The Malta Independent 22 January 2019, Tuesday

Ukrainian media report Malta placed on list of offshore zones, Finance Ministry not informed

Helena Grech Sunday, 21 January 2018, 08:00 Last update: about 2 years ago

Sections of the Ukrainian media have reported that Malta has been placed on the Ukrainian government's list of offshore zones, together with Estonia and Latvia.

The Malta Independent on Sunday contacted the Finance Ministry for comment but was told that, as Malta has not received an official communication on the matter, it could not comment.

An article by Interfax-Ukraine, a Ukrainian-based news portal, says that Malta has been placed on "the list of countries whose transactions with contractors are subject to control under the Transfer Pricing Law".


Transfer pricing refers to the practice by which multi-national corporations set prices for goods and services between various entities of the same parent company. Aggressive transfer pricing practice plays a major role in tax avoidance as it allows multinational companies to pay its corporate tax rate where the company is registered, which tends to be jurisdictions that offer advantageous rates.

Malta has had its tax imputation system come under heavy criticism as companies with foreign shareholding enjoy a 6/7 tax rebate, effectively allowing them to pay five per cent corporate tax on company profits.

The Estonian media also reports that Malta has been included in the list as of late 2017, while it also reported that the Estonian Minister of Foreign Affairs Sven Mikser explained how countries can be placed on the list if their corporate taxation rate is more than five per cent lower than Ukraine's.

It also reported that a consequence of being placed on the list is that a company based in a country that has been placed on the list, such as allegedly Malta - according to the report, would have to pay extra VAT and income tax, which increases its costs and worsens its competitive position.

While the Maltese government maintains that it has not received any official communication on the matter, questions have begun to be asked as to whether, apart from Ukraine possibly taking issue with Malta's incentives for foreign businesses to set up shop on the island, another issue could also be at hand.

Malta's controversial Citizenship-by-Investment scheme, which is set to be extended, has received much interest from wealthy Russian tycoons. The Maltese government refuses to publish the names of citizenship buyers but does publish a full list of people who have become Maltese citizens either by investment, marriage or through naturalisation.

A scan of the list found many names in wealthy Russian society and the local media quoted a report tabled in Parliament that confirmed that 54 per cent of those buying Maltese citizenship are of Russian descent.

Ukraine could also take issue over Russian money pouring into Malta in exchange for free movement across all EU member states, while the country was brought to its knees by Russia for flirting with the idea of EU accession.

Since Ukraine signed the association agreement with the EU's 27 nation bloc, Russia has retaliated in a number of ways such as banning the importation of Ukrainian chocolate and other moves to hurt Ukraine economically.

In 2014, heavy protests erupted with mainly Western Ukraine wanting closer ties with the EU and Eastern Ukraine wanting closer ties with Russia, with some extremists also wanting the eastern part of the country to become part of Russia, in the same way that Crimea was annexed.



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