Government tables bill to overhaul tax enforcement and introduce tougher penalties for financial crime

The Government has tabled a Bill in Parliament to amend a number of Malta’s tax laws, marking a significant step in its efforts to modernise the country’s fiscal enforcement framework and tackle financial crime more effectively.

The wide-ranging Bill proposes amendments to key revenue laws, including the Social Security Act, the Duty on Documents and Transfers Act, the Income Tax Management Act, and the Value Added Tax Act. It also introduces changes to the Criminal Code to reinforce the Commissioner for Tax and Customs’ investigative and enforcement powers.

Among the most notable proposals is the establishment of a harmonised framework for out-of-court settlements across all major tax laws. This mechanism will allow taxpayers to resolve tax breaches through formal agreements with the Commissioner, subject to the payment of additional penalties ranging from €10,000 to €1 million. Taxpayers who enter into such agreements will be exempt from criminal prosecution for the offences covered, though civil liability will remain for any amounts not included in the agreement. Importantly, this framework may be used even when criminal proceedings are underway, as long as no final judgment has been issued.

The statute of limitations will also be suspended during the negotiation period, helping prevent procedural obstacles from delaying the resolution of complex cases.

The Bill introduces the legal concept of “connected breaches” – breaches of law that are linked to or committed in furtherance of a primary fiscal breach. These may include premeditated acts to evade taxes, efforts to conceal or facilitate such breaches, or actions taken to obtain the means to commit the offence. However, serious offences such as extortion, bribery, corruption, trading in influence, and abuse of official authority – as outlined in the Criminal Code – are explicitly excluded from being treated as connected breaches for the purposes of out-of-court settlement.

To further discourage abuse, the Bill proposes two new criminal offences related to violations of settlement agreements with Government departments. The first – fraudulent breaches of such agreements – carries a penalty of up to four years’ imprisonment or a fine of up to €2.5 million. The second – unjustified breaches – is punishable by up to two years’ imprisonment or a fine of up to €500,000.

The Government has expressed hope for a constructive debate in Parliament and the timely enactment of what it described as an “important reform”.