Tax Alert - Pillar II and TTIR filing obligation exemption

What is the latest news on the status of Pillar Two in Malta?

• To date, Malta has not introduced an Income Inclusion Rules (IIR), an Undertaxed Profits Rule (UTPR) or a Qualified Domestic Minimum Top-up Tax (QDMTT). Moreover, there has been no announcement on the intention of adoption of these rules any time prior to the expiration of the derogation period afforded to Malta under article 50(1) of the Global Minimum Tax Directive (Council Directive (EU) 2022/2523) (the Directive).
• Nonetheless, Malta has recently introduced a framework for an elective tax (the FITWI Framework), published in Legal Notice 188 of 2025, entitled ‘Final Income Tax Without Imputation Regulations, 2025’, (the FITWI Regulations).
• Under the FITWI Regulations, entities may elect to be subject to income tax in Malta at a rate of 15% on the chargeable income as computed under the provisions of the Income Tax Act, instead at a rate in terms of the established income tax rules, as set out in the Income Tax Act and Income Tax Management Act.
• Such an elective tax was intended to give constituent entities located in Malta that are in scope of Pillar Two (Malta CEs) the faculty to pay the tax in Malta and meet the Directive’s minimum tax. Essentially, for the FITWI Framework to achieve its purposes, the tax paid in terms of the Regulation needs to be recognised by IIR– and UTPR–implementing jurisdictions as a Covered Tax that should be fully taken into account when assessing safe harbour eligibility or the top-up tax liability of the Maltese constituent entities under the IIR and/or UTPR.
• This is because, for such tax to be considered Covered Tax, it must first meet the definition of a Tax. The OECD GloBE Model Rules define the term ‘Tax’ as “a compulsory unrequited payment to General Government”, but do not provide guidance vis-à-vis the attributes which a tax must have to fall within such a definition.
• For more information on these Regulations, please refer to our tax alert on this topic.

Are there any compliance obligations Constituent Entities in Malta must adhere to in relation to Pillar Two?

• Although Malta has delayed the implementation of the IIR and UTPR, it has transposed the administrative provisions of the Directive with the aim of ensuring the proper functioning of the Directive.
• Such provisions, found in Regulation 5(2) and 5(3) of European Union Global Minimum Level of Taxation for Multinational Enterprise Groups and Large-Scale Domestic Group Regulations, (S.L. 123.212) (the GloBE Regulations), prima facie set out an obligation on  all Malta CEs to file a top-up tax information return (TTIR) with the Commissioner for Tax and Customs.
• That being said, the same provisions state that the obligation on Malta CEs to file a TTIR shall not apply if the TTIR has been filed by the ultimate parent entity or by a designated filing entity that is located in a jurisdiction which has a qualifying competent authority agreement (QCAA) in effect with Malta for the reporting fiscal year.
• As defined in the same regulations, a “qualifying competent authority agreement” shall mean a bilateral or multilateral agreement or arrangement between two or more competent authorities that provides for the automatic exchange of annual TTIR.” 
• It is therefore key to assess whether Malta is party to any QCAA. In this respect, the TTIR dissemination approach outlined in Council Directive 2025/872 amending Directive 2011/16/EU on administrative cooperation in the field of taxation (DAC9) and in the OECD Guidelines on the GloBE Information Return – both of which were published after the Directive - do not provide that jurisdictions like Malta, as a jurisdiction implementing neither IIR, UTPR or QDMTT, will be entitled to an automatic exchange of information of the TTIR.
• Whilst the dissemination approach actually adopted by EU and non-EU countries is yet to be seen, and developments or deviations of such a dissemination approach are not excluded, currently, it would seem that Regulation 5(3) of the Regulations cannot be invoked until Malta remains a non-implementing jurisdiction.
• Nevertheless, this does not mean that Malta CEs will be obliged to file a TTIR in Malta. This is because, the spirit of paragraph 16 of the preamble of the GloBE Directive and paragraph 17 of the preamble of DAC9 are reflected in the Guidelines published by the Malta Tax and Customs Administration (MTCA GloBE Guidelines) on these same regulations, wherein it is clarified that a Malta CE cannot file a TTIR in Malta until Malta delays the application of the IIR and UTPR – and this is regardless of whether there is a QCAA in place with Malta as provided for in Regulation 5(2) or not.  
• So far it appears that the exemption above does not extend for the notification requirement.

What about the compliance obligations applicable to Ultimate Parent Entities located in Malta?

• The exemption from the TTIR filing obligation in Malta also applies for Malta CEs forming part of a group whose UPE is located in Malta. Therefore, such Malta UPEs and their local subsidiaries cannot file a TTIR in Malta until Malta continues to delay the application of the IIR and UTPR.
• However, this does not mean that such Malta UPEs are completely absolved from any compliance obligations. Indeed, as clarified in the MTCA GloBE Guidelines, Malta UPEs are required to nominate a designated filing entity located in another Member State which has not delayed the application of the IIR and UTPR or a third country jurisdiction to file the TTIR on behalf of the Malta UPE.
• When it comes to third country jurisdictions, the Directive provides that such a jurisdiction must have, for the reporting fiscal year, a QCAA in effect with the Member State in which the ultimate parent entity is located. It remains to be seen how this proviso will apply in practice in light of the principles underpinning the DAC9 and the OECD dissemination approach, which mandate that jurisdictions which did not introduce IIR, UTPR or QDMTT will not be entitled to the automatic exchange of information of the TTIR, which is one of the prerequisites of a QCAA.
• Furthermore, so to ensure the proper functioning of the Directive, the Malta UPEs and their Malta CEs are obliged by law to provide the designated filing entity nominated by the Malta UPE with information necessary for the latter to ensure the proper completion and submission of the TTIR.

Next steps

• Malta CEs shall continue to monitor developments in regards to Pillar two notification form and any other compliance obligations as they are announced.
• Furthermore, Malta CEs shall continue to monitor top-up tax liability arising under an IIR or UTPR outside of Malta. Malta UPEs and their Malta CEs should also monitor their position in light of the provisions of the interaction of Articles 50(2) and 56 of the Directive, which mandate the application of the UTPR as from the financial year beginning on 31 December 2023 for MNE Groups with ultimate parent entities located in jurisdictions which delayed the implementation of the IIR and UTPR – including Malta. 

Contacts for further information