Why Malta’s deferral of the OECD minimum tax could prove a long-term advantage

Malta’s decision to delay the implementation of the OECD’s Global Minimum Tax may ultimately prove a strategic move, as ongoing revisions to the framework point to a ruleset that has not yet stabilised.

The Global Anti-Base Erosion (GloBE) Rules, approved in December 2021 by the OECD’s Inclusive Framework on Base Erosion and Profit Shifting – which comprises 154 jurisdictions including Malta – are designed to ensure that large multinational enterprises are subject to a minimum effective tax rate of 15 per cent on any excess profits arising in each jurisdiction in which they operate.

Within the European Union, the rules were transposed through a Council Directive, setting out a coordinated approach to Pillar Two of the OECD agreement. Under the EU Directive, the Income Inclusion Rule (IIR) came into force in most EU Member States in 2024, with the Undertaxed Profits Rule (UTPR) following in 2025.

However, pursuant to Article 50 of the Directive, Malta, along with a small number of other Member States, have elected to defer the application of both rules until 2030.

Speaking to BusinessNow.mt, the Malta Institute of Taxation (MIT) stresses that this deferral does not mean the global minimum tax rules do not apply to multinational groups with a presence in Malta. Rather, it means that Malta itself is not required to levy top-up taxes under these rules during the deferral period.

Companies may nonetheless choose to pay such top-up taxes in Malta after changes introduced in 2025.

In assessing whether the delay vindicates government policy, the Institute points to the evolving nature of the OECD framework. Since their initial publication in 2021, the GloBE Rules’ accompanying Commentary has already been updated six times, reflecting both the technical complexity of the rules and the need to ensure uniform application across jurisdictions.

Some of these updates, they note, introduced retroactive changes that effectively neutralised incentives put in place by certain countries in response to the global minimum tax. Further amendments are widely expected in the coming months and years.

“In that context, there is merit in arguing that postponing implementation pending stabilisation of the framework will enable national governments to design more durable long-term tax policies,” the Institute said.

The US exemption

The framework has not been without controversy, particularly following the introduction of a so-called ‘Side-by-Side’ package aimed at addressing level-playing-field concerns.

According to the MIT, the Side-by-Side package acknowledges that the United States maintains a domestic and international tax regime that produces outcomes equivalent to the GloBE Rules.

This recognition has raised questions about whether the global minimum tax could be undermined if US multinationals are effectively shielded from top-up taxes imposed elsewhere.

Nevertheless, the Institute notes that the EU has confirmed the application of the Side-by-Side package within the EU Directive, and do not expect the global minimum tax framework to be discontinued as a result.

While concerns persist internationally over whether US multinationals may enjoy a competitive advantage – particularly given evidence that large shares of foreign profits continue to be booked in low-tax jurisdictions – the Malta Institute of Taxation stopped short of speculating on whether such dynamics could influence corporate relocation or headquarters decisions over the long term.