Group structures are common in Malta, especially among companies involved in cross-border operations or tax planning. These setups often require separate legal entities that still need to be managed and reported on as one. Preparing consolidated financial information can be difficult, particularly when data is inconsistent or delayed across entities.
Malta's Fiscal Unit regime was introduced to help reduce administrative pressure in these situations. While it supports a centralised tax payment model, the underlying accounting work still needs to be done properly.
What the Fiscal Unit regime involves
Under this regime, a group of eligible companies can form a Fiscal Unit and be treated as a single taxpayer. The principal taxpayer is responsible for filing one income tax return that covers the entire group. This simplifies the filing process and allows for a flat rate of tax to be applied across the group.
However, the member entities are still required to maintain their own accounting records and meet statutory reporting obligations. This means the principal taxpayer must collect and consolidate accurate information from all members.
Common issues in group reporting
Group reporting becomes more difficult when accounting systems and processes differ between entities. Some of the more common challenges include:
- Different account structures or reporting templates
- Inconsistent application of accounting policies
- Delays in receiving information from group members
- Intercompany balances that do not reconcile
- Local teams preparing reports in different currencies or formats
These issues can slow down month-end reporting, create audit issues, and lead to difficulties when preparing consolidated data for tax or internal planning purposes.
The role of financial studies in improving reporting
Financial studies can help group finance teams better understand the structure and performance of the group. These can take the form of reporting reviews, intercompany mapping exercises, or reviews of accounting policies application. When done early, these studies canreduce the risk of reporting errors or late submissions.
Supporting group valuations and restructuring
In some cases, group reporting is also needed to support a change in structure, the formation of a Fiscal Unit, or the disposal of certain entities. In these instances, valuations may be required to determine arm's length transactions, internal transfers, or fair value assessments.
BDO Malta supports clients in preparing the accounting input, as well as the fair value determination, required for these exercises. This includes reviewing historical financials, assisting with consolidation adjustments, and preparation of valuation assignments and reports where needed.
Consolidation support from an accounting perspective
Whether you are reporting for tax purposes under the Fiscal Unit regime or preparing financials for internal use, having clean and consistent data across your group is essential. BDO Malta's accounting advisory team provides support in reviewing group structures, aligning reporting templates, and preparing consolidated financial information to assist both finance teams and auditors.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
