the Model CAA. In all other cases, jurisdictions should send corrected, amended or additional information received from a Reporting Financial Institution as soon as possible after it has been received.
Malta appears ready to respond to notifications and to provide corrected, amended or additional information in a timely manner and no such concerns were raised by Malta’s exchange partners and therefore with respect to Malta’s implementation of these requirements.
Based on these findings it was concluded that Malta appears to be meeting expectations in relation to responding to notifications from exchange partners and the sending of corrected, amended or additional information. Malta is encouraged to continue to ensure the ongoing effectiveness of its implementation.