THE ACCOUNTANT
THE ACCOUNTANT ISSUE 4 | 2024
THE ACCOUNTANT magazine is issued quarterly.
Published by
EDITOR Maria Cauchi Delia
DESIGNER
Daniela Cutajar
ADVERTISING INQUIRIES theaccountant@miamalta.org
All correspondence, articles for publication and enquiries are to be addressed to:
The Editor MIA Professional Limited Level 1, Tower Business Centre Tower Street, Swatar BKR 4013, Malta.
The Institute does not necessarily concur with the views expressed by the authors in the articles published in this journal. The publishers and authors do not assume any responsibility for loss or damages incurred by any person acting or refraining from action as a result of any view expressed in this journal.
If you would like to be featured in this publication, please visit www.bit.ly/GetRecognised for more information.
President’s Address Mark Bugeja
As another year draws to a close, we reflect on the past and set out our expectations for the year ahead. If we want to be realistic, keeping up with the pace of change has become a very big ask. Since my last contribution in The Accountant, the world has continued to change dramatically, and the only constant of this change is the unpredictability that it is creating.
In just over a few weeks, we have seen President Trump’s return to the White House, backed with comfortable majorities in the House and Senate, escalating tensions in the Middle East, the collapse of the German Government, and the formation of a new European Commission and Parliament with a stronger hard-right influence. These events inevitably pose existential questions to the European Union (EU), as outlined in Mario Draghi’s recent report, which highlights the end of an era when the European Union could depend on cheap Russian energy, limitless Chinese markets, and United States security guarantees. Coupled with Europe’s declining competitiveness and slow innovative pace, the EU urgently needs to do some soul searching.
As part of the wider community, this has an impact on Malta too, though the implications are possibly distinct. While most of Europe is struggling with slow growth, Malta has maintained robust economic growth and employment creation in recent years. Our challenges differ from those of the broader continental landscape. In particular, the European push towards harmonised tax systems has further curtailed the fiscal independence of individual nations, making the cultivation of a stronger competitiveness culture in Malta all the more critical. This changing environment requires Malta to adopt a strategic and cohesive approach to safeguard and enhance its competitive position in the years ahead.
In this context, the Institute has been at the forefront of advocating for a strategic direction that places competitiveness at the core of Malta’s agenda. We continue to call for unified action across all levels of Government that consolidates diverse initiatives under a shared vision. While welcoming recent efforts to establish long-term economic strategies, we must emphasise that these need to be translated into tangible plans and action points. This is what the accountancy profession is advocating for — a clear and consolidated approach to addressing the issues that we are all facing.
The need for such direction was a dominant theme that emerged during the Institute’s Tax Conference where participants emphasised the urgent need for action across wide areas, together with a reduction in administrative bureaucracy. Among the key concerns raised was the length of time that the proposals regarding Qualified Refundable Tax Credits (QRTCs) are taking to be finalised. We are encouraged by the references to QRTCs in the Budget 2025 proposals, which signal recognition of their importance to Malta’s fiscal strategy. However, this must translate into concrete action within a reasonable timeframe.
During meetings with international clients, local professionals are being asked what Malta’s offering will be, a question that cannot be answered at this stage. The urgency of this matter is compounded by the fact that Malta is gradually approaching the halfway mark of the six-year derogation period granted for implementing Pillar II of the Organisation for Economic Co-operation and Development’s global tax reform framework. Failure to conclude this matter, risks leaving Malta unprepared for the changes ahead and can potentially erode its attractiveness as a destination for quality business investment.
In this context, the profession therefore calls for a strategic, transparent and collaborative approach that aligns fiscal policies with Malta’s long-term economic priorities. Stakeholders, including industry professionals and policymakers, must come together to ensure that Malta retains its competitive standing while fulfilling its international commitments. Time is of the essence; the following months will serve as a litmus test for the country’s ability to respond effectively to the challenges ahead.
As an Institute, we have continued to play our part at different levels.
We have maintained continuous communication with the Accountancy Board to ensure that the necessary updates to legislation and regulations, some stemming from international developments, are effectively transposed and reflected locally. This involves some of the most critical areas for the profession, including the definition of an accountant, the services that our professionals can provide and the updating of the Code of Ethics.
In addition to these fundamental updates, discussions have also addressed the need to devise new Continuing Professional Education (CPE) requirements, especially in light of the requirements of the Corporate Sustainability Reporting Directive (CSRD). As CSRD nears its final stages of transposition into Maltese Law, it is clear that this Directive represents a complex and far-reaching shift that will significantly impact the accountancy profession and the business environment within
which we operate. The changes span multiple pieces of legislation, including the Companies Act and the Accountancy Profession Act.
Our primary role throughout this process has been to ensure that the profession adheres to these evolving requirements while maintaining the highest standards of quality across the board. With the implementation of CSRD, alongside the green transition and the increasing importance of sustainability reporting, we see enormous potential for the accountancy profession to play a pivotal role in driving positive change. We are excited about the opportunities that these developments could bring and are committed to ensuring that the profession is equipped to seize them. This is also reflected in the extensive CPE programme the Institute is developing for the year ahead.
Ultimately, we are eager to see the profession not only meet the challenges but also flourish and make the most of the opportunities in sustainability reporting and the broader green transition.
On behalf of the Institute, I would like to thank all our members for their continued dedication and service. A special word of thanks goes to all the MIA team, the Council members and all professionals who contribute regularly through the Institute’s Committees and Groups for their incessant efforts throughout the year.
I wish you all a peaceful Christmas and a prosperous New Year.
Message from MIA CEO Maria Cauchi Delia
It is my pleasure to welcome you to the fourth and final edition of The Accountant for 2024.
During this year, a variety of themes that continue to transform the profession and the industry as a whole were addressed by the MIA, with every element tackled largely fitting in with the three pressing challenges that are reshaping the local business landscape: enabling sustainability, mastering technology, and enhancing competitiveness. Strategic leadership and longterm thinking are essential to view these challenges not as obstacles, but as opportunities for growth and innovation. These themes have been central to the work of our members within their respective organisations, and they form the backbone of our strategy for the years ahead. Our job is to push the profession towards meaningful change, beyond talk, while ensuring that members are always one step ahead in being ready for what is to come.
In all this, the most imperative issue remains the need to attract a diverse talent pool for the future. Without the necessary skills and people to drive these crucial changes, all other efforts falter. As the demand for skilled professionals continues to grow, it is essential that we invest in the next generation, ensuring that the future of the profession remains strong, dynamic and diverse. Last November, we were pleased to welcome 200 new members, and in our traditional ceremony, we celebrated their exceptional hard work. Yet, that is not enough.
We are proactively working on this through different fora, no less by contributing towards the government’s upcoming economic migration policy. However, we believe that the key underlying challenge remains that of enhancing the attractiveness of the profession. In this context, the Institute views the younger generation as one of our most important allies. We are committed to engaging with upcoming professionals to encourage them to take the lead in driving forward the attractiveness of the profession. We aim to bridge the gap between the expectations of the new generation
and the reality of the profession, highlighting the opportunities it offers, such as broad employability across different sectors, advanced career prospects both locally and internationally, and the potential for greater international mobility. At a recent event hosted by the Young Members Group, aptly named The Elephant in the Room, we explored how these advantages align with the aspirations of Gen Z. Many of today’s young adults are eager to shape a professional environment that prioritises moral and social responsibility. Ironically, the direction towards which the accountancy profession is moving, particularly with new requirements such as sustainability reporting, positions it to meet the demands of the new generation. This is why young members are rightly placed to be the profession’s flag-bearers.
Clearly, we are not alone in this situation, and most of the challenges we face are very similar to what our counterparts across the continent and beyond, face. This is why we are giving more importance to expand our presence in international forums, giving us direct insights into upcoming changes and key developments within the accountancy profession.
Recently, we had the opportunity to meet and engage with representatives from Accountancy Europe, the International Federation of Accountants and other professional accountancy organisations from across the globe. This extensive international engagement helps us remain informed, agile, and equipped to make well-founded decisions in an increasingly complex and fast-paced environment. It also supports our local initiatives, allowing us to better anticipate global trends and challenges, exchange ideas and solutions, and ensure that we align with the international direction of the profession.
We have regular discussions within the National Coordinating Committee and with the Financial Intelligence Analysis Unit. These conversations remain crucial as we work towards providing clarity on the regulatory framework. Additionally, we are actively
addressing the significant challenge businesses face in opening bank accounts, working closely with other professionals and banks to find sustainable solutions. We have also provided our feedback to the FIAU as part of the consultation exercise on the revision of the Implementing Procedures – Part II addressed to the Virtual Financial Assets Sector.
Our dialogue with the Malta Tax and Customs Administration remains open and constructive, particularly regarding various tax-related proposals, which we have also incorporated into our recommendations for Budget 2025. We are also engaged in discussions about the establishment of a large taxpayers’ office, providing feedback to ensure its effective setup.
We have also provided our input to the Malta Financial Services Authority (MFSA) with respect to the revision of the regulatory framework for Company Service Providers, and discussed matters related to the implementation of the Digital Operational Resilience Act, where we continue to provide valuable input to encourage the seamless implementation of these new requirements, which will bring further change to the industry.
Our ongoing work with authorities also includes discussions with the Malta Business Registry on necessary changes to the local regulatory framework, including the Companies Act and the Civil Code.
Over the past months, we have also provided continuous feedback to the MFSA on the transposition of the Corporate Sustainability Reporting Directive and presented our proposals to the Accountancy Board regarding necessary changes in the Code of Ethics and the licensing of sustainability assurance service providers, amongst others.
As always, all this would not be possible without the commitment of my team at the Institute and the voluntary, but precious, contribution of our dedicated Committees and Working Groups.
While expressing hope that the end of the year offers a moment to pause and celebrate our achievements, on behalf of the Institute I would like to extend my warmest wishes to all our members for Christmas and the New Year.
SUSTAINABILITY CORNER
IAASB approves ISSA 5000
The International Auditing and Assurance Standards Board (IAASB) has approved the International Standard on Sustainability Assurance (ISSA) 5000 and finalised its text. The standard has been subsequently certified by the Public Interest Oversight Board (PIOB), and IAASB will now prepare firsttime implementation support materials.
The final language of the standard is expected to be formally published by the end of the year. A range of guidance and application materials will be released in January 2025. More info on the PIOB approval can be found here
UN Climate Change Conference
The United Nations Framework Convention on Climate Change (COP29) took place between 11 th and 22 nd November 2024 in Azerbaijan. Its objective was to accelerate global climate action in the midst of increasing environmental challenges. The conference discussed how to secure the financial investments needed to reduce emissions and protect vulnerable populations, while at the same time urging nations to update their climate action plans to meet the 1.5°C target set by the Paris Agreement. More information can be found here
CEAOB guidelines on limited assurance on sustainability reporting
The European Commission invited the Committee of European Audit Oversight Bodies (CEAOB) to develop non-binding guidelines regarding limited assurance on sustainability reporting. The aim is to avoid fragmentation and ensure that practices are as consistent as possible until the adoption of an assurance standard at European Union level. Following this, on 30 th September, the CEAOB released a document containing the said guidelines.
These are intended to provide high level assistance to facilitate a common understanding of some key aspects of the limited assurance engagement requirements introduced by the Corporate Sustainability Reporting Directive. More information is available here
ESG ratings: European Council greenlights new regulation
In November 2024, the European Council adopted a new regulation on Environmental, Social and Governance (ESG) rating activities. The ratings provide an opinion of a company’s or a financial instrument’s sustainability profile.
The objective of these rules is to enhance the consistency of rating activities in the European Union to increase investors’ confidence in sustainable financial products and to strengthen the reliability and comparability of ESG ratings by improving the operational transparency of the ESG ratings providers and preventing conflicts of interest. More information is here
ROUNDUP
ESMA 2025 Work Programme: Green Bonds and ESG Rating Providers in focus
The European Securities and Markets Authority (ESMA), the European Union’s (EU’s) financial markets regulator and supervisor, will enhance its focus on safeguarding resilient, transparent and sustainable European financial markets. In its Work Programme (WP) for the year ahead, ESMA indicated that key areas of focus will include the European Green Bonds and the Environmental, Social and Governance (ESG) Rating Providers Regulations. Following the adoption of the European Market Infrastructure Regulation 3, ESMA will take on new responsibilities and develop a substantial number of technical standards, including for the new Active Account Requirement. According to its WP, ESMA will also select and authorise the first Consolidated Tape Provider, an important step to enhance transparency of European markets. Further details are available here
Portugal’s
Albuquerque
confirmed as EU Financial Services Commissioner
Maria Luís Albuquerque has been confirmed as the EU’s new Commissioner for Financial Services. The confirmation follows a rigorous hearing with Members of the European Parliament (MEPs) in November, where Albuquerque, Portugal’s nominee for the role, answered questions as part of the Commissioners-designate assessment. She needed a twothirds majority vote from MEPs to secure the position. All major parties in parliament supported the nominee, except the left and the far-right Europe of Sovereign Nations Group. In her hearing, Albuquerque highlighted the crucial role of national Financial Intelligence Units in the success of AMLA, the EU’s new anti-money laundering and countering the financing of terrorism authority.
Local Appointments
KPMG Malta has announced the appointment of Luke Borg, Jonathan Bugeja and Nadia Camilleri as Directors with effect from 1st October 2024.
MIA diary
MIA Tax Conference 2024
29th October 2024
The MIA Tax Conference, organised with the support of the Institute’s Direct and Indirect Taxation Committees, explored the latest fiscal developments both locally and at European Union level. Held right after Malta’s Budget 2025, the Conference provided timely discussions on fiscal matters raised by the Minister for Finance in his address. The Conference was supported by Scope Solutions.
MIA Football Tournament
17th November 2024
The much-anticipated MIA Annual Football Tournament brought no less than eleven teams in a spirited competition, as they battled through the qualifying rounds all the way to the final. Deloitte took the honours, ahead of CLA Malta and PwC. The event raised funds for the Children in Need Foundation, showcasing the profession’s dedication to supporting worthy causes.
New Members Ceremony
14th November 2024
The Institute welcomed 200 new members who completed their qualifications with ACCA and the University of Malta (UoM) during the past academic year. The ceremony, held at the Hilton Hotel, Portomaso, celebrated these achievements in the presence of the MIA President Mark Bugeja and members of the Council, CEO Maria Cauchi Delia, ACCA Europe Head Caitriona Allis, Dr Emanuel Said, Dean of Faculty of Economics, Management & Accountancy (FEMA), and Prof Lauren Ellul, Head of the FEMA Department at UoM. The event also recognised top-performing students and awarded the Kevin Mahoney Award for exceptional voluntary work to Fabian Cardona.
Halloween Teambuilding 31st October 2024
The MIA team marked Halloween with a fun-packed teambuilding event in Gozo, featuring a Tuk Tuk tour across the sister island. The MIA staff embraced the festive spirit, turning up in creative costumes, with a prize awarded for the best outfit. The day was filled with adventure and laughter, fostering stronger bonds that strengthen the team for the challenges that lie ahead.
Celebrating Two Decades of MIA-ACCA Collaboration
20 Years of the Joint Examination Scheme
The Malta Institute of Accountants (MIA) and the Association of Chartered Certified Accountants (ACCA) have celebrated the 20th anniversary of the Joint Examination Scheme (JES) in Malta.
The activities commemorating this important milestone spanned over three days, with different events targeted at members, students, employers and Approved Learning Partners. Over the past twenty years, the partnership has supported thousands of
students in earning internationally recognised qualifications in areas essential to today’s business world, including financial management, risk assessment, and digital competency. This partnership and the way forward were discussed during a meeting between MIA representatives including MIA Chief Executive Officer Maria Cauchi Delia and ACCA Chief Executive Helen Brand, as well as ACCA representatives, namely ACCA Member Engagement Manager Lefki Panteli, and ACCA Head of Europe Caitriona Allis at the MIA Offices.
The JES was renewed for a further five years, confirming both sides’ commitment to equipping Maltese professionals with globally relevant skills and qualifications. Through the JES, MIA and ACCA offer globally recognised qualifications with local relevance. Students who complete the ACCA in Malta can meet the examination requirements for membership in both bodies at the same time.
Engaging Stakeholders and Shaping the Future
As part of the celebration, MIA and ACCA organised discussions with Approved Learning Partners and employers, as well as an interactive session with students. The key objective of these sessions was to reflect on what has been achieved so far over the past years and to gather insights for the future direction of the profession. These discussions underscored the need for continuous evolution in accountancy education, including enhanced support for students and a focus on emerging skills for a changing economy, particularly as the profession takes further responsibility for demands originating in the sustainable and digital domain. The sessions also provided an opportunity for the Institute to share details on its activities, serving as a bridge between all its members, including both individual professionals and member firms, and the institutions, locally and abroad.
Approved Learning Partners Event
MIA & ACCA Representatives
Business Relationship Manager
Silvia Feldiorean and Head of ACCA Qualification Lisa Gilmore took the lead in these engaging sessions which produced valid feedback to be taken onboard for the years ahead, supporting both sides’ objectives to continuously improve their value offering.
The interactive student session allowed future accountants to engage directly with professionals, discussing real-world applications of their studies and gaining insights into career development. This was followed by study tips for students. The event was roundedup with a quiz event which brought out the knowledgeable but also the fun side of our future fellow professionals.
Celebrating Milestones with Stakeholders
A cocktail reception followed the festivities, bringing together past MIA Presidents, ACCA representatives, MIA Council Members, and former student award winners. This event provided a moment to reflect on the achievements and milestones of the past two decades, honouring those who have contributed to the development and growth of the MIA-ACCA partnership.
Through this gathering, the organisations celebrated not only their history but also their shared vision for the future. It highlighted the depth of their collaboration, and the lasting bonds formed over the years, each contributing to the professional community.
“Our partnership with ACCA over the past two decades has empowered professionals to set a high standard in accountancy, finance and management. As we celebrate this milestone, we take pride in seeing qualified accountants become leaders across various sectors, both in Malta and internationally, thanks to the strong foundation provided by their ACCA Qualification.”
MARIA CAUCHI DELIA, MIA CEO
“This agreement with ACCA provides Maltese professional accountants with highly respected, business-relevant qualifications that serve those aspiring to excel in accountancy, finance, and management. These qualifications set a strong benchmark for building a rewarding and successful career. We take great pride in this collaboration and are honoured to continue on this journey, which has seen remarkable success over the past twenty years.”
MARK BUGEJA, MIA PRESIDENT
Students’ Event Celebration Event
“MIA and ACCA achieve so much together, including of course the exam scheme, but also in a wider sense. We work together on numerous forums and events to promote the growth and development of the accountancy profession, and ensure it makes a strong and positive contribution to Malta’s economy and globally. These are the results and the record of a strong and productive alliance.”
HELEN BRAND, ACCA CHIEF EXECUTIVE
MIA-ACCA ConferenceThe Accountancy Profession: An Evolving Profession
The anniversary celebrations culminated in a joint conference that attracted leaders and other members of the accountancy profession. Core themes addressed during the conference included sustainability, digitalisation, and ethics, three elements increasingly central to the responsibilities of today’s accountants.
Different panels highlighted how automation has reduced the time spent on routine tasks, with accountants increasingly focusing on strategic advisory roles and leveraging data analytics for deeper insights, turning raw numbers into valuable business intelligence. In parallel, accountancy professionals are now being tasked in verifying sustainability data and ensuring compliance with emerging regulations in the sustainability sphere. The profession’s expanded responsibilities include collaborating with various departments to gather reliable data, addressing scepticism and ensuring transparent reporting.
The event also underscored the growing importance of ethics, with accountants tasked with upholding integrity and transparency, in parallel with the rapid changes in the environment within which accountancy professionals are working, as well as the pressing demands to which they are subjected. Practical examples of situations that can emerge in reallife scenarios were tackled with participation from the floor.
Throughout the discussion, a constant call for attention focused on the need for future-focused skills, with speakers insisting on the need for accountants to develop tech-savvy, critical thinking, and advisory capabilities to stay relevant. As more tasks are automated, the profession must adapt to higherlevel strategic functions and prepare today’s workforce for tomorrow’s tech-driven, ethically anchored landscape.
The conference was opened by MIA President Mark Bugeja and MIA CEO Maria Cauchi Delia who highlighted key issues shaping the future of the profession,
with a focus on sustainability and digitalisation. The insights shared paved the way for thorough discussions on trends in these areas.
Throughout the conference, ACCA
Chief Executive Helen Brand highlighted the rapid evolution of the accountancy profession, stressing the importance of keeping the human element central to the role of accountants. She noted that while new skills are essential in the changing landscape, the profession’s core values — innovation, integrity, and inclusion — remain unchanged, promising a future rich with opportunities.
Meeting with the Minister for Finance
During her visit in Malta, ACCA Chief Executive together with MIA President, MIA CEO and ACCA Head of Europe had the opportunity to discuss the opportunities and challenges of the accountancy profession and the role of professional bodies in this regard, focusing on the existing and ongoing collaboration between MIA and ACCA, with the Minister for Finance, Clyde Caruana.
MIA-ACCA Conference
Meeting with the Minister for Finance
The Accountant of the Future Leading Digital Transformation in Business
Digital transformation is the current talk of town, and the speed of change is possibly one that we cannot forecast any longer.
Imagine this scenario: a food and beverage company is considering the integration of a new cloud-based accounting system. The Information Technology (IT) department is excited about the upgrade, seeing the potential for automation and real-time data processing. However, the operations team is hesitant. It is worried about the disruption to daily operations, the security of sensitive financial data, and whether the Board will approve the hefty investment needed for the technology. At this point, the accountant steps in — not just as a financial expert, but as a digital strategist. He/she outlines how the new system will streamline reporting, improve accuracy, increase efficiency, and provide valuable insights into cash flow and expenses. By explaining how the technology will support longterm financial goals and mitigate risks, the accountant convinces the Board to invest in the upgrade. This will possibly be a very common story in firms worldwide over the next few years – just, it will not always be so straightforward.
As the digital economy rapidly reshapes business models and creates new economic opportunities, professional accountants are moving head-on towards an inevitable transformation. The role of accountants is evolving beyond traditional financial reporting and compliance to encompass a broader, more strategic focus that includes understanding and driving digital transformation within organisations.
Digital transformation introduces both opportunities and challenges, and accountants, as trusted financial stewards, must adapt and lead. The accountants of tomorrow will not only manage financial data but also act as key influencers in decisions around technological investments and digital strategies. To do this, they need to embrace new technologies, acquire essential digital skills, and most importantly, learn how to
communicate the value of these transformations to the Board.
The different shades of digital
The digital economy is characterised by rapid advances in technology, such as Artificial Intelligence (AI), blockchain, digital trust, and cloud computing, which are reshaping the way businesses operate. These technologies offer incredible opportunities for businesses to improve efficiency, streamline processes, and create new revenue streams. However, they also come with significant challenges, such as increased cybersecurity risks, regulatory complexities, and the need for upskilled workers.
For example, retail firms are moving towards AIpowered data analytics solutions to forecast demand more accurately. This technology allows them to optimise inventory management, reduce waste and improve supply chain efficiency. However, the shift also introduces challenges: they need to train staff to interpret the AI-generated insights and face increased cybersecurity risks as sensitive customer data is being processed through cloud-based platforms. Additionally, ensuring compliance with evolving data protection regulations across different regions requires significant investment in legal expertise and new systems to manage these complexities.
The Malta Digital Innovation Authority supports capacity-building measures on investment in innovative technologies based on their research priority areas. (Further information is available at Applied Research Grant (MARG) - Malta Digital Innovation Authority.)
For accountants, the appreciation of this new reality will be fundamental in the second half of the present decade, and beyond. In an environment where technological change impacts everything from financial reporting to compliance, accountants must stay ahead of the curve. The biggest matter is that the profession cannot afford to lag behind. This is not just about keeping up with technology but understanding its implications across the board — from regulatory and compliance matters to managing risks in digital investments.
Tomorrow’s Accountants: Strategic Influencers and Decision-Makers
Whilst skill shortages appear to be a global phenomenon, this issue has significantly perturbed the performance of Maltese businesses in recent years. A Eurobarometer study published late last year revealed that more than 60% of Maltese businesses have their work held up because of skills shortages. Even worse, a remarkable 87% of employers report difficulties in filling at least one position within their company due to a lack of sufficiently skilled candidates or a shortage of applicants.
Faced with this reality, digital solutions become more attractive than ever. This reliance on technology is especially critical in the finance function, where the need for accurate, real-time data is paramount. However, the transition to digital finance systems brings its own set of complexities.
One of the most significant changes that the accountants of the future will face is the need to influence decision-making at the highest levels. Boards and leadership teams often view digital investments as purely an IT matter, which can lead to a narrow focus on the bottom line, rather than the long-term strategic value these technologies offer.
Rather, digital transformation is a fundamental, interdisciplinary, inter-departmental shift that impacts every aspect of the organisation, and as such, any investment in technology should be evaluated strategically. Accountants are in a unique position to assess whether these investments are made with the right intent and whether the organisation has the capacity (and possibly, the willingness) — in terms of both people and resources — to manage them effectively.
To counter this, accountants need a new skill set that goes beyond financial expertise. The ability to influence, communicate effectively, and bring about change will be key. They must convince and sell the idea that digital investments are essential, not just for operational efficiency, but as a means of ensuring the company’s future survival. This means accountants must be in a position to present compelling cases for digital investments, demonstrating their value in terms of governance, risk management, and long-term financial returns.
As businesses become more digitally integrated, accountants will need to adopt a more crossfunctional approach, working closely with IT, operations, and other departments, including marketing. The role of accountants will be increasingly intertwined with technology, requiring an understanding and evaluation of the value of IT decisions, including AI, blockchain, and data analytics. These technologies are transforming the finance industry, and without a firm grasp of their potential, accountants risk being left behind.
But it’s not just about understanding the technology. Accountants will also need to better measure the value that IT investments bring to the firm. This will involve asking the right questions, assessing the benefits of digital tools, and ensuring that these investments align with the company’s broader strategic goals.
Challenges Ahead: From Cybersecurity to Regulatory Compliance
With digital transformation come new risks. Cybersecurity threats, data breaches, and fraud are
all growing concerns for businesses operating in the digital space. For accountants, the challenge will be to safeguard the integrity and reliability of financial information while navigating an increasingly complex regulatory landscape.
Accountants must be well-versed in technology related regulations, such as the General Data Protection Regulation, the Network and Information Security 2 Directive, and the Digital Operational Resilience Act, which focus on ensuring the resilience of financial institutions to cyber threats, and other compliance issues specific to the digital economy.
Accountants are also expected to work closely with IT specialists and cybersecurity experts to identify and mitigate risks to financial data and systems. Additionally, as new business models emerge, such as platform-based models, accountants need to update their knowledge to be in a position to understand the related risks and devise adequate internal controls.
Being well-versed in technology-related regulations is essential for accountants as it enhances compliance capabilities, strengthens risk management practices, supports their advisory roles, improves operational efficiency, and fosters a culture of continuous learning within the profession.
The Importance and Use of SOC/ISAE Reports
In the realm of digital transformation, ensuring the security and reliability of financial data is paramount. System and Organisation Controls (SOC) reports and International Standard on Assurance Engagements (ISAE) reports play a crucial role in this context. SOC reports provide assurance on the controls at a service organisation relevant to user entities’ internal control over financial reporting, security, availability, processing integrity, confidentiality, and privacy. ISAE 3402 reports offer assurance on the controls at a service organisation that are likely to be relevant to user entities’ internal control over financial reporting. These reports are essential for accountants as they offer a detailed evaluation of the effectiveness of the controls in place, helping to mitigate risks associated with outsourcing and third-party service providers. By leveraging SOC and ISAE reports, accountants can ensure that their organisations maintain robust control environments, comply with regulatory requirements, and build trust with stakeholders by demonstrating
a commitment to high standards of data security and operational integrity.
The Need for Continuous Learning
All this points towards one direction — we cannot stand still. Our role is evolving, and so must the education and training that supports it. Continuous professional education (CPE) requirements will possibly need to be updated to include more focus on digital realities. Accountants need to be trained not just in traditional financial management but also in emerging areas such as IT governance, digital auditing, and the ethical implications of data, AI, and automation.
The accountants of tomorrow must be lifelong learners, staying up to date on the latest technological trends, regulatory changes, and best practices in digital finance.
While the challenges of digital transformation are significant, they also present exciting opportunities for accountants. In a world where it is all about data, accountants are in a unique position to leverage their expertise in financial analysis and reporting to drive innovation. The ability to analyse large datasets and provide insights that help businesses make informed decisions will be highly valued in the digital economy. The accountants of the future will not be replaced by technology but will work alongside it, using digital tools to enhance their capabilities and deliver greater value to their organisations.
As Darwin allegedly said (though this has been denied in recent years), it is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change.
Accountants must not only understand the digital tools that are transforming the business landscape but also take the lead in ensuring that these tools are used effectively and ethically. By acquiring the skills needed to influence decision-making and manage digital investments, accountants can position themselves as key players in the digital economy, helping their organisations navigate the challenges and seize the opportunities that lie ahead.
Ultimately, the accountants of the future will be more than financial experts — they will be digital strategists, change agents, and trusted advisors in a transformed new world.
Why Finance Professionals
Can’t Ignore AI
Artificial Intelligence (AI) is reshaping the finance industry, offering a competitive edge that cannot be ignored. From data-driven investment decisions to automating back-office tasks, AI is a gamechanger for many financial institutions. Despite its growing influence, a significant portion of finance professionals still view AI as either too complex or a passing trend. But the reality is, AI is already reshaping the competitive landscape.
If I had to explain why AI is so crucial for finance professionals today in a single word, I would choose “efficiency.” The financial industry has always been about managing risks, maximising returns, and understanding market trends. The traditional ways of doing this are now being superseded by AI, which can process immense amounts of data in realtime. In a place like Malta, where financial services contribute a significant portion of the economy, remaining competitive in global markets is crucial. AI can help streamline operations, offer better services, and support local companies to compete more effectively in European and international markets.
In major economic services, AI is already a key player in fraud detection, alerting companies to anomalies before human employees can spot them. Banks and investment firms use AI to scan for signs of suspicious activity, ensuring compliance with European regulations like the General Data Protection Regulation (GDPR) and the Markets in Financial Instruments Directive II. This immediate, large-scale analysis is not just a time-saver; it is also a lifesaver when it comes to safeguarding businesses from hefty fines or reputational damage. Thus, in this context, AI does not just cut costs — it makes businesses safer and more efficient.
The broader European financial market is also feeling the shift. Large organisations lean heavily on AI to offer more personalised customer service and dynamic portfolio management. European regulators, though cautious, are slowly catching up to this new reality by working on frameworks
that encourage innovation without compromising stability. This is particularly relevant for Maltese finance professionals given that they operate within a European Union (EU) framework but often in a smaller scale and with fewer resources than their larger European counterparts. By adopting AI-driven tools, smaller institutions can level the playing field.
In practice, significant AI adoptions focus on automating repetitive tasks that once required entire teams of analysts. For example, compliance officers use AI to monitor vast numbers of transactions to identify potential Anti-Money Laundering (AML) law violations. In European markets, AI tools are being developed to help manage increasingly complex portfolios, providing personalised advice based on client data and market forecasts. The sheer speed at which AI operates can provide a competitive edge, but there is more to it than just automation. AI is becoming a tool for innovation. Businesses are using it to develop new products and services that cater to the needs of clients in ways that were previously unimaginable.
How AI is revolutionising customer service
Chatbots and virtual assistants powered by machine learning are helping financial institutions answer routine customer inquiries. This leaves human employees free to focus on more complex tasks, thus improving both productivity and customer satisfaction. More impressively, AIpowered systems learn from every interaction, constantly improving performance and customising responses. The AI’s ability to provide personalised investment strategies or risk management recommendations also sets it apart. It can analyse the behaviour of individual investors or companies and tailor its suggestions accordingly.
Imagine a system that learns a particular business investment style and automatically adjusts its recommendations to the respective changing financial goals or market conditions. It is no wonder that in the major financial centres worldwide, wealth managers and advisors increasingly rely on AI to handle large-scale investment portfolios with greater precision.
While AI offers great promise, it also presents significant challenges. One of the significant risks is over-reliance on AI systems without fully understanding their limitations. This concern is particularly relevant for finance professionals who may not have a strong background in technology. Algorithms, after all, are only as good as the data fed into them. If a financial institution uses biased or incomplete data, the results could be catastrophic, leading to poor investment decisions or misinterpreted risks. As AI becomes more ingrained in daily operations, finance professionals need to ensure that they have a deep understanding of the tools they are using.
Another concern is data security. With AI handling such extensive amounts of sensitive information, robust security protocols are more critical than ever. European regulations, including the GDPR, place strict controls on data use, and AI systems
must be fully compliant. Financial institutions must invest in cutting-edge cybersecurity measures to ensure that the benefits of AI do not come at the cost of compromised customer data.
Ethics is also an area that is attracting attention. European regulators are closely monitoring how AI is used in finance, particularly concerning transparency and accountability. In the event of an AI-driven decision that negatively impacts a customer or a company, who is responsible? This grey area has yet to be fully explored, but financial professionals must be prepared for the eventuality that they may be held accountable for decisions made by machines. Complying with EU-wide regulations and effectively leveraging AI will require careful planning to strike the right balance between innovation and risk management.
So, where does this leave finance professionals who are on the fence about adopting AI? Simply put, ignoring AI is no longer an option. But fear not - AI is not here to take over jobs or replace humans in finance, at least not yet for certain jobs. It offers an opportunity to enhance productivity, improve accuracy, and drive innovation. The finance professionals who succeed in the next decade will be those who learn how to work alongside AI, using it as a tool to improve their judgement and decision-making processes, not replace them. With its growing financial services sector, Malta is wellplaced to embrace this technology, but it will take a shift in mindset to realise its potential fully.
The immediate impact of AI may not disrupt your business, but a competitor who understands how to use AI better than you will undoubtedly have a competitive advantage. It is important to start integrating AI into the business operations rather than wait until a competitor has taken the lead. By staying ahead of the curve, one can use AI to enhance the services offered, reduce risks, and remain compliant with ever-changing regulations. In a rapidly evolving financial landscape, the choice is simple: embrace AI or risk being left behind by those who do.
Author Prof.
Dingli is an AI expert and Professor at the University of Malta, with over 20 years experience in the field. He has helped numerous companies successfully implement AI solutions. His work has been recognised as world-class by international experts, and he has received numerous awards from international organisations (such as the UN, European Space Agency and others). He is a member of the Malta.AI task force, aiming to position Malta as a global AI leader.
Alexiei
MIA’s work in progress: Engagement of the profession survey
As the voice of the accountancy profession in Malta, the Malta Institute of Accountants (MIA) is constantly involved in discussions which revolve on the challenges and opportunities currently being faced by the profession. Keeping in view that there is a shortage of human resources in the accounting field, the MIA has decided to obtain a better understanding of this matter through a survey that explores the key factors contributing to the engagement of the accountancy profession. The survey was developed by the MIA Young Members Group and will be carried out with the support of MISCO.
The survey will delve into core themes including job satisfaction, compensation and career progression, work-life balance, members’ perception of the profession as well as the perception of external stakeholders, and culture and values.
The ultimate objectives are to increase the engagement of the members of the accountancy profession and gather information and statistics that will enhance the Institute’s understanding of the key factors that are having an impact on the local market. This will also contribute towards the process of developing recommendations and identifying necessary action points that will address the gap between the demand and supply of accountancy professionals.
To strengthen the effectiveness of this survey, the MIA, with the support of its Young Members Group, organised a thematic networking event on 12th November. The event attracted professionals from different accounting backgrounds and provided a broader understanding of the key areas being explored through the survey. Participants, split into 9 groups, engaged in insightful roundtable discussions and had the opportunity to confront themselves with the impact of technological development and increased regulations on accounting professionals, as well as the role played by education and training, amongst others. The event was a great opportunity for all attendees to voice their opinion and actively contribute to matters which involve them directly.
This is, however, just the first phase of the project. As a second phase, other MIA Groups will be involved, and more focus will be put on attractiveness. This includes projects with the Professional Accountants in Business Group which has already provided input and participated in discussions with the Young Members Group with regards to the engagement survey.
The Institute will keep members informed on any updates relating to the release of the survey and strongly encourages stakeholders to participate in this initiative to contribute towards paving the way for a better future for accountancy.
Digital Transformation at the MFSA
The Malta Financial Services Authority (MFSA or the Authority) is strategically committed to enhancing its operating efficiency and oversight effectiveness significantly. Presently, the MFSA is implementing a digital transformation programme aimed at fundamentally reshaping its business processes and interactions with licence applicants and authorised entities over the next three years. In parallel, the Authority is retaining the direction of travel in terms of supervisory priorities and outcomes-based supervision, in line with evolving European regulations and emerging risks.
Fintech innovation is permeating traditional authorised financial entities while digitally native financial services players are innovating with new business models that are rapidly reshaping the financial landscape. This makes it increasingly critical to future-proof the Authority’s effectiveness of its supervisory remit at a micro and macro level, together with enforcement work, in the long term.
This initiative is built on a strong foundation of investment in talent and technology-related initiatives over the past five years. These were necessary for the Authority to embark on this next phase of the large-scale digital transformation it is now executing. Between 70% and 80% of digital transformation programmes typically fail to meet their objectives for two reasons: either because many organisations assume that these are purely Information Technology (IT) projects or they are launched prematurely at a stage when data quality and data management practices are poor, change management is weak, and the understanding of business processes on the ground is superficial. At the MFSA, these risks have been largely mitigated ab initio as part of earlier interventions into its transformation journey. Specialised teams set up over the last few years cover programme and change management, business process analysis, data governance and data management, IT planning, cybersecurity, TechOps and DevOps. However, equally important to the success of this transformation, is the full support and buy-
in that the programme receives from the rest of the organisation, which is eager and committed to embrace change. This is a key priority for the Authority’s leadership, as the MFSA is a growing organisation with a headcount now surpassing 500 employees.
Over the past few years, the operational resilience and security of the MFSA’s enterprise IT architecture in a hybrid-cloud setup has been significantly enhanced – achieving Recovery Time and Recovery Point Objectives metrics down to a few minutes and recording practically zero data loss for core systems. Records Management has also been centralised and digitised ahead of the transition to fully digitally native and reengineered authorisation (licensing) processes. Several iterations of data cleansing projects and the breaking down of current processes into artefacts – that is, the identification, documentation and organisation of the key inputs, outputs, and tools involved in individual business processes – were also necessary before initiating the implementation of a core platform that will take centre stage over the next three years.
The core platform at the heart of this transformation, or the Supervisory Cycle Management System (SCMS) as it is known at the MFSA, consists of several components or sub-systems. These cut across all elements of enterprise IT architecture, business information (data models, information flow, and knowledge management) and business value streams (customer journeys, operational value streams, products and services). The platform’s implementation will take three years. Around 45 MFSA employees together with an equal number of specialists engaged by the contractors are working on the project. The first milestone, which will cover the fundamental underlying architecture of the platform as well as approximately 80 licensing-related processes, is expected to be reached in the second half of 2025. This is when the platform will go live in production, marking the start of a gradual phasing out of
the Authority’s legacy platform, known as LH Portal, over time. Subsequent phases of the SCMS project in 2026 and 2027 will cover supervisory interactions and reviews, ongoing regulatory returns, and risk models. While the SCMS project is ongoing, the Authority is working on other complementary digitalisation projects. These include the enhancing of records management covering areas and processes that are out of the scope of the supervisory cycle. These projects run in parallel with evergreening projects covering the broader IT infrastructure, systems, and applications.
What is SCMS?
The Authority has taken a Business Process Re-engineering (BPR) approach to digitalisation. The software platform is just an enabler, and relatively speaking, it is the easiest part of project execution in terms of solution delivery.
It is suboptimal to invest considerable time, money and effort to implement business process orchestration and automation through new software platforms based on legacy processes. This is because the latter are inherently manual, pre-digital era, knowledge-intensive processes that leverage to a significant degree the tacit knowledge of experts operating within the guard rails of good governance structures, documented policies and procedures, regulatory business rules, and technical standards. Business process efficiency and effectiveness can only
scale to a high degree through technology and data science if tacit process knowledge is firstly captured and codified into structured formats such as workflows, rules, and data elements. This is followed by the re-engineering of each process and the redesigning of data models in a way that enables a shift of most institutional knowledge into digital platforms. Once that is done, one can then leverage technology to take data-driven analysis, workflow automation, risk modelling, performance management, and customer experience to a new level. The MFSA is currently at this stage in the project –identifying and eliminating duplication of data among tens of thousands of data points across all financial sectors, simplifying application form data elements and processes to make them digitally native, associating every process to a product or licence catalogue, and redefining customer journeys. In parallel, the MFSA is setting up the development, staging and production environments of the new platform.
SCMS will enable technology-driven business process orchestration management, ensuring the end-to-end alignment and monitoring of complex processes spanning multiple financial sectors, systems, functional teams, and stakeholders that require real-time integration and advanced decision-making. The platform will enable business workflow automation based on redefined digitally native processes, thus increasing efficiency by reducing manual intervention and repetition of work. For example, if the Authority
knows an applicant because he/she has been pre-authorised for one type of licence and is applying for another licence, the MFSA will leverage that knowledge and reduce requests for information when processing the new application to the greatest extent possible.
SCMS will become the Authority’s main knowledge management system for supervision, allowing MFSA officials to access institutional knowledge based on their role. This will enable them to carry on with their supervisory tasks in a structured way through platform-driven workflows based on a continuously updated 360-degree view of authorised entities and licensed individual’s involvements. Interactions with applicants and licensed entities will be done through the platform to the greatest extent possible, with all relevant parties able to view an up-to-date status of interactions and pending processing.
Will the Authority embrace AI in its digital transformation?
It is not a question of if – but when, where, and how. Artificial Intelligence (AI) in its broadest sense offers tremendous benefits in applications such as data analysis and automated detection of anomalies. It therefore has the potential to improve the efficiency and effectiveness of regulatory oversight through techniques such as Machine Learning. This is over and above the use of AI in day-to-day back-office productivity, using tools such as chatbots leveraging Generative AI that has become increasingly popular. However, uncontrolled and premature use of AI in an enterprise environment could create and significantly amplify, in a very short period, challenges similar to legacy problems of data confidentiality, integrity, availability and maintainability caused by unchecked reliance on spreadsheets, siloed team-level databases and business processes built on them across organisations. This is because data governance
and data management are not addressed strategically at an enterprise level. These are all wonderful tools, but the cart cannot be put before the horse.
While we are already in the age of AI embedded in office productivity tools and cloud services, the use of Machine Learning, Natural Language Processing and Large Language Models in specific vertical use cases across the supervisory cycle requires special considerations. At the MFSA, this certainly requires the foundations being laid in SCMS to be firmly in place first. AI-enabled supervisory technology will therefore be a gradual enhancement to SCMS and other areas of application at the Authority in the coming years.
In view of the highly regulated and continuously evolving industry that the MFSA supervises, and its broad multi-sectoral remit, the journey ahead is complex and demanding from all stakeholders as significant change will happen in-flight. The reality of the matter is that the era of oneoff digital transformation projects in financial services is over. We are going through a period of concentrated effort of the digitalisation programme that will serve as a launchpad for the Authority to enter an era of continuous digital evolution at pace with FinTech and corresponding evolving regulation. Just like managing a rolling financial forecast to reflect new data, market conditions and business realities, digital evolution is a continuous process of innovation, adjustment and recalibration. There is no final version – just an ongoing effort to stay accurate, responsive and prepared for what’s next. Ultimately, this will enable the MFSA to become increasingly more agile and significantly better at data-driven supervision, while reducing bureaucracy and overheads within the parameters of all relevant regulations. This should also mirror financial services entities’ journey as they leverage digitalisation, FinTech and Regulatory Technology for innovation, meeting compliance requirements and increasing operating efficiency.
Author
Ing. Ivan Zammit serves as COO at the MFSA, where he oversees and strategically leads the organisation’s operational and corporate support functions, including People & Culture, Technology, Programme Management,
The Viability of Forming a Fiscal Unit
What is a fiscal unit and what are its implications?
A parent company and its one or more subsidiaries can form a fiscal unit in terms of the Consolidated Group (Income Tax) Rules (the Rules) introduced in Malta in 2019. These Rules are effective for periods beginning on or after 1st January 2019 (i.e. Year of Assessment 2020). Essentially, the fiscal unit would be considered as one entity for tax purposes and is required to file one consolidated income tax return for the whole group, based on an audited set of consolidated financial statements for the fiscal unit. The conditions that need to be satisfied to form a fiscal unit are:
1. The parent company of the group, which is by default the Principal Taxpayer of the fiscal unit, has to be a company registered in Malta.
2. The Principal Taxpayer should hold at least 95% of two of the following three rights in a subsidiary undertaking at the end of the year preceding the year of assessment in which an election to form a fiscal unit is made:
a. Voting rights;
b. Profits available for distribution; and
c. Assets available for distribution upon winding up.
A subsidiary undertaking for which the parent satisfies the above, and which forms part of a fiscal unit, is called a Transparent Subsidiary.
3. The Principal Taxpayer and all Transparent Subsidiaries should have coterminous accounting periods for all years in which they form part of a fiscal unit, except for newly incorporated or wound-up companies, in which case the start and end date may differ.
4. A company should not have any overdue balances or outstanding filings required in terms of the Income Tax Act, the Value Added Tax Act and the Final Settlement System Rules.
5. An entity cannot be part of more than one fiscal unit.
How, when and why?
The formation of a fiscal unit is entirely optional and therefore a parent company and its transparent subsidiaries will elect to form a fiscal unit only if it is somehow beneficial to them. In those cases where the parent company does not own 100% of a transparent subsidiary, approval from the other holders of the equity shares, the so-called Minority Shareholders, is also required. The principal taxpayer is generally allowed six months from the morrow of the financial period end to register a fiscal unit or to inform the Commissioner for Tax and Customs (CfTC) of any changes to its composition. Benefits for groups of companies that elect to form a fiscal unit include:
1. Structures where the parent company is eligible for a refund reducing the effective tax rate of the group below 35%. Through the fiscal unit, the group can immediately apply the effective tax rate without suffering a time lag between the payment of the standard corporate income tax rate of 35% and the receipt of the shareholder refund at the level of the shareholder. The effective tax rate is calculated by the following formula and, by way of an example, can be reduced to 5% if the 6/7th refund applies:
Effective tax rate =
In addition, the group may benefit from such reduced effective tax rate without the need to distribute a dividend
2. Groups where individual entities have unutilised tax balances (such as trading losses and income tax credits) which can be utilised in a fiscal unit scenario.
What are the implications of forming a fiscal unit from an accounting point of view?
1. Requirement to prepare consolidated accounts and financial statements
In Malta, companies are required by law to submit an income tax return in which information is based
on audited financial statements. Hence, a fiscal unit must prepare and get audited consolidated financial statements to be able to prepare the consolidated income tax return of the fiscal unit. If consolidated financial statements are being prepared solely for income tax purposes, then the fiscal unit may prepare a set of special purpose consolidated financial statements and avail itself of the exclusion to:
a. Prepare the statement of cash flows;
b. Disclose comparative information, only for the first year of fiscal unity; and
c. Disclose certain notes to the financial statements as listed in the guidelines issued by the CfTC as well as the Malta Institute of Accountants.
2. Tax Consolidation vs Consolidation under the applicable accounting framework
In accordance with International Financial Reporting Standards (IFRS) and General Accounting Principles for Small and Medium-sized Entities (GAPSME), an entity qualifies as a subsidiary if the parent has control over that entity. Whilst ownership of 50%+ of the voting rights can be presumed to result in control, a detailed assessment might have to be carried out to establish if other factors impact whether a parent’s ownership does or does not denote control. For fiscal unit purposes, the rules are very clear in that the parent entity must own at least 95% of a subsidiary.
3. Taking over of tax balances
The Rules provide that the balance of any item allowed to be carried forward and which exists at the end of the basis year preceding the formation of the fiscal unit shall be considered to be a balance of the principal taxpayer once the fiscal unit is formed. When a transparent subsidiary is not a 100% subsidiary, this is subject to the approval of the minority shareholders. If the minority shareholders do not approve this, then the balances shall be kept in abeyance and not taken into account for so long as the subsidiary remains part of the fiscal unit. Upon leaving the fiscal unit, certain tax balances carried forward by the fiscal unit but which pertain to the subsidiaries, might remain balances of the principal taxpayer and are therefore not returned back to the subsidiary.
From an accounting point of view, due consideration is to be given to the nature of the deferred tax assets of the subsidiary upon joining the fiscal unit, whether recognised or unrecognised, in order to determine whether those deferred tax assets shall be assumed by the principal taxpayer in their separate financial statements.
4. Recognise a notional income tax expense
The chargeable income of the fiscal unit is derived by adding up the chargeable income of the principal taxpayer and the transparent subsidiary, and then remove the effect of any “ignored transactions”, which are essentially intra-group transactions.
In the separate/individual financial statements, the parent company and the transparent subsidiaries are still required to recognise a current tax expense based on their notional taxable profit. There are two acceptable methods in determining the taxable profit of the individual members – the stand-alone approach and the fiscal unit approach.
The stand-alone approach implies that the notional current tax expense of each entity is computed by reference to its own chargeable income, as a standalone entity. The fiscal unit approach, on the other hand, would eliminate the effect of any intra-group transactions.
The stand-alone or fiscal unit approach is a policy choice which should be applied consistently, and this applies even to deferred tax calculations. Under the stand-alone approach, the recognition of deferred tax assets is based on the assumption that the entity, on its own, would have enough future taxable profits against which any tax balances carried forward would be utilised. On the other hand, the fiscal unit approach would take into consideration the future taxable profits of the fiscal unit as a whole.
5. Tax funding and allocation agreement
As the Principal Taxpayer has the obligation to settle the consolidated tax liability of the fiscal unit, it is up to the fiscal unit members to agree on how this will be settled and whether each member will fund their own notional tax liability, calculated under the stand-alone or fiscal unit approach. The parties may enter into a Tax Funding and Allocation Agreement in order to:
• Set out the rights and obligations of fiscal unit members; and
• Set out the circumstances which entitle any of the members to compensation, as well as when that compensation becomes due. In its absence, transactions are deemed to be carried out with equity participants. If for example the parent does not require the subsidiary to make a compensation for the amount of tax paid by the parent on behalf of the subsidiary, then such a transaction would be considered to be a deemed contribution by the parent.
6. Impairment considerations on intra-group receivable balances
Any intra-group receivable balances created as a result of fiscal unity, as well as the tax funding and allocation agreement, fall within scope of the impairment requirements of IFRS 9 Financial Instruments and Section 9 of GAPSME Financial assets, financial liabilities and equity.
7. Joint and several liability
Whilst the principal taxpayer assumes the rights, duties and obligations under the Income Tax Act, Chapter 123 of the Laws of Malta relative to that fiscal unit, all members of the fiscal unit are jointly and severally liable with the principal taxpayer for tax payment obligations towards the tax authorities. Due consideration is to be given to IAS 37 Provisions, Contingent Liabilities and Contingent Assets or Section 17 of GAPSME Provisions and Contingencies as applicable, to determine to what extent it is probable or possible that the principal taxpayer would default. The tax authorities would revert to the other members of the fiscal unit for payment as a result.
Anti-abuse provision
The Rules contain an anti-abuse provision which states that the tax payable by the principal taxpayer on the income of the fiscal unit cannot be less than 95% of the aggregate net tax that would have been paid by the separate entities forming part of the fiscal unit, after any applicable tax refunds, as otherwise antiabuse measures will be applied, resulting in additional tax being payable.
Conclusion
Despite the benefits outlined above, a group that is electing to form a fiscal unit may have to navigate through some complexities, such as determining eligibility and preparing financial statements in terms of the Rules (which could differ from the statutory consolidation). Due care is required to be in full compliance with the relevant Rules.
Authors
A Partner within the Advisory function, Dr Jonathan Dingli PhD co-leads the Corporate Accounting Advisory Services team and leads both the Learning Academy and the ESG Reporting Service line at KPMG in Malta. He currently lectures on advanced financial reporting to Master in Accountancy students at the University of Malta and is also an elected member of the Council of the MIA and forms part of its Officers team.
Maria Attard Filletti is currently an associate director within the KPMG Corporate Accounting Advisory Services team, with over ten years of experience in assisting clients with their accounting requirements. Maria forms part of the Knowledge Management Committee within her team and often delivers technical training on VAT and accounting matters, both within KPMG and externally.
Enabling and connecting accountants with startups
Digital innovation such as Artificial Intelligence (AI), Internet of Things, Big Data, cloud computing, and blockchain, is giving rise to new possibilities at a rapid pace, further sustaining today’s digitalfirst economy. Businesses are set to go through a transformation incorporating digital solutions and automated processes, resulting in competitive advantage, increase in productivity, cost reduction, minimisation of human errors and global connectivity. Digital Transformation is fostering a culture of innovation throughout the ecosystem. This is not only limited to businesses but also to professionals such as accountants who need to adapt to the fastpaced digital environment and stand to profit from the use of the most appropriate digitally innovative tools. The setting up of the Malta Digital Innovation Authority’s (MDIA’s) DiHubMT has been driven by the acknowledgement of the benefits brought about by digital transformation as well as the challenges to navigate through the vast options and keep up with the pace of innovation. DiHubMT is recognised by the European Commission as Malta’s European Digital Innovation Hub (EDIH). EDIHs are part of a broader European Union’s initiative to support digital transformation across Europe, having the overall objective to accelerate the adoption of emerging technologies while also ensuring that European businesses remain competitive on a global scale.
Built on this objective, DiHubMT is a one-stopshop that supports companies to respond to the digital challenges and become more competitive, by integrating digital technologies into their operations. However, whilst some companies are adopters of digital innovation, meaning that they can benefit from the deployment of digitally innovative tools, others, including micro and small enterprises, are the drivers as they are driving digital innovation through their research and development of new digital solutions. Navigating the complex landscape of digital transformation and the resulting technical, financial and regulatory compliance considerations poses significant challenges for both the adopters and the drivers of digital innovation. Thus, the catalogue of services offered at DiHubMT is tailored for the needs of both adopters and drivers.
To successfully speed up the digital transformation of the local ecosystem, the financial investment that must be undertaken must be acknowledged. In fact, one of the services offered at MDIA’s DiHubMT is the provision of Business Development and Funding Support to Small and Medium Enterprises (SMEs), startups and even new entrants who are still exploring the possibility of launching their own startup. DiHubMT assists entities in identifying and applying for relevant grants and funding opportunities, collaborating with other public bodies as necessary.
It also notes that startups and SMEs developing digitally innovative solutions tend to need assistance and guidance in relation to business aspects such as the development of a business plan, financial management, intellectual property, and legal and regulatory compliance. Therefore, DiHubMT is also seeking to bridge the gap between innovative, tech-driven startups and SMEs and the financial professionals, such as accountants, who can guide startups and SMEs towards sustainable growth. DiHubMT shall be launching a new scheme whereby professionals can offer their expertise in business consultancy to startups and SMEs for a number of predefined hours.
DiHubMT shall also be launching an equity-free accelerator programme which will grant successful applicants an initial sum to support their ventures. The programme will cover key elements essential for startup success, including value proposition and market definition, to ensure startups define their unique offerings and target markets clearly. It will also focus on go-to-market strategies to help startups define how they will enter the market and sell their products, addressing product launch, pricing, and sales channels. Technological aspects such as technology integration and product development, will also be addressed to help startups build scalable products. Workshops on finance, funding options, business registration and Intellectual Property will guide startups through budgeting, financial elements, and legal compliance to secure a sustainable future. The accelerator will also support startups with developing the
skills necessary to deliver impactful pitches. The programme will culminate with a pitch competition where the best-performing startup wins a final award.
The rapid pace of digital innovation can be overwhelming, with businesses facing a multitude of options, especially when one takes into account the various technical options businesses may be presented with. Without a clear understanding of what is possible and a digital strategy, navigating these challenges can be daunting. DiHubMT helps address this pain point in two ways. First, it leverages the use of the Digital Maturity Assessment (DMA) developed by the European Commission and made available solely to the EDIHs. The DMA is designed to help businesses evaluate their digital transformation readiness. The tool assesses various aspects of a company’s digital capabilities, including digital business strategy, digital readiness, humancentric digitalisation, data governance, AI, and green digitalisation. By identifying strengths and areas for improvement, the DMA tool provides companies with insights to better integrate digital
technologies into their operations, improving productivity and competitiveness. The result can be used by the startup or SME as an initial step towards developing its digital strategy, highlighting the exact key priority areas. DiHubMT recommends that financial professionals encourage their clients to undertake this complimentary DMA. The second approach adopted is the organisation of workshops that demonstrate how emerging technologies can be leveraged effectively, providing practical insights and guidance on implementation. These sessions aim to highlight what different technological developments can mean to businesses and how they can improve their operations.
Upskilling and reskilling our workforce, especially in areas such as AI, virtual environments, and cybersecurity, is essential to remain competitive in today’s rapidly evolving digital economy. These technologies are driving transformation across industries, creating both opportunities and challenges.
DiHubMT shall be organising a series of short-term training courses to support the reskilling and upskilling of the Maltese workforce. Businesses are encouraged to benefit from these training courses to ensure that their employees can adapt to new tools, secure digital environments, and leverage AI for innovation. This will not only boost individual employability but also enhance organisational resilience and growth, making businesses more agile in the face of technological disruption.
Financial professionals such as accountants are invited to join the DiHubMT’s community, (https://dihubmt. eu/community/) to benefit from the assistance that DiHubMT offers to all professionals, ensuring that they can keep up with the speed of digital innovation, and to support DiHubMT in its objective to aid the uptake and development of new digital solutions by the local startups in a financially sustainable manner.
DiHubMT is a project funded by the European Union. Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union or the European Commission. Neither the European Union nor the granting authority can be held responsible for them.
Author Dr Jean-Marie Mifsud is the Chief Innovative Technology Officer at the Malta Digital Innovation Authority. She has extensive R&D, industry, and regulatory experience, focusing mainly on telecommunications and digital transformation. She was awarded a Bachelor of Electrical Engineering (Honours) and a Ph.D. in ICT from the University of Malta.
MTCA UPDATES
The Digital transformation within the MTCA
In May 2023, the Malta Tax and Customs Administration (MTCA) launched a strategic plan for the period 2023-2025, with the aim of transforming the organisation to become more aligned with today’s challenges and consistently working towards the creation of a unified national Tax and Customs Administration.
At the core of this Strategy is voluntary taxpayer compliance across all taxes, moving away from an ‘enforcement’ approach towards greater focus on building trust and improving communication between MTCA’s departments and taxpayers. By improving how the MTCA conducts its mission through supporting voluntary compliance, tax revenue generation will also increase over time. In turn, this will support the Government in the provision of public policy.
To reach its goals, the MTCA has decided to deploy a data-driven approach. Through this approach, the MTCA is transforming many of its procedures into data-led processes. These are then converted into information that can be used to generate new forms of value, enriching data-driven decisionmaking. The tool of choice of MTCA in encouraging voluntary compliance is SAS Viya, a software with inbuilt Artificial Intelligence (AI) capabilities. It is worth noting that other public administrations around Europe also make use of this software.
The MTCA believes that it is crucial to make efficient and effective
use of data available at MTCA’s end by consolidating all taxpayer data, including registration, tax return submissions (individual and corporate), tax audits, and tax collection, as well as trading activities at Customs. This ensures seamless coordination between all MTCA directorates and eliminates existing compartmentalisation of processes, practices and procedures.
The benefits of such approach include streamlining of internal processes and ensuring better services to taxpayers.
Streamlining of internal processes
The deployment of SAS Viya ensures that all the information collected over time is available through reports generated using a single software, leading to consistency and efficiency. In addition, during on-field visits, taxpayers are informed if they are in default in multiple risk areas, leading to better communication with the taxpayer, increased coordination and improved efficiency.
Better services to taxpayers
One of the transformation’s key goals, is to make the organisation more customer-centric to improve the consumer experience and increase voluntary compliance. To achieve this, the organisation aims to prioritise the customer experience at every stage of interaction. This involves focusing on various service delivery channels and customer service to encourage voluntary compliance.
To make efficient and effective use of data, the MTCA aims to collect all taxes promptly when they are due and deploy a dataled decision approach to detect and combat non-compliance and tax evasion. The swift collection of taxes is motivated by the fact that the older the debt, the more challenging it becomes to collect.
Also, detecting and combatting noncompliance and tax evasion implies that the use of AI is ultimately deployed on consolidated data across all tax types to enable the tax administration to anticipate noncompliance behaviours, thus saving taxpayers fines and penalties from errors and omissions. This paves the way towards compliance by design.
Achieving compliance by design necessitates that the implementation process of the digital transformation is viewed as a journey. This journey involves transforming three significant components: people, processes, and technology.
Ensuring the right mindset of employees implies frequent and clear communication about the aims of the initiative and its progress. Regular internal communication also supports employees in embracing new working methods, ensuring greater harmonisation is achieved. In addition, frequent communication is crucial for MTCA in its role as a knowledge leader, through which the Administration engages actively with key stakeholders and participates in seminars and conferences.
As part of the modernisation initiative, greater harmonisation will be further secured with the implementation of the Integrated Tax and Customs Administration System (ITCAS), which includes business process reengineering. In this context, the MTCA has issued a tender to procure a commercial off-the-shelf software which will replace all legacy systems. Hence, the effective deployment of the technology is essential.
Ultimately, this initiative and the changes the transformation is bringing, supports the Government in delivering public policy in a context where the international tax environment continues to go
through ongoing change and debate, and the global economic environment remains fragile. Hence, countries including Malta need to rebuild fiscal buffers following the significant economic intervention to support livelihoods throughout the pandemic and beyond. This fragile environment, as well as the changing business landscape, requires national tax agencies to enhance their efficiency and the effectiveness of voluntary compliance to protect their national tax base and support the livelihoods of their taxpayers.
Upcoming Deadlines
January
• Value Added Tax (VAT) Return period ending November 2024 – Electronic Submission 22nd January 2025
• Recapitulative Statement period ending December 2024 – 15th January 2025*
• Central Electronic System of Payment Information (CESOP) Report for Quarter period ending December 2024 –28th January 2025
• Final Settlement System (FS5) Payer’s Monthly Payment Advice for December 2024 –31st January 2025
• DAC 4 / Country by Country (CbC) Reporting by Ultimate Parent Entity/Surrogate Parent Entity – Group’s fiscal year ending 31st January 2024 –31st January 2025
• DAC 7 Reporting Deadline by Platform Operators31st January 2025
February
• VAT Return Period Ending December 2024 – Electronic Submission 22nd February 2025
• Eco-Tax Quarter Period October to December 2024–15th February 2025
• VAT Declaration – Article 12 – Electronic Submission and Payment 15th February 2025
• Recapitulative Statement Period Ending January 2025 – 15th February 2025*
• FS7 Employers end of year reporting and FS3 Payee Statement of Earnings –15th February 2025
• FS5 Payer’s Monthly Payment Advice for January 2025 –29th February 2025
• DAC 4 / CbC Reporting by Ultimate Parent Entity/ Surrogate Parent Entity –Group’s fiscal year ending 28th February 2024 –28th February 2025
• DAC 6 Reporting - Deadline for the submission of the Annual Notification Form by NonDisclosing Intermediaries –28th February 2025
March
• VAT Return Period Ending January 2025 – Electronic Submission 22nd March 2025
• VAT Declaration – Article 11 – Manual Submission – 15th March 2025
• VAT Declaration – Article 11 –Electronic Submission –22nd March 2025
• Recapitulative Statement Period Ending February 2025 –15th March 2025*
• FS5 Payer’s Monthly Payment Advice for February 2025 –31st March 2025
• Company Tax Return –Financial Year ending 31st January 2024 – Manual Return Deadline –31st March 2025**
• Company Tax Return –Financial Year ending 28th February 2024 – Manual Return Deadline –31st March 2025**
• Company Tax Return –Financial Year ending 31st March 2024 – Manual Return Deadline –31st March 2025**
• Company Tax Return –Financial Year ending 30th April 2024 – Manual Return Deadline –31st March 2025**
• Company Tax Return –Financial Year ending 31st May 2024 – Manual Return Deadline –31st March 2025**
• Company Tax Return –Financial Year ending 30th June 2024 – Manual Return Deadline –31st March 2025**
• DAC 2 Reporting - Deadline for Financial Institutions (FIs) – FIs using Excel – 31st March 2025
• DAC 4 / CbC Reporting by Ultimate Parent Entity/ Surrogate Parent Entity –Group’s fiscal year ending 31st March 2024 – 31st March 2025
• DAC 4 Annual Notification by Local Constituent Entities –Financial year ending from 31st January 2024 to 30th June 2024 – 31st March 2025
* Recapitulative Statements are due on the 15th day of the following calendar month. Where the total quarterly amount (ex. VAT) is less than €50,000 the recapitulative statement is due by no later than the 15th day of the following calendar month. Nil Recapitulative Statements are not to be submitted.
** Web Extension Deadline available.
UNLIMITED CPE BUNDLE
Digital Transformation
At what stage of the journey is your organisation?
Gordon Micallef People Power: The Foundation of Effective Digital Transformation
Digital transformation is reshaping industries across the globe and changing their business models and way of operating life. From the way we communicate, where instant messaging and video calls have replaced traditional phone conversations and inperson meetings, to how we shop, with e-commerce platforms enabling us to purchase goods from the comfort of our homes, technology has fundamentally altered our daily routines. The accountancy profession is no exception. For the final edition of The Accountant this year, we sat down with Gordon Micallef, Chairperson of the MIA’s Digital Committee and Partner at RSM, to explore what digital transformation truly means and its impact on the profession.
With 24 years of experience spanning across digital and cyber-related projects, including a decade as Partner with specific focus on the digital realm, Gordon has been at the forefront of driving the digital agenda. His background in Information Technology audit has given him a unique perspective, allowing him to effectively bridge change, assurance and technology.
As we prepared to discuss the risks, challenges, and opportunities surrounding digital transformation, particularly for accountancy and auditing professionals, Gordon was quick to suggest the need to first appreciate what digital transformation actually entails. “Not every process involving technology is digital transformation,” he quips. “Changing a tech system alone is not transformative. It is when you change the business trajectory to achieve new levels of results — that’s real digital transformation. Digital tools are just one part of the process,” he insists.
Despite technological progress, Gordon believes that people will ultimately make or break any successful transformation operation within an organisation. “No matter how sophisticated the technology, without the right people driving it, meaningful change cannot occur. You can have the best technology at your fingertips, but if you do not have the right people to implement and manage it, you will not achieve the desired results,” he explains. This goes beyond simply having skilled staff — it requires fostering a culture of good governance and communication, which are essential for any successful transformation.
Gordon adds that good governance is crucial to ensuring that a digital transformation project aligns with a company’s goals and vision. Clear communication is equally important, as it helps bridge gaps between units, processes, and functions, and ensures everyone is aligned throughout the transition, encouraging various teams to feel part of the project and to be significant contributors to its realisation. He points out that many companies focus too much on technology and neglect the human and organisational elements that enable that technology to deliver results. “It is not uncommon that when working with businesses through such changes, I spend more time emphasising governance and communication than the technology itself,” Gordon admits.
As the conversation evolves, it is amply clear that the accountant’s role is changing in sync with these new realities; it now extends beyond just understanding financials to having a crucial role in ensuring organisations adopt new technologies in a way that drives real, sustainable transformation. Without proper governance to steer transformation and clear communication to align teams, even the most advanced tools will fall short of creating lasting change.
So why aren’t local businesses investing enough in meaningful digital transformation? Gordon believes it often comes down to a lack of vision and strategy at different levels, starting from the Board and top management. In a way, this opens opportunities for the profession. “Accountants can and should take the lead here, but the issue lies in whether they have the right mindset and tools. For example, can they properly evaluate a digital transformation project?”.
This is where the MIA, including through the efforts of the Digital Committee, plays an important role, working to equip accountants with the necessary skills in data analytics, cybersecurity, navigating the cloud, and emerging technologies like Artificial Intelligence. Over the past months, the Committee has also contributed to several proposals which fed towards the Institute’s response to the proposed National Education Strategy as well as through the creation of a skillset map aimed at identifying the right skillset required for accountancy professionals to thrive in this new setting.
Adding complexity to transformation is that resistance might not always be related to skills. Businesses often hesitate, especially when they are pressed for time or cost. Yet, the long-term benefits of embracing new technologies often outweigh by far the initial difficulties. Embedding technology into the business’ culture and hiring practices can attract and retain talent, whilst training and ongoing support ensure smoother transitions.
Another form of resistance often comes from people inside an organisation. “Transformation is a change, and most of the times, people do not embrace change easily,” Gordon says. This again links back to the critical role of governance and communication — these ensure that everyone understands the change, supports it, and works towards shared goals. Here, he explains that
governance in digital transformation extends beyond technology itself, encompassing project management, data governance, and other critical areas that ensure success. Accountability is also essential — clear roles, risk management, and alignment with the organisation’s strategy are vital to prevent digital transformation from becoming just a temporary initiative.
In today’s fast-paced technological environment, digital transformation is a continuous process. “By the time a project is completed, you will likely be planning the next one,” he adds. Continuous adaptation is crucial to maintaining an organisation’s competitiveness, as stagnation is not an option in today’s rapidly evolving markets.
As the conversation reaches its concluding stages, Gordon reaffirms that digital transformation is about more than staying current — it is about adding long-term value. “You cannot remain the same,” he says. “The Chief Financial Officer must be able to evaluate all aspects of transformation — people, processes, and technology — and understand how they collectively drive the business forward. This is an integral part of making sure the firm remains competitive out there,” he adds.
Looking ahead, he insists that the future of accountancy is closely intertwined with the future of digital transformation. As businesses continue to embrace new technologies, accountants will need to evolve from financial experts to strategic leaders with digital expertise. The emergence of roles such as digital strategists or data analysts illustrates the shift in expectations for accountants, highlighting the need for a skillset that extends beyond traditional financial expertise.
In this context, Gordon’s parting advice is that accountants must take a proactive approach to learning and developing the skills necessary to excel in this digital era. The accountants of the future will need to embrace lifelong learning, continuously updating their knowledge of emerging technologies, regulatory developments, and best practices in digital finance. Embracing this shift is essential, positioning accountants at the forefront of a new world and ensuring that the profession remains relevant and valuable in an increasingly digital future. “The future is about being responsive to change and seize the opportunities that come with it,” he concludes.
Meet the Team
JACQUELINE MAMO
A few words to describe you: Patient, caring, problem solver, dynamic, responsible, eye for detail, passionate and dedicated in whatever I do.
Working at MIA means....
Never a dull moment! Every day brings unique challenges, from addressing member and student queries to managing staff requests, ensuring smooth office operations and maintenance, and supporting the CEO on various projects.
What’s the most memorable place you’ve ever travelled to, and what made it special?
Norway – seeing the aurora borealis. The indescribable colours in the sky are something out of this world.
If you had to eat one meal for the rest of your life, what would it be?
I am more of a snack person than a meal person, so it is difficult to choose, but it would definitely be something with potatoes and cheese.
What’s the best piece of advice you’ve ever received?
There is always an answer to every problem – half of it lies in the way we deal with it and what control we have over it.
What’s a fun fact about you that most people don’t know? Whoever knows me outside of work, knows I am a tranquil person who always looks for simple, quiet things. I am a person who enjoys the simplest of things.
Pets at home?
Yes, I love animals and have a dog: my furry kid, Mr Miguel! He means the world to me, and I try to include him in whatever I do as much as possible.
What’s your favourite book, movie, or series that you recommend to everyone?
August Rush, a movie on the amazing power of music to bring people together.
If you won the lottery tomorrow, what’s the first thing you would do?
I would definitely rent a private jet and travel with my closest people and dog (then, maybe, it would be dogs) to a different country.
