Bill 142 of 2025 - Harmonising Maltese Revenue Enforcement

Bill No. 142, the Various Revenue Laws (Amendment) Act 2025, was published in the Government Gazette today, on 25 July 2025. The declared purpose of this proposed law is to “strengthen the investigative tools and powers and the options for settlement of the Commissioner for Tax and Customs in the fight against fiscal evasion” by creating a uniform statutory settlement mechanism across the principal revenue codes.

The Bill inserts a verbatim “special mechanism for out-of-court settlements” into the Social Security Act (new article 127A), the Duty on Documents and Transfers Act (new article 68), the Income Tax Management Act (new article 52A) and the Value Added Tax Act (new article 84A). Each clause takes precedence over any conflicting provision in the relevant Act or in any other law, thereby harmonising the settlement power throughout the Maltese revenue system.

The procedure is initiated by the taxpayer through a written request accompanied by corrected declarations. If the Commissioner (or, in the social-security context, the Director) accepts the adjustments, a draft agreement is issued. That draft must be executed within six months of the initial request, although an extension is permissible where additional time is necessary to determine the extent of illicit proceeds. Once the draft is served, the signed agreement must be returned within one month, subject to a discretionary extension for reasonable cause. If the taxpayer fails to meet either time-limit, the settlement mechanism ceases to apply.

If the law is approved as it is, a concluded agreement would have three principal legal effects:

1. Most importantly, it extinguishes all criminal liability for both the underlying offence and any connected breach arising from the same factual matrix.

2. The quantified sum becomes an executive title enforceable under Title VII of Part I of Book Second of the Code of Organisation and Civil Procedure, enabling summary execution without the need for further judicial intervention.

3. Prescription in respect of the offence and any connected breach is suspended during the negotiation period, and no prosecution may be brought while that suspension is running.

   
   

To deter abuse of the system, the Bill inserts three new offences into the Criminal Code. This proposed law criminalises the fraudulent breach of a Government settlement, punishable by imprisonment of up to four years or a fine of up to two and a half million euro. Article 187B addresses an unjustified breach, carrying a maximum of two years’ imprisonment or a fine of up to five hundred thousand euro. Article 187C designates any benefit obtained under a tainted agreement as proceeds of crime, thus triggering the asset-recovery regime.

From a doctrinal perspective, the Bill represents a deliberate shift from criminal enforcement toward administrative compliance. By codifying the settlement power, imposing clear timelines and introducing severe penalties for bad-faith default, the legislature is seeking to reconcile efficient revenue collection with proportional criminal deterrence.

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