INCOME TAX ACT

INCOM E TA X

CHAPTER 123

INCOME TAX ACT

To impose a Tax upon Incomes.

Amended by

XVII. 1994.35.

1st January, 1949

ACT LIV of 1948, as amended by Acts: VI of 1953, XX of 1955, V of 1958; Emergency

Ordinance XV of 1958; Ordinances: VIII and XVI of 1959, XXV of 1960, XXIV and XLI of

1961, XXV of 1962; Legal Notice 4 of 1963; Acts: X and XIV of 1963; V of 1964; Legal Notice

46 of 1965; Acts: XXXI of 1966, XXVII of 1967, VIII of 1969, XXVIII and XXXV of 1972, X

and XX of 1973, XLIX and LVIII of 1974; Legal Notice 148 of 1975; Acts: XLII of I975, XXII,

XXIV and XXXIX of 1976, XXVI of 1977, XXVIII of 1978, XXI of 1980, IX and XL of 1981, IX

and XIII of 1983; XIV of 1984, VIII of 1987; XXXI of 1988, XIX of 1989, XXXVI of 1990, VIII

of 1991, XIII of 1992, XVIII of 1993, I and XVII of 1994, XXII of 1995, XX of 1996, V, XVII of

1998, IX of 1999 and XI of 2000; Legal Notice 238 of 2000; Acts IV and IX of 2001, II of 2002,

II of 2003, II, III and XIII of 2004, II and IX of 2005, II of 2006, and II, IV, IX, XIII and XXXII

of 2007; Legal Notice 409 of 2007; Acts II and XVII of 2009; Legal Notice 98 of 2009; Acts I

and XIX of 2010; Legal Notice 336 of 2010; Acts IV, XVI and XXII of 2011, and V of 2012;

Legal Notice 218 of 2012; and Acts III of 2013, XII, XXII, XXIII and XXXVII of 2014, XIII,

XXI and XXXIII of 2015, XV of 2016, XVI of 2017, VII of 2018, VII of 2019, VIII of 2020 and

VIII, XVIII of 2021, VII of 2022 , XII, XXVII and XXXV of 2023, XIII of 2024, IX of 2025 and

III of 2026.

The short title of this Act is the Income Tax Act.

Article 56(12)(c)

Additional tax chargeable under article 56(12)(c)

1. In this Schedule

" a d d i t i o n a l t a x " m e a n s t h e a d d i t i o n a l t a x c h a rg e a b l e i n

accordance with the provisions of article 56(12)(c) in respect of a

default or omission;

"endangered tax" † means, subject to the provisions of item 12,

the difference between the tax declared to be chargeable by the

taxpayer after taking into account any exemption, relief, allowance

or tax credits to which he may be entitled and the tax actually

chargeable after considering the same, but shall not include any

additional tax

Provided that where the Commissioner is satisfied that the tax

actually chargeable or any part thereof has been paid under the Final

Settlement System (FSS) Rules, the amount so paid shall not be

regarded as endangered tax notwithstanding that it may not have been

declared;

"default" means a default in furnishing a return of income

required to be submitted for the purposes of the Income Tax Acts;

"omission" means the omission from any return of income

submitted for the purpose of the Income Tax Acts of any amount

which should have been included therein and includes any act or

omission which is deemed to constitute an omission in terms article

56(12);

"tax professional" means an individual being the holder of a

warrant issued under the Accountancy Profession Act, or a member

of the Malta Institute of Taxation, or a member of the legal

profession in Malta who specialises in taxation, or a partnership of

such individuals the majority of whom are so qualified: provided

that the Commissioner shall be entitled to request such proof as he

may deem appropriate to the effect that an individual qualifies as a

tax professional as aforesaid.

2. Additional tax chargeable under article 56(12)(c) for a

default by an individual in furnishing a return in respect of the year

of assessment 2009 or any subsequent year of assessment shall be

* The provisions of this Schedule, as substituted by Legal Notice 98 of 2009, shall

apply with respect to additional tax chargeable in terms of article 56(12)(c) for the

year of assessment 2009 and subsequent years of assessment: provided that the

provisions of this Schedule, as in force immediately before the coming into force of

the substituting rules, shall continue to apply with respect to additional tax chargeable

in accordance with the said article 56(12)(c) for years of assessment preceding the

year of assessment 2009.

†Applicable from 1st January, 2025.

at the amounts shown in Table A hereunder

TABLE A

Number of months from the date on which a

Additional tax

return is required to be submitted in accordance

with the relevant provisions of the Income Tax

Management Act

Within 6 months

€10

Later than 6 but within 12 months

€50

Later than 12 but within 18 months

€100

Later than 18 but within 24 months

€150

Later than 24 but within 36 months

€200

Later than 36 but within 48 months

€300

Later than 48 but within 60 months

€400

Later than 60 months

€500

3. Additional tax chargeable under article 56(12)(c) for a

default by a person, other than an individual, in furnishing a return

in respect of the year of assessment 2009 or any subsequent year of

assessment, shall be at the amounts as shown in Table B hereunder

TABLE B

Number of months from the date on which a

Additional tax

return is required to be submitted in accordance

with the relevant provisions of the Income Tax

Management Act

Within 6 months

€50

Later than 6 but within 12 months

€200

Later than 12 but within 18 months

€400

Later than 18 but within 24 months

€600

Later than 24 but within 36 months

€800

Later than 36 but within 48 months

€1,000

Later than 48 but within 60 months

€1,200

Later than 60 months

€1,500

4. Where a person proves that a default in furnishing a return

filed or due to be filed by him was due to a reasonable excuse, the

Commissioner may remit part or all of the additional tax otherwise

chargeable in accordance with item 2 or 3 in respect of that default

Provided that

(a) an insufficiency of funds to pay any tax due, or

(b) when reliance is placed on any other person to perform

any task, the fact of that reliance or any dilatoriness or

inaccuracies on the part of the person relied upon,

shall not constitute a reasonable excuse for the purpose of this

item.

5. (1) Subject to the provisions of the other items of this

Schedule, additional tax chargeable under article 56(12)(c) for an

omission from a return shall be one point five per cent (1.5%) per

month of the endangered tax.

(2) Subject to the provisions of item 7, the rate of additional

tax per month as provided in paragraph (1) shall be calculated for

every month or part thereof, such period commencing with the

month during which the tax on the chargeable income for that year

was due and payable and ending with the month during which the

omission is rectified by a further return made under article 13 of

the Income Tax Management Act or an assessment is made.

6. (1) When an omission from a return is rectified by a person

by means of the delivery of a further return made in accordance

with article 13 of the Income Tax Management Act before that

person is notified in writing by the Commissioner, in terms of sub-

article (7) of the said article, that an enquiry will be conducted into

that person’s tax declarations and liabilities -

(a) if that further return is delivered to the Commissioner

not later than twelve months after the relative tax

return date, the additional tax otherwise chargeable

under item 5 for that omission shall be fully remitted;

(b) in any other case, the rate of additional tax otherwise

chargeable under item 5 for that omission shall be zero

point one per cent (0.1%) per month of the endangered

tax.

(2) Where an omission from a return is rectified by a person by

means of the delivery of a further return made in accordance with

article 13 of the Income Tax Management Act after that person has

been notified in writing by the Commissioner, in terms of sub-

article (7) of the said article, that an enquiry will be conducted into

that person’s tax declarations and liabilities, but before that person

is notified with an assessment in which additional tax is charged for

that omission, the rate of additional tax otherwise chargeable under

item 5 for that omission shall be zero point seven five 0.75% per

month of the endangered tax.

7. The maximum additional tax for an omission payable

under item 5 or 6 shall in no case be more than sixty times the

applicable rate in terms of the respective item.

8. (1) Where a return of income delivered by a person

contains an omission and -

(a) that person has sought and relied upon the written

advice of a tax professional, insofar as the matter to

which the omission refers is concerned, and submits

the original written advice together with the return by

not later than the relative tax return date; or

(b) that person proves that the omission was not due to

any fraud, art, contrivance or gross or wilful neglect,

the Commissioner may remit part or all of the additional tax

otherwise due in accordance with this Schedule in respect of that

omission.

(2) An advice, referred to in paragraph (1)(a), furnished by a

tax professional, shall not of itself constitute a binding

interpretation of the relative statutory provisions and their proper

application.

(3) The Commissioner shall not be required to remit the

additional tax in accordance with item (1)(a) if he determines the

advice in question to be spurious or frivolous: provided that the

Commissioner’s decision under this paragraph shall be subject to

review by the Administrative Review Tribunal in any appeal filed

in connection with the relative assessment.

(4) Without prejudice to paragraph (1)(a), the fact that an

omission was due to the complexity of a particular transaction or to

the complexity of any particular provision of the law shall not, of

itself, be considered as a valid ground for the remission of

additional tax under paragraph (1)(b).

9. The additional tax chargeable under article 56(12)(c) shall

be in addition and without prejudice to interest chargeable under

article 44(2A) of the Income Tax Management Act, but no such

interest shall be charged on the said additional tax.

10. When a person files a declaration prescribed for the

m a k i n g o f a n e l e c t i o n u n d e r a r t i c l e 1 2 o f t h e I n c o m e Ta x

Management Act, and he is not a person to whom that article

applies and subsequently submits a full and correct return, he shall

be deemed for the purposes of article 56(12)(c) and of this

Schedule to have omitted from his return all his income except for

that income referred to in article 12(2)(b) of that Act and to have

rectified that omission when he submits the full and correct return.

11. When a person to whom article 12 of the Income Tax

Management Act applies files a declaration prescribed for the

making of an election under that article after the date prescribed

therefor, he shall for the purposes of article 56(12)(c) and of this

Schedule be deemed to have made a default in furnishing a return

and that default shall continue until a return is furnished.

12. (1) When the Commissioner, having determined the

amount of tax payable by a person for a year or years of assessment

on the basis of an estimate made under article 31(3) of the Income

Tax Management Act, gives notice in writing to that person, in

terms of article 13(7) of that Act, that an enquiry will be conducted

into his tax declarations and liabilities, and that person

subsequently furnishes a return of income in respect of the said

year or years, that person shall be deemed to be subject to

additional tax for an omission in addition to any additional tax to

which he may be liable for a default.

(2) For the purposes of calculating the endangered tax for an

omission to which the person referred to in paragraph (1) shall be

subject, the said endangered tax shall be considered to be equal to

the tax calculated on the total income, deducting therefrom any

credits, as declared in the said return.

(3) Where an assessment or an additional assessment for a year

or years of assessment is made under article 31(5) of the Income

Tax Management Act on a person referred to in paragraph (1), for

the purposes of calculating the endangered tax, the tax calculated

on the total income, deducting therefrom any credits, as declared in

the said return, shall be considered to be zero

Provided that the additional tax for omission as resulting

from paragraph (2) shall be deducted from the amount of the

additional tax as resulting from this paragraph.

13. (1) The Commissioner may remit such part or all of the

additional tax otherwise chargeable in accordance with this

Schedule in respect of a default or an omission as he may deem fit.

(2) The Commissioner may impose any condition that he may

consider appropriate for any remission under paragraph (1),

including the requirement that the person concerned shall not make

another default or omission within such period as the

Commissioner may establish or that the said person shall make a

payment of tax in such amount and within such time as the

Commissioner may determine.

(3) Should any condition imposed by the Commissioner in

accordance with the provisions of paragraph (2) be infringed by the

person concerned, any reduction of additional tax granted by the

Commissioner in addition to the reductions contemplated by the

other provisions of this Schedule shall be forfeited.

(4) If forfeiture is due under the provisions of paragraph (3),

any additional reduction made under the provisions of this item, but

not under the provisions of the other items, shall be deemed to have

been a suspension of liability to the said additional tax, and not the

cancellation of the relevant additional tax.

(5) The Commissioner shall communicate in writing to the

person concerned any condition imposed under paragraph (2), the

c o n s e q u e n c e s o f a n i n f r i n g e m en t o f a n y s u c h co n d i t i o n i n

accordance with paragraph (3) and, when such is the case, the fact

that forfeiture has been incurred.

(6) The use of the Commissioner’s discretion under this item

shall not be questioned in any appeal.

(1) In this Act, and in any rules made under this Act,

unless the subject or context otherwise requires -

"a company registered in Malta" shall mean a company which is

resident in Malta or a company which, although not resident in

Malta, carries on any activity in Malta and in the case of a company

which is neither incorporated nor resident in Malta shall mean a

company that is registered for this purpose with the Commissioner

in such manner as may be prescribed;

"body of persons" means any body corporate, including a

company, and any fellowship, society or other association of

persons, whether corporate or unincorporate, and whether vested

with legal personality or not;

"bonus shares" means and includes the paid-up value of shares

distributed by a company to its shareholders to the extent to which

the paid-up value represents a capitalization of profits;

"certified public auditor" means an individual who holds a

warrant to act as auditor issued under the Accountancy Profession

Act, or a partnership of auditors duly registered under the said Act,

provided such individual is not disqualified and in the case of a

partnership none of the partners is an individual who is disqualified

for appointment as auditor or from holding such appointment on

any of the grounds mentioned in article 153 of the Companies Act;

"chargeable income" means the total income of any person for

any year;

"collective investment scheme" means any scheme or

arrangement which is licensed under the Investment Services Act

or notified in terms of the Investment Services Act (List of Notified

AIFs) Regulations;

"Commissioner" means the Commissioner for Tax and Customs;

"Commonwealth" has the same meaning as is assigned to it in

article 124 of the Constitution of Malta;

"company" means -

(a)

(i)

a limited liability company constituted under the

Companies Act or under the Commercial

Partnerships Ordinance; or

(ii) any other company constituted as such under any

other law in force in Malta;

(iii) (1) any partnership en nom collectif and any

INCOM E TA X

partnership en commandite constituted

under the Companies Act or under the

Commercial Partnerships Ordinance;

(2) any partnership regulated by the applicable

provisions of the Civil Code and registered

in such manner as may from time to time be

provided in terms of the Second Schedule

to the Civil Code;

(3) any European Economic Interest Grouping

(EEIG) formed pursuant to the provisions

of the Companies Act (European Economic

Interest Grouping) Regulations;

(4) * any Special Limited Partnership Fund

established in accordance with the Investment

Services Act (Special Limited Partnerships

Funds) Regulations;

and which partnership or EEIG as the case may

be, has elected to be treated as a company in

terms of article 27(6) of the Income Tax

Management Act and for as long as such election

remains in force

Provided that in the case of a cell company as

defined in any regulations made in terms of the

Companies Act (hereinafter in this proviso referred

to as "the Regulations") as these may be amended

from time to time, or in any other law or regulations

replacing the Regulations, for all intents and

purposes of the Income Tax Acts, every cell of a cell

company and that part of a cell company in which

non-cellular assets are held, shall each be deemed to

be a separate company and any words and

expressions in the Income Tax Acts which are

relevant to a company shall be construed

accordingly. The interpretation of such words and

expressions insofar as applicable to a cell company

shall be made on the basis of the relevant provisions

of the Companies Act and of the Regulations

Provided further that a partnership en commandite with its

capital divided into shares constituted prior to the 1st of

January, 2015 shall be deemed to have elected to be

treated as a company in terms of article 27(6) of the

Income Tax Management Act and for as long as such

election remains in force;

(b)

(i)

any body of persons constituted, incorporated or

registered outside Malta, and of a nature similar

to a company referred to in sub-paragraphs (i) or

(ii) of paragraph (a) above;

*Applicable from year of assessment 2026. Vide Article 13(2) of Act III of 2026.

(ii) any body of persons constituted, incorporated or

registered outside Malta and of a nature similar

to any partnership referred to in sub-paragraph

(iii) of paragraph (a) above, where such body of

persons has elected to be treated as a company in

terms of article 27(6) of the Income Tax

Management Act and for as long as such election

remains in force;

(c) any co-operative society duly registered as such under

the appropriate law for the time being in force in

Malta;

"continental shelf" has the same meaning as is assigned to it in

the Continental Shelf Act;

"debenture interest" means interest payable by a company under

or by virtue of a debenture or a debenture trust deed, whether in the

form of a mortgage or any other instrument or document

acknowledging indebtedness;

"distributable profits" shall mean the total profits which are

available for distribution by a company registered in Malta under

the laws for the time being in force in Malta, and the distributable

profits shall, for the purposes of this Act, be allocated to the

following accounts, that is to say, final tax account, immovable

property account, foreign income account, Maltese taxed account,

and untaxed account, and for the purposes of this definition these

accounts shall comprise the distributable profits as set out in the

respective definitions

Provided that in the case of a company which is neither

incorporated nor resident in Malta the distributable profits shall be

the profits attributable to the activities of such company in Malta

and in respect of which it has registered with the Commissioner

less any of such profits which the company has distributed in

previous years;

"dividend" includes -

(a) bonus shares

(b) any distribution made by a company, to its partners or

shareholders, as the case may be, and any amount

credited to them as partners or shareholders as the case

may be; and

(c) any distribution made by a co-operative society to its

members and any amount credited to them as

members, including any patronage refund, bonus

certificate or bonus share, made, paid or allotted in

accordance with the law regulating such societies for

the time being in force in Malta;

"equity holding" shall mean a holding of the share capital in a

company which is not a property company, when the shareholding

entitles the shareholder to at least any two of the following rights

(hereinafter referred to as "equity holding rights")

(i)

a right to votes;

(ii) a right to profits available for distribution to

shareholders; and

(iii) a right to assets available for distribution on a

winding up of that company,

and "equity shares", "equity shareholder" and "equity

shareholding" shall be construed accordingly

Provided that the Commissioner shall be entitled to

determine that an equity holding exists even where such holding is

not a holding of the share capital in a company or does not consist

solely of such a holding of share capital, but where it can be

demonstrated that in substance there is at any time an entitlement to

at least two of the equity holding rights;

"exclusive economic zone area" shall have the same meaning as

assigned to it in the Exclusive Economic Zone Act;

"final tax account" shall mean the taxed account to which an

amount of distributable profits which suffered tax, calculated in

such manner and in such amount as may be prescribed, shall be

allocated before any distributable profits are allocated to any other

taxed account;

"foreign income account" shall, with effect from the year

immediately preceding the year of assessment 1996, mean any of

the following categories of distributable profits arising in that year

and in subsequent years to the extent that they result from taxable

income

(a) profits resulting from royalties and similar income

arising outside Malta and from dividends, capital gains,

interest, rents, income or gains derived from a

participating holding or from the disposal of such holding

other than a participating holding in a company resident

in Malta, or in a partnership en commandite the capital

of which is not divided into shares which is resident in

Malta, and any other income derived from investments

situated outside Malta, which are liable to tax in Malta

and shown as part of the company’s chargeable income

in the return made pursuant to article 10 of the Income

Tax Management Act, and are receivable by a company

registered in Malta not being a company registered under

the Malta Financial Services Authority Act, and

(b) profits resulting from investments, assets or liabilities

situated outside Malta to a company not registered

under the Malta Financial Services Authority Act, and

either licensed as a bank in Malta or in possession of

a licence granted under the provisions of the Financial

Institutions Act

Provided that, notwithstanding the provisions of article

92(1)(b), with effect from the year of assessment 2016,

this paragraph shall not be applicable to any company

which is not specifically empowered to receive such

profits or gains; and

(c) all profits or gains of a company registered in Malta,

which are liable to tax in Malta and shown as part of

the company’s chargeable income in the return made

pursuant to article 10 of the Income Tax Management

Act and attributable to a permanent establishment

(including a branch) situated outside Malta, and for

these purposes "profits or gains" shall be calculated as

if the permanent establishment is an independent

enterprise operating in similar conditions and at arm’s

length; and

(d) profits resulting from dividends paid out of the foreign

income account of another company registered in

Malta; and

(e) profits or gains resulting to a company registered in

Malta authorised under article 7 of the Insurance

Business Act, not being a company registered under

the Malta Financial Services Authority Act, from the

business of insurance in relation to risks situated

outside Malta

Provided that this provision shall apply exclusively to

companies which allocated profits to the foreign

income account on the basis of this paragraph for any

year of assessment up to and including year of

assessment 2007, and such companies shall only be

entitled to continue allocating profits on the basis of

this paragraph up to and including year of assessment

2011

Provided that in the case of a company referred to in

paragraph (e) of this definition, any profits or gains which would,

in accordance with the above provisions, stand to be allocated to

the foreign income account will, for any financial year, not be so

allocated unless such profits or gains arise in the year immediately

preceding the year of assessment 2000 and in subsequent years

Provided further that in the case of a company which is

licensed as a bank in Malta or which forms part of a banking group

as defined below, any profits which would, in accordance with the

above provisions, stand to be allocated to the foreign income

account will, for any financial year, not be so allocated unless

(a) more than ninety-five per cent of its average daily

deposits throughout the financial year are taken from

persons who are not residents in Malta; and

(b) where the company forms part of a banking group,

such group meets, on a consolidated basis, the

requirement specified in paragraph (a) above.

For the purposes of this proviso

(a) "banking group" shall comprise only Maltese

registered companies, at least one of which must be a

bank licensed in Malta, and which companies are

members of a banking group of companies. Two

companies shall be deemed to be members of a

banking group of companies if one is the ten per cent

affiliate of the other or both are ten per cent affiliates

of a third company. For this purpose, a company shall

be deemed to be a ten per cent affiliate of another

company (parent company)

(i)

if and so long as more than ten per cent of its

ordinary share capital and more than ten per cent

of its voting rights are owned directly or

indirectly by the parent company; or

(ii) the parent company is beneficially entitled either

directly or indirectly to more than ten per cent of

any profits available for distribution to the

ordinary shareholders of the affiliate company;

or

(iii) the parent company would be beneficially

entitled either directly or indirectly to more than

ten per cent of any assets of the affiliate

company available for distribution to its

ordinary shareholders on winding up

Provided that notwithstanding the above

provisions, a company which has been acquired by a

bank in satisfaction of a debt and which does not

otherwise form part of the bank’s business shall be

deemed not to form part of a banking group;

(b) ''average daily deposits'' shall be computed by taking

the total deposits at the end of each day for the

financial year and dividing such amounts by the

number of days in that financial year and average daily

deposits taken from persons who are not resident in

Malta shall be computed in like manner. The word

''deposits'' shall have the meaning assigned to it in the

Banking Act;

(c) the amount of the consolidated average daily deposits

of a banking group shall include only deposits

accepted by companies forming part of the banking

group placed by persons other than such companies

Provided further, that in the case of an international trading

company, the profits which would, in accordance with the above

provisions, stand to be allocated to the foreign income account will,

for any financial year, not be so allocated

Provided further that notwithstanding anything contained in

this Act or in any rules made thereunder any profits derived up to

the 31 December 2010 by a company which was resident in Malta

prior to the 1 January 2007 (other than a company which has

exercised its option in terms of paragraph (i)(2) of the proviso to

article 48(4A)(b) of the Income Tax Management Act) which would

have been allocated to the foreign income account had such profits

been brought to charge to tax in the year of assessment 2007 shall

be allocated to the foreign income account;

"immovable property account" shall mean the taxed account to

which distributable profits which have suffered tax and which are

not allocated to the final tax account calculated in such manner as

may be prescribed, shall be allocated before any distributable

profits are allocated to the other taxed accounts;

"income" except for the purposes of article 4(1) and Part IV shall

include capital gains as defined in article 5;

"the Income Tax Acts" shall collectively mean this Act and the

Income Tax Management Act;

"industrial building or structure" includes a building used as a

hotel or a car park or offices, as may be prescribed. For the purpose

of this definition

(a) the word "hotel" includes any number of constructions

suitably furnished and equipped, with accommodation

in single or double bedrooms, provided that such

constructions are grouped together and have in

common ancillary hotel services and amenities within

a single and defined parcel of land and are operated by

a common management for the accommodation and for

the use of guests against payment;

(b) the word "car park" refers to a structure of a

commercial nature available to the general public,

which is the main income generating activity of any

person claiming any deductions in its respect under

article 14(1)(f) or (j), or whose operation by any such

person involves substantial activity, having regard to the

capital employed, the organisation of the operation and

the income that it generates, and which is first used for

this purpose after the 1st January 2012;

"international trading company" means a company registered in

Malta by not later than 31 December 2006 which is engaged solely

in carrying on trading activities with persons outside Malta who are

not resident in Malta and which has its objects expressly limited to

such trading activities as well as to such acts and activities as are

necessary for the conduct of its operations from Malta. The

following activities shall be allowable activities of an international

trading company

(a) purchases for export of goods manufactured,

assembled or processed in Malta provided that such

purchases are not made from a person who owns

directly or indirectly more than fifteen per cent of the

ordinary share capital of the said international trading

company;

(b) trading with companies registered in Malta under the

Malta Financial Services Authority Act;

(c) trading with other international trading companies;

and

(d) the management of companies resident in Malta whose

business is restricted to affiliated insurance and where

such business is carried on exclusively with non-

residents;

(e) the provision of management, administration or other

services to collective investment schemes resident in

Malta where such schemes are marketed exclusively

outside Malta and are licensed or exempt from

licensing under the Investment Services Act; and

(f)

the provision of ship management services by companies

whose activities and objects solely comprise the

management of ships which are of not less than one

thousand nett tons and which are engaged in the carriage

of goods or passengers

Provided that a company shall not be, in the year

immediately preceding a year of assessment, an

international trading company if it claims a benefit

under any provision of a law, other than the Income

Tax Acts, which has the effect of reducing its

chargeable income or its rate of tax for the said year of

assessment, and in such case, notwithstanding the

provisions of article 52(8)(a), any ruling which had

been notified under the provisions of article 52(5)

shall become void. This proviso shall have effect

notwithstanding that the relevant law deems that such

benefit is granted under any of the provisions of the

Income Tax Acts

Provided that the company has not opted to cease

to be an international trading company pursuant to

article 48(4A)(b)(i)(1) of the Income Tax Management

Act

Provided further that notwithstanding any other

provisions of this Act or any other law including the

provisions of article 52(8) of this Act no company

shall be an international trading company with effect

from 1 January 2011;

"loss" in relation to a trade, business, profession, or vocation

means loss computed in like manner as profits;

"Malta" means the Island of Malta, the Island of Gozo and the other

islands of the Maltese Archipelago, including the territorial waters

thereof, the continental shelf and any exclusive economic zone area;

"Maltese taxed account" means any of those profits of a company

that are not included in the foreign income account and

(a) which have suffered tax; or

(b) which have been exempt from tax under the provisions

of any Maltese law and where the distribution of such

profits by the company is also exempt from tax in the

hands of the shareholders

Provided that this paragraph shall cease to apply with

effect from year of assessment 2008;

"married" refers to any of the spouses or partners in a married

couple;

"married couple" refers to two spouses who contracted marriage

or two partners who have registered their partnership as a civil

union, in accordance with the legal provisions of the country where

the marriage or civil union was executed;

"participating holding" shall mean a holding which arises where

(a) a company holds directly at least five percent of the

equity shares of a company whose capital is wholly or

partly divided into shares, which holding confers an

entitlement to at least five percent of any two of the

following

(i) right to vote;

(ii) profits available for distribution; and

(iii) assets available for distribution on a winding up

Provided that the Commissioner shall be entitled to

determine that the provisions of this paragraph are

satisfied even where the said minimum level of

entitlement exists in the circumstances referred to in

the proviso to the definition of "equity holding";

(b) a company is an equity shareholder in a company and

the equity shareholder company is entitled at its option

to call for and acquire the entire balance of the equity

shares not held by that equity shareholder company to

the extent permitted by the law of the country in which

the equity shares are held; or

(c) a company is an equity shareholder in a company and

the equity shareholder company is entitled to first

refusal in the event of the proposed disposal,

redemption or cancellation of all of the equity shares

of that company not held by that equity shareholder

company; or

(d) a company is an equity shareholder in a company and

is entitled to either sit on the Board or appoint a person

to sit on the Board of that company as a director; or

(e) a company is an equity shareholder which holds an

investment representing a total value, as on the date or

dates on which it was acquired, of a minimum of one

million, one hundred and sixty-four thousand euro

(€1,164,000) (or the equivalent sum in a foreign

currency) in a company and that holding in the

company is held for an uninterrupted period of not less

than 183 days; or

(f)

a company is an equity shareholder in a company and

where the holding of such shares is for the furtherance

of its own business and the holding is not held as

trading stock for the purpose of a trade

Provided that a holding of a company in –

(a)

a partnership or EEIG referred to in sub-

paragraph (iii) of paragraph (a) of the definition of

"company" in sub-article (1) of article 2 of the Act, not

being a property partnership, and which has not elected

to be treated as a company in terms of article 27(6) of

the Income Tax Management Act; or

(b)

a body of persons referred to in sub-

paragraph (ii) of paragraph (b) of the definition of

"company" in sub-article (1) of article 2 of the Act, not

being a property partnership, and which has not elected

to be treated as a company in terms of article 27(6) of

the Income Tax Management Act; or

(c)

a

collective

investment

vehicle

constituted, incorporated or registered outside Malta and

which is not resident in Malta, where the liability of

investors in such scheme is limited to the amount

invested by them,

shall be deemed to constitute a participating holding if it

satisfies the provisions of any of paragraphs (a) to (f)

above which shall apply mutatis mutandis to such

holding. For the purposes of this proviso, the terms

"equity shares" or "shares" shall be construed as

referring to the capital in the said partnership, EEIG,

body of persons or collective investment scheme as the

case may be which entitles the holder to at least two of

the following rights

(i)

a right to vote;

(ii) a

right

to

profits

available

for

distribution; and

(iii) a right to assets available for distribution

on a winding up of the said body of persons,

and the term "equity shareholder" shall be construed accordingly and

the reference to "company" in this definition and in the provisos

thereto shall be deemed to include also such partnership, EEIG, body

of persons or collective investment scheme as the case may be.

Provided that the Commissioner shall be entitled to

determine that an equity holding exists even where the particular

company does not have a holding in the share capital in a company

or does not consist solely of such a holding of share capital, but it

can demonstrate that in substance it holds an entitlement to at least

two of the equity holding rights

Provided further that in the case of a holding falling within

the purport of paragraph (a) above, the provisions of the said

paragraph shall be deemed to be satisfied even where the minimum

level of entitlement referred to in that paragraph exists at any time

by reference to the circumstances referred to in the proviso to the

definition of "equity holding";

"passive interest or royalties" shall mean interest or royalty

income which is not derived, directly or indirectly, from a trade or

business, where such interest or royalties have not suffered or

suffered any foreign tax, directly, by way of withholding, or

otherwise, at a rate of tax which is less than five per cent (5%);

"person" includes -

(a) a body of persons; and

(b) a responsible spouse in accordance with article 49;

"petroleum" means crude oil of whatever density, natural gas and

other hydrocarbons and substances that may be extracted therefrom;

"portfolio investment" is an investment in securities such as

shares, bonds, and such like instruments and which is held as one of

many such investments for the purpose of investment by risk

spreading where such an investment is not a strategic investment

and is made with no interest in and without the intention of

influencing the management of the company invested in and in

addition is made only to follow the share price and dividend policy

of the company invested in to maximise investment returns and to

sell the investment as soon as it appears that the shares may lose

value;

"prescribed" means prescribed by rule under this Act;

"property company'' shall mean a company which owns

immovable property situated in Malta or any real rights thereon or a

company which holds, directly or indirectly, shares or other

interests in any entity or person, which owns immovable property

situated in Malta or any real rights thereon where five percent or

more of the total value of the said shares or other interests so held

is attributable to such immovable property or rights

Provided that where a company, entity or person carrying on a

trade or business owns immovable property situated in Malta or any

real rights thereon, consisting only of a factory, showroom, warehouse

or office used solely for the purpose of carrying on such trade or

business, such company, entity or person shall, for the purpose of this

definition, be treated as not owning immovable property if not more

then fifty percent of the value of its assets consist of immovable

property situated in Malta or any rights over such property and it does

not carry on any activity the income from which is derived directly or

indirectly from immovable property situated in Malta;

"property partnership" shall mean a partnership as defined in

article 5(1)(b) which owns immovable property situated in Malta,

or any real rights thereon, or a partnership which, directly or

indirectly, holds shares or other proprietary interests in any entity

or person, which owns immovable property situated in Malta, or

any real rights thereon, where five percent or more of the total

value of the said shares or other proprietary interests so held is

attributable to such immovable property or rights

Provided that where a partnership, entity or person carrying

on a trade or business owns immovable property situated in Malta, or

any real rights thereon, consisting only of a factory, showroom,

warehouse or office used solely for the purpose of carrying on such

trade or business, such partnership, entity or person shall, for the

purpose of this definition, be treated as not owning immovable

property if not more then fifty percent of the value of its assets consist

of immovable property situated in Malta, or any real rights over such

property, and it does not carry on any activity the income from which

is derived directly or indirectly from immovable property situated in

Malta;

"resident in Malta" when applied to an individual means an

individual who resides in Malta except for such temporary absences

as to the Commissioner may seem reasonable and not inconsistent

with the claim of such individual to be resident in Malta; when

applied to a body of persons, means any body of persons the control

and management of whose business are exercised in Malta,

provided that a company incorporated in Malta on or after 1st July

1994 shall be resident in Malta and any other company

incorporated in Malta shall be resident in Malta from 1st January

1995 where the management and control of the business of the

company is exercised outside Malta;

"scholarship" includes a bursary, an award, a grant or an

endowment of a similar nature, given or established for educational

purposes;

"self assessment" has the meaning assigned to it in sub-articles

(2) and (3) of article 10 of the Income Tax Management Act;

"the Special Commissioners" means the Commissioners

appointed by the President of Malta under article 34 of the Income

Tax Management Act;

"spouse" shall include a partner registered as being in a civil

union;

"tax" means the income tax imposed by the Income Tax Acts;

"taxed account" and "taxed accounts" shall mean any or all of the

final tax account, immovable property account, foreign income

account, Maltese taxed account and untaxed account;

"tax return date" with respect to a person for a year of assessment

means the date prescribed pursuant to article 10(1) of the Income

Tax Management Act for the submission by that person of the

return of income for that year of assessment;

"tax settlement date" has the meaning assigned to it in article

42(1A) of the Income Tax Management Act;

"total income" means the aggregate amount of the income of any

person from the sources specified in Part II of this Act, remaining

after allowing the exemption under Part III and the deductions

under Part IV, and computed in accordance with the provisions of

Part V

Provided that, subject to the provisions of article 12(3)(b)

of the Income Tax Management Act, any income which is not

required to be disclosed and is not disclosed in accordance with the

provisions of the Income Tax Acts shall not form part of total

income;

"untaxed account" shall consist of those profits (or losses as the

case may be), which represent the total distributable profits (a

positive amount) or the total accumulated losses (a negative

amount) as the case may be, and deducting therefrom the total sum

of the amounts allocated to other taxed accounts;

"year of assessment" m eans the p er iod of twelve months

commencing on the first day of January, 1949 and each subsequent

period of twelve months.

(2) Words and expressions used in this Act which are not

known to the law of Malta but are known to the English Law, shall,

s o f a r a s m a y b e n e c e s s a r y t o g i v e e ff e c t t o t h i s A c t a n d

consistently with the provisions thereof, have the meaning assigned

to them in the English Law and be construed accordingly.

The administration of this Act shall be vested in the

Commissioner, and the provisions of articles 3 and 4 of the Income

Tax Management Act shall apply to the Commissioner in the

exercise of his powers and functions under this Act.

PART II

IMPOSITION OF INCOME TAX

(1) Subject to the provisions of this Act, income tax shall

be payable at the rate or rates specified hereafter for the year of

assessment commencing on 1st January, 1993 but only with respect

to any capital gains made on or after the 25th November, 1992 and

for each subsequent year of assessment upon the capital gains as

defined in article 5 accruing or derived from Malta or elsewhere,

and whether received in Malta or not, and for the year of

assessmen t commencin g on 1st January, 1949 and for each

subsequent year of assessment upon the income of any person

accruing in or derived from Malta or elsewhere, and whether

received in Malta or not in respect of -

(a) gains or profits from any trade, business, profession or

vocation, for whatever period of time such trade,

business, profession or vocation may have been

carried on or exercised including the profit arising

from the sale by any person of any property acquired

by him for the purpose of profit-making by sale, or

from the carrying on or carrying out of any profit-

making undertaking or scheme;

(b) gains or profits from any employment or office,

including the value of any benefit provided by reason

of any employment or office; and -

*Applicable from year of assessment 2019.

(i)

for the purpose of this paragraph the Minister

responsible for finance may by regulations

prescribe the circumstances in which a person

shall be treated as receiving a benefit from

another person provided by reason of an

employment or office and the value of any such

benefit;

(ii) where in terms of the said regulations a person is

treated as receiving a benefit provided by virtue

of an employment or office after the termination

thereof and that benefit has the nature of a

pension the benefit shall be treated as a pension

and the value determined in accordance with the

said regulations shall constitute income

chargeable to tax under paragraph (d).

(c) dividends, premiums, interest (which includes any

gains from any sum of money in whatever currency

deposited with a person carrying on the business of

banking under the Banking Act in any account

whatsoever) or discounts

Provided that, notwithstanding any other provision of

this Act, such income of a company from an offshore

banking subsidiary company shall constitute income

chargeable to tax under paragraph (a) and the

provisions of article 56(6) shall apply to such income;

(d) any pension, charge, annuity or annual payment;

(e) rents, royalties, premiums and any other profits arising

from property;

(f)

Repealed by Act XX of 1996;

(g) gains or profits not falling under any of the foregoing

paragraphs

Provided that

(i)

in the case of income arising outside Malta to a

person who is not ordinarily resident in Malta or

not domiciled in Malta, the tax shall be payable

on the amount received in Malta;

(ii) no tax shall be payable on capital gains arising

outside Malta to a person who is not ordinarily

resident in Malta or not domiciled in Malta or to

a person who is charged to tax at the rate of

fifteen cents (0.15) in the euro as laid down in

article 56(11);

(iii) in the case of any person who is charged to tax at

the rate of fifteen cents (0.15) in the euro as laid

down in article 56(11), the tax shall be payable

only on any income or capital gains arising in

Malta and on any amount of income arising

outside Malta and received in Malta;

(iv)

in the case of income or capital gains arising from

activities carried out in an exclusive economic

zone area, only activities which are licensed or

otherwise authorised to be undertaken in

accordance with the Exclusive Economic Zone

Act shall be deemed to be carried out in Malta and

the provisions of the Income Tax Acts shall apply

accordingly. For the avoidance of doubt, transfers

of assets situated within the exclusive economic

zone area shall be deemed to have taken place in

Malta and the provisions of articles 5 and 5A of

this Act shall apply accordingly.

Sohowever that items (i) and (ii) of this proviso shall

not apply to an individual who is a long-term

resident, or who holds a permanent residence

certificate or a permanent residence card, in respect

of any income derived by such individual in the year

of being granted long-term resident status or the

right of permanent residence and in subsequent

years. The terms "long-term resident", "permanent

residence certificate" and "permanent residence

card" shall have the meaning assigned to them

respectively in the Status of Long-Term Residents

(Third Country Nationals) Regulations and the Free

Movement of European Union Nationals and their

Family Members Order.

Sohowever also that paragraphs (i) and (ii) of this proviso

shall not apply to an individual whose spouse is ordinarily

resident and domiciled in Malta.

(2) Any sum realized under any insurance against a loss of

profits shall be taken into account in the ascertainment of any

profits or income.

(3) Where a person carries on in Malta an agricultural,

manufacturing or other productive undertaking, the following

provisions shall have effect, that is to say

(a) if such person sells any product of the undertaking, in

a wholesale market, outside Malta or for delivery

outside Malta, whether the contract is made within

Malta or outside Malta, the full profits arising from the

sale shall be deemed to be income of such person

accruing in or derived from Malta

Provided that if it is shown to the satisfaction of the

Commissioner that the profit has been increased

through treatment of the product outside Malta other

than handling, grading, blending, sorting, packing or

disposal, such increase of profits shall not be deemed

to be income accruing in or derived from Malta;

(b) if such person otherwise disposes of, uses or deals

with any product of the undertaking, outside Malta, the

*Applicable from the year of assessment 2019.

profit which might have been obtained if such person

had sold the product to the best advantage in a

wholesale market outside Malta shall be deemed to be

the profit arising from such disposal, dealing or use,

and to be the income of such person accruing in or

derived from Malta.

(4) Where a body of persons carries on a club or similar

institution and receives from its members not less than one half of

its gross receipts on revenue account (including entrance fees and

subscriptions), it shall not be deemed to carry on a business; but

where less than one half of its gross receipts are received from

members, the whole of the income from transactions both with

members and others (including entrance fees and subscriptions)

shall be deemed to be receipts from a business, and the body of

persons shall be chargeable eit her i n r espect of the profi ts

therefrom or in respect of the income which would be assessable if

it were not deemed to carry on a business whichever is the greater.

In this sub-article ''members'' in relation to a body of

persons means those persons who are entitled to vote at a general

meeting of the body at which effective control is exercised over its

affairs.

Nothing in this sub-article shall operate to annul or reduce

an exemption granted in article 12, save as provided in sub-article

(1)(l) thereof.

(5) Where under the provisions of article 24, a balancing

charge falls to be made, the amount thereof shall be deemed to be

income chargeable with tax under this Act.

(6) Subject to the provisions of sub-article (7), on the winding

up, in full or in part, of any pension, saving, provident or other

society or fund approved by the Commissioner for the purposes of

article 53(1)(b)(ii), the following provisions shall have effect

(a) any refund, reimbursement, gratuity, bonus, payment,

compensation or other return or benefit paid or

accruing to any person as a consequence of winding up

shall, notwithstanding anything to the contrary

contained in this Act or in any law, document, deed,

contract, agreement or other instrument, be deemed to

constitute income chargeable to tax in the hands of the

said pension, saving, provident or other society or fund

in the year of assessment in which it is granted or so

accrues, and not to constitute income chargeable to tax

in the hands of the person to whom it is paid or

accrues; and

(b) no refund, reimbursement, gratuity, bonus, payment,

compensation or other return or benefit shall be paid as

aforesaid before payment has been effected of the tax

chargeable in accordance with the provisions of this

sub-article.

(7)

Sub-article (6) shall not apply -

(i)

to any benefit, or value thereof, chargeable with

tax under sub-article (6) and which is paid or

payable to members of the said pension, saving,

provident or other society or fund, or other

beneficiaries claiming through or under them, in

accordance with the conditions under which the

said pension, saving, provident or other society

or fund was approved by the Commissioner;

(ii) to any capital sum exempt from tax under article

12(1)(g).

When a person -

(i)

changes his residence and becomes resident in

Malta and he was at no time domiciled or

resident in Malta prior to such change in

residence; or

(ii) changes his domicile and becomes domiciled in

Malta and he was at no time domiciled or

resident in Malta prior to such change in

domicile; or

(iii) is "a company resulting from the merger" which

is registered in Malta as set out in regulation

3(2) of the Cross-border Mergers of Limited

Liability Companies Regulations (hereinafter

referred

to

as

"Cross-border

Mergers

Regulations") and none of the assets owned by

the company on the day of the merger was

owned by any merging company which is

domiciled and, or resident in Malta at any time

prior to the date of the particular merger,

and has made an election for the purpose of this paragraph by

notice in writing to the Commissioner, all assets which are situated

outside Malta and which were acquired by him, or in the case of a

company resulting from the merger, by any non-resident merging

company, prior to the above-mentioned change in domicile or

residence or prior to the entry into force of the merger (each of

which shall hereinafter be referred to as "occurrence"), shall be

deemed, for the purpose of calculating any income that would not

have been subject to tax had it arisen before the particular

occurrence would have taken place, to be assets acquired on the

date of the particular occurrence, at a cost which is proved to the

satisfaction of the Commissioner to be the market value which it

had on the date of the said occurrence

Provided that such an election shall not be available unless

the particular person exercises the election by not later than the end

of the year of assessment immediately following the basis year in

which the occurrence takes place.

INCOM E TA X

5.(1) (a) Capital gains derived by a person from the transfer of a

Capital gains.

capital asset shall be charged under article 4(1).

Added by

XVIII. 1993.4.

Notwithstanding anything contained in any other part

Renumbered by

of this Act, such gains shall be ascertained as laid

XVII. 1994.2.

Amended by

down in this article and in such manner as may be

XVII. 1994.7;

prescribed. The capital gains to which the provisions

XXII. 1995.2;

of this article shall apply are

XX. 1996.4;

V. 1998.8;

(i)

gains or profits arising from any transfer of the

XVII. 1998.70;

XI. 2000.4;

ownership or usufruct of any immovable

IX. 2001.23;

property or the assignment or cession of any

II. 2004.8;

rights over such property;

XIII. 2004.51;

II. 2006.7;

(ii) gains or profits arising from the transfer of the

II. 2009.10;

I. 2010.12;

ownership or usufruct of or from the assignment

IV. 2011.8;

or cession of any rights over any securities,

V. 2012.10;

business, goodwill, business permits, copyright,

L.N. 218 of 2012;

III. 2013.19;

patents, trademarks and trade-names and any

XII. 2014.13;

other intellectual property; and

XIII. 2015.44;

XXI. 2015.28;

(iii) gains or profits arising from a transfer of the

XV. 2016.13;

beneficial interest in a trust in accordance with

XVI. 2017.15;

the provisions of sub-article (19). For the

XVIII.2021.15;

VII.2022.18.

purposes of this subparagraph, "transfer of the

beneficial interest in a trust" shall include a

transfer of a full or partial beneficial interest in a

trust and any alienation of any such full or

partial interest as a result of a disclaimer of such

interest or as a result of a person not remaining a

beneficiary of such trust;

(iv) gains or profits arising from a transfer of

securities as provided for in sub-article (9A) and

from a transfer of value in securities as provided

for in sub-article (13)(b)(ii); and

(v) gains or profits arising from the transfer of the

ownership or usufruct of or from the assignment

or cession of any rights over any interest in a

partnership. For the purposes of this

subparagraph "transfer" shall mean

(a) a transfer of a full or partial interest and

any alienation of any such full or partial

interest in a partnership; and

(b) a deemed transfer of an interest in the

partnership. Where a person acquires or

increases a partnership share there is a

deemed transfer of an interest in the

partnership to that partner from the other

partners;

(b) In this article -

"partnership" means -

(a) any partnership constituted under the Companies

Act or under the Commercial Partnerships

Ordinance, being either a commercial

partnership en nom collectif or a commercial

partnership en commandite the capital of which

is not divided into shares;

(b) except for the purposes of sub-paragraph (v)(b),

any other partnership having a legal personality

distinct from that of its members constituted,

incorporated or registered under any other law in

force in Malta;

(c) any body of persons constituted, incorporated or

registered outside Malta, and of a nature similar

to the aforesaid partnerships;

(d) a European Economic Interest Grouping (EEIG)

formed pursuant to the provisions of the

Companies Act (European Economic Interest

Grouping) Regulations;

"partnership share" means the share to which a person

is entitled in the income of the partnership and to

assets available for distribution on a winding up of the

partnership;

"transfer" includes any assignment, sale, emphyteusis

or sub-emphyteusis, partition, donation, settlement of

property on trust, distribution and reversion of

property settled on trust, sale by instalments, and any

alienation under any title including any redemption,

liquidation or cancellation of units or shares in a

collective investment scheme as defined in article 2 of

the Investment Services Act and maturity or surrender

of linked long term policies of insurance, and any

occurrence that is deemed to be a transfer in

accordance with the provisions of sub-articles (9A)

and (13)(b), and for the avoidance of doubt includes any

transfer of an asset by a company to its shareholders, or

by a commercial partnership en nom collectif or

commercial partnership en commandite the capital of

which is not divided into shares to its members, in the

course of winding up the company or partnership or in

the course of a distribution of assets to its shareholders or

partners pursuant to a scheme of distribution, but does not

include a transfer causa mortis, or a transfer of property by

the trustee of a disability trust or disability foundation to

any one or more of the remaining beneficiaries of such

trust or foundation or the heirs of the disabled beneficiary

upon the death of the disabled beneficiary of such trust or

foundation and where such remaining beneficiaries or

heirs comprise only persons referred to in sub-article

(2)(e)(i); for the purposes of this article, the expressions

''disability trust'' and ''disability foundation'' shall have the

meaning assigned to them in article 12(1)(z); and

"securities" shall mean shares and stocks and such like

instrument that participate in any way in the profits of

the company and whose return is not limited to a fixed

rate of return, units in a collective investment scheme

as defined in article 2 of the Investment Services Act,

and units and such like instruments relating to linked

long term business of insurance.

(2) For the purpose of ascertaining the gains or profits arising

from any transfer of immovable property in terms of sub-article

(1)(a)(i) -

(a) there shall be deducted in such manner and amount as

may be prescribed, the cost of acquisition, the inflation

element, any ground-rent paid on the property and for

which a deduction is not due to the taxpayer under any

other

provision

of

this

Act,

maintenance,

improvements, other expenses that have increased the

value of the immovable property since it was acquired

and other expenses directly related to the transfer;

(b) any transfer of immovable property by means of a

deed of exchange shall be considered as if separate

deeds of transfer were taking place between the parties

to the deed;

(c) where immovable property is granted on emphyteusis

or sub-emphyteusis for a period exceeding fifty years,

or extendable to such periods, the following rules shall

apply

(i)

where the premium exceeds the cost of

acquisition in accordance with paragraph (a)

hereof, such excess shall be deemed to be gains

or profits;

(ii) where the cost of acquisition in accordance with

paragraph (a) hereof exceeds the premium such

excess shall be deductible from the gains or

profits arrived at in accordance with sub-

paragraph (iii) hereof;

(iii) no account shall be taken of any ground-rent or

increase in ground-rent involved in the transfer

unless and until such ground-rent or increase in

ground-rent is redeemed, or the directum

dominium or sub directum dominium, as the case

may be, is transferred and in such case the gains

or profits shall be deemed to be the price of

redemption or sale less any deduction in

accordance with sub-paragraph (ii) hereof;

(d)

(i) a transfer shall not include a contract of partition

where no owelty is due to any of the co-

partitioners, and upon a transfer of any property

by a co-partitioner the cost of acquisition shall be

deemed to be the cost of acquisition of the

property in question at the time of acquisition by

the co-partitioner;

(ii) for the purposes of this paragraph only the

immovable property held in common and

partitioned shall be taken into account, and

where money or other movables held in common

is assigned to a co-partitioner in consideration

for the reduction in the share of immovables

assigned to him the partition shall be deemed to

be one where an owelty has been paid;

(iii) where a person receives an owelty on a contract

of partition he shall be deemed to have made

capital gains as is equivalent to as much of the

increase in the value of the property between the

time of the acquisition by the co-partitioners and

the time of partition, so however that tax on

capital gains shall only be payable at the time of

partition on such part of the capital gains made

as is not included in the increase in the value of

the property assigned to that co-partitioner

between the time of acquisition by the co-

partitioner and the partition, and where such co-

partitioner transfers the property assigned to him

the cost of acquisition shall be deemed to be the

cost of acquisition of the immovables when

acquired by the co-partitioners before the

partition;

(iv) where a co-partitioner pays an owelty at the time

of the partition, he shall be deemed to have made

no capital gain at the time of the partition, and

where such co-partitioner transfers any

immovable property assigned to him in the

partition, the cost of acquisition shall be deemed

to be such portion of the sum of the cost of

acquisition of the co-partitioner’s share of all the

immovables partitioned together with the owelty

paid on the contract of partition, as is equivalent

to the portion of the value of the immovable

transferred to the total value of immovables

assigned to the co-partitioner in the deed of

acquisition;

(e) a donation shall be considered as a deemed sale made

at the market value of the property at the time of

transfer. Provided that no tax shall be payable where

the donation is made by a person to

(i)

his spouse, descendants and ascendants in the

direct line and their relative spouses, or in the

absence of descendants to his brothers or sisters

and their descendants, or

(ii) philanthropic institutions approved for the

purposes of article 12(1)(e);

(f)

without prejudice to the provisions of article 12(1)(e),

where the property referred to in paragraph (e) is

disposed of by the donee within five years of the

donation, the donee shall be charged on the gain

ascertained in accordance with the provisions of this

article by taking into account the cost of acquisition of

the property at the time it was acquired by the donor;

where the property is sold by the donee after the lapse

of five years the cost of acquisition shall be deemed to

be the value of the property as declared in the deed of

donation;

(g) gains and profits relating to a transfer by donation,

settlement of property in trust, or distribution or

reversion of property settled in trust means the

difference in the market value of the property at the

time of the donation, settlement, distribution or

reversion and the cost of acquisition of the property at

the time of acquisition of the property by the donor,

settlor or trustee as the case may be. The relevant

instrument pursuant to which the said transfers were

effected shall include a declaration of the said market

value.

(3) For the purpose of ascertaining the gains or profits arising

from any transfer of property in terms of sub-article (1)(a)(ii)

(a) the acquisition cost of shares acquired before the 25th

November, 1992 shall be valued either on the Equity

method of share valuation (net asset value) based on

the last accounts submitted to the Commissioner by the

18th December, 1992 by taking into account the value

of immovable property existing in the said accounts

and adjusted in terms of sub-article (2)(a) or on the

actual purchase price, whichever is the higher;

(b) listed shares quoted on a stock exchange on the 25th

November, 1992 shall be valued at the price existing

on that date; and in the case of shares quoted in foreign

currency, the rate of exchange (middle rate of the

Central Bank) on that date shall be used;

(c) shares acquired after the 25th November, 1992, shall

be valued on the cost of acquisition

Provided that with respect to shares acquired under a

share option scheme the cost of acquisition shall be

established in accordance with such rules as may be

made by the Minister responsible for finance

Provided further that where an amount standing to the

credit of any of a company’s reserve accounts, other

than a capital redemption reserve and profits available

for distribution, is applied in paying up to any extent

any shares allotted by the company, the cost of

acquisition of such shares shall be zero

Provided also that the acquisition cost of shares resulting

from a conversion of a partnership into a company as

referred to in article 45B shall be the cost of acquisition

of the interest (representing those shares) held in the

partnership that had been converted into the said

company;

(d) where on a share transfer the rights pertaining to those

shares are changed in any way, the transfer value of the

shares shall be taken as if no such change has been

made;

(e) any transfer consisting of an exchange shall be

considered as if two separate transfers were taking

place; and

(f)

the provisions of sub-article (2)(d), (e), (f) and (g)

shall apply mutatis mutandis to this sub-article;

(g) in the case of a transfer of shares listed on a stock

exchange recognised by the Commissioner for the

purpose of this provision not being securities in a

collective investment scheme and not being exempt

from tax under the provisions of sub-article (6)(b)

(i)

the transfer value shall in no case exceed the

market value of the said shares immediately

upon being admitted to listing, and

(ii) the cost of acquisition taken into account shall

be the cost of acquisition of the original shares

For the purpose of this paragraph "original shares"

shall have the same meaning assigned in sub-article

(6)(b).

(3A) For the purpose of ascertaining the gains or profits arising

from any transfer of property in terms of sub-article (1)(a)(v)

(a) the acquisition cost in each of the circumstances

mentioned in this paragraph shall, subject to any

adjustments that may be prescribed, be determined as

follows

(i) the acquisition cost of an interest acquired from

an existing partner shall be the actual purchase

(ii) the acquisition cost of an interest acquired causa

mortis shall be the lower of the value declared in

a deed of transfer causa mortis and the price

which that interest would have fetched had it

been sold on the open market on the date of that

acquisition;

(iii) the acquisition cost of an interest acquired by

way of a capital contribution made to the

partnership shall be the amount or value of such

contribution;

(iv) the acquisition cost of an interest resulting from

a conversion of a company into a partnership as

referred to in article 45A shall be the cost of

acquisition of the shares (representing that

interest) held in the company that had been

converted into the said partnership

Provided that where the said shares consist of

shares whose return is limited to a fixed rate of

return the acquisition cost shall be taken to be

zero; and

(b) any transfer consisting of an exchange shall be

considered as if two separate transfers were taking

place; and

(c) the provisions of sub-article (2)(d), (e), and (f) and shall

apply mutatis mutandis to this sub-article.

(4) The provisions of sub-article (2)(d) shall apply mutatis

mutandis where the assets partitioned include both assets under

sub-article (1)(a)(i) and (ii).

(5) The provisions of sub-article (1)(a)(i) shall not apply to

gains or profits relating to transfer of immovable property

(a) where a copy of the relevant deed of transfer dated

prior to the 25th November, 1992 or of the relevant

promise to transfer or acquire also dated prior to the

25th November, 1992, made in favour of the

transferee, has been duly registered with the Inland

Revenue Department by the 1st December, 1992 and a

certificate to that effect has been issued by the

Commissioner or, in the case of a deed of transfer, the

deed has been duly enrolled in the Public Registry by

the 1st December, 1992;

(b) where the Commissioner is satisfied that the property

or undivided part of the property has been owned and

occupied for a period of at least three years as the

transferor’s own residence immediately preceding the

date of transfer and provided that the property is

disposed of within twelve months of vacating the

premises;

(c) for the purposes of paragraph (b) "own residence"

means the principal residence owned by the taxpayer

or his spouse being a dwelling house which has been

the owner’s only or main residence, including land,

transferred through the same deed with the principal

residence, which the owner has for his own occupation

and enjoyment with that residence as its garden or

grounds consisting of an area which, regard being had

to the size and character of the dwelling house, is

required for the reasonable enjoyment of it as a

residence. A garage attached to or underlying a house

or a block of flats, or a garage of not more than

seventy square metres situated within five hundred

metres of the dwelling house, and transferred through

the same deed with the principal residence shall be

deemed to be included as part of the residence. The

period of residence includes the physical occupation of the

premises and any absences from Malta such as on account

of foreign employment, holiday or study as well as any

absences due to illness, or care in a hospital or home for

the elderly, provided that the premises in question are not

being used or employed for any other purpose during such

absence. Any part of the house, garden or grounds which

is used exclusively for commercial purposes for any time

within two years of the transfer, or which is not required

for the reasonable enjoyment of it as a residence shall not

be considered as "own residence" and this part shall be

apportioned on the basis of the area occupied for this

purpose as a proportion of the whole area of the relative

dwelling house, garden or grounds

(d) where the property was taken over by Government and

in respect of which a declaration by the President of

Malta has been issued in terms of the Land Acquisition

(Public Purposes) Ordinance before the 25th

November, 1992;

(e) where the property is assigned between spouses

consequent to a judicial or consensual separation or a

divorce;

(f)

where the property formed part of the community of

acquests between the spouses or was otherwise owned

in common between them and is assigned to one of the

spouses on the dissolution of the community or is

partitioned between the spouses, or the surviving

spouse and the heirs of the deceased spouse;

(g) where the property is assigned on emphyteusis for fifty

years or less.

(6) The provisions of sub-article (1)(a)(ii) shall not apply to

gains or profits relating to

(a) (deleted by Act II. 2009.10.);

(b) transfer of shares listed, or in consequence of a listing, on

a stock exchange recognised by the Commissioner for

the purpose of this provision not being securities in a

collective investment scheme;

(c) transfer of securities listed on a stock exchange

recognised by the Commissioner for the purpose of this

provision being securities in a collective investment

scheme held in a prescribed fund as defined in article

41A(b);

(d) transfer of units and such like instruments relating to

linked long term business of insurance where the

benefits are wholly determined by reference to the

value of, or income from, securities to which either

paragraph (b) or (c) applies;

(e) property transferred in the circumstances listed in sub-

article (5)(e) and (f).

(6A) The provisions of sub-article (1)(a)(v) shall not apply to gains

or profits relating to property transferred in the circumstances referred

to in sub-article (5)(e) and (f).

(7) Where a person is entitled to capital allowances under

article 14(1)(f) and (j) in respect of a capital asset which is sold at a

thereto, the cost of acquisition shall be computed on the cost of

acquisition and the cost of any improvement made thereto.

(8) Where an asset referred to in sub-article (1)(a) used in a

business for a period of at least three years is transferred and

replaced within one year by an asset used solely for a similar

purpose in the business, any capital gains realised on the transfer

shall not be taxed but the cost of acquisition of the new asset shall

be reduced by the said gain. When the asset is disposed of without

replacement, the income, whether chargeable under this article or

under article 4(1)(a), shall take into account the transfer price and

the cost of acquisition reduced as aforesaid

Provided that, unless otherwise authorised by the

Commissioner, provisional tax as provided in article 43(1)(b) of that

Act shall be payable on any transfer to which this sub-article applies

Provided further that if the capital gain exceeds the cost of

acquisition of the replacement property any excess is to be taxable in

the year in which the replacement property was acquired and the cost

of acquisition of the replacement property to be taken into account on

a subsequent transfer will be zero.

(9)

(i) Where an asset is transferred from one company to

another company and such companies are

(a) deemed to be a group of companies for the

purposes of article 16, or

(b) controlled and beneficially owned directly or

indirectly to the extent of more than fifty per

cent by the same shareholders,

it shall be deemed that no loss or gain has arisen from

t h e t r a n s f e r. In ascertaining the income, whether

chargeable under this article or under article 4(1)(a),

where such an asset is subsequently transferred by a

company to another company which does not fall

within the provisions of paragraphs (a) or (b), or to

another person, as the case may be, the base cost and

the date of acquisition of the asset that would be

considered shall be the original cost and the date when

it was acquired before the transfer from the first

company, being the company within the group, took

place

Provided that the Minister may by rules prescribe

conditions for the relief envisaged in this sub-article that

are different from those provided for in this paragraph,

and those rules shall apply to transfers that are made after

such date as may be prescribed.

(ii) Where an asset falling under the circumstances

referred to in paragraph (i) is in the form of immovable

property which is transferred by a company to another

company that falls within the provisions of sub-

paragraphs (a) and (b) of the said paragraph, or of rules

prescribed in accordance with the said paragraph, or

where the said immovable property is subsequently

transferred to another company which does not fall

within the said provisions, or to another person, as the

case may be, the notary publishing the relative deed of

transfer shall attach to the said deed a notice made in

such manner and containing such details as may be

prescribed by the Minister.

(iii) Where the asset referred to in paragraph (i) consists of

immovable property situated in Malta or shares in a

property company, the provisions of this sub-article

shall only apply where the individual direct or indirect

beneficial owners of the companies referred to in

paragraph (i) are the same and each such individual

holds, directly or indirectly, substantially the same

percentage interest in the nominal share capital and

voting rights in each of the said companies. For the

purpose of this paragraph the proviso to the definition of

''property company'' in article 2(1) shall not apply

Provided that for the purpose of this paragraph an

individual is deemed to hold substantially the same

percentage interest in the nominal share capital and

voting rights in each of the said companies where the

difference between the percentage interest held in each

company does not exceed twenty percent

Provided further that where an individual holds,

directly or indirectly, less than twenty percent of the

nominal share capital and voting rights in only one of

the said companies, such individual shall, for the

purpose of this paragraph, not be taken into account in

determining whether the individual direct or indirect

beneficial owners of the said companies are the same

Provided also that if more than one individual holds,

directly or indirectly, less than twenty percent of the

nominal share capital and voting rights in only one of

the said companies, the previous proviso shall not

apply where together such individuals hold, directly or

indirectly, twenty percent or more of the nominal share

capital and voting rights in that company

Provided also that the whole of this paragraph shall not

apply, where the companies referred to in paragraph (i)

are directly or indirectly owned as to eighty percent or

more by a company whose securities are listed on a

stock exchange recognised by the Commissioner for the

purpose of this provision.

(iv) Where an asset, qualifying for tax relief under this

article, is transferred from one company to another

company and the company acquiring the asset issues

shares in exchange for the acquired asset, whether to

the transferring company or to any other person, the

cost of acquisition of the said shares shall, for the

purpose of calculating the gains or profits derived from

the subsequent transfer of the said shares, be reduced

(but not below zero) by an amount determined by

deducting from the transfer value of the asset its cost

of acquisition to the transferring company

Provided that this paragraph shall not apply where the

said asset is charged to tax under the provisions of sub-

article (9A) of this article or article 5A(12A).

(9A) (a) If a company ("the chargeable company") holds shares

in a company, which had been acquired from another

company, and such acquisition was exempt from tax

under sub-article (9), this sub-article shall apply if the

chargeable company ceases to be a member of the

original group before the lapse of six years from the

date of the said acquisition. References in this sub-

article to a company ceasing to be a member of a group

do not apply to cases where a company ceases to be a

member of the original group by being wound up or

dissolved or in consequence of another member of the

original group being wound up or dissolved

Provided that where a company ceases to be a member

of the original group by being wound up or dissolved,

for the purpose of determining whether the chargeable

company ceases to be a member of the original group

under paragraph (b), such company shall be deemed to

have remained in existence.

(b) The chargeable company shall cease to be a member of

the original group, if such company and the company

from which it had acquired the shares referred to in

paragraph (a) no longer satisfy the provisions of sub-

article (9)(i) and (iii) and such determination shall be

made by reference to the same individuals referred to

in paragraph (iii) of the said sub-article taken into

account in determining whether the two companies

referred to in this paragraph satisfied the provisions of

sub-article (9)(i) and (iii) on the date of the acquisition

referred to in paragraph (a)

Provided that where the acquisition referred to in

paragraph (a) took place before the 1st January 2010,

sub-article (9)(iii) shall be disregarded for the purpose

of determining whether a company ceases to be a

member of a group

Provided further that where the chargeable company

ceases to be a member of the original group, solely as

a result of a change in the direct or indirect individual

shareholders of the company from which it had

acquired the shares referred to in paragraph (a), the

chargeable company shall, for the purpose of this

paragraph, not be treated as ceasing to be a member of

the original group as a result of such change, so

however that for the purpose of determining whether

the chargeable company ceases to be a member of the

original group it shall be deemed that such change had

not taken place and such determination shall be made

by reference to the same individuals referred to in sub-

article (9)(iii) taken into account in determining

whether the chargeable company and the company

from which it had acquired the shares satisfied the

provisions of sub-article (9)(i) and (iii) on the date of

the acquisition referred to in paragraph (a).

(c) For the purpose of this sub-article the term "original

group" shall mean the two companies referred to in

paragraph (b), and the individual direct or indirect

beneficial owners of the said companies who were

taken into account in determining whether the

provisions of sub-article (9)(i) and (iii) had been

satisfied on the date of the acquisition referred to in

paragraph (a)

Provided that where the two companies referred to in

this paragraph are directly or indirectly owned as to

eighty percent or more by a company whose securities

are listed on a stock exchange recognised by the

Commissioner for the purpose of this provision the term

"original group" shall mean the two companies

referred to above and the company whose securities

are listed on the said stock exchange as existing on the

date of the acquisition referred to in the paragraph (a)

Provided further that where an individual acquires

shares in terms of a donation exempt from tax under

the provisions of sub-article (2)(e), or a transfer causa

mortis, such individual shall be deemed for all the

purposes of this sub-article to have held such shares

from the date such shares were previously acquired in

an acquisition preceding the date of the donation or the

transfer causa mortis.

(d) When the chargeable company ceases to be a member

of the group it shall be treated for all the purposes of

this article as if, immediately after its acquisition of

the shares referred to in paragraph (a), it had

transferred and immediately re-acquired the shares at

that time.

(e) The base cost and the date of acquisition of the shares

that is taken into account for the purpose of

determining any gain or loss shall be the original cost

and the date when the shares had previously last been

acquired by a company by means of a transfer that did

not qualify for an exemption in terms of sub-article (9)

or by means of an allotment, which ever is the later.

(f)

(i)

For the purpose of ascertaining the gains or

profits arising under this sub-article, the

acquisition cost of shares acquired before the

25th November, 1992 shall be valued either on

the Equity method of share valuation (net asset

value) based on the last accounts submitted to

the Commissioner by the 18th December, 1992

or on the actual purchase price, whichever is the

higher.

(ii) Shares acquired on or after the 25th November

1992, shall be valued on the cost of acquisition

Provided that where an amount standing to the credit

of any of a company’s reserve accounts other than a

capital redemption reserve and profits available for

distribution, is applied in paying up to any extent any

shares allotted by the company, the cost of acquisition

of such shares shall be zero.

(g) Any gain or loss on the transfer referred to in

paragraph (d) shall be treated as accruing to the

chargeable company immediately before the company

ceases to be a member of the group in accordance with

paragraph (b).

(h) For the purpose of paragraph (a) the term "shares in a

company" shall mean shares in a company which, on the

date of the acquisition referred to in the said paragraph

owned, directly or indirectly, any immovable property

situated in Malta or any real rights thereon and the said

property or any part thereof is still, directly or indirectly,

owned by such company on the date it ceases to be a

member of the group in accordance with the provisions of

paragraph (b). For the purpose of this paragraph a

company is treated as indirectly owning immovable

property if it holds, directly or indirectly, shares or other

interests in any entity or person, which owns immovable

property situated in Malta or any real rights thereon

where five percent or more of the total value of the said

shares or other interests so held is attributable to such

immovable property or rights.

(i)

Where in accordance with paragraph (d) the

chargeable company is treated as having transferred

and immediately reacquired the shares, and a

chargeable gain or a capital loss accrues to the

chargeable company on the deemed transfer, the

chargeable gain or capital loss accruing on the deemed

transfer shall be treated as accruing not to the

chargeable company but to a related company

("company A") if -

(i)

at the time of accrual, company A was

incorporated in Malta, and

(ii) a joint election under this paragraph is made by

the chargeable company and company A to treat

the chargeable gain or capital loss as accruing to

company A, and

(iii) such joint election is made by notice given to the

Commissioner not later than twelve months after

the end of the accounting period of the

chargeable company or company A (whichever

is the earlier) in which the time of accrual fell,

and

(iv)

provisional tax payable in accordance with

article 43 of the Income Tax Management Act, is

paid by company A at a rate of thirty-five

percent of the market value of the shares deemed

transferred within the period prescribed in the

said article.

For the purpose of this paragraph company A is related

to the chargeable company if both companies form a

group for the purposes of sub-article (9) at the time of

accrual and "time of accrual" means the time at which,

by virtue of paragraph (d), the gain or loss is treated as

accruing to the chargeable company.

(10) (a) A capital loss shall be computed in the same manner as

a capital gain.

(b) Any loss resulting from the transactions falling under

sub-article (1) shall not be set off against other income

for the year of assessment but shall be carried forward

and set off against capital gains in respect of

subsequent years of assessment until the full loss is

absorbed.

(c) Bad debts incurred in relation to the said transactions

proved to the satisfaction of the Commissioner to have

become bad during the year immediately preceding the

year of assessment, notwithstanding that such bad

debts were due and payable prior to the

commencement of the said year, shall be allowed as a

deduction against the capital gains in the year in which

they were incurred and if there are no gains for that

year shall be carried forward and set off against future

gains

Provided that all sums recovered in respect of amounts

previously allowed as bad debts shall be treated as gains for the

purposes of this article and charged accordingly for the year in

which they are recovered.

(11) The gains or profits from any transaction chargeable under

paragraph of article 4(1)(a) shall not be chargeable again as capital

gains in relation to the same transaction under this article.

(12) (a) The market value of an asset shall be the price which

that asset would fetch if sold on the open market at the

time of transfer;

(b) where the market value of an asset is required to be

determined by the Commissioner he may seek the

opinion or assistance of any appraiser, architect or

other valuer; and

(c) the person making the appraisement or valuation on

behalf of the Commissioner shall for the purpose of

carrying out the task so entrusted to him be deemed to

be a person serving in the Department of the

Commissioner and as having an official duty under

this Act.

INCOM E TA X

(13) (a) Where a person transfers an asset which, at the time of

acquisition, formed an undivided part of a larger asset

(hereinafter in this paragraph referred to as "the whole

asset"), the deductions allowable in ascertaining the

gain arising from that transfer shall be equivalent to

such proportion of the cost of acquisition of the whole

asset and of the other deductions that would be due in

terms of this article had that person transferred the

whole asset, as the consideration for the transfer bears

at the time of the transfer to the market value of the

whole asset.

(b)

(i)

A reduction of the share capital of a company

shall be deemed to be a transfer of such

proportion of the holding of the owner as is

equal to the proportion of the reduction of the

capital of the company and shall constitute a

gain or loss for the purpose of this article in the

year in which such reduction is effected

Provided that where there is a proportionate

reduction in the shareholding of all the

shareholders, such that the proportion of the

shareholding of each shareholder with respect to

number, type, class, voting rights and value of

shares is equal before and after the reduction is

effected, it shall be deemed that no loss or gain

has arisen from the transfer.

(ii) Where the market value of shares held by a

person ("the transferor") in a company has been

reduced as a result of a change in the issued

share capital of such company, or a change in

voting rights attached to such shares, and such

value passes into other shares in or rights over

the company held by any other person ("the

transferee"), the transferor shall be deemed to

have made a transfer of such value so reduced to

the transferee. Any gains or profits shall be

calculated by taking into account the difference

between the market value of the shares held

immediately before and after the said change

Provided that this paragraph shall not apply

where the change in the issued share capital or

change in voting rights does not produce any

change in the individual direct or indirect

beneficial owners of the said company and in the

proportion in the value of the said company

represented by the shares owned beneficially

directly or indirectly by each such individual

Provided further that this paragraph shall not

apply where the change in the issued share

capital consists of an allotment of shares in a

company as a result of an exchange of shares on

a restructuring of holdings exempt from tax

under the provisions of sub-article (14)

Provided also that this paragraph shall not apply

where the said company is a company whose

securities are listed on a stock exchange

recognised by the Commissioner for the purpose

of this provision

Provided also that this paragraph shall not apply

where the transfer of value is made by the

transferor to a person referred to in sub-article

(2)(e)(i)

Provided also that this paragraph shall not apply

where the said company is not a "property

company" and it can be shown to the satisfaction

of the Commissioner that the said change is

effected for bona fide commercial reasons and

does not form part of a scheme or arrangements

of which the main purpose, or one of the main

purposes is avoidance of liability to tax. For the

purpose of this paragraph the proviso to the

definition of ''property company" in article 2(1)

shall not apply.

(c) On any subsequent transfer of the shares referred to in

paragraph (b)(i), the cost of acquisition shall be

deemed to be the residual part of the cost of

acquisition not taken into account on the reduction of

capital.

(14) Where a transfer involving the exchange of shares on

restructuring of holding upon mergers, demergers, divisions,

amalgamations and reorganisation takes place it shall be deemed

that no loss or gain has arisen from such transfer and the cost of

acquisition upon a subsequent transfer of the original shares or the

new shares shall be deemed to be the cost of acquisition of the original

shares.

For the purposes of this sub-article -

"original shares" means shares held before and involved in

the restructuring, and

"new shares" means, in relation to any original shares, the

shares in the company which, as a result of the restructuring, represent

the original shares

Provided that the provisions of this sub-article shall only

apply in such manner and in such circumstances as may be

prescribed by the Minister

Provided further that the first proviso hereof shall not apply

to divisions and mergers where the draft terms of the said divisions

and mergers had been forwarded to the Registrar of Companies for

registration in terms of the provisions of the Companies Act on or

prior to the 24th November, 2003 and the Registrar had published

the relevant statement in the Government Gazette in terms of the

said Act on or prior to the 31st December, 2003, provided that a

copy of the relative publication is attached to the relative deed.

(15) Where a business or a partnership en nom collectif, as a

going concern is incorporated into a limited liability company,

which is beneficially owned to the extent of not less than seventy-

five per cent by the same person who owned the business or the

partnership en nom collectif and there is a transfer of assets it shall

be deemed that no loss or gain has arisen from the transfer.

Provided that where such assets are subsequently transferred by the

company, the base cost and date of acquisition of the assets that

would be considered, whether chargeable under this article or under

article 4(1)(a), shall be the original cost and the date when it was

acquired before the first transfer took place

Provided further that this article shall apply only where an

individual or a partnership en nom collectif transfers to a company

a business as a going concern, together with the whole assets of the

business, or together with the whole of those assets other than cash,

and the business is so transferred wholly in exchange for shares

issued by the company to the person transferring the business

Provided also that for the purpose of computing any

chargeable gain accruing on the disposal of the said shares, the cost of

acquisition taken into account shall be reduced by any chargeable gain

that would have resulted on the transfer of the said business had this

sub-article and article 5A not been applied.

(16) For the purposes of this article the value of the usufruct and

of the nuda proprietas shall be computed in accordance with the

provisions set out in the Duty on Documents and Transfers Act.

(17) The Minister may make rules making provision for the

purpose of removing the effect of any scheme made for the purpose

of avoiding, reducing or postponing any tax due under this article,

and in addition the Minister may make rules providing that any

transfer of any right referred to in sub-article (1) shall only be valid

if it is made by agreement in writing and if payment of such portion

of the provisional tax on the capital gains due thereon is made as

may be prescribed and if the said agreement is registered in such

manner as may be prescribed with such authority as may be

prescribed.

(18) On the settlement of property on trust, where the trust is

established or evidenced by means of a written instrument it shall

be deemed, for the purposes of this article that -

(a) no transfer had taken place where the sole settlor is

also the sole beneficiary of such trust;

(b) such property had been donated directly by the settlor

of such trust to the beneficiaries that are persons other

than the settlor himself

Provided that -

(i)

the relevant trust instrument specifically

provides that the beneficiaries have an

irrevocable vested right to receive all the

property settled in trust as specified in the said

written instrument; and

(ii) the relevant trust instrument specifically

provides that the beneficiaries are, in relation to

each settlor, persons referred to in sub-article

(2)(e)(i), whether they are in existence or not at

the time of such settlement, or are persons

referred to in paragraph (e)(ii) of the said sub-

article in each case, such persons being either

alone or with the settlor himself; and

(iii) the beneficiaries include persons who are in

existence at the time of the settlement of such

property on trust;

(c) no loss or gain had arisen

Provided that -

(i)

the relevant trust instrument specifically

provides that the beneficiaries of such trust

comprise only persons referred to in sub-article

(2)(e)(i), whether they are in existence or not at

the time of such settlement, in relation to each

settlor and may also include the said settlor

himself; and

(ii) the beneficiaries of such trust include at the time

of such settlement a person who by reason of an

interdiction, incapacitation, or of a physical or

mental impairment, or by reason of an irregular

or dissolute lifestyle is substantially limited in

his ability to administer or manage the property

settled in trust, or include at the time of such

settlement a person who by reason of a physical

or mental impairment is or may become unable

to fully provide for his own maintenance, and

where the trustee of such trust provides the

Commissioner with the necessary evidence

proving such interdiction, incapacitation,

impairment or inability in the form of medical

certificates, court orders or any other relevant

documents which the Commissioner may deem

necessary; and

(iii) the beneficiaries of such trust include persons

who are in existence at the time of the settlement

of such property.

(19) (a) For the purposes of the provisions of sub-article

Transfers of

beneficial interest.

(1)(a)(iii), gains or profits shall be deemed to arise on

the date of the execution of a written instrument

(hereinafter in this sub-article referred to as "transfer

instrument") whereby there is a transfer of the

beneficial interest in a trust which includes taxable

trust property. For the purposes of this sub-article

"taxable trust property" means property referred to in

sub-article (1)(a)

Provided that this phrase includes only such property,

the transfer of which, had it been carried out directly

by the relevant beneficiary, would have given rise to

gains or profits chargeable to tax in accordance with

the provisions of this Act.

(b) The gain or profit arising from the transfer of the

beneficial interest in a trust which has taxable trust

property shall be equal to the consideration for the said

beneficial interest as declared in the relevant transfer

instrument. No deductions shall be allowable against

the consideration payable to the transferor.

(c) The gain or profit that is determined in accordance

with paragraph (b) shall be taxable at the rate specified

in article 56(6). No relief, reduction, credit or set-off of

any kind shall be made in respect of such tax.

(d) In addition to the requirements laid down in Sub-Title

VII of Title VI of Part II of Book Second of the Civil

Code, any person transferring the beneficial interest in

a trust which includes taxable trust property shall,

within forty-five days of the date on which the transfer

instrument was executed, provide the trustee of such

trust with an authenticated copy of the said transfer

instrument and shall require the trustee to collect an

amount of tax equal to the tax determined in

accordance with the provisions of paragraph (c) for

onward payment to the Commissioner.

(e) The tax so collected by the trustee from the transferor

in accordance with the provisions of paragraph (d)

shall be a debt due from the trustee to the

Commissioner payable by not later than the fourteenth

day following the end of the month in which the trustee

had collected the tax. Together with this payment, the

trustee shall provide the Commissioner with -

(i)

an account of the gains or profits together with a

list of all the assets making up the taxable trust

property on the date the transfer instrument was

executed on such form as may be prescribed;

(ii) an authenticated copy of the relevant transfer

instrument; and

(iii) a copy of the last financial statements of the

trust.

(f)

The trustee of the relevant trust shall, by not later than

fifteen days from the date when he receives

acknowledgement from the Commissioner of receipt of

the tax and documents referred to in paragraph (e),

furnish the parties to the transfer instrument with a

certificate evidencing that the tax has been paid and

that his obligations under paragraph (e) have been

fulfilled.

(g) Notwithstanding the provisions of Sub-Title VII of

Title VI of Part II of Book Second of the Civil Code,

any transfer of a beneficial interest in a trust which

includes taxable trust property shall not take place and

shall not have any effects for the purposes of any law

unless the said transfer is made by means of a transfer

instrument and unless the transferor and the trustee

have fulfilled their obligations in accordance with the

provisions of paragraphs (d) and (e).

(h) Subject to the provisions of article 10A of the Income

Tax Management Act, the person transferring the

beneficial interest in a trust which includes taxable

trust property shall not be obliged to disclose the

existence of such gains or profits in any return made

pursuant to the provisions of the Income Tax Acts and

no further tax shall be payable on such gains or profits.

(i)

The provisions of this article shall not apply -

(i)

where the Commissioner is satisfied that an

irrevocable disclaimer of a beneficial interest

was not effected with the sole or main purpose

of avoiding, reducing or postponing liability to

tax and where he has, at his discretion, ordered

in writing that the provisions of this article are

not applicable to such a disclaimer;

(ii) to any transfer of beneficial interest in a trust

where the trustee holds property solely for the

purpose of a designated commercial transaction

as defined in sub-article (24).

(20) (a) Where, in the administration of a trust, the trustee

transfers property of such trust, gains shall be

ascertained in accordance with the provisions of this

article and the cost of acquisition shall be determined

in accordance with the provisions of paragraphs (b)

and (c).

(b) In the case where such property had been settled in

trust in any of the circumstances described in sub-

articles (18) and (24) where the settlor is also a

beneficiary of the trust, the cost of acquisition shall be

equal to the cost of acquisition of such property at the

time it was originally acquired by the settlor of such

trust. Where the property had been settled in the

circumstances described in sub-article (18)(a) or sub-

article (24)(a), it shall be deemed for the purposes of

this article that the settlor has directly transferred such

property.

(c) Subject to the provisions of paragraph (b), the cost of

acquisition shall be the cost of acquisition at the time

when such property was first acquired as trust property

of that trust whether by way of settlement or otherwise.

(21) (a) For the purposes of this article, property is distributed

to beneficiaries of a trust when the trustee transfers

property of a trust to any beneficiary of such trust

provided that such transfer does not constitute a

reversion of property settled on trust as defined in sub-

article (22)(a).

(b) Where property which had been settled on trust is

distributed to the beneficiaries it shall be deemed that

for the purpose of this article -

(i)

no transfer took place in the case where such

property had been settled in the circumstances

described in sub-article (18)(b) provided that the

property was distributed to beneficiaries which

were not settlors of the trust;

(ii) property distributed to persons referred to in

sub-article (2)(e)(i) in relation to the settlor, was

donated directly by the settlor to such

beneficiaries where such property had been

settled in the circumstances described in sub-

article (18)(c);

(iii) notwithstanding the relevant deeming provisions

of sub-article (18), such property was donated

directly by the original settlor of that property to

such beneficiaries where such property had been

settled in the circumstances described in sub-

article (18)(b) and (c) and was subsequently

distributed to a beneficiary that was also a

settlor of such trust

Provided that the said beneficiary is a person

referred to in sub-article (2)(e)(i) in relation to

the said original settlor who had owned such

property prior to its settlement in trust.

(c) The provisions of sub-article (20) shall apply mutatis

mutandis in the circumstances of a distribution of

property as they apply to the transfer of property in the

administration of a property of a trust.

(22) (a) For the purpose of this article, property settled on trust

reverts where there is a transfer to a person who is the

settlor of a trust (even where such person is a

beneficiary of that same trust) of property which had,

immediately before its settlement into such trust, been

owned by that same settlor.

(b) Where property which had been settled in trust in the

circumstances described in sub-article (18) reverts

back to the settlor, notwithstanding the relevant

deeming provisions of sub-article (18), it shall be

deemed for the purposes of this article that such

property had never been settled into such trust.

(c) Where property had been settled into trust in

circumstances other than those described in paragraph

(b), and where such property reverts back to the settlor

for the reasons referred to in article 16 of the Trusts

and Trustees Act, it shall be deemed for the purpose of

this article that no loss or gain had arisen in the event

of such reversion.

(d) The provisions of sub-article (20) shall apply mutatis

m ut a nd i s i n t he c ir c u m s t a n c e s o f a r e v e r s io n o f

property settled on trust as they apply to the transfer of

property in the administration of a property of a trust.

(23) In the case of a subsequent transfer of property by a settlor

or beneficiary, as the case may be -

(a) where such property had reverted to such settlor; or

(b) where such property was

distributed

to

the

beneficiaries, and where -

(i)

such distribution was deemed, in accordance

with the provisions of this article, to be a direct

donation from the settlor of the trust to the said

beneficiaries of such trust; and

(ii) such property is transferred by such

beneficiaries within the period of time referred

to in sub-article (2)(f) from the date of such

deemed donation;

capital gains shall be ascertained in accordance with the provisions

of this article by taking into account the cost of acquisition of such

property at the time it was originally acquired by the settlor of the

trust before the relevant settlement.

(24) (a) No transfer of the property shall be deemed to have

taken place -

(i)

on the settlement of property consisting of

shares in one company when the settlor who

owned the said shares prior to the settlement

thereof on trust is also the sole beneficiary of the

trust;

(ii) on the settlement of property consisting of

shares in one company when the settlement is

made by more than one settlor, and the said

settlors are the only beneficiaries of the trust,

and the beneficiaries are entitled to benefit in

accordance with the terms of the trust in the

same proportion as they would have done as

settlors;

(iii) on the reversion to the settlors of the shares

referred to in subparagraphs (i) and (ii) in the

same proportion which the settlors would have

been entitled to when the property was owned by

them as settlors immediately prior to the

settlement;

(iv) upon the transfer of shares in one company

purchased by a trustee with money settled in

trust by a settlor for the purpose of acquiring,

purchasing or subscribing to such shares, when

the said transfer is made to the sole beneficiary

of the trust who is also the original settlor;

and in each case, the trustee is a person authorised or

not required to be so authorised to act as a trustee in

terms of articles 43 and 43A of the Trusts and Trustees

Act.

(b) No transfer of the property of a trust shall be deemed

to have taken place where the trustee of such trust

transfers all the property of such trust, which transfer

involves only a change in the trustee of such trust and

there is no change in the beneficiaries or in the

beneficial interest.

(c) No loss or gain shall be deemed to have arisen where

property is settled into a trust and where the trustee

holds such property for the purpose of designated

commercial transactions or where such property so

settled reverts to the settlor. Where such property is

transferred by the trustee of such trust to its

beneficiaries (or to any person through a judicial sale

or otherwise), the cost of acquisition shall be the cost

at which the settlor of such trust had acquired the said

property. In such a case, the provisions of sub-article

(10) can be availed of by the settlor in the same

manner as if the transfer of the property by the trustee

had been made directly by the settlor himself. Where

such property is not so transferred but reverts to the

settlor, or where the settlor waives his right to a

reversion of the property, and there is a subsequent

transfer of such property, the cost of acquisition shall

be the cost at which the settlor had acquired the said

property prior to its settlement into the said trust.

Subject to the approval of the Commissioner, the

provisions of this paragraph shall also be applicable

where a property is settled into a trust for the purpose

of a commercial transaction not being a designated

commercial transaction. For the purposes of this

paragraph, "designated commercial transactions"

means the custody of investment instruments, the

establishment or holding of real or personal security

interests (including hypothecs, privileges, pledges and

guarantees), and any other commercial transaction

which may be prescribed, while "commercial

transaction" shall have the meaning assigned to it in

article 2 of the Trusts and Trustees Act.

(25) (a) Where a person that is authorised or not required to be

so authorised to act as a trustee in terms of articles 43

and 43A of the Trusts and Trustees Act holds in its own

name shares in a company on behalf of the beneficial

owner of such shares, and where such person transfers

or otherwise disposes of the beneficial ownership of

such shares to a third party, such a transaction shall be

deemed to constitute a transfer of shares for the

purposes of this article.

(b) Where a change in the registered holder of shares in a

company does not involve a change in the beneficial

ownership thereof, such change shall not be deemed to

constitute a transfer of shares for the purposes of this

article provided that the registered holder of such

shares remains a person authorised or not required to

be so authorised to act as a trustee in terms of articles

43 and 43A of the Trusts and Trustees Act.

(c) For the purposes of this sub-article "beneficial owner"

means a person who is the real owner of, or who is

otherwise beneficially entitled to, the shares which are

subscribed or held on his behalf and in his interest by a

person authorised or not required to be so authorised to

act as a trustee in terms of articles 43 and 43A of the

Trusts and Trustees Act and "beneficial ownership"

shall be construed accordingly.

(d) When the shares referred to in this sub-article are

transferred either by the trustee to a person other than

the settlor or by the settlor to a third party after the

shares have reverted to the settlor, the acquisition cost

shall be deemed to be the cost of acquisition of the

shares by the settlor when the shares were originally

purchased or subscribed by the settlor prior to the

shares being settled into the trust.

(26) The Minister may make regulations determining the method

of calculation of capital gains in relation to transfers involving

trusts and to prescribe any matter that may be prescribed in relation

to such transfers.

(1) Notwithstanding any other provision of the Income

Tax Acts, tax shall be chargeable and payable on any transfer to

which this article applies in such amount, at such rate and in such

manner as provided herein.

(2)

(a) In this article, unless the context otherwise requires -

"own residence" has the meaning assigned to it in

article 5(5)(c);

"project" means property that has been developed by

the owner into more than one transferable unit or

divided for transfer into more than one transferable

portion

Provided that it shall not include land acquired by

the owner and divided for transfer into more than one

transferable portion, where the land is transferred by the

owner in the same state as when acquired (i.e. no

excavation or any other works whatsoever have been

carried out on the property) and no permit has been

issued by the Planning Authority during the period of

ownership by the owner sanctioning the development of

the land into more than one transferable unit.

"property" means any immovable property situated in

Malta and any right over such property;

"transfer" has the meaning assigned to it in article

5(1)(b) and includes any assignment or cession of any

rights over property, and any occurrence that is deemed

to be a transfer in terms of sub-article (12A) of this article

and any provision of article 5. Except as provided in

sub-article (7A), it shall not include a partition of

property where no owelty is due. When property is

transferred by means of a deed of exchange the parties

shall be deemed to have made two separate deeds of

transfer.

(b) Saving the provisions of sub-article (7), property

assigned to a co-partitioner under a deed of partition

shall be deemed to have been acquired by that co-

partitioner at the time that he had acquired his

undivided share before that partition and by virtue of

the same transfer causa mortis or inter vivos under

which he had acquired that undivided share.

(c) In determining whether an owelty is due on a contract

of partition, the provisions of article 5(2)(d) shall

apply mutatis mutandis.

(d) The assignment of any right obtained in terms of a

promise of sale of immovable property (konvenju),

including a promise to alienate immovable property in

any manner and a promise of an emphyteutical grant,

shall not be treated as a transfer of property to which

this article applies

Provided that the Minister may, by rules, prescribe

(i)

the conditions for the validity of any

such assignment;

(ii)

the deductions that may be allowed

for the purpose of determining the income

resulting from any such assignment;

(iii) the tax chargeable on the income

determined as aforesaid;

(iv) the time within which and the manner

in which the tax so chargeable shall be paid.

(3) Saving the other provisions of this article, this article

applies to any transfer of property made on or after the 1st

November, 2005, excluding

(a) a transfer in respect of which all the following

conditions are satisfied

(i)

a notice of a promise of sale or transfer relating

to that transfer has been given to the

Commissioner in accordance with the provisions

of article 3(6) of the Duty on Documents and

Transfers Act or of rules made under that Act by

not later than the 22nd November, 2005;

(ii) the transfer is made on or after the 1st

November, 2005 but not later than the 31st

March, 2006 and is made pursuant to and for the

consideration and at the same terms provided for

in that promise of sale or transfer;

(iii) a notice of that transfer is given to the

Commissioner in accordance with the said Act

by not later than the 15th May, 2006;

(iv) the transferor elects, by means of a declaration

made to the notary at the time of the publication

of the deed of the transfer and recorded in the

said deed, to exclude that transfer from the scope

of this article;

(b) a transfer of property that is made not later than twelve

years after the date of the acquisition thereof if the

transferor elects, by means of a declaration made to

the notary at the time of the publication of the deed of

the transfer and recorded in the said deed, to exclude

that transfer from the scope of this article

Provided that, where a transfer of property made not

later than twelve years after the date of the acquisition

thereof is made on or after the 1st January, 2015, an

election as aforesaid, to exclude that transfer from the

scope of this article, may only be made if the following

conditions are satisfied

(i)

a notice of a promise of sale or transfer relating to

that property has been given to the

Commissioner before the 17th November, 2014;

(ii)

the said property is transferred to the same

person or persons appearing on the said promise

of sale agreement; and

(iii)

the said property is transferred before the 1st

January, 2016

Provided also that in the case of a transfer that is made

on or after the 1st March, 2006, of property that forms

part of a project

(i)

an election as aforesaid may only be made if the

transfer is the first transfer made by the said

transferor, on or after the said date but before the

1st January, 2015, of property forming part of

that project; and

(ii) when an election as aforesaid has been made it

shall also apply to all subsequent transfers of

property forming part of that project made by the

said transferor not later than twelve years from

the date of the acquisition thereof, and all such

transfers shall accordingly be transfers to which

this article shall not apply;

INCOM E TA X

(iii) notwithstanding the previous sub-paragraph (ii)

when an election as aforesaid has been made it

shall not apply to transfers of property forming

part of that project made by the said transferor

on or after the 1st January, 2015 in respect of

which a notice of a promise of sale or transfer

relating to that property has not been given to

the Commissioner in accordance with the

provisions of article 3(6) of the Duty on

Documents and Transfers Act or of rules made

under that Act before the 17th November, 2014

(iv) notwithstanding the provisions of sub-paragraph (i)

of this proviso, in the case of a transfer of property

that forms part of a project made on or after 1st

January, 2015, where the first transfer of property

forming part of such project is made on or after 1st

January, 2015, an election as aforesaid may be

made if a notice of a promise of sale or transfer

relating to that property has been given to the

Commissioner before the 17th November, 2014,

so however that the provisions of sub-paragraph (ii)

of this proviso shall not apply where the first

transfer of property forming part of a project is

made on or after 1st January, 2015

Provided further that, for the purposes of determining

whether the property has been transferred not later

than twelve years from the date of its acquisition,

where the transferor is a company that had acquired

the property by means of a transfer that qualified for

an exemption in terms of sub-article (4)(f) or article

5(9) ("intra-group exemption"), it shall be deemed to

have acquired the property on the date on which the

property had previously last been acquired by a

company by means of a transfer that did not qualify for

the intra-group exemption;

(c) a transfer of property situated within a special

designated area, as defined in the Immovable Property

(Acquisition by Non-Residents) Act, if it is made by

the person who was the owner of that property on the

date when that area first became a special designated

area and if the transferor elects, by means of a

declaration made to the notary at the time of the

publication of the deed of the transfer and recorded in

the said deed, to exclude that transfer from the scope

of this article

Provided that an election as aforesaid, to exclude that

transfer of property situated within a special

designated area from the scope of this article, may

only be made in the case of a transfer that is made

before the 1st January, 2015

Provided also that -

(i)

in a transfer that is made on or after the 1st

March, 2006, an election as aforesaid may only

be made if the transfer is the first transfer of

property situated within that special designated

area made by the said transferor on or after the

said date but before the 1st January, 2015; and

(ii) when an election as aforesaid has been made it

shall also apply to all subsequent transfers of

property situated within that special designated

area, made at any date by the said transferor, and

all such transfers shall accordingly be transfers

to which this article shall not apply;

(iii) notwithstanding the previous sub-paragraph (ii)

when an election as aforesaid has been made it

shall not apply to transfers of property situated

within that special designated area made by the

said transferor on or after the 1st January, 2015

in respect of which a notice of a promise of sale

or transfer relating to that property has not been

given to the Commissioner in accordance with

the provisions of article 3(6) of the Duty on

Documents and Transfers Act or of rules made

under that Act before the 17th November, 2014;

(d) a transfer in respect of which all the following

conditions are satisfied

(i)

the property was, immediately before the

transfer, co-owned by two individuals and the

transfer is made by one of the co-owners to the

other;

(ii) the co-owners had, for the purposes of article

32(4)(a) of the Duty on Documents and

Transfers Act, declared in the deed of the

acquisition of that property that they had

acquired it for the purpose of establishing

therein or constructing thereon their sole

ordinary residence;

(iii) the transferor elects, by means of a declaration

made to the notary at the time of the publication

of the deed of the transfer and recorded in the

said deed, to exclude that transfer from the scope

of this article;

(e) a transfer in respect of which all the following

conditions are satisfied

(i)

it is a transfer of property to the Government of

Malta made pursuant to an acquisition of that

property in terms of the Land Acquisition

(Public Purposes) Ordinance;

(ii) the Government had taken possession of that

property, or an Order of the President has been

issued in respect thereof, before the 1st

November, 2005 and this fact is evidenced by a

letter signed by the Commissioner of Land and

attached to the deed of transfer. The transferor

shall produce that letter to the notary publishing

the deed. The notary shall attach that letter to the

deed of the transfer and shall deliver a certified

copy thereof to the Commissioner in such

manner as may be prescribed;

(iii) the transferor elects, by means of a declaration

made to the notary at the time of the publication

of the deed of the transfer and recorded in the

said deed, to exclude that transfer from the scope

of this article;

(f)

a transfer made by means of a judicial sale by auction

or in the course of a winding up by the Court except

for a transfer to which sub-article (5)(c)(ii) applies;

(g) a transfer of property that had been used in a business

for a period of at least three years and that is replaced

within one year by property ("the new property") used

solely for a similar purpose of the business

Provided that

(i)

this paragraph shall only apply, and accordingly

article 5(8) shall apply, if the transferor so elects

by means of a declaration made to the notary at

the time of the publication of the deed of the

transfer and recorded in the said deed;

(ii) when, subsequent to a transfer to which article

5(8) applied, including a transfer made before

1st November, 2005, the new property is

disposed of and that disposal does not qualify

for the tax relief under article 5(8), that disposal

shall also be a transfer to which this article 5A

does not apply, and the income, whether

chargeable under article 4(1)(a) or under article 5,

derived therefrom shall be determined as provided

in article 5(8);

(iii) this paragraph shall not apply, and accordingly

article 5(8) shall not apply, if the replacement

property is disposed of or ceases to be used in such

business, within a period of two years starting from

the date the replacement property was acquired or

such shorter period as the Commissioner may

determine;

(h) a transfer of property by a person who is not resident

in Malta and who is resident for tax purposes in

another country if that person produces to the notary

who publishes the deed of transfer a statement signed

by the tax authorities of the country of that person’s

residence that confirms that person’s residence in that

country and that certifies that that person is subject to

tax in that country on gains or profits derived from the

transfer of immovable property situated in Malta. The

notary shall attach that statement to the deed and shall

deliver an authenticated copy thereof to the

Commissioner in such manner as may be prescribed

Provided that such person is not owned or controlled

by, directly or indirectly, nor acts on behalf of, an

individual or individuals who is or are resident in

Malta

Provided also that, notwithstanding anything said in

the Income tax Acts provisional tax paid relating to the

transfer of such property made on or after the 1st

January, 2015, under the provisions of article 43(1)(b)

of the Income Tax Management Act shall not be

available for refund under article 48 of the said Act

and the provisions of article 43(4)(b) of the said Act

shall not apply to such transfer;

(i)

a transfer of property pursuant to a lease agreement

that included the option of purchase of the property at

an agreed price, where the said arrangements had been

made prior to, but the transfer occurs after, the 1st

November 2005;

(j)

a transfer of property forming part of a project made by

a company which has issued debt securities to the

public and such debt securities are listed on a stock

exchange recognised, and if the transferor elects, by

means of a declaration made to the notary at the time

of the publication of the deed of the transfer and

recorded in the said deed, to exclude that transfer from

the scope of this article

Provided that

(i)

an election as aforesaid may only be made if the

transfer is the first transfer made by the said

transferor, on or after 1st April, 2015, of property

forming part of that project; and

(ii) when an election as aforesaid has been made it

shall also apply to all subsequent transfers of

property forming part of that project made by the

said transferor and all such transfers shall

accordingly be transfers to which this article shall

not apply

Provided also that this paragraph shall only apply where

the reason for the offer and use of proceeds, as disclosed

in the prospectus published when the debt securities are

offered to the public, is solely to develop and construct the

said project.

(4) No tax shall be chargeable on a transfer to which this article

applies where that transfer is

(a) a donation made by a person

(i)

to his spouse, to his descendant or ascendant in

the direct line, or to the spouse of any such

descendant or ascendant, or, in the absence of

any descendants in the direct line, to his brother

or sister or to a descendant of his brother or

sister,

(ii) to a philanthropic institution approved for the

purposes of article 12(1)(e)

Provided that on a subsequent transfer of the

property by any person mentioned in sub-

paragraph (i), the date of acquisition of the

property shall be considered to be the date of the

original acquisition of the property by the person

who had made the original donation;

(b) a donation deemed to have been made in terms of

article 5(18)(b) or 5(21)(b)(ii) by a person to a person

or institution mentioned in paragraph (a);

(c) a transfer of property not forming part of a project,

consisting of a dwelling house, that has been owned

and occupied by the transferor as his own residence for

a period of at least three consecutive years

immediately preceding the date of transfer and

provided that the property is disposed of within twelve

months of vacating the premises or such other period or

condition as may be prescribed and provided that such

property is declared by the transferor to be his main

residence through an election made to the Commissioner

in such manner and subject to such rules as may be

prescribed

Provided that

(i)

any period during which the transferor has

occupied the property as his own residence with

the permission of the Housing Authority

pursuant to a promise of sale (konvenju) by that

Authority shall be deemed to be a period during

which the transferor owned that property;

(ii) where the property was inherited by the

transferor from a direct ascendant, the period

during which the said ascendant had owned and

occupied the property as his own residence shall

be deemed to be a period during which the

property had been owned by the transferor;

(iii) where the transferor had acquired the property

under an assignment to which paragraph (d) or

(e) refers, the period during which the person

making that assignment had owned the property

and used it as his own residence shall be deemed

to be a period during which the property had

been owned by the transferor;

(iv) where any condition for the exemption under

this paragraph is satisfied in respect only of an

undivided part of the property the exemption

shall be restricted proportionately;

(v) where the property was inherited by the

transferor from his or her spouse, the period

during which the said spouse had owned and

occupied the property as his or her own

residence shall be deemed to be a period during

which the property had been owned by the

transferor;

(vi)

where at any time in the period of ownership there

is a change in the dwelling house or the part of it

which is occupied as the individual’s residence,

whether on account of a reconstruction or

conversion of a building or for any other reason, or

there have been changes as regards the use of part of

the dwelling house for the purpose of a trade,

business or profession or for any other purpose, the

relief given by this sub-article may be adjusted in

such manner as the Commissioner may determine

in an assessment;

(vii)

where the property has been owned and occupied

by the transferor and his spouse as their residence

for a period of at least three (3) years and, as a

consequence of a divorce or a de jure or de facto

separation, one (1) of the spouses ceases to occupy

the property, the property shall only be treated as

having been vacated if and when the other spouse

also ceases to occupy the property as his sole

ordinary residence;

(d) the assignment of property between spouses

consequent to a judicial or consensual separation or a

divorce

Provided that the provisions of this paragraph shall

also apply where the property to be assigned is owned

by a company which is fully owned by any or both

spouses;

(e) the assignment of property that formed part of the

community of acquests between the spouses or was

otherwise owned in common between them, to one of

the spouses on the dissolution of the community, or the

partition of such property between the spouses or the

surviving spouse and the heirs of the deceased spouse

Provided that on a subsequent transfer of the said property,

the date of acquisition of the share assigned as aforesaid

shall be the original date when the property was acquired

by the two spouses;

(f)

a transfer of property from one company to another

which, would qualify for tax relief under article 5(9)

but for the provisions of this article

Provided that the provisions of article 5(9)(ii) and (iv)

shall also apply to the said transfer

Provided further that if such transfer does not qualify

for tax relief under article 5(9) solely for the reason

that it is not a transfer of a capital asset, such transfer

shall be exempt from tax under the provisions of this

paragraph if the said transfer is part of a restructuring,

involving the transfer of the whole or part of a

company’s business to another company

Provided also that on a subsequent transfer of the said

property made within a period of twelve years after the

date of the acquisition thereof as determined in

accordance with the second proviso to sub-article

(3)(b), the cost and date of acquisition of the said

property shall, where the transferor elects to exclude

the transfer from the scope of this article, be the

original cost and the date referred to in article 5(9)(i).

(g) the transfer of property upon the incorporation of a

business or a partnership en nom collectif as a going

concern into a limited liability company that satisfies

the conditions laid down in article 5(15)

Provided that this paragraph shall not apply, and

accordingly article 5(15) is not applicable, if the

business is disposed of or ceases to exist, within a

period of two years starting from the date the business

is transferred to the said company or such shorter

period as the Commissioner may determine

Provided further that, for the purposes of determining

whether the property has been transferred not later

than twelve years from the date of its acquisition,

under sub-article (3)(b), where the transferor is a

company that had acquired the property by means of a

transfer that qualified for an exemption in terms of this

sub-article or article 5(15), it shall be deemed to have

acquired the property on the date on which the

property had previously been acquired by the person

transferring the property to the said company;

(h) the settlement of property on trust, or the distribution

or reversion of property settled on trust, or the transfer

of all the property of a trust involving only a change in

the trustee of a trust and where there is no change in

the beneficiaries or in the beneficial interest

Provided that for the purposes of the provisions of

article 5(18) to (25), it is deemed that in such

instances, no transfer has taken place, or that no loss or

gain has arisen;

(i)

except as may be otherwise prescribed, the transfer of

property by a person whose income or capital gains

from the transfer of that property is exempt from tax in

terms of article 12(1), or an exemption order made

under article 12(2), or any other provision of the

Income Tax Acts or any other law;

(j)

A transfer of property by a company to its shareholder

or to an individual related to its shareholder in the

course of winding up or in the course of a distribution

of assets pursuant to a scheme of distribution, where

the said shareholder is an individual or his spouse,

who owns or own, directly or indirectly, not less than

95% of the share capital and voting rights of the said

company transferring the property as aforesaid.

For the purpose of this paragraph an individual is

related to the said shareholder if such individual is his

spouse, his descendant or ascendant in the direct line,

or the spouse of any such descendant or ascendant, or,

in the absence of any descendants in the direct line, his

brother or sister or a descendant of his brother or

sister

Provided that this paragraph shall only apply where all

the following conditions have been satisfied

(i)

the said shareholder held, directly or indirectly,

not less than 95% of the share capital and voting

rights of the company transferring the property

for a period exceeding five years immediately

preceding the date of the transfer of the property

as aforesaid;

(ii) the said property consists of any immovable

property, including land;

(iii) the said property is held as a capital asset by the

company and has been so held for a period

exceeding five years immediately preceding the

date of the transfer of the property as aforesaid

Provided further that, on a subsequent transfer of the

said property by the said shareholder or related

individual, the provisions of sub-article (3)(b) shall

not apply

Provided also that on a subsequent transfer of the said

property, the date of acquisition of the property shall be

considered to be the date of the original acquisition of the

property by the company

Provided also that where the said property is

subsequently transferred by the said shareholder or

related individual, as the case may be, to a person

referred to in sub-article (4)(a)(i), and such person

subsequently transfers the said property within a

period of five years from the date of its acquisition the

provisions of sub-article (3)(b) shall not apply

Provided also that every company resident in Malta shall

allocate the distributable profits derived from a transfer

to which this paragraph applies, and on which no tax is

payable in accordance with this paragraph, to the final tax

account.

(5)

(a) Subject to the other provisions of this sub-article, the

tax on a transfer to which this article applies shall be

chargeable at the rate of 12% of the transfer value

INCOM E TA X

Provided that in the case of transfers of property made

on or after the 1st January, 2015, other than property

forming part of a project as referred to in the second

proviso to sub-article (3)(b) of this article and property

situated within a special designated area as referred to

in sub-article (3)(c) of this article in respect of which a

notice of a promise of sale or transfer relating to the

said property forming part of a project or situated

within a special designated area has been given to the

Commissioner in accordance with the provisions of

article 3(6) of the Duty on Documents and Transfers

Act or of rules made under that Act before the 17th

November, 2014, the tax on a transfer to which this

article applies shall be chargeable at the rate of 8% of

the transfer value

Provided that where a notice of a promise of sale or

transfer relating to a property given to the Commissioner

in accordance with the provisions of article 3(6) of the

Duty on Documents and Transfers Act or of rules made

under that Act before the 17th November, 2014 is either

cancelled after the said date or expired and, either the

said property is transferred to the same person or persons

appearing on the said promise of sale which has been

cancelled or, another property forming part of the same

project or situated within the same special designated area

is transferred to the same person or persons appearing on

the said promise of sale which has been cancelled or has

expired, any of such transfers shall for the purpose of this

article be deemed to be transfers in respect of which a

notice of a promise of sale or transfer has been given to

the Commissioner in accordance with the provisions of

article 3(6) of the Duty on Documents and Transfers Act

or of rules made under that Act before the 17th November,

2014;

(b) When a transfer to which this article applies is a

transfer of property -

(i)

that was acquired by the transferor in terms of a

transfer causa mortis that happened after the

24 th November, 1992; or

(ii) that was acquired by the transferor in terms of a

donation made more than five years before the

date of the transfer in question,

the tax thereon shall be chargeable at 12% of the

excess, if any, of the transfer value over its acquisition

value

Provided that this paragraph (b) shall not apply where

the property transferred consists of a transfer of a property

forming part of a project. For the purpose of this proviso

''project'' means property that was acquired by the

transferor in the circumstances referred to in sub-

paragraph (ii) above and which has been developed by the

said transferor into more than one transferable property

Provided also that this paragraph (b) shall not apply if the

transferor so elects by means of a declaration made to the

notary at the time of the publication of the deed of the

transfer and recorded in the said deed

Provided also that when a transfer to which this article

applies is a transfer of property that was acquired by

the transferor in terms of a donation made five years or

less before the date of the transfer in question, the

transferor shall be deemed for all the purposes of this

sub-article (5) to have acquired such property on the

date such property was previously acquired in an

acquisition preceding the date of the donation

Provided further that this paragraph (b) shall not apply to

a transfer referred to in paragraph (c).

(c) When a transfer to which this article applies is a

transfer of property that was acquired by the transferor

in terms of a transfer causa mortis and -

(i) the said acquisition causa mortis happened

before the 25th November 1992; or

(ii) the said acquisition causa mortis happened on or

after the 25th November 1992, and the property

is transferred by means of a judicial sale by

auction,

the tax thereon shall be chargeable at the rate of 7% of

the transfer value.

(d) Subject to the provisions of paragraphs (b) and (c),

when a transfer to which this article applies is a

transfer of property in the circumstances referred to in

article 31C(1), the tax thereon shall be chargeable at

the rate of 10% of the transfer value

Provided that in the case of transfers of property

referred to in this paragraph made on or after the 1st

January 2015 and before the 1st January 2016 in

respect of which a notice of a promise of sale or

transfer relating to that property has not been given to

the Commissioner in accordance with the provisions of

article 3(6) of the Duty on Documents and Transfers

Act or of rules made under that Act before the 17th

November, 2014 the tax thereon shall be chargeable at

the rate of 7% of the transfer value. The second

proviso to paragraph (a) of this sub-article shall apply

accordingly.

(e) When a transfer to which this article applies, made on

or after the 1st January, 2015, is a transfer of property

not forming part of a project that is made not later than

five years after the date of the acquisition thereof, the

tax thereon shall be chargeable at the rate of 5% of the

transfer value

Provided that, for the purposes of determining whether

the property has been transferred not later than five

INCOM E TA X

years from the date of its acquisition, where the

transferor is a company that had acquired the property

by means of a transfer that qualified for an exemption

in terms of sub-article (4)(f) or article 5(9) ("intra-

group exemption"), it shall be deemed to have acquired

the property on the date on which the property had

previously last been acquired by a company by means

of a transfer that did not qualify for the intra-group

exemption

Provided also that this paragraph (e) shall not apply

where the said property was, at any time within the

period of five years preceding the transfer, owned by a

person related to the transferor and the property formed

part of a project at such time

Provided further that, unless the transferor had acquired

the property for the purpose of establishing therein or

constructing thereon his sole ordinary residence and

declared such intention in the deed of acquisition for the

purposes of article 32(4)(a) of the Duty on Documents

and Transfers Act, this paragraph (e) shall not apply if, at

any time during the period of five (5) years preceding the

transfer, the transferor, or a person related to the transferor,

carried out on that property any works for which a

development permission was required in terms of the

Development Planning Act but excluding any works for

which a permission is granted without the need for an

application in terms of an order made under that Act.

For the purpose of these provisos -

(i)

an individual is deemed to be related to the

transferor if the transferor is a body of persons of

which the said individual is, directly or

indirectly, a shareholder, partner or member; and

(ii)

two bodies of persons are deemed to be related

persons if they are, directly or indirectly, controlled

or beneficially owned as to more than twenty-five

percent by the same persons.

(f)

Notwithstanding the previous paragraphs (a), (d) and

(e) when a transfer to which this article applies, made

on or after the 1st January, 2015, is a transfer of

property that was acquired by the transferor before the

1st January, 2004 and in respect of which a notice of a

promise of sale or transfer relating to that property has

not been given to the Commissioner in accordance

with the provisions of article 3(6) of the Duty on

Documents and Transfers Act or of rules made under

that Act before the 17th November, 2014, the tax on a

transfer to which this article applies shall be

chargeable at the rate of 10% of the transfer value. The

second proviso to paragraph (a) of this sub-article

shall apply accordingly. In the case where such notice

of promise of sale has been given before the 17th

November, 2014, the tax chargeable shall be at the rate

of 12% of the transfer value

Provided that, for the purposes of determining whether

the property has been acquired by the transferor before

the 1st January, 2004, where the transferor is a

company that had acquired the property by means of a

transfer that qualified for an exemption in terms of

sub-article (4)(f) or article 5(9) ("intra-group

exemption"), it shall be deemed to have acquired the

property on the date on which the property had

previously last been acquired by a company by means

of a transfer that did not qualify for the intra-group

exemption.

(g) When a transfer to which this article applies, made on

or after the 1st January, 2015, is a transfer of property

that was immediately before the transfer owned by an

individual, or co-owned by two individuals, who had

for the purposes of article 32(4)(a) of the Duty on

Documents and Transfers Act declared in the deed of

the acquisition of that property that the said property

had been acquired for the purpose of establishing

therein or constructing thereon his or their sole

ordinary residence, and the transfer is made not later

than three years after the date of the acquisition

thereof, the tax thereon shall be chargeable at the rate

of 2% of the transfer value

Provided that this paragraph shall only apply where the

said individual does not own any other residential

property at the time of the transfer. The notary who

receives any deed of such a transfer shall record in the

deed a written declaration by the individual so

transferring that he does not own any other residential

property at the time of the transfer and the notary shall

warn the said individual of the importance of the

truthfulness of such declaration.

(h) Notwithstanding paragraphs (a), (e) and (f), when a

transfer to which this article applies is a transfer of

property situated in an urban conservation area or

scheduled by the Malta Environment and Planning

Authority (MEPA) in terms of article 81 of the

Environment and Development Planning Act, and the

transferor declares to the notary receiving the deed of

the transfer that he has carried out works on that

property in compliance with a permit issued by MEPA

providing for the restoration and, or rehabilitation of

that property upon an application for that purpose that

was filed with MEPA on or after 1 January 2015, the

tax on the transfer shall be chargeable at the rate of 5%

of the transfer value if the following conditions are

satisfied

(i)

the transfer is made on or after the 1st January

2016;

(ii) the provisions of this paragraph or of paragraph

INCOM E TA X

(d) were not applied in respect of any previous

transfer of the same property;

(iii) the restoration and, or rehabilitation works have

been certified by MEPA as having been

completed in compliance with the relative

permit;

(iv)

the certificate referred to in sub-paragraph (iii)

is produced to the notary who receives the deed

of the transfer and the notary produces a

certified copy of the certificate to the

Commissioner together with the notice required

by article 51 of the Duty on Documents and

Transfers Act;

(v)

the person who transfers the property submits

any forms and documentation that the

Commissioner may require in connection with

the said works and with the transfer.

*†

(i)(i) When a transfer that is made on or after 1 January

2022 is a transfer of property that had been leased for a

period of at least ten (10) years ending on the date of

the transfer, and during that whole period of ten (10)

years the tenant was entitled to a benefit in respect of

that lease under the Private Rent Housing Benefit

Scheme, the Nikru Biex Nassistu Scheme or the

Rehabilitation of Vacant Dwellings for Rent Scheme

administered by the Housing Authority, and that

transfer is made to the tenant of that property, no tax

shall be chargeable on the first two hundred thousand

euro (€200,000) of the transfer value and the tax on the

excess, if any, shall be chargeable at the normal rate.

(ii)When a transfer satisfies the conditions of sub-

paragraph (i) except only that it is not made to the

tenant but to another person, the tax on the first two

hundred thousand euro (€200,000) of the transfer

value shall be chargeable at the rate of one half of the

normal rate and the tax on the excess, if any, shall be

chargeable at the normal rate.

(iii)When a transfer satisfies the conditions of sub-

paragraph (i) except only that the period of the lease

and, or the period during which the tenant was entitled

to the said benefit was less than ten (10) years but not

less than three (3) years, the tax on the first two

hundred thousand euro (€200,000) of the transfer

value shall be chargeable at the rate of one half of the

normal rate and the tax on the excess, if any, shall be

chargeable at the normal rate.

*Applicable from year of assessment 2023.

†Applicable from year of assessment 2025. Vide Regulation 8 (2) (a) of Act XIII of

2024. (iv) * This paragraph shall apply only if the parties to the

transfer or any of them produces to the notary who

publishes the deed of the transfer a document issued

by the Housing Authority certifying the period during

which the tenant of the lease of the property had been

entitled to a benefit in respect of that lease under the

Private Rent Housing Benefit Scheme, the Nikru Biex

Nassistu Scheme, or the Rehabilitation of Vacant

Dwellings for Rent Scheme, as the case may be. The

notary shall make a reference to that document in that

deed and shall produce that document to the

Commissioner together with the notice of the transfer

referred to in article 51 of the Duty on Documents and

Transfers Act.

(v) For the purpose of this paragraph, "normal rate" means

the rate of tax that would be chargeable on the relevant

value of the transfer in terms of this article were it not for

the provisions of this paragraph.

(6)

(a) The transfer value of property is the higher of the

market value of that property and the consideration

p a i d o r p a y a b le f o r t h e tr a n s f e r. In a contract of

emphyteusis and in any transfer of property where the

consideration consists of or includes periodical payments

to which article 4(1)(d) or (e) applies, the ground rent or

any such other periodical payment payable shall be

chargeable as income in accordance with the

provisions of article 4 and shall not be included in the

transfer value of a transfer to which this article applies.

(b) The acquisition value of property shall be determined

in such manner as may be prescribed.

(7) Saving the provisions of sub-article (7A), in a partition of

property where an owelty is paid -

(a) any person to whom an owelty is due shall be deemed

to have sold part of the property assigned to him. That

sale shall be deemed to be made on the date of the

partition for a consideration equivalent to the owelty;

and

(b) any person by whom an owelty is due shall be deemed

to have bought part of the property assigned to him.

That purchase shall be deemed to be made on the date

of the partition for a consideration equivalent to the

owelty.

(7A) (a) When the property that is partitioned consists of or

includes property that was acquired by the partitioners from a

person ("the original owner") who was, in respect of that transfer,

exempt from tax in terms of sub-article (4)(c) or of article 5(5)(b),

each of the partitioners shall be deemed to transfer a portion of that

property equivalent to his undivided share in that property.

*Applicable from year of assessment 2025. Vide Regulation 8 (2) (a) of Act XIII of

2024. (b)For the purposes of this article, the transfer that is deemed

to take place upon a partition in accordance with paragraph (a) shall be

deemed to be a sale of property for its market value and the transferor

shall be deemed to have acquired that property on the date on which it

had been acquired by the original owner. Any subsequent transfer shall

be deemed to be a transfer of property that had been purchased on the

date of the partition.

(8)

(a) When a transfer is a transfer of property that was

acquired under more than one acquisition, and the tax

chargeable on the transfers of the parts so acquired or

on the gains or profits derived therefrom would fall, if

t h o s e p a r t s w e r e t r a n s f e r r e d s e p a r a t e l y, t o b e

determined in accordance with different provisions of

the Income Tax Acts, those provisions shall apply as if

more than one transfer has taken place and the transfer

v a l u e o f e a c h s u c h t r a n sf e r s h a l l b e d e t e r m i n e d

separately and in such manner as may be prescribed.

(b) When property is transferred in part the acquisition

value of the part that is transferred shall be a

proportion of the acquisition value of the whole

determined in such manner as may be prescribed.

(9)

(a) Except as may be prescribed, the amount on which tax

is chargeable in accordance with this article shall not

be reduced by any deduction whatsoever.

(b) No losses or bad debts arising from, or expenditure

incurred in respect of, a transfer to which this article

applies shall be allowable as a deduction against any

income or capital gains.

(10) (a) Tax payable on a transfer to which this article applies

shall be final and shall be separate and distinct from

that paid or payable under any other provisions of this

Act or of the Income Tax Management Act. It shall not

be available as a credit against the tax liability of any

person or taken into account for the purpose of

determining the amount of any refund payable under

the said Acts. No provisional tax shall be payable

under article 43 of the Income Tax Management Act in

respect of any transfer to which this article applies.

(b) Saving the other provisions of this article, no tax shall

be chargeable in terms of any provision of the Income

Tax Acts on gains or profits derived from any transfer

to which this article applies to the extent that they are

attributable to a transfer whose transfer value has been

correctly declared in the deed of the transfer or a

transfer which has been correctly declared to be

exempt or out of the scope of this article, or

determined by means of an order in writing that is

made under sub-article (12)(c) and that has become

final and conclusive.

(c) Any person who owns immovable property situated in

Malta shall keep an account in such manner as may be

prescribed of all proceeds and expenditure relating to

transfers to which this article applies in addition to any

other accounts and records that he is required to keep

in accordance with the other provisions of the Income

Tax Acts.

(d) Every company resident in Malta shall allocate the

distributable profits derived from transfers to which

this article applies, and on which tax is payable in

accordance with this article, to the final tax account.

The said distributable profits shall be determined in

such manner as may be prescribed.

(e) Any party to a transfer to which this article applies or

to a promise of sale relating to such a transfer shall

furnish the Commissioner with such particulars

relating to that transfer as the Commissioner may

require or as may be prescribed.

(11) Tax chargeable under this article shall be due by the

transferor and shall be remitted to the Commissioner within fifteen

w o r k i n g d a y s o f t h e r e l a t i v e t r a n s f e r. E x c e p t w h e r e t h e

Commissioner orders otherwise, either in a general manner or in

respect of particular cases, this payment is to be made by the notary

who publishes the transfer deed by means of a bank draft or a

cheque drawn on that notary’s personal bank account, payable to

the Commissioner.

(12) (a) The parties to any transfer of property shall be obliged

to declare to the notary publishing the deed of transfer

all the facts that determine if the transfer is one to

which this article applies and that are relevant for

ascertaining the proper amount of tax chargeable or

any exemption, including the value which, in their

opinion, reasonably reflects the market value of the

s a i d p r o p e r t y, i f t h i s v a l u e i s h i g h e r t h a n t h e

consideration for the transfer.

(b) The notary publishing a deed of transfer shall warn the

parties about the importance of the truthfulness of

declarations made therein and shall record in the deed

the fact that he has given the said warning.

(c) Where it appears to the Commissioner that -

(i)

tax is chargeable on a transfer which is declared

in the deed to be a transfer on which no tax is

payable; or

(ii) the tax chargeable on a transfer is, for any

reason, more than that declared to be payable in

the deed,

he may issue an order in writing to the transferor

stating therein the tax which in his opinion is properly

chargeable in the circumstances and the additional tax

as specified in paragraph (e).

(d) An order under this sub-article may be made not later

than six years from the end of the year in which the

transfer is notified to the Commissioner

Provided that an order that is made solely on account

of the fact that the market value of the property in

question is higher than the transfer value declared in

the deed -

(i)

may only be made if the declared transfer value

is less than eighty-five per cent of the market

value; and

(ii) may not be made later than twelve months after

the date on which the transfer is notified to the

Commissioner.

(e) The additional tax referred to in paragraph (c) shall be

equivalent to the difference between the amount of tax

payable as declared in the deed and the amount of tax

payable in accordance with the order referred to in

paragraph (c).

(f)

The additional tax referred to in paragraphs (c) and (e)

shall be payable by the transferor in addition to the tax

which is payable on the transfer value of the property

in accordance with the other provisions of this article.

(g) If any amount of tax due in accordance with this article

is not remitted to the Commissioner within the time set

out in sub-article (11), interest shall be charged

thereon at the rate of one per cent per month or part

thereof for the period ending on the day on which that

amount is remitted

Provided that, for any period or part thereof commencing

on or after 1st January 2009, interest shall be calculated

at the rate of point seven five percent (0.75%) per month

or part thereof and the total interest shall not exceed the

said amount of tax

Provided further that for any period or part thereof

commencing on or after 1st January 2014 interest shall be

calculated at the rate established by the provisions of

article 44(2A) of the Income Tax Management Act and

the total interest shall not exceed the said amount of tax.

(h) Saving the other provisions of this article, the

provisions of the Income Tax Acts relating to the

collection and remission of the tax, interest and

additional tax shall apply to any tax, interest and

additional tax due under this article as if the tax,

interest and additional tax referred to in the said

provisions included also the tax, interest and

additional tax chargeable and payable under this

article.

(i)

A transferor who disagrees with an order served upon

him under paragraph (c) shall have the same rights to

object to that order and to appeal from a decision of

the Commissioner refusing that objection as if that

order were an assessment issued under the Income Tax

Management Act and the relevant provisions of that

Act relating to objections and appeals shall apply

mutatis mutandis.

(12A)(a) If a company ("the chargeable company") owns

p r o p e r t y w h i c h h a d b e e n ac q u i r e d f r o m an o t h e r

company and such acquisition was exempt from tax

under sub-article (4)(f) or article 5(9), this sub-article

shall apply if the chargeable company ceases to be a

member of the original group before the lapse of six

years from the date of the said acquisition. References

in this sub-article to a company ceasing to be a member

of a group of companies do not apply to cases where a

company ceases to be a member of a group by being

wound up or dissolved or in consequence of another

member of the group being wound up or dissolved

Provided that where a company ceases to be a member

of the original group by being wound up or dissolved,

for the purpose of determining whether the chargeable

company ceases to be a member of the original group

under paragraph (b), such company shall be deemed to

have remained in existence.

(b) The chargeable company shall cease to be a member of

the original group, if such company and the company

from which it had acquired the property referred to in

paragraph (a) no longer satisfy the provisions of

article 5(9)(i) and (iii) and such determination shall be

made by reference to the same individuals referred to

in paragraph (iii) of the said article taken into account

in determining whether the two companies referred to

in this paragraph satisfied the provisions of article

5(9)(i) and (iii) on the date of the acquisition referred

to in paragraph (a)

Provided that where the acquisition referred to in

paragraph (a) took place before the 1st January 2010,

article 5(9)(iii) shall be disregarded for the purpose of

determining whether a company ceases to be a member

of a group

Provided further that where the chargeable company

ceases to be a member of the original group, solely as

a result of a change in the direct or indirect individual

shareholders of the company from which it had

acquired the property referred to in paragraph (a), the

chargeable company shall, for the purpose of this

paragraph, not be treated as ceasing to be a member of

the original group as a result of such change, so

however that for the purpose of determining whether

the chargeable company ceases to be a member of the

original group it shall be deemed that such change had

not taken place and such determination shall be made

by reference to the same individuals referred to in

article 5(9)(iii) taken into account in determining

whether the chargeable company and the company

from which it had acquired the property satisfied the

provisions of article 5(9)(i) and (iii) on the date of the

acquisition referred to in paragraph (a).

(c) For the purpose of this sub-article the term "original

group" shall mean the two companies referred to in

paragraph (b), and the individual direct or indirect

beneficial owners of the said companies who were

taken into account in determining whether the

provisions of article 5(9)(i) and (iii) had been satisfied

on the date of the acquisition referred to in paragraph

(a)

Provided that where the two companies referred to in

paragraph (b) are directly or indirectly owned as to

eighty percent or more by a company whose securities

are listed on a stock exchange recognised by the

Commissioner for the purpose of this provision, the

term "original group" shall mean the two companies

referred to above and the company whose securities

are listed on the said stock exchange as existing on the

date of the acquisition referred to in paragraph (a)

Provided also that where an individual acquires shares

consequent to a judicial or consensual separation, in

terms of a donation, exempt from tax under the

provisions of article 5(2)(e), or a transfer causa mortis

such individual shall be deemed for all the purposes of

this sub-article to have held such shares from the date

such shares were previously acquired in an acquisition

preceding the date of the judicial or consensual

separation, donation or the transfer causa mortis.

(d) When the chargeable company ceases to be a member

of the group it shall be treated for all the purposes of

this article as if, immediately after its acquisition of

the property referred to in paragraph (a), it had

transferred and immediately re-acquired the property

at that time and the transfer value to be taken into

account is the value at which the chargeable company

had acquired the said property from the group

company in an acquisition to which sub-article (4)(f)

applies.

(e) The tax on a transfer to which this sub-article applies

shall be charged at the rate of eight percent (8%) of the

transfer value as established in paragraph (d): provided

that the said rate shall be ten percent (10%) if the

acquisition of property referred to in paragraph (c)

occurred before the 1st January, 2004.

(f)

Tax chargeable under this sub-article shall be due by

the chargeable company and shall be remitted to the

Commissioner within fifteen working days from the

date on which such company ceases to be a member of

the group as provided in paragraph (b).

(g) Where

in

accordance

with

paragraph

(d)

the

chargeable company is treated as having transferred

and immediately reacquired the property, the tax

chargeable on the deemed transfer in accordance with

paragraph (f) shall be treated as being due not by the

chargeable company but by a related company

("company A") if

(i) company A is incorporated in Malta;

(ii) a joint election under this paragraph is made by

the chargeable company and company A to treat

the tax chargeable on the deemed transfer as

being due by company A;

(iii) such joint election is made by notice given to the

Commissioner not later than fifteen working

days from the date on which the chargeable

company ceases to be a member of the group as

provided in paragraph (b); and

(iv) the tax chargeable referred to in paragraph (f) is

paid by company A within the period referred to

in the said paragraph.

For the purpose of this paragraph company A is related

to the chargeable company if both companies form a

group for the purposes of article 5(9) at the time the

original group ceases to exist.

(12B)

Where, under the provisions of article 14(1)(f) and (j) any

deduction has been allowed in any year of assessment in

respect of any property in ascertaining the total income of

any person, and before the source of income in respect of

which the deduction has been allowed has ceased to

belong to the said person, any of the events set out in

article 24(1) occurs in the year immediately preceding the

year of assessment in the case of any such property in

respect of which any deduction has been allowed as

aforesaid, notwithstanding any other provision of this

Act, such person shall render to the Commissioner at the

same time as he renders his tax return under article 10 of

the Income Tax Management Act, a balancing statement

in respect of the property in question in the manner set

out in article 24(1) and the other sub-articles of article 24

shall apply accordingly in respect of such balancing

statement. For the avoidance of doubt, any balancing

charge resulting from the balancing statement shall be

charged to tax at the rates applicable to the particular

person in terms of article 56.

(13) The Minister may make rules for the better implementation

of the provisions of this article and, without prejudice to the

generality of the foregoing, such rules may provide for

(a) the manner in which the value of any property or of

any part of property to which this article applies is to

be determined;

(b) the manner in which the tax due under this article is to

be paid and collected and the obligations of any person

in respect of the payment of such tax;

(c) the manner in which any apportionment of tax due is to

be made for the purposes of this article; and

(d) any matter that may be prescribed under this article.

(1) For the purposes of this article, an "investment services

expatriate" shall mean any individual who is an employee of, or

provides services to, an investment services company which holds

an investment services licence issued under article 6 of the

Investment Services Act or a company which is recognised by the

relevant competent authority for the purposes of article 9A of that

said Act, and whose activities solely comprise the provision of

management, administration, safekeeping or investment advice to

collective investment schemes as defined in the aforesaid Act, and

an ''insurance expatriate'' shall mean any individual who is an

employee of, or provides services to, an insurance company as

defined in sub-article (4), and either

(a) is not ordinarily resident and not domiciled in Malta;

or

(b) was not resident in Malta for a minimum period of

three years immediately preceding the year in which

he commences such employment with or provides

services to any investment services company or

insurance company as aforesaid and provided that

during the said three years such individual has been

engaged on a full time basis in a similar position

outside Malta.

(2) An investment services expatriate or insurance expatriate,

for the period from the year preceding the first year of assessment

in which he is first liable to tax under the provisions of this Act up

to and including the year preceding the tenth year of assessment,

may opt not to be liable to tax on income relating to the following

expenditure incurred for the benefit of the investment services

expatriate or insurance expatriate or his immediate family by the

investment services company or insurance company of which he is

an employee or to which he provides investment or insurance

services

(a) removal costs in respect of relocation to or from

Malta;

(b) accommodation expenses incurred in Malta;

(c) travel costs in respect of visits by the investment

services expatriate or insurance expatriate and his

immediate family to or from Malta;

(d) provision of a car for the use of the investment

services expatriate or insurance expatriate in Malta;

(e) a subvention of not more than six hundred euro (600)

per calendar month;

(f)

medical expenses and medical insurance; and

(g) school fees in respect of the children of the investment

services expatriate or insurance expatriate.

(3) An investment services expatriate or insurance expatriate

shall be treated as not resident in Malta for the purposes of article

12(1)(c).

(4) For the purposes of this article, an ''insurance company''

shall mean a company authorised under article 7 of the Insurance

Business Act, an insurance manager as defined in article 2 of the

Insurance Distribution Act and a company carrying on the business

of insurance broking under article 12 of the Insurance Distribution

Act.

(1) No tax shall be payable upon the income of any person

1973. which but for the provisions of this article would have been

chargeable for the year of assessment commencing on 1st January,

1973. (2) Notwithstanding the provisions of sub-article (1) hereof,

tax shall still be chargeable for the year of assessment 1973 in

r e s p e c t o f a n y b o n u s s h a r e a n d a n y u n d u l y l a rg e d i v i d e n d

distributed by any company by resolution taken between the 27th

July, 1972 and the 31st December, 1972, and in respect of any other

unduly inflated income chargeable under any of the paragraphs of

article 4(1) where the Commissioner is of the opinion that such

income accrued to or was derived by any person between the 27th

July, 1972 and the 31st December, 1972 who was in a position to

determine the amount thereof.

(3) The income still chargeable to tax for the year of

assessment 1973 in accordance with the provisions of sub-article

(2) shall be computed by considering the said bonus share and the

excessive part of the unduly large dividend and income to be the

highest part of the chargeable income which, but for the provisions

of that sub-article, would have been charged to tax for the year of

assessment 1973.

(4) For the purposes of sub-article (2) any dividend declared

during the period 27th July, 1972 to 31st December, 1972 which

exceeds by twenty per cent the highest dividend declared by the

same company between the 1st January, 1969 and the 26th July,

1972, shall, unless the contrary is proved, be deemed to be unduly

large.

(5) Saving the foregoing provisions of this article, the

provisions of this Act shall still apply for the year of assessment

1973. (6) The provisions of this article shall not apply in the case of

any individual who, in any year of assessment up to the year of

assessment 1972, was entitled to a deduction under article 53(4),

(5) or (6) as in force at the relative time

Provided that the personal deductions for the year of

assessment 1973 shall in any such case be increased by an amount

equal to what would have been the individual’s chargeable income

for the said year but for the provisions of this sub-article.

(7)

In any case referred to in sub-article (6), no surtax shall be

payable for the year of assessment 1973.

(8)

Where, in respect of the year of assessment 1973 -

(i) a company is entitled to deduct tax from a

dividend paid to any person in accordance with

the provisions of article 59(1) hereof; or

(ii) tax has been paid by deduction from the income

of any person in accordance with the provisions

of article 59(6) or article 73 hereof,

such tax shall, saving any other provisions of this Act, be set off

against the liability to tax of the said person for such year of

assessment as the Commissioner may elect.

(9) Any excess remaining after tax has been set off as provided

in sub-article (8) shall be refunded i n accordance with the

provisions of article 48 of the Income Tax Management Act.

(10) The provisions contained in sub-article (1) shall not apply

to the income of any body of persons arising from activities

r e l a t i n g o r a n c il l a r y t o o i l- pr os p e c t i n g , b a n k i n g , s o u nd o r

television broadcasting, film renting or insurance (excluding

commissions derived from the sale of insurance by bodies of

persons residing in Malta).

(1) Notwithstanding the provisions of this Act and of the

Succession and Donation Duties Ordinance, hereinafter in this

article referred to as "the Ordinance", or of the Death and Donation

Duty Act, the provisions of this article shall apply to any income

omitted by any person from a return submitted by him to the

Commissioner before the 27th July, 1972 in respect of any year of

assessment up to the year of assessment 1972 and to any income

not returned to the Commissioner by the said date by any person

who has not submitted a return for any year of assessment up to the

year of assessment 1972; provided that there shall be excluded any

such income -

(a) brought to charge to tax in any assessment -

(i) which became final and conclusive before the

27th July, 1972; or

(ii) which was raised by the Commissioner before

the 27th July, 1972 on any person who was not

domiciled in Malta during 1971; or

(b) which accrued to or was derived by any person who

had no chargeable income for any year of assessment

up to the year of assessment 1972.

(2) The income to which this article applies shall be determined

by reference to any capital asset which existed on the 31st

December, 1971, being an accumulation thereof or the source

giving rise to the said income: the value of such asset on the said

date being taken to be the cost of acquisition, or the actual amount

or value thereof, whichever is the less.

(3) The income to which this article applies shall be deemed to

be chargeable income for the year of assessment 1974, separate and

distinct from any other chargeable income for the said year of

assessment.

(4) The rate of tax applicable to the chargeable income herein

contemplated shall be three cents (0.03) in the euro.

(5) Notwithstanding any other provision of the Income Tax

Acts, other than article 31 of the Income Tax Management Act, the

Commissioner may at any time after the 1st October, 1972, raise an

assessment on the chargeable income referred to in sub-article (3)

and proceed for the collection of the tax due.

(6) The provisions of this article shall not apply to the income

specified in sub-article (1) hereof unless the capital asset referred

to in sub-article (2) is declared on the prescribed form which shall

be filed with the Commissioner within nine months commencing

from the 1st October, 1972.

(7) The declaration referred to in sub-article (6) hereof shall

not be deemed to have been filed with the Commissioner unless the

prescribed form is fully and accurately completed.

(8) Tax charged under the provisions of this article shall not be

deemed to be part of any tax paid or payable under this Act for the

purposes of articles 59, 76 and 89.

(9) No proceedings under this Act or under the Ordinance or

under the Death and Donation Duty Act, shall be taken against any

person in respect of the income referred to in sub-article (1) hereof,

nor shall any fiscal penalty apply thereunder in respect of the said

income, if the person in question was liable to have proceedings

taken against him or to have a fiscal penalty applied by reason of

any act or event happening before the 27th July, 1972.

(10) No tax or duty beyond the tax specified in sub-article (4)

hereof shall be levied under this Act or under the Ordinance or

under the Death and Donation Duty Act, on the income in respect

of which immunity from proceedings is granted by sub-article (9)

hereof.

(11) The provisions of sub-article (9) and (10) hereof shall apply

to the duties, penalties and proceedings contemplated by the

Ordinance or by the Death and Donation Duty Act, only in so far as

the assets referred to in sub-article (2) -

(i)

were left out from a notice in which they should

have been declared for the purposes of the

Ordinance if the said notice was filed with the

Commissioner before the 27th July, 1972, or

(ii) were transmitted under a succession opening on

the death of a person or on the taking of vows by

a person in a monastic order outside Malta and

no notice thereof was filed with the

Commissioner before the 27th July, 1972

provided that the time limit set out in article

33(a)(iii) of the Ordinance for the filing of the

said notice had lapsed before the said date, or

(iii) were transmitted under a gratuitous disposition

inter vivos and no notice thereof was filed with

the Commissioner before the 27th July, 1972,

provided that the time limit set out in article

33(c) of the Ordinance for the filing of the said

notice had lapsed before the said date.

(12) Nothing contained in this article shall apply to the duty

charged under the Ordinance in respect of any assessment raised

before the 27th of July, 1972.

(13) Notwithstanding the other provisions of this article, where

the capital asset referred to in sub-article (2) remains undeclared by

any person either in whole or in part within the period specified in

sub-article (6) -

(a) the rate of tax set out in sub-article (4)(c) shall be

substituted by the rate of thirty cents (0.30) in the euro

in respect of such undeclared income or part thereof;

and

(b) if such person is convicted on a charge that he has

knowingly failed to declare the said capital asset, he

shall be liable to a fine (multa) of not less than two

hundred and thirty euro (230) and not exceeding two

thousand and three hundred euro (2,300), and to

imprisonment for a term not exceeding two years.

(14) The amount of any levy paid under the Bearer Accounts

Levy Act by the 31st of December, 1971, shall be deducted from

any tax charged under the provisions of this article in respect of any

holding in the relative bearer account and of any interest derived

therefrom, so however that such deduction shall not exceed the tax

chargeable under this article in respect of such holdings

Provided that nothing in this article contained shall be

deemed to empower the Commissioner to charge to tax any holding

in a bearer account with any bank except by way of an assessment

raised on the person holding the title to such an account.

(15) Any person may elect by notice in writing filed with the

Commissioner within the period specified in sub-article (6) hereof

that the provisions of this article shall not apply to the income

referred to in sub-article (1)

Provided that in such cases nothing in this Act contained

shall prevent the Commissioner from raising an assessment on such

income at any time in accordance with the provisions of the other

articles of this Act.

(1) Subject to the provisions of this article, article 8 shall

also app ly to t he i nco me of an y person no t retu rn ed to th e

Comm issioner in respect of the year preceding any year of

assessment up to the year of assessment 1972, if -

(a) the Commissioner is satisfied that the said person had

submitted to him before the 27th July, 1972, a return

for any other year of assessment but not for the year of

assessment in question; and

(b) the income accrued to or was derived by any person

other than a company.

(2) In any case falling under sub-article (1), or under the said

sub-article and of article 8(1), the minimum amount of tax payable

shall be the higher of the following two amounts

(a) the tax computed in accordance with the provisions of

article 8(2), (3), (4) and (5), or

(b) the total amount of tax charged under article 56(1), (2),

(3) and (10) for the last year of assessment on account

of which an assessment or assessments to tax that were

all final and conclusive on the 27th July, 1972, had

been raised by the said date, multiplied by the number

of years for which no return had been filed as

aforesaid.

(3) Any person may elect not to avail himself of the provisions

of this article.

(4) If a person does not elect as provided in sub-article (3), the

requirements of article 10 of the Income Tax Management Act shall

not be enforced in his regard in respect of any year of assessment

on account of which the provisions of sub-article (1) apply.

(1) Notwithstanding any other provision of the Income

Tax Acts, a person, apart from the return for the year of assessment

1995, may present a spontaneous declaration on the prescribed

form and the income of that person falling under articles 4 and 5 for

the years of assessment prior to the said year of assessment shall be

deem ed to be the i ncome as arrived at under the follow ing

provisions of this article.

(2) The spontaneous declaration shall show as income falling

under article 4(1) for the years of assessment 1994, 1993, 1992 and

1991 a sum based on a true declaration of the income declared by

that person falling under article 4(1) (but excluding any investment

income as defined in article 41 and capital gains falling under

article 5) for the year of assessment 1995 as follows

(a) for the year of assessment 1994, a sum equivalent to

80% of the relative income declared in the return for

the year of assessment 1995, excluding any investment

income as defined in article 41 and capital gains

falling under article 5 as aforesaid;

(b) for the year of assessment 1993, a sum equivalent to

90% of the sum declared under paragraph (a) hereof;

(c) for the year of assessment 1992, a sum equivalent to

90% of the sum declared under paragraph (b) hereof;

and

(d) for the year of assessment 1991 a sum equivalent to

90% of the sum declared under paragraph (c) hereof

Provided that where a person was in any of the years of

assessment 1991 to 1994 not registered as a taxpayer and had no

income liable to tax under this Act, he shall under paragraphs (a) to

(d) hereof, only declare that he received no income for the years of

assessment therein referred to previous to the year of assessment in

which he first became liable to tax under this Act.

(3) The spontaneous declaration shall also make a statement of

any undeclared capital gains falling under article 5 in respect of

each year of assessment where such gains were so undeclared.

(4) Where a spontaneous declaration has been made in

accordance with the provisions of this article

(a) the income of the person making the declaration and

subject to tax under the provisions of this Act other

than this article shall be deemed to be the income

declared by that person in the return for the relative

year of assessment

Provided that

(i)

where in respect of any year of assessment the

income of that person has been arrived at in an

assessment which is final and conclusive the

income so arrived at shall be deemed to be the

income so declared; and

(ii) where any income falling under article 4(1) has

been or is reported by an employer or other

person paying the income to the Commissioner

in any return required for the purposes of the

Deduction of Tax (PAYE) Rules, 1972, or in

accordance with such rules ought to be so

reported, such income shall be deemed declared

by such person;

(b) the assessment for the relative year of assessment shall

be raised on the basis of the income declared or

deemed declared in accordance with paragraph (a)

hereof

Provided that in the case where a return was not

submitted to the Commissioner by the 31st March

1995, the assessment for the relative year of

assessment shall be raised on the following basis

(i)

If the return is in respect of any of the years of

assessment 1991 to 1994, the income for the

relative year of assessment shall subject to the

provisions of paragraph (a)(ii) hereof be

considered to be that declared by such person in

the relative return or the income determined in

accordance with sub-article (2), whichever is the

higher;

(ii) If the return is in respect of a year of assessment

prior to year of assessment 1991, the income for

the relative year of assessment shall subject to

the provisions of paragraph (a)(ii) hereof be

considered to be that declared by such person in

the relative return or a sum equal to the income

determined in accordance with sub-article

(2)(d), whichever is the higher; and

(c) any additional tax under article 56(12) in respect of

any year of assessment for which there is not an

assessment which is final and conclusive, shall be

waived.

(5) For the purposes of sub-article (2), (4) and (7), income

under article 4(1) and capital gains falling under article 5, means

the income as adjusted in accordance with the provisions of this

Act.

(6) The income declared in a spontaneous declaration in

accordance with this article shall be deemed to be separate

chargeable income for the year of assessment 1995, and shall,

subject only to the deductions as provided in sub-article (7) be

subject to tax at the rate of twenty-five cents (0.25) in the euro.

(7) There shall only be deducted from the income declared in

respect of each year of assessment under sub-article (2), the income

declared or deemed declared in accordance with sub-article (4), by

the taxpayer for the respective year of assessment being income

falling under article 4(1) not being investment income as defined in

article 41 or capital gains falling under article 5

Provided that

(a) where in respect of a year of assessment the income

falling under article 4(1)(a) as declared in accordance

with sub-article (4) is a loss, such income shall for the

purposes of this article be deemed to be nil; and

(b) where in respect of a year of assessment the income

declared in accordance with sub-article (4) falling

under article 4(1) (excluding investment income as

defined in article 41 or capital gains falling under

article 5) is greater than the income declared under

sub-article (2) in respect of the same year of

assessment, the income declared in accordance with

sub-article (4) shall be deemed to be equal to that

declared under sub-article (2) in respect of the same

year of assessment.

(8) The tax on income chargeable under this article shall be

payable in three instalments as follows

(a) fifty per cent by not later than the 15th December 1995

together with the submission of the spontaneous

declaration to the Commissioner;

(b) twenty per cent by not later than the 29th March, 1996;

and

(c) thirty per cent by not later than the 30th September,

1996. (9) The Commissioner shall send by registered post to each

person who makes a valid spontaneous declaration in accordance

with this article, a notice stating the amount of his separate

chargeable income for the year of assessment 1995 and the amount

of tax payable thereon by him, and the provisions of Part VII and of

article 32 of the Income Tax Management Act shall apply to such

notice.

(10) The spontaneous declaration referred to in the previous sub-

articles to this article shall be deemed not to have been filed with

the Commissioner unless

(a) the prescribed form is fully and accurately completed

and is submitted in duplicate to the Commissioner not

later than the 15 December, 1995;

(b) all returns for the years of assessment up to and

including the year of assessment 1995 are submitted to

the Commissioner by the time the declaration is made;

and

(c) payment of the first instalment of tax is made as laid

down in sub-article (8).

(11) Where it results to the Commissioner that a person who

filed a valid spontaneous declaration under this article has

underdeclared his income for the year of assessment 1995 or has

underdeclared any income which ought to be declared under sub-

article (3) hereof or has under the proviso to sub-article (2) hereof

declared that he has received no income for any year of assessment

in which he was liable to tax, the Commissioner shall recompute

the separate chargeable income on the basis of the reassessed

income for the year of assessment 1995, and, or as ought to have

been declared under sub-article (3), and, or disregarding the

provisions of the proviso to sub-article (2) hereof as the case may

be, and raise a tax thereon at the rate of sixty-five cents (0.65) in

the euro. The Commissioner shall thereupon issue a fresh notice of

assessment and any previous notice issued under this article shall

be cancelled and any tax already paid in respect of the previous

notice or together with the filing of the spontaneous declaration

shall be set off from any tax due in accordance with this sub-article.

(12) The relevant provisions of Part VII of the Income Tax

Management Act shall apply to the tax due under sub-article (11)

Provided that a person shall have a right of objection and

appeal as laid down in articles 33, 35 and 37 of the Income Tax

Management Act against a notice of assessment issued in

accordance with sub-article (11).

(13)(a)

Tax charged under the provisions of this article shall

not be deemed to be part of any tax paid or payable

under this Act for the purposes of articles 59, 76 and

89. (b) Nothing contained in this article shall affect the

provisions of articles 43, 44 and 45.

(14) Where a person makes a spontaneous declaration in

accordance with the provisions of this article, the Commissioner

shall disregard the provisions of article 14(1)(g) regarding the

carrying forward of losses incurred during any year preceding the

year of assessment 1995 with respect to the year of assessment

1995 and subsequent years of assessment.

(15) The Minister may make rules generally for carrying out the

provisions of this article and may in particular by those rules

provide for the form of returns, claims, statements and notices

under this article.

(1) In this article

"relevant laws" means the Income Tax Acts, the Succession and

Donation Duties Ordinance (Cap. 70 of the revised edition of the

Laws of Malta, 1942), the Death and Donation Duty Act, the Duty

on Documents Act and the Duty on Documents and Transfers Act;

"qualifying asset" means an asset that is registered in accordance

with a scheme made under article 39 of the Exchange Control Act

or article 11 of the External Transactions Act;

"tax" means any tax or duty chargeable under any provision of

the relevant laws.

(2) Subject to the provisions of sub-article (3), there shall be

exempt from tax otherwise chargeable under any provision of the

relevant laws

(a) any income, including capital gains, derived from a

qualifying asset at any time before the date on which

that asset is registered as a qualifying asset;

(b) any income, including capital gains, to the extent that

a qualifying asset represents such income or an

undeclared part of such income or an accumulation

thereof, at any time before the date on which that asset

is registered as a qualifying asset, derived by any

person during the year immediately preceding any year

of assessment in respect of which that person has

furnished a return of his income to the Commissioner

before the 31st March, 2005, or during the year

immediately preceding any year of assessment

commencing on or before the 1st January, 2005, in

respect of which that person was not required to

furnish a return of his income;

(c) any transfer inter vivos or transmission causa mortis of

any asset, any document of transfer of such an asset

and any assignment of an asset made or happening

before the 31st March, 2005, or in respect of the

undeclared part of the value or consideration of such

transfer or transmission, to the extent that a qualifying

asset represents such asset or the value in

consideration of such transfer or transmission at any

time before the date on which that asset is registered as

a qualifying asset.

(3) The exemption from tax on income referred to in sub-article

(2)(a) and (b) shall apply to the extent that the said income has not

been declared in any income tax return furnished to the Commissioner,

and no tax has been assessed with respect thereto in any assessment

raised under the Income Tax Acts and notified before the 31st March,

2005, and the exemption from tax referred to in paragraph (c) of the

said sub-article shall apply to the extent that no return, declaration or

notice of the relative transfer, transmission or assignment has been

furnished to the Commissioner and no tax has been paid or assessed

thereon in an assessment raised and notified before the said date under

any provision of the relevant laws or to the extent that the value or

consideration or transfer or transmission has been undeclared and

represented as aforesaid by the qualifying asset.

(4) No person shall be bound to make or furnish, or be considered

to have ever been bound to make or furnish, any return, declaration,

act or notice that would otherwise have been required to be made or

furnished in accordance with any provision of the relevant laws

relating to income, transfer, transmission, assignment or document that

is exempt from tax in terms of sub-article (2), and any responsibility

which the said person would have had under the relevant laws for the

failure to make or to furnish any such return, declaration, act or notice

shall be considered as never having existed, and every person who,

under any scheme made by the Government or any public entity or

under any law, whichever it may be including this Act, before such

registration was considered to be entitled to any benefit, exemption or

other advantage as a result of not having declared such eligible assets

(or income therefrom) in connection with any claim for such benefit,

exemption or advantage, shall not be considered as having committed

an offence as a result of not having declared those assets (or income

therefrom) and shall not be required to refund that benefit, exemption

or other advantage acquired before that declaration

Provided that if such person, after the date of registration of

those eligible assets (or income therefrom) continues for a period after

the declaration to take that benefit, exemption or advantage without

being entitled thereto, such person shall be considered as never having

been exempted from liability for the offence, and shall forfeit the right

not to refund any benefit, exemption or advantage acquired before the

registration

Provided further that nothing in this article shall be construed

as exempting any person from refunding any benefit, exemption or

other advantage demanded to be paid back by the competent authority

before the making of such declaration

Provided also that in the case of a qualifying asset that is

registered under the Investment Registration Scheme Regulations,

2014, made under the External Transactions Act, the references to the

dates "31st March, 2005" and "1st January, 2005" in sub-article (2) and

"31st March, 2005" in sub-article (3) shall be construed as references

to "4th November, 2013", "1st January, 2013" and “31st May, 2014”,

respectively.

Provided also that in the case of a qualifying asset that is

registered under the Special Registration Scheme Regulations,

made under the External Transactions Act, the references to the

dates "31st March, 2005" and "1st January, 2005" in sub-articles

(2) and (3) of this article shall be construed as references to "15th

March, 2007" and "1st January, 2006", respectively.

(5) Where a person has availed himself of this article with

respect to the Investment Registration Scheme Regulations, 2014,

any losses referred to in article 5(10)(a) and article 14(1)(g)

declared in the return for year of assessment 2013 and for any

preceding year of assessment, whenever submitted, shall not be

carried forward and set off against the total income of the said

person for the year preceding the year of assessment 2014 or in any

subsequent year.

(6)

(a) A person who is served with a notice of enquiry

r e f e r r e d t o i n a r t i c l e 1 3 ( 7 ) o f t h e I n c o m e Ta x

Management Act shall, within thirty days from the

d at e of serv ice of t he sai d not ice, subm it t o the

Commissioner the Registration Certificate referred to

in regulation 9 of the Investment Registration Scheme

Regulations, 2014.

(b) Notwithstanding the provisions of sub-article (2), the

exemption referred to in the said sub-article shall not

apply if the person referred to in paragraph (a) fails to

submit the said Certificate within thirty days from the

date of service of the said notice

Provided that the Commissioner, upon being satisfied

that the said person was prevented from submitting the

said Certificate within such period owing to absence

from Malta, sickness or other reasonable cause, may

extend the period as may be reasonable in the

circumstances.

Tax shall be charged, levied and collected for each year of

assessment upon the chargeable income of any person for the year

immediately preceding the year of assessment.

(1) Every person shall each year make up the accounts of

his trade or business which he is required to keep in accordance

with the provisions of this Act to the day immediately preceding

the next following year of assessment.

(2) Notwithstanding the provisions of sub-article (1) hereof,

the Commissioner may permit any person to whom this sub-article

applies to make up the said accounts to a date other than the day

immediately preceding a year of assessment and, where permission

has been granted as aforesaid, the gains or profits for that year of

assessment and subsequent years of assessment shall be computed

on the income of the year terminating on the date in the year

immediately preceding the year of assessment on which the

Commissioner has permitted that the accounts be made up.

(3)

Sub-article (2) applies to any -

(a) company;

(b) commercial partnership en nom collectif, or

commercial partnership en commandite which has not

elected to be treated as a company in terms of article

27(6) of the Income Tax Management Act;

(c) body corporate established by law;

(d) undertaking required by article 30(7)(d) to be dealt

with as a separate body of persons.

(4) In granting his permission for the purposes of sub-article

(2), the Commissioner may impose such conditions as he deems fit

and reasonable, and where the person who has requested

permission for a change in accounting date accepts the conditions

laid down by the Commissioner and the accounting date of the

trade or business is changed accordingly, such conditions shall be

operative notwithstanding any other provisions of this Act.

(5) The Minister responsible for finance may make rules

prescribing -

(a) the method by which changes in an accounting date

may be authorized by the Commissioner for the

purposes of this article; and

(b) the conditions which may be imposed or required by

the Commissioner in authorizing changes as aforesaid.

PART III

EXEMPTIONS

(1) There shall be exempt from the tax -

Exemptions.

Amended by

XX. 1955.2;

(a) (i) the income of the University of Malta;

XV.1958.2;

XXV. 1960.5;

(ii) the income of the Malta College of Arts, Science and

XXIV. 1961.2;

Technology;

XXV. 1962.2,4;

L.N. 4 of 1963;

(b) the allowances and benefits as may be specified by the

X. 1963.2;

Minister responsible for finance by notice published in

XIV. 1963.2;

XXXI. 1966.2;

the Gazette which are payable under the Social

XXVII. 1967.20;

Security Act, or in consequence of any measure

VIII. 1969.4;

XLIX. 1974.3;

announced in the annual Budget Speech;

XLII. 1975.3;

(c) (i)

any interest, discount, premium or royalties

XXII. 1976.4;

XXXIX. 1976.8;

accruing to or derived by any person not resident

XXVIII. 1978.5;

in Malta

XXI. 1980.3;

IX. 1981.3;

Provided that the exemption under this sub-

IX. 1983.6;

paragraph shall not apply in respect of any year

XIII. 1983.5;

XIV. 1984.3;

in which the said person is engaged in trade or

VIII. 1987.3;

business in Malta through a permanent

XXXI. 1988.4;

establishment situated therein and where the

XIX. 1989.4;

XXXVI. 1990.4;

royalties or the debt claim in respect of which

VIII. 1991.2;

the interest, discount or premium, is paid are

XIII. 1992.2.

Renumbered by

effectively connected with such permanent

XVII. 1994.2.

establishment;

Amended by

XVII. 1994.12;

(ii) any gains or profits accruing to or derived by

XX. 1996.6;

any person not resident in Malta on a transfer of,

XVII. 1998.70;

or on a transfer of any rights over, any units in a

IX. 2001.24;

II. 2002.44;

collective investment scheme as defined in article

II. 2003.9;

2 of the Investment Services Act, any units and

II. 2004.9;

other such like instruments relating to linked long

II. 2007.5;

IV. 2007.9;

term business of insurance, including the surrender

XVII. 2009.45;

or maturity of linked long term policies of

I. 2010.15;

IV. 2011.10;

insurance, any interest in a partnership which is not

V. 2012.13;

a property partnership and any shares or securities

L.N. 218 of 2012;

in a company (which for the avoidance of doubt

III. 2013.21;

XII. 2014.15;

includes redemption, liquidation or cancellation)

XXII. 2014.13;

which is not a property company and for the

XXXVII. 2014.2;

purpose of this paragraph the word "transfer"

XIII. 2015.48;

XV. 2016.15.

shall have the same meaning assigned to it under

article 5(1)(b)

Cap. 370;

XVI. 2017.17;

Provided that the beneficial owner of the interest,

VII.2018.17;

VII.2019.18; *

royalty, gain or profit, as the case may be, is a person

VIII.2020.15;

not resident in Malta and such person is not owned and

XVIII.2021.16;

controlled by, directly or indirectly, nor acts on behalf

VII.2022.20;

of an individual or individuals who are ordinarily

III.2026.15.

resident and domiciled in Malta;

(iii) (A) any dividend paid by a company registered

in Malta to an individual out of profits

*Applicable from year of assessment 2020.

allocated to the any of the taxed accounts,

other than the final tax account and the

untaxed account, where such individual’s

chargeable

income,

excluding

such

dividend, is equal to or exceeds the relevant

threshold

Provided that, in the case where such

individual is entitled to claim a deduction

against a dividend declared in a tax return,

the amount or portion of such dividend, up

to the amount of the said deduction, shall

not be exempt from tax

Provided further that in the case where the

said individual’s chargeable income

excluding such dividend is less than the

relevant threshold, the amount or portion of

such dividend to be exempt from tax shall

be an amount determined by deducting

from his chargeable income the relevant

threshold

Provided also that the preceding proviso

shall not apply where the said individual’s

chargeable income does not exceed the

relevant threshold.

(B) Any dividend or part thereof, exempt from

tax under paragraph (iii)(A), shall, for the

purpose of paragraph (a) of the last proviso

to article 60 and paragraph (a) of the last

proviso to article 48(1) of the Income Tax

Management Act, be a dividend to which

the said paragraphs refer.

(C) For the purpose of article 12(1)(c)(iii)

(a) Where such individual has more than

one such dividend, the aggregate

amount of such dividends shall be

treated as one dividend;

(b) ''Relevant threshold'' is as follows

(i) in the case where the rates

prescribed under article 56(1)(a) apply,

the relevant threshold is €28,700;

(ii) * in the case where the rates

prescribed under article 56(1)(b)(i)

apply, the relevant threshold is €19,500;

(iii) † in the case where the rates

*Amendment applicable from the year of assessment 2027. Vide Article 13(2) of Act

III of 2026.

†Amendment applicable from the year of assessment 2027. Vide Article 13(2) of Act

III of 2026.

prescribed under article 56(1)(b)(ii), (iv)

and (v) apply, the relevant threshold is

€21,200

Provided that this sub-paragraph (iii)

shall not apply in the case of dividends

arising out of shares listed on a stock

exchange

recognised

by

the

Commissioner for the purpose of this

provision and distributed to an

individual whose holding of such shares

in a company represents less than 0.5%

of the paid-up share capital of the said

company

Provided also that the preceding

proviso

shall

only

apply

to

distributions of dividends made out of

profits derived in the year preceding

the year of assessment 2018 or later;

(d) the income of any retirement fund or retirement

scheme licensed, registered or otherwise authorized

under the Special Funds (Regulation) Act or any Act

replacing the said Act or derived by a company from

long term contracts of insurance that are treated as

qualifying personal retirement schemes or qualifying

occupational retirement schemes in terms of the

provisions of such rules as may be prescribed, other than

income from immovable property situated in Malta;

(e) the income of any institution, trust, bequest or

foundation, of a public character, and of any other

similar organization or body of persons, also of a

public character, which is engaged in philanthropic

work and either qualifies for exemption under this

paragraph in accordance with rules made for this

purpose by the Minister responsible for finance under

article 96 or is named by the said Minister as engaged

in philanthropic work for the purposes of this

paragraph and there is not in respect of it a declaration

by the said Minister that it has ceased to be so named;

(f)

the income of any political party including the income

of clubs adhering to political parties;

(g) wound and disability pensions granted in respect of

wounds or disabilities caused by war and any pensions

granted to dependent relatives of members of the

armed forces of the Commonwealth killed on war

service;

(h) any capital sum received by way of commutation of

pension (up to a maximum of thirty percent (30%) of

the total pension), retiring or death gratuity or received

as consolidated compensation for death or injuries;

(for the purposes of this paragraph, ''total pension''

means the total value of the pension available to

provide pension payments)

Provided that in the case of commutation of pensions

in relation to retirement schemes, licensed, registered

or otherwise authorised under the Special Funds

(Regulation) Act or any Act replacing the same, the

maximum capital sum that may benefit from this

exemption shall, unless provided otherwise by means

of rules prescribed by the Minister, be as provided

under that Act, including any regulations or directives

issued thereunder;

(i)

the income arising from a scholarship held by a person

receiving full time instruction at a university, college

or similar educational institution

Provided that this paragraph shall not apply to

income, by whatever name called, paid out of funds

disbursed or otherwise provided by the employer of

the recipient which the recipient would have received

by reason of his employment if he had not held such

scholarship; and any income to which this paragraph

does not apply shall be deemed to be income

chargeable to tax in accordance with the provisions of

article 4(1)(b);

(j)

the income of any trade union registered under the

Employment and Industrial Relations Act in so far as

such income is not derived from a trade or business

carried on by such trade union;

(k) the profits of a non-resident shipowner as defined in

article 28, provided that the country to which such

non-resident shipowner belongs extends a similar

exemption to shipowners who are not resident in such

country but who are resident in Malta;

(l)

the income of a club or similar institution which the

Commissioner is satisfied is organised and operated

exclusively for social welfare, civic improvement,

pleasure or recreation, or for any other purpose except

profit, no part of the income of which is payable to, or

is otherwise available for the personal benefit of, any

proprietor, member or shareholder, so long as such

club or similar institution is not deemed to carry on a

business in accordance with article 4(4);

(m) Repealed by Act XX of 1996.

(n) the income of a philharmonic society which the

Commissioner is satisfied constitutes a bona fide band

club, provided that such society has regular premises

registered with the Police as a club and that such

premises are in daily use as a place of resort by its

members;

(o) the income of a club or similar institution which the

Commissioner is satisfied constitutes a bona fide

sports club, provided that no part of the income of

which is payable to, or is otherwise available for the

personal benefit of, any proprietor, member or

shareholder, and provided also on winding up of such

club or institution, no funds are distributed or

available to such proprietor, member or shareholder;

(p) any dividend paid by a company whose main source of

income in the relevant year is charged at the rate

provided for in article 56(13) in respect of a Contractor;

(q) the income of a co-operative society;

(r) such subsidy as may be prescribed related to the

Common Agricultural Policy or to any other similar

scheme introduced in accordance with international or

supra-national agreements;

(s)

the income of a collective investment scheme other

than income from immovable property situated in

Malta and investment income to which article 41A(a)

refers;

(t) (i)any financial assistance, as determined by the courts

of a European Union or a European Economic Area

(hereinafter "EU/EEA") Member State or by the courts

of another country as the Commissioner may approve

or as agreed by a public deed of personal separation

under the authority of the courts of a EU/EEA Member

State or by the courts of another country as the

Commissioner may approve, or as ordered by the

courts of a EU/EEA Member State in a divorce

judgment or decree or by the courts or other authorities

of another country as the Commissioner may approve,

received by an individual from his estranged spouse in

respect of the maintenance of a child;

(ii)any financial assistance received by the parent of a

child in respect of the maintenance of that child and paid

by the other parent in terms of a public deed regulating

the obligations of the parents for the maintenance of that

child.

(u) (1) any income or gains derived by a company

registered in Malta from a participating holding or from

the transfer of such holding, where the taxpayer has not

shown such income or gain as part of his chargeable

income in the return made pursuant to article 10 of the

Income Tax Management Act

Provided that with respect to a dividend derived from a

participating holding acquired on or after 1 January 2007

the exemption contemplated by this paragraph shall only

apply when the conditions set out in either paragraph (i)

or paragraph (ii) are satisfied

(i)

where the body of persons in which the

participating holding is held satisfies any one of

the following conditions, that is to say

(1)

it is resident or incorporated in a country

or territory which forms part of the

European Union;

(2) it is subject to any foreign tax of at least

fifteen per cent (15%);

(3) it does not have more than fifty per cent

(50%) of its income derived from passive

interest or royalties;

(ii) where none of the conditions set out in

paragraph (i) are satisfied then both of the

following two conditions must be satisfied

(1) the equity holding by the company

registered in Malta in the body of persons

not resident in Malta is not a portfolio

investment and for this purpose the

holding of shares by a company registered

in Malta in a body of persons not resident

in Malta which derives more than fifty per

cent of its income from portfolio

investments shall be deemed to be a

portfolio investment; and

(2) the body of persons not resident in Malta

or its passive interest or royalties have

been subject to any foreign tax at a rate

which is not less than five per cent (5%)

Provided further that the provisions of the immediately

preceding proviso shall, with effect from 1 January

2011, also be applicable to dividends received from a

participating holding acquired before the 1 January

2007

Provided also that in respect of

(a) a participating holding in a company or in a partnership,

EEIG, other body of persons or collective investment

scheme referred to in the first proviso to the definition

of "participating holding" in sub-article (1) of article

2, that is resident in Malta; or

(b) a participating holding in any other body of persons

that holds, directly or indirectly, shares or other

interests in a company or in a partnership, EEIG, other

body of persons or collective investment scheme

referred to in the first proviso to the definition of

"participating holding" in sub-article (1) of article 2,

that is resident in Malta,

gains or profits arising on the transfer of any holding

referred to in paragraph (a) or paragraph (b) derived by

a company registered in Malta (hereinafter in this sub-

article referred to as "the transferor company"), shall

only qualify for the exemption if such gains or profits

would have been exempt in terms of sub-paragraph (ii)

of paragraph (c) had the transfer of the holding been

made by the beneficial owner of the transferor

company. Where the beneficial owner is more than one

(1), and if gains or profits made by one (1) or more

thereof would have been exempt (hereinafter in this

sub-article referred to as "the exempt beneficial

owner") and others not been exempt, the exemption

shall apply to that part of the gain or profit to which

the exempt beneficial owner is beneficially entitled.

For the purpose of this proviso any body of persons or

collective investment vehicle which is resident in

Malta shall be deemed not to fall within the purport of

the term "beneficial owner"

Provided further that where the transferor company has

claimed the exemption contemplated in terms of the

immediately preceding proviso on the whole or part of

the said gains or profits, and any person who would not

have qualified for exemption in terms of sub-paragraph

(ii) of paragraph (c) had the transfer of the holding been

made thereby (hereinafter in this sub-article referred to as

"the non-qualifying shareholder"), thereafter becomes

beneficially entitled to all or any of such gains or profits

or to a larger part thereof than was the case at the time

they arose, even prior to their distribution, such untaxed

gains or profits or such additional part thereof to which

the non-qualifying shareholder becomes entitled, shall be

taxed at the rate referred to in sub-article (6) of article 56

and such tax shall constitute tax payable by the company

in the year of assessment in respect of which such person

shall become entitled to such profits even prior to their

distribution.

Provided further that for the purpose of this paragraph

the word "transfer" shall have the same meaning

assigned to it under article 5(1)(b)

Provided further that the exemption contemplated by this

paragraph shall not apply to income derived from a

participating holding in a body of persons resident for tax

purposes in a jurisdiction that is included in the EU list of

non-cooperative jurisdictions for a minimum period of

three (3) months during the year immediately preceding

the year of assessment unless it is proved to the satisfaction

of the Commissioner that the said body of persons

maintains sufficient significant people functions in that

jurisdiction as is commensurate with the type and extent of

the activity carried on in that jurisdiction and the income

earned therefrom. Where such three (3) months are

consecutive and fall in two (2) subsequent consecutive

basis years, the exemption shall not apply in respect of any

such income derived in any one (1) of the two (2) years;

INCOM E TA X

(u) (2)

any income or gains derived by a company

registered in Malta (hereinafter "the particular company")

which are attributable to a permanent establishment

(including a branch) situated outside Malta or to the

transfer of such permanent establishment, whether such

permanent establishment belongs exclusively or in part to

the particular company, including a permanent

establishment operated through any entity or relationship

other than a company, in which the particular company

has an interest, where the taxpayer has not shown such

income or gains as part of its chargeable income in the

return made pursuant to article 10 of the Income Tax

Management Act, and for these purposes "profits or

gains" shall be calculated as if the permanent

establishment is an independent enterprise operating in

similar conditions and at arm’s length

Provided that where, in the opinion of the Commissioner,

a series of transactions is effected with the sole or main

purpose of reducing the amount of tax payable in terms

of this Act by any person by reason of the operation of

this provision, such a person shall be assessable as if this

provision did not apply and, for the purpose of this

provision, a series of transactions shall mean any two or

more corresponding or circular transactions carried out

by the same person, either directly or indirectly, as the

case may be

Provided further that for the purpose of this paragraph the

word "transfer" shall have the same meaning assigned to

it under article 5(1)(b)

Provided further that as from 1st January, 2016, in the

case of distributed profits received from a participating

holding by a parent company that is resident in Malta or

the permanent establishment of a parent company that is

resident in another EU Member State, which permanent

establishment is situated in Malta and which benefit

from the exemption from withholding tax set out in

article 5 of EU Directive 2011/96/EU on the common

system of taxation applicable in the case of parent

companies and subsidiaries of different Member States as

amended, the exemption under the provisions of sub-

paragraph (u)(1) shall only apply to the extent that such

profits are not deductible by the relevant subsidiary in

that other EU Member State.

For the avoidance of doubt, notwithstanding any other

provision to the contrary in this Act, distributed

profits received by the said parent company or

permanent establishment that are deductible by the

relevant subsidiary in such other EU Member State

shall fall under the charging provisions of sub-article

(1) of article 4. This proviso implements the provisions

of Article 1(1) of EU Directive 2014/86/EU of 8th July,

2014 amending Directive 2011/96/EU on the common

system of taxation applicable in the case of parent

companies and subsidiaries of different Member States

and the terms used herein shall, unless the context

requires otherwise, be interpreted in terms of EU

Directive 2011/96/EU on the common system of

taxation applicable in the case of parent companies and

subsidiaries of different Member States as amended;

(v) royalties, advances and similar income derived from -

(i) patents in respect of inventions

(ii) copyright

(iii) trademarks

whether in the course of a trade, business, profession

or vocation or otherwise, subject to the satisfaction of

such terms and conditions (including any limits on the

maximum amount of the exempt income) and

obtaining such determinations as may be prescribed

Provided that where any income which is exempt from

tax in terms of this paragraph is derived by a company,

the distribution of the particular profits by way of

dividend by such company shall also be exempt from

tax in the hands of the shareholders, so however that

where the person in receipt of such dividend is itself a

company (hereinafter referred to as "the second

company"), any dividend paid to the members of the

second company shall, to the extent that such dividend

is paid out of profits which are exempt in terms of this

paragraph, not be charged to tax under this Act, and

where a member of the second company is again a

company, the provisions of this proviso shall apply

mutatis mutandis as though references to the second

company were references to that member, and the

principle set out in this proviso shall continue to be

applied for as long as the exempt profits referred to in

this paragraph are distributed by way of dividends

Provided further that where such royalties, advances

or similar income are derived by a company, this

exemption shall not apply where the company has

shown such income as part of its chargeable income in

the return made pursuant to article 10 of the Income

Tax Management Act;

(w) the income from employment (other than employment

derived from the holding of an office of director) of a

married person who is over forty years of age and

starts in employment after having been absent from

any gainful occupation for at least five years, and

whose name was not during the said time on the

unemployment register (Parts 1 and 2) as established

by JobsPlus, and where such income does not exceed

the amount mentioned in rule 2(a) of the Deduction

(Income from Employment) Rules and the said person

is chargeable to tax jointly with her or his spouse at the

rates specified in article 56(1)(a)

Provided that this paragraph shall apply for a period of

five consecutive years of assessment commencing from

the basis year in which the person started work;'

(x) interest payable to an individual in his own name by

(i)

a person carrying on the business of banking in

accordance with the laws of any European Union

Member State in respect of a sum of money

deposited into a special individual saving

account

recognised

as

such

by

the

Commissioner, and

(ii) interest payable to an individual in his own name

by the Government of a European Union

Member State or by any agency thereof, by a

corporation or authority established by law, or in

respect of a public issue by a company, entity or

other legal person howsoever constituted and

whether resident in Malta or otherwise, where

the relevant interest-bearing securities are

credited for the benefit of the individual to a

special individual saving account recognised as

such by the Commissioner

Provided that the aggregate amount of the deposits

into such account and the value of the interest-bearing

securities credited for the benefit of the individual into

such account do not together exceed one thousand euro

(€1,000) in any year or such other amount as may be

prescribed by the Minister from time to time;

(y) any stipend or maintenance grant paid to a student by

the Government or any Government institution;

(z) any income or gains derived by the trustee of a

disability trust or by a disability foundation upon the

transfer of immovable property forming part of the

disability trust or the disability foundation where the

sale proceeds from the transfer of such property are to

be exclusively utilised by the trustee or foundation for

the maintenance of the disabled beneficiary, and an

undertaking to that effect is made by the trustee or the

foundation in the deed of sale

Provided that if the disabled beneficiary dies before all

the sale proceeds are utilised for his maintenance, then

any balance thereof distributed by the trustee of the

disability trust or the disability foundation to the

parents of the disabled beneficiary and, or the other

beneficiaries of the disability trust or foundation shall

be taxed as follows

(i)

if less than eighty per centum (80%) of the sale

proceeds have been applied for the maintenance

of the disabled beneficiary up to his death, the

remaining portion which is distributed to the

parents and, or the other beneficiaries of the

disability trust or foundation will be taxed at the

rate of 8% of the transfer value, and the tax is to

be paid by the trustee or foundation before any

distributions are made to the parents of the

disabled beneficiary and, or the other

beneficiaries of the disability trust or

foundation; or

(ii) if eighty per centum (80%) or more of the sale

proceeds have been applied for the maintenance

of the disabled beneficiary up to his death, no

tax shall be payable on the remaining portion

which is distributed by the trustee or the

foundation to the parents of the disabled

beneficiary and, or the other beneficiaries of the

disability trust or foundation.

For the purpose of this paragraph, "disability trust"

and "disability foundation" mean any protected

disability trust or foundation, as the case may be,

which qualify as such in terms of the Trusts and

Trustees Act, any other applicable law regulating

foundations, or any regulations made thereunder, and

provided that

(i)

the trustee or administrator thereof shall not

have the power to appoint new beneficiaries

after the creation of the trust or foundation;

(ii) the trust terminates on the death of the disabled

beneficiary; and

(iii) the relevant trust instrument or foundation deed

specifically provides that the beneficiaries of such

trust or foundation comprise only

(a)

a person or persons who is/are on the

Register of Persons with Disability kept by

the National Commission Persons with

Disability set up in terms of the Equal

Opportunities (Persons with Disability)

Act, and

(b)

persons referred to in article 5(2)(e)(i),

whether they are in existence or not at the

time of such settlement, in relation to the

disabled person

Provided that nothing in this sub-article shall be construed

as granting any exemption from the filing of a return in respect of

any such income, or as exempting in the hands of the recipients any

dividends, interests, annuities, emoluments, pensions or other gains

or profits paid wholly or in part out of the income so exempted.

(2) The Minister responsible for finance may exempt any

person or class of persons with or without retrospective effect from

all or any of the provisions of this Act on any ground which to him

may seem sufficient. Any such exemption may be made subject to

such conditions or the payment of such other rate or rates of tax,

whether related to income or otherwise, or to both such conditions

and payment, as the Minister may deem appropriate.

(3) The Minister responsible for finance may by order

published in the Government Gazette provide that the interest

payable on any loan charged on the public revenue of Malta shall

be exempted from the tax, either generally or only in respect of

interest payable to persons not resident in Malta, and such interest

shall, as from the date and to the extent specified in the order, be

exempt accordingly.

(4) The Minister responsible for finance may by order

published in the Government Gazette provide that the interest

payable on any debentures, debenture stock or other securities

issued by the Malta Development Corporation under the Malta

Development Corporation Act, as security for any authorised

borrowing of the said Corporation, shall be exempted from the tax,

either in whole or in part and to such extent as he may deem

appropriate, and such interest shall, as from the date and to the

extent specified in the order, be exempt accordingly.

Tax shall not be payable in respect of any income arising

outside Malta to any person who is in Malta for some temporary

purpose only and not with any intent to establish his residence

therein and who has not actually resided in Malta at one or more

times for a period equal in the whole to six months in the year

preceding the year of assessment.

PART IV

DEDUCTIONS

(1) For the purpose of ascertaining the total income of any

person there shall be deducted all outgoings and expenses incurred

by such person during the year preceding the year of assessment to

the extent to which such outgoings and expenses were wholly and

exclusively incurred in the production of the income, including -

(a) borrowing costs incurred by such person where the

Commissioner is satisfied that they were wholly and

exclusively incurred for the purpose of that person’s

trade, business, profession or vocation, or on capital

employed for the purpose of acquiring income

Provided that the deduction allowable under this

paragraph shall be subject to such limitations, and may be

carried forward, in such manner as may be prescribed and

in accordance with guidelines issued under article 96(2);

(b) rent paid by any tenant of land or buildings occupied

by him for the purpose of acquiring the income;

(c) any sum expended for repairs of premises, plant or

machinery employed in acquiring the income, or for

the renewal, repair or alteration of any implement,

utensil or article so employed;

(d) bad debts incurred in any trade, business, profession or

vocation, proved to the satisfaction of the

Commissioner to have become bad during the year

immediately preceding the year of assessment

notwithstanding that such bad debts were due and

payable prior to the commencement of the said year

Provided that all sums recovered during the said year

on account of amounts previously written off or

allowed in respect of bad debts shall for the purposes

of this Act be treated as receipts of the trade, business,

profession or vocation for that year;

(e) any sum contributed by an employer to a pension,

saving, provident or any other society or fund which

may be approved by the Commissioner as may be

prescribed;

(f)

a deduction in respect of the wear and tear of any plant

and machinery, and any premises being an industrial

building or structure, arising out of the use or

employment of such property in the production of the

income; and where such property is employed on such

terms that the burden of wear and tear thereof falls

upon the person making use of the property in the

production of the income, but such property does not

belong to him, he shall be entitled to any deduction to

which he would have been entitled had the property

belonged to him

INCOM E TA X

Provided that -

(i)

the amount to be deducted in respect of premises

being an industrial building or structure shall not

exceed two per cent of the cost thereof, not

including the cost of the land on which the

building or structure is erected;

(ii) where the total deductions allowable under this

paragraph and under paragraph (j) cannot be

given effect to in full in any year because there

are no profits or gains chargeable for that year

from the source of income in respect of which

they are allowable or because the profits or gains

chargeable from that source are less than the

deductions, the deductions or such part of the

deductions to which effect has not been given,

shall be added to the deduction for wear and tear

in respect of that source for the following year

and deemed to be part of that deduction, or if

there is no such deduction in respect of that

source for that year, be deemed to be the

deduction for that year and so on for subsequent

years;

(iii) the aggregate of the deductions made under this

paragraph and under paragraph (j), added to the

wear and tear, if any, or to such part thereof as

may be appropriate, which occurred prior to the

commencement of this Act, shall not exceed the

original cost, or such part of it as may be

appropriate, of such plant, machinery or

premises, having regard to the extent to which

they were wholly and exclusively used in the

production of the income, and -

(a) the wear and tear which occurred

prior to the commencement of this

Act shall be computed at the

prescribed rates, and

(b) the cost of the land on which the

building or structure is erected shall

in all cases be excluded from the

original cost of the premises;

(g) the amount of a loss incurred by any person, solely or

in partnership, in any trade, business, profession or

vocation during the year preceding the year of

assessment which, if it had been a profit, would have

been assessable under this Act; and in computing such

loss account shall be taken of all deductions which

would have been allowable under the other paragraphs

of this sub-article, except paragraphs (f) and (j), if it

had been a profit; and where the amount of a loss

incurred and computed as aforesaid is such that it

cannot be set off against capital gains or income from

other sources for the year preceding the year of

assessment, it shall, to the extent to which it cannot be

wholly set off against capital gains or income for the

said year, be carried forward and set off against what

would otherwise have been the total income for

subsequent years in succession

Provided that nothing in this paragraph shall be

construed as permitting the set off of any loss incurred

outside Malta which, if it had been a profit and had

been retained outside Malta, would not have been

chargeable to tax under this Act

Provided further that a loss as aforesaid shall not be

deducted against income which stands to be allocated

to the final tax account and any loss resulting from

activities or sources the profit derived from which

would have been allocated to the final tax account

shall not be a loss to which this paragraph applies

Provided also that, subject to the "group relief

provisions", no person shall, notwithstanding anything

contained in any other Act, be entitled to a deduction

under this paragraph in respect of any loss incurred by

another person

Provided also that

(i)

where any merger or division referred to in the

Rulings (Income Tax and Duty Treatment of

Mergers and Divisions) Rules is being effected

for bona fide purposes to the satisfaction of the

Commissioner; and

(ii) as a result of such merger or division, a trade or

business previously carried on by a company or

other person involved in the particular merger or

division (hereinafter referred to as "the First

Company") or any part thereof, shall thereafter

be carried on by another company or companies

or other person involved in such merger or

division (hereinafter collectively referred to as

"the Second Company"); and

(iii) the First Company is entitled to any loss or to

the balance of any loss incurred by the First

Company in any year preceding the year of

assessment or to any wear and tear or initial

allowances, or to the balance of any such

allowances due in respect of any year as

aforesaid;

the Commissioner shall be entitled to grant his

permission for the losses and, or wear and tear and, or

initial allowances or such part thereof as he may deem

fit, in the light of the trade or business or any part

thereof which shall thereafter be carried on by the

Second Company, to be claimed by the Second

Company and to be set-off against its gains or profits

as the case may be in determining its chargeable

income, in lieu of the First Company. In granting his

permission the Commissioner may impose such

conditions as he deems fit and reasonable, and where

the person who has requested permission accepts the

conditions laid down by the Commissioner, such

conditions shall be operative notwithstanding any

other provisions of this Act.

(h) any expenditure on scientific research incurred by a

person engaged in any trade, business, profession or

vocation and proved to the satisfaction of the

Commissioner to have been incurred for the use and

benefit of the trade, business, profession or vocation

Provided that any such expenditure of a capital nature,

unless it is an expenditure in respect of which a

deduction is allowable under paragraphs (f) and (j),

shall be spread equally over the year in which it has

been incurred and the five succeeding years

Provided further that no deduction shall be

allowed under the provisions of this paragraph in the

case of any such expenditure on plant or machinery or

premises, in respect of which any deduction is allowed

under paragraphs (f) and (j).

For the purposes of this paragraph "scientific

research" shall include

(i)

basic research comprising activities undertaken for

the advancement of scientific or technological

knowledge;

(ii) applied research where a specific application is

in view;

(iii) development work involving the use of the

results of basic and applied research as aforesaid

for the purpose of creating new or improving

existing materials, devices, products or

processes.

(ha) * (i) any expenditure incurred, at one hundred and

seventy-five per cent (175%) of the actual amount of

such expenditure, on research, development and

innovation activities by a person engaged in any trade,

business, profession or vocation and proved to the

satisfaction of the Commissioner to have been incurred

for the use and benefit of the trade, business,

profession or vocation

Provided that any such expenditure of a capital

nature, unless it is an expenditure in respect of

which a deduction is allowable under paragraphs

(f) and (j), shall be spread equally over the year

in which it has been incurred and the five (5)

subsequent years

*Applicable from the year of assessment 2027. Vide Article 13(2) of Act III of 2026.

Provided further that no deduction shall be

allowed under the provisions of this paragraph

where such expenditure relates to plant or

machinery or premises, in respect of which any

deduction is allowed in accordance with

paragraphs (f) and (j);

(ii) this paragraph shall apply from such date as may be

provided by the Minister responsible for finance by

notice in the Gazette;

(iii) the Minister responsible for finance may by rules define

the activities that constitute research, development and

innovation for the purposes of this paragraph as well as

prescribe such other conditions as may be applicable to

this paragraph;

(i)

(Deleted by: XV. 2016.16).

(j)

in respect of plant and machinery first used and

employed in the year immediately preceding the year

of assessment, an initial deduction of one-fifth of the

capital expenditure thereon, and in respect of premises

being an industrial building or structure first used and

employed in the year immediately preceding the year

of assessment, an initial deduction of one-tenth of the

capital expenditure thereon

Provided that deductions made under this paragraph

shall be restricted, set off and carried forward as laid

down in the second and third provisos to paragraph (f)

Provided further that the deduction contemplated by this

paragraph in respect of plant and machinery shall no

longer be applicable with effect from such year of

assessment as may be determined by the Minister by

order in the Gazette;

(k) any sum or expenses proved to the satisfaction of the

Commissioner to have been paid or incurred by or on

behalf of a candidate for election as member of the

House of Representatives on account of or in respect

of the conduct or management of such election

Provided that such deduction shall only be allowed in

the case of an elected candidate and shall not exceed

the maximum amount of expenditure permissible

under the General Elections Act, in respect of one

candidate or the amount actually incurred by such

candidate, whichever is the lesser;

(l)

any expenditure incurred by a person engaged in a

trade, business, profession or vocation for the purpose

of promoting that trade, business, profession, or

vocation including any expenditure on market research

and obtaining market information, advertising or other

means of soliciting business, providing samples, and

participating in fairs and exhibitions;

(m) any expenditure of a capital nature on intellectual

property or any intellectual property rights incurred by

a person and which intellectual property or intellectual

property rights are proved to the satisfaction of the

Commissioner to have been used or employed in the

production of the income of such person

Provided that any such expenditure shall be spread

equally over a number of years which shall not be less

than a minimum period of three consecutive years, the

first year being that in which the said expenditure has

been incurred or the year in which the intellectual

property or intellectual property rights is first used or

employed in producing the income

*

Provided further that, notwithstanding the first proviso,

any such expenditure may be deducted in the year in

which the said expenditure has been incurred or the year

in which the intellectual property or intellectual property

rights were first used or employed in producing the

income of such person, subject to such conditions as may

be prescribed

Provided also that when the intellectual property or

intellectual property rights were transferred to the said

person ("the acquirer") by a company ("the transferor")

and it was deemed in terms of article 5(9) that no loss or

gain arose from that transfer, the total deduction that may

be claimed by the acquirer shall be the lower of the cost

of acquisition and the market value of the said property

or rights as at the time of that transfer, reduced, in either

case, by the amount, if any, that the transferor had

claimed as a deduction in terms of this paragraph in

respect of the property or rights that have been

transferred;

(ma) any expenditure of a capital nature incurred on or

after 1st January 2025 by a person carrying on a trade,

business, profession or vocation as consideration for

the acquisition of a business permit or a concession, or

a commercial lease, where the business permit or the

concession or the commercial lease in question is used

or employed in the production of income chargeable to

tax in accordance with article 4(1)(a)

Provided that

(i) in this paragraph, and subject to the other

provisions thereof

"business permit" means a permit to carry

on or operate a business that is issued by a public

authority in accordance with any applicable law

and it shall be deemed to have been acquired by a

person if and when such person is registered as

*Applicable from Year of Assessement 2024. Vide Regulation 8 (2) (b) of Act XIII of

2024. the holder thereof with the relevant public

authority;

"concession" means the privilege to carry

on a business activity granted by a public

authority that has exclusive rights over such

activity;

"commercial lease" means the lease of a

commercial going concern (twellija) or the lease

of immovable property for the purpose of

carrying therein a trade, business, profession or

vocation and includes a sub-lease of a

commercial lease;

"public authority" means the government,

a

government

ministry,

department

or

government agency, or any other entity in which

the government has, directly or indirectly, a

controlling interest;

(ii)the deduction shall not include any sum paid for,

or attributable to the outright acquisition of a

business or a business goodwill, or rights in

accordance with an emphyteutical concession,

or any intellectual property or rights to which

paragraph (m) applies, or any other tangible or

intangible asset other than the business permit,

the concession or the commercial lease in

question;

(iii) no deduction shall be allowed in respect of the

acquisition of a permit, concession or lease for

an indefinite duration or for a duration of more

than fifteen (15) years;

(iv) the deduction shall only be allowable if the

acquisition in question, including the payment of

the consideration, results by means of a

document in writing;

(v) the deduction shall be spread in equal amounts

over a period of fifteen (15) years or over the

period, if shorter, for which the permit or the

concession or the lease has been acquired by the

person claiming such deduction;

(vi) where the duration of the business permit or the

concession or the commercial lease in question

may be extended or renewed at the option of the

person acquiring them or without the

requirement for a payment of a capital nature by

way of a further consideration, the periods for

which they may be so extended or renewed shall

be deemed to be part of their duration, and the

provisions of sub-paragraphs (iii) and (v) shall

INCOM E TA X

apply accordingly;

(vii) when, during the year immediately preceding a

year of assessment, a person who had acquired a

business permit or a concession or a commercial

lease transfers, assigns or cedes that permit,

concession, or lease, or sublets the leased

property in question, or no longer uses or

employs that permit, concession or lease in the

production of income chargeable to tax in terms

of article 4(1)(a), he shall not remain entitled to

claim any further deduction in accordance with

this paragraph, as from that year of assessment,

in respect of such permit, concession or lease

even though he may not have yet availed himself

of the full deduction which otherwise may be

granted in terms of this paragraph;

(viii) when a person who has claimed a deduction

under this paragraph transfers the permit,

concession or lease in question, any deduction

that he may be entitled to claim in respect of the

deduction") under the relevant provisions of this

Act in the determination of the tax chargeable on

such transfer or on the gains or profits derived

therefrom, shall be reduced by the total amount

that he has claimed as a deduction in terms of

this paragraph in respect of the said permit,

concession or lease, but the reduction shall not

exceed the price of the acquisition deduction;

(ix)

no deduction shall be allowable under this

paragraph in respect of the acquisition of a

business permit, concession or commercial lease

from a related party and for this purpose

-

two (2) individuals shall be deemed

as related parties if they are related within the

degrees referred to in article 5A(4)(a)(i);

-

an individual and a company or

other legal person shall be treated as related

parties if such individual holds, directly or

indirectly, alone or together with any other related

party or parties, more than twenty-five percent

(25%) of the shares or voting rights or interest in

such company or other legal person;

-

two (2) legal persons shall be

deemed to be related parties if more than twenty-

five percent (25%) of the shares or voting rights

or interest in each of those legal persons are held,

directly or indirectly, by the same persons;

(x)

capital expenditure incurred as consideration for

the extension, renewal or modification of the

terms and conditions of the acquisition of a

business permit, concession or commercial lease

shall be allowable in accordance with and

subject to the provisions thereof to the same

extent and in the same manner as if the said

extension, renewal or modification constituted a

fresh acquisition;

(xi) the Minister may by rules modify and increase

the conditions and limitations to the right to a

deduction under this paragraph and may modify

the manner in which the deduction may be

claimed.

(n) any sum proven to the satisfaction of the

Commissioner to have been paid by an employer to a

licensed or registered childcare centre as fees in

respect of childcare services for the children of his

employees, up to a maximum of nine hundred and thirty-

five Euro (€935) per child;

(o) such sums in respect of risk capital as are aimed at

approximating neutrality between debt and equity

financing, as the Minister may prescribe.

(p) a deduction not exceeding such percentage amount of

qualifying income as may be prescribed derived from

qualifying intellectual property (which term shall be

defined in such manner as may be prescribed) may be

claimed by any person entitled thereto, whether such

income arises in the course of a trade, business,

profession or vocation or otherwise, subject to the

satisfaction of such terms and conditions and to obtaining

such determinations as may be prescribed.

(2)

(a) The Minister responsible for finance may make rules

prescribing the method of calculating or estimating the

deductions allowable under this article, and may by

such rules also determine the amount of the deduction.

(b) The Minister responsible for finance may by such

rules also prescribe tax credits and deductions other

than those listed in sub-article (1), and may also by

such rules determine the class of persons to whom

such tax credits or deductions shall apply and the

method of calculating or estimating such tax credits or

deductions and the amounts thereof.

(3) Where any person incurs expenditure before he begins to

carry on his trade or business, and the expenditure -

(a) is incurred not more than eighteen months before that

time; and

(b) is not deductible in ascertaining the trading or business

income of that person, but would have been so

deductible under sub-article (1) had it been incurred

after that time,

such expenditure as may be prescribed shall be treated as incurred on

the day on which the trade or business is first carried on by that person.

(4) Where a person derives income from work carried out on or

in relation to immovable property situated in Malta, consisting of

brokerage and professional services, construction work, project

management of construction work and work of tradesmen, or from

the granting of loans or from any form of credit to finance the

acquisition, development, construction, refurbishment, renovation

of immovable property or any right thereon and any other matter

which increases or enhances the value of such immovable property

or any right thereon, and such property is owned by a related

person, the following shall have effect

(a) the income derived from the work, loans or credit, or

from the transfer of such immovable property or any

right thereon to which such work, loans, or credit is

related, shall be deemed to constitute separate

chargeable income for the purpose of this sub-article;

(b) in determining the chargeable income derived from the

said work, the total deductions allowable under this

article shall not exceed the amount of the

consideration received or receivable for the said work;

and

(c) in determining the chargeable income derived from the

transfer of such immovable property or any right

thereon, the total deductions allowable under this

article shall not exceed the consideration received or

receivable for the said immovable property or right

thereon, in so far that such excess consists of any

amounts paid or payable in respect of the work, loans,

or credit referred to in this sub-article.

For the purpose of this paragraph any amounts paid or

payable in respect of the said work, loans, or credit shall for the

purpose of determining the chargeable income to be taken into

account only after all other allowable deductions have been taken

into account

Provided that paragraph (c) shall not apply with respect to

income derived from loans or credit, where it can be proved to the

satisfaction of the Commissioner that the amount paid or payable in

respect of the loans or credit referred to in this sub-article reflects

the amount that would have been paid or payable if the persons

referred to in this sub-article were not related.

For the purpose of this sub-article -

(i)

an individual is deemed to be related to another

person if that other person is a body of persons

of which the said individual is, directly or

indirectly, a shareholder, partner or member; and

(ii) two bodies of persons are deemed to be related

persons if they are, directly or indirectly,

controlled or beneficially owned as to more than

twenty-five percent by the same persons.

(5) Notwithstanding the other provisions of this article, when a

person incurs expenditure for a supply of goods or services in

respect of which the supplier is required to issue a tax invoice or

other document in terms of article 50 or 51 of the Value Added Tax

Act, no deduction shall be allowed under this article in respect of

that expenditure unless that person is in possession of a tax invoice

or other document issued in accordance with the said article 50 or

51 and produces such tax invoice or other document if required to

do so by the Commissioner.

Notwithstanding anything to the contrary contained in this

Act, if an individual proves to the satisfaction of the Commissioner

that in the year preceding a year of assessment he has paid to his

estranged spouse an alimony payment as determined by the courts

of a European Union or a European Economic Area (hereinafter

"EU/EEA") Member State or by the courts of another country as the

Commissioner may approve or as agreed by a public deed of

personal separation under the authority of the courts of a EU/EEA

Member State or by the courts or other authorities of another

country as the Commissioner may approve, or as ordered by the

courts of a EU/EEA Member State in a divorce judgment or decree

or by the courts of another country as the Commissioner may

approve, he shall be allowed as a deduction against his income the

lesser of these amounts -

(a) the amount actually paid in accordance with the Court

order or public deed;

(b) the individual’s chargeable income for the year.

(1) Notwithstanding anything to the contrary contained in

this Act, if an individual proves to the satisfaction of the

Commissioner that in the year preceding a year of assessment he

has paid school fees in respect of his children attending a registered

private kindergarten or a licensed independent school, as confirmed by

the Ministry responsible for education, he shall be allowed as a

deduction against his income the lesser of these amounts -

(a) the amount actually paid as certified by the head of the

relative school or kindergarten;

(b) six thousand five hundred euro (€6,500) in respect of

each child who attended such secondary school, or four

thousand six hundred euro (€4,600) in respect of each

child who attended such primary school, or three

thousand five hundred euro (€3,500) in respect of each

child who attended such kindergarten

Provided that the deduction shall only be allowed if the

payment and the details of the individual making the claim are

confirmed by information provided, in such format and content as

determined by the Commissioner, by the head of the relative school or

kindergarten.

*Applicable from year of assessment 2020.

†Applicable from year of assessment 2026.

(2) Any individual qualifying under the provisions of sub-

article (1) who proves to the satisfaction of the Commissioner that

in the said year he has paid fees to the named school in respect of

his child with special needs for the services of a facilitator, shall be

allowed as a deduction against his income the fees so paid up to a

maximum of nine thousand and three hundred and twenty euro

(9,320), provided that advice shall have been given by a board

established for the purpose by the Minister responsible for

education to the effect that the said facilitator is necessary for that

child.

(3) Where the parents of a child who attends a named school as

provided in sub-articles (1) and (2) live separately and they jointly

contribute towards the payment of the school fees, the allowable

deduction in respect of that child shall be apportioned between

them in proportion to the amount of their contribution.

Notwithstanding anything to the contrary contained in this

Act, if an individual proves to the satisfaction of the Commissioner

that in the year preceding a year of assessment he has paid fees in

respect of childcare services for his children who were below the

age of twelve years to a bona fide childcare centre he shall, for each

child, be allowed as a deduction against his income the lesser of

these amounts -

(a) the amount actually paid as confirmed by official

receipts;

(b) two thousand euro (€2,000)

Provided that the Minister may by rules prescribe the

conditions under which this deduction shall be allowed.

Notwithstanding anything to the contrary contained in this

Act, if an individual proves to the satisfaction of the Commissioner

that in the year preceding a year of assessment he has paid fees on

his own behalf or on behalf of a family member, in respect of

residence in a private home for the elderly or the disabled, or at a

respite centre for the disabled, he shall be allowed as a deduction

against his income the lesser of these amounts -

(a) the amount actually paid;

(b) * four thousand five hundred euro (€4,500)

Provided that, for any year of assessment, the total

deductions claimed in respect of any resident shall not exceed the

amount as stipulated in this article

Provided further that the deduction shall only be allowed if

the payment and the details of the individual making the claim are

confirmed by information provided, in such format and content as

determined by the Commissioner, by the person running the home

or centre.

*Applicable from the year of assessment 2027. Vide Article 13(2) of Act III of 2026.

Notwithstanding anything to the contrary contained in this

Act, if an individual proves to the satisfaction of the Commissioner

that in the year preceding a year of assessment he has paid fees in

respect of his children who have not attained the age of sixteen

years, attending sports activities organised either by a person

registered under the Sport Persons (Registration) Regulations or by

the Kunsill Malti għall-Isport, he shall, for each child, be allowed

as a deduction against his income the lesser of these amounts -

(a) the amount actually paid;

(b) three hundred euro (€300)

Provided that the deduction shall only be allowed if the

payment and the details of the individual making the claim are

confirmed by information provided by the registered person

through the Kunsill Malti għall-Isport or by the Kunsill Malti għall-

Isport as the case may be, in such format and content as determined

by the Commissioner

Provided further that in the case of attendance at regular

sports activities organised by entities outside Malta, registration as

aforesaid shall not be necessary and the claim for deduction shall

be made directly by the individual concerned in such format and

content as determined by the Commissioner.

If an individual proves to the satisfaction of the

Commissioner that he has paid fees in respect of his studies at a

recognised tertiary education institution, whether locally or abroad,

he shall be allowed a deduction against his income in respect of

such fees in such manner and subject to such conditions as may be

prescribed.

Notwithstanding anything to the contrary contained in this

Act, if an individual proves to the satisfaction of the Commissioner

that in the year preceding a year of assessment he has paid fees in

respect of his children who have not attained the age of sixteen

y e a r s , a t t e n d i n g c r e a t i v e o r c u l t u r a l c o u r s e s o rg a n i s e d b y

institutions or persons licensed or accredited by the Malta Council

for Culture and the Arts, he shall, for each child, be allowed as a

deduction against his income the lesser of these amounts -

(a) the amount actually paid;

(b) three hundred euro (€300)

Provided that the deduction shall only be allowed if the

payment and the details of the individual making the claim are

confirmed by information provided by the licensed or accredited

person or institution through the Malta Council for Culture and the

Arts, in such format and content as determined by the

Commissioner

Provided further that in the case of attendance at creative or

cultural courses organised by entities outside Malta, accreditation

as aforesaid shall not be necessary and the claim for deduction shall

be made directly by the individual concerned in such format and

content as determined by the Commissioner.

* Repealed by Act XIII.2024.11.

(1) For the purposes of this article investment services

company shall mean a company which on the 1st October, 2003

held an investment services licence issued under article 6 of the

Investment Services Act, or a company which, on the 1st October,

2003 was recognised by the relevant competent authority for the

purposes of article 9A of that said Act, and whose activities solely

comprise the provision of management, administration,

safekeeping, or investment advice to collective investment schemes

as defined in the aforesaid Act.

(2) For the purposes of ascertaining the total income of an

investment services company for any year up to the year

immediately preceding the year of assessment commencing on such

date that the Minister may by notice in the Gazette appoint † , the

amounts specified in paragraphs (a) to (e) shall, at the company’s

option, be allowed as deductions in addition to or as a replacement

for, as the case may be, the amounts allowed under article 14(1)

and shall be subject to the conditions stipulated in that article. For

this purpose

(a) rental, energy costs, building maintenance, building

insurance and other building occupancy costs incurred

in the period from the year preceding the first year of

assessment in which the investment services company

first becomes liable to tax under this Act up to and

including the year preceding the tenth year of

assessment shall be allowed as an additional one

hundred per cent of such expenditure;

(b) a one hundred per cent deduction shall replace the

deductions provided for under article 14(1)(f) and (j)

in respect of expenditure which is incurred in the

period commencing from the year preceding the first

year of assessment in which the investment services

company first becomes liable to tax under the

provisions of this Act up to and including the year

preceding the fifth year of assessment and, in addition,

expenditure in respect of office premises shall be

eligible for such deduction as if the said premises were

industrial buildings;

(c) the amounts invested by an investment services

company for its own account in a collective investment

scheme managed by that company shall be allowed as

a deduction if such investment is made during the

period commencing from the year preceding the first

year of assessment in which the investment services

company first becomes liable to tax under the

*Applicable from Year of Assessment 2025. Vide Regulation 8 (2) (a) of Act XIII of

2024. † 1st January, 2011 - see the Notice of Appointed Date (Income Tax Act) Order -

provisions of this Act up to and including the year

preceding the fifth year of assessment

Provided that such funds so invested are not

disinvested from such collective investment scheme

within two years of the making of the said investment

Provided further that this additional deduction shall

not affect the amount which is to be taken as the cost

of acquisition of such investment for the purposes of

any other provision of this Act, and also provided that

such deductions shall not be carried forward as part of

a loss to be set off against the company’s liability in

respect of a capital gain arising on the disposal of its

investments in the collective investment scheme;

(d) remuneration paid by an investment services company

to its employees who are resident in Malta shall be

allowed as an additional one hundred per cent of that

remuneration if such expenditure is incurred during

the period commencing from the year preceding the

year of assessment in which the investment services

company first becomes liable to tax under the

provisions of this Act up to and including the year

preceding the tenth year of assessment;

(e) there shall be allowed as a deduction any other

expenses and outgoings incurred by the investment

services company wholly and exclusively for the

purposes of carrying on its business and which would

otherwise not have been allowed as a deduction under

the provisions of article 14(1).

(3) Where an investment services company incurs expenditure

before it begins to carry on its business, and the expenditure -

(a) is incurred not more than five years before that time;

and

(b) is not deductible in ascertaining the total income of the

investment services company, but would have been so

deductible under article 14(1) or under sub-article

(2)(e) had it been incurred after that time,

such expenditure shall be treated as incurred on the day on which

the business is first carried on by the investment services company,

and of sub-article (2)(a) to (d) shall apply in respect of such

expenditure.

(4) The additional deductions specified in sub-article (2)

represent the maximum deductions allowed for the purposes of that

sub-article, and an investment services company need not claim the

full amount of such maximum deductions in respect of any year of

assessment.

(5) The additional deductions provided for in this article shall

not be taken into account in determining the amount of loss, if any,

available for surrender under the provisions of articles 16 to 22

(group relief provisions) of this Act.

The provisions of article 15 relating to investment services

companies shall, where applicable, apply mutatis mutandis to

companies which, on the 1st October, 2003 were authorised to act

as insurance managers under article 13 of the Insurance Business

Act.

For the purposes of this article and of articles 17 to 22,

hereinafter collectively referred to (including this article) as the

"group relief provisions", two companies resident in Malta but

neither of which is resident for tax purposes in any other country

shall be deemed to be members of a group of companies if one is

the fifty-one per cent subsidiary of the other or both are fifty-one

per cent subsidiary of a third company resident in Malta.

For the purposes of the group relief provisions, a company

shall be deemed to be a fifty-one per cent subsidiary of another

company, hereinafter referred to as the "parent company"

(a) if and so long as more than fifty per cent of its

ordinary share capital and more than fifty per cent of

its voting rights are owned directly or indirectly by the

parent company; and

(b) the parent company is beneficially entitled either

directly or indirectly to more that fifty per cent of any

profits available for distribution to the ordinary

shareholders of the subsidiary company; and

(c) the parent company would be beneficially entitled

either directly or indirectly to more than fifty per cent

of any assets of the subsidiary company available for

distribution to its ordinary shareholders on a winding

up.

(1) Subject to, and in accordance with, the provisions of

this article and of articles 18 to 22, allowable losses may, in the

case set out in sub-article (2), be surrendered by a company,

hereinafter referred to as "the surrendering company", and, on the

making of a claim by another company, hereinafter referred to as

“the claimant company”, be allowed to the claimant company as a

deduction called “group relief”. A claim made by virtue of this sub-

article is hereinafter referred to as a “group claim”.

(2) Group relief shall be available where the surrendering

company and the claimant company are both members of the same

group throughout the year preceding the year of assessment for

which the relief is claimed.

(3) For any year of assessment, two or more claimant

companies may make group claims relating to the same

surrendering company.

(4)

A payment for group relief -

(a) shall not be taken into account in computing profits or

losses of either company for the purposes of tax

imposed by this Act; and

(b) shall not, for any of the purposes of this Act, be

regarded as a distribution.

For the purposes of this sub-article "payment for group relief"

means a payment made by the claimant company to the

surrendering company in pursuance of an agreement between them

in respect of an amount surrendered by way of group relief, being a

payment not exceeding that amount.

(1) (a) If in the year preceding a year of assessment the

surrendering company has incurred an allowable loss, the amount

of the loss may be set off for the purposes of tax against the total

income of the claimant company for the corresponding year of

as sessment and, w here applica bl e , f o r sub s e q ue nt y e a r s o f

assessment provided that in the year in which the surrendering

company incurs the loss both companies have accounting periods

which begin and end on the same dates

Provided that where the surrendering company makes up

accounts and pays tax in a currency other than that of the claimant

company any loss surrendered shall be set off against the total

income of the claimant company as aforesaid, after such amount is

converted to the currency in which the claimant company makes up

accounts and pays tax. Such conversion shall be carried out by

reference to the mean rate or rates of exchange between such

currency or currencies and the euro ruling on the last day of the

accounting period to which such loss refers as issued by the Central

Bank of Malta.

(b) A surrendering company may surrender allowable losses by

way of group relief in excess of the total income of the claimant

company in the year preceding a year of assessment, in which case

the claimant company may carry forward and set off those losses in

accordance with the provisions of article 14(1)(g) as if they were

losses of its own trade.

(c) Where the allowable loss, had it been a profit, would have

been allocated to the immovable property account or the Maltese

taxed account of the surrendering company, the claimant company

may deduct such loss from its income which stands to be allocated

to either its immovable property account or its Maltese taxed

account, and such loss may only be carried forward against the

claimant company’s total income arising in subsequent years as

would stand to be allocated to any of these taxed accounts.

(d) Where the allowable loss, had it been a profit, would have

been allocated to the foreign income account of the surrendering

company, the claimant company may only deduct such loss from its

total income as would stand to be allocated to its foreign income

account and such loss may only be carried forward against the

claimant company’s total income arising in subsequent years as

would stand to be allocated to its foreign income account.

(e) For the purposes of paragraphs (c) and (d) any election made

in accordance with rule 9(a) of the Tax Accounts (Income Tax) Rules

shall be ignored.

(2) Notwithstanding the provisions of sub-article (1), a

company which is either -

(a) newly incorporated and at all times after its

incorporation satisfies the conditions to be deemed a

member of the same group of companies as another

company in the year preceding a year of assessment

and has the same accounting period end date as that

other company in that year preceding the year of

assessment, or

(b) wound up part way through its accounting period and

until it is so wound up satisfied the conditions to be

deemed a member of the same group as another

company in the year preceding a year of assessment

and has the same accounting period start date as that

other company in that year preceding the year of

assessment,

will be deemed for the purposes of sub-article (1)(a) to have an

accounting period which begins and ends on the same date as that

of the other company and group relief shall be available in full for

that year.

If, apart from this article, a company is a member of a

group of companies, and arrangements are in existence the sole or

main purpose of which is to reduce any company’s tax liability, and

by virtue of the said arrangements that company would cease to be

a member of that group of companies, then that company shall be

treated as not being a member of that group of companies for any

year preceding a year of assessment in which the said arrangements

are in existence.

(1) Relief shall not be given more than once, whether by

giving group relief and by giving some other relief (in respect of

any year of assessment) to the surrendering company, or by giving

group relief more than once, in respect of the same amount.

(2) In accordance with the provisions of sub-article (1), two or

more claimant companies cannot, in respect of any one loss, obtain

in total more relief than could be obtained by a single claimant

company.

A claim for group relief

(a) need not be for the full amount available,

(b) shall include the consent of the surrendering company

set out in such form as the Commissioner may require,

and

(c) must be made by the later of -

(i) the tax return date for the relative year of

assessment in respect of which the claim is

made, or

(ii) twelve months following the end of the

company’s accounting period, which date falls

within the year immediately preceding the year

of assessment for which the claim is made.

For the purpose of the group relief provisions

(a) a reference to "allowable loss" or "allowable losses"

shall be construed as a reference to the loss or losses

referred to in article 14(1)(g), to the extent that they

are incurred in the year preceding the year of

assessment and are not unrelieved losses carried

forward from previous years; and

(b) references to "total income" shall have the meaning

assigned to it by article 2 but shall be computed before

any deduction is made in respect of group relief.

The Minister for finance may make rules providing for

bodies of persons under common ownership to be entitled to elect

to compute and bring to charge their chargeable income or losses as

the case may be, on a collective basis, and for the consequent

carrying out of the relevant provisions and obligations under the

Income Tax Acts as if they are a single body of persons, subject to

such terms and conditions as may be laid down in such rules.

* The Minister responsible for finance may make regulations

for the charging and levying on an elective basis of a tax higher

than that established in relation to the profits of Malta entities as

defined in such regulations, and may, in particular, by such

regulations, provide for

(a) the scope, applicability and amount of such tax;

(b)

manner in which the tax due under this article shall be

calculated, paid and collected and the obligations in

respect of the payment of such tax; and

(c) such other conditions and consequences in relation to the

application of such tax.

(1) Where any person engaged in the business of

exploration for, and the production of, petroleum (hereinafter

referred to as "the Contractor") derives, or aims to derive, gains or

profits through a Production Sharing Contract (hereinafter referred

to as "the Contract") granted to such person by the Government of

Malta by way of licence in accordance with the provisions of the

Petroleum Production Act, the Continental Shelf Act and the

Petroleum (Production) Regulations, or any provision amending or

substituting the said Acts or Regulations, the chargeable income of

the said person from such business shall be determined as set out in

this article.

(2)

(a) The gains or profits derived by the Contractor from the

production of petroleum for any basis year, being the

year immediately preceding a year of assessment, shall

be arrived at by deducting the recoverable costs as

defined in the Contract and not yet fully recovered by

the Contractor, from the total of the value of the cost

recovery petroleum and of the share of profit

petroleum, as defined in the Contract, allotted to the

Contractor for that year, to which shall be added any

*Applicable from year of assessment 2025.

ancillary or incidental income for the same year.

(b) Where after such deduction as is referred to in

paragraph (a) there remains any balance of unabsorbed

recoverable costs, the amount of such unabsorbed

costs shall be carried forward to the following year and

shall be added to and become part of the recoverable

costs for that year.

(c) The procedure referred to in paragraph (b) shall be

followed in subsequent years until all recoverable

costs shall have been absorbed.

(3)

(a) For the purposes of this article, particularly for the

purposes of sub-article (2), each Contract shall be

deemed to constitute a separate and distinct source of

income and any Contractor deriving gains or profits

from more than one Contract shall be subject to tax as

if he were a separate and unconnected person with

respect to each such Contract.

(b) Where more than one petroleum field is in production

in an area covered by the same Contract, the gains or

profits from each such field shall be determined as if

each such field constitutes a separate and distinct

source of income arising to a separate person, so

however that the Contractor shall have the right to

identify the fields in the said area where the cost of

exploration and development operations are to be

taken into account in determining the relative gains or

profits.

(4) The provisions of articles 16 to 22 shall not apply in the

case of any company in any year in which the company is operating

under a licence referred to in sub-article (1).

(5)

(a) Notwithstanding anything contained in the Income Tax

Acts, where a non-resident sub-contractor renders

services to a Contractor in Malta, such Contractor shall

withhold tax at the rate set out in article 56(13)(b) on

payments made to the sub-contractor for services

rendered in Malta and shall pay to the Commissioner

any tax so withheld within thirty days from the making

of the deduction.

(b) Where a Contractor fails to deduct and pay tax in

accordance with paragraph (a), the provisions of

article 73(4) of this Act and of article 40(1) of the

Income Tax Management Act shall apply mutatis

mutandis.

(c) The tax withheld in accordance with paragraph (a)

shall be considered as a final withholding tax unless

the sub-contractor notifies the Commissioner that this

tax is to be considered as a provisional tax payment to

be credited against the tax liability of the said sub-

contractor’s chargeable income for the relevant year of

assessment computed in accordance with the

I NC O M E TA X

provisions of the Act.

(d) The notification referred to in paragraph (c) shall be

made by not later than the tax return date for the

relevant year of assessment and in such form as the

Commissioner may require.

(6) Except for gains or profits derived from the production of

petroleum referred to in sub-articles (1) and (2), any income or deemed

income derived by a Contractor and subject to tax under any of the

provisions of this Act shall be so brought to charge in accordance with

the said provisions and at the applicable rates, but no deduction shall

be granted thereagainst in respect of any loss or outgoing expense

incurred in connection with the exploration for or the production of

petroleum.

(1) Where, under the provisions of article 14(1)(f) and (j),

any deduction has been allowed in any year of assessment in

ascertai ning the total incom e of any person and any of the

following events occurs in the year immediately preceding the year

of assessment in the case of any property in respect of which any

deduction has been allowed as aforesaid, that is to say, either the

property or any part thereof -

(a) is sold or otherwise transferred under an onerous title,

whether still in use or not; or

(b) is destroyed; or

(c) is put out of use as being worn out or obsolete or

otherwise useless or no longer required,

and the event in question occurs before the source of income in

respect of which the deduction has been allowed has ceased to exist

or to belong to the said person, he shall, in the year of assessment,

render to the Commissioner, at the same time as he renders his

return of income under article 10 of the Income Tax Management

Act, a statement (hereinafter referred to as a "balancing

statement"), in respect of the property in question showing the

following items, that is to say

(i)

the amount of the capital expenditure on the

provision thereof; and

(ii) the total depreciation which has occurred by

reason of wear and tear since the date of the

acquisition of such property, taking into account

the aggregate amount of all deductions

previously allowed under the provisions of

article 14(1)(f) and (j) and of any deductions or

charges previously allowed or made under sub-

article (2)(a) or (b);

(iii) the amount of all sale, insurance, salvage or

compensation monies in respect thereof and,

where the property has been transferred by

exchange, the value thereof, or, if put out of use,

the disposal value thereof.

(2)

In ascertaining the total income of a person who is required

under sub-article (1) to render a balancing statement to the

Commissioner, a deduction (hereinafter referred to as a "balancing

allowance") shall be allowed or, as the case may be, an addition

(hereinafter referred to as a "balancing charge") shall be made and

such balancing allowance or balancing charge shall be calculated

by reference to the balancing statement or statements rendered by

the person in respect of the year immediately preceding the year of

assessment, as follows

(a) the amount of a balancing allowance shall be the

amount by which the amount of item (i) of the

balancing statement exceeds the sum of the amounts of

item (ii) and item (iii) of that statement; or

(b) the amount of the balancing charge shall be the amount

by which the sum of the amounts of item (ii) and item

(iii) of the balancing statement exceeds the amount of

item (i) of that statement

Provided that -

(i)

the balancing charge shall in no case exceed the

aggregate amount of any deductions previously

allowed under the provisions of article 14(1)(f)

and (j) and included in item (ii) of the balancing

statement;

(ii) where the property in respect of which a

balancing allowance falls to be allowed or a

balancing charge falls to be made was used only

partly in the production of the income, only so

much of the balancing allowance that would

otherwise have been allowed, or of the balancing

charge that would otherwise have been made

shall be allowed or made as may be appropriate

having regard to the extent of use for the said

purpose.

(3) Where property, in the case of which any of the events

mentioned in sub-article (1) has occurred, is replaced by the owner

thereof and a balancing charge falls to be made on him by reason of

that event or, but for the provisions of this sub-article, would have

fallen to be made on him by reason thereof, then, if by notice in

writing to the Commissioner he so elects, the following provisions

shall have effect, that is to say

(a) if the amount of the balancing charge which would

have been made is greater than the capital expenditure

on providing the new property -

(i)

the balancing charge shall be an amount equal to

the difference; and

(ii) no balancing allowance under sub-article (2) and

no deduction under article 14(1)(f) and (j) shall

be made or allowed in respect of such new

property or the capital expenditure on the

provision thereof; and

(iii) in considering whether any, and, if so, what

I NC O M E TA X

balancing charge falls to be made in respect of

the capital expenditure on providing such new

property, the aggregate amount of all deductions,

previously allowed in respect of such property

under the provisions of this article and of article

14(1)(f) and (j), shall be deemed to be equal to

the full amount of such expenditure;

(b) if the capital expenditure on providing the new

property is equal to, or greater than the amount of the

balancing charge that would have been made -

(i) the balancing charge shall not be made; and

(ii) the amount of any deductions in respect of the

said expenditure under the provisions of article

14(1)(f) and (j) shall be calculated as if the

capital expenditure on providing such new

property had been reduced by the amount of the

balancing charge which would have been made;

and

(iii) in considering whether any, and, if so, what

balancing allowance or balancing charge falls to

be made in respect of the capital expenditure on

providing such new property, the aggregate

amount of all deductions, previously allowed in

respect of such property under the provisions of

this article and under article 14(1)(f) and (j),

shall be deemed to have been increased by an

amount equal to the amount of the balancing

charge that would have been made

Provided that where the new property is only partly

employed in the production of the income, only so much of the

capital expenditure incurred in providing the property shall be

taken into account for the purposes of this sub-article as may be

appropriate having regard to the extent to which such property is

wholly and exclusively employed in the production of the income.

(4) Where any person has delivered a balancing statement, the

Commissioner may -

(a) accept the statement and make a balancing allowance

or balancing charge accordingly; or

(b) refuse to accept the statement and, to the best of his

judgment, determine the amount of the balancing

allowance or balancing charge and make a balancing

allowance or balancing charge accordingly.

(5) Where a person has not delivered a balancing statement and

the Commissioner is of the opinion that a balancing charge would

fall to be made upon such person in respect of any such property,

then the Commissioner may, according to the best of his judgment,

determine the amount of such balancing charge and assess him

accordingly.

(6) Nothing in sub-article (4) and (5) contained shall prevent

the decision of the Commissioner in the exercise of the power

conferred upon him by those sub-articles from being questioned in

an appeal in accordance with the provisions of articles 35 and 37 of

the Income Tax Management Act.

(7)

For the purpose of this article -

(a) the expression "property" means plant and machinery,

and premises being an industrial building or structure

owned and employed by any person in the production

of his income;

(b) the capital expenditure on providing any property shall

be the amount which, in the opinion of the

Commissioner, such property would have cost if

bought in the open market at the time it was provided;

(c) the price in respect of any property sold or the value of

any property otherwise transferred under an onerous

title shall be the amount which, in the opinion of the

Commissioner, such property would have fetched if

sold or otherwise transferred under an onerous title on

the open market at the time it was sold or transferred;

(d) the disposal value in respect of any property which is

put out of use shall be the amount which, in the

opinion of the Commissioner, such property would

have fetched if sold or otherwise transferred under an

onerous title in the open market at the time it was put

out of use.

(8) Where in any year of assessment full effect cannot be given

to any balancing allowance owing to there being no profits or gains

chargeable for that year from the source of income in respect of

which such allowance is claimed or owing to the profits or gains

chargeable from that source being less than the allowances, then so

long as the source of income in respect of which the allowance falls

to be made continues to exist and to belong to the person entitled to

the said allowance, the balance of such allowance shall be added to,

and be deemed to from part of, the allowance, if any, for the next

succeeding year of assessment, and if no such allowance falls to be

made for that year, shall be deemed to constitute the allowance for

that year, and so on for subsequent years of assessment.

For the purposes of articles 14 to 24 both inclusive,

expenses incurred in the production of, and allowable deductions

given in respect of, income derived from profits which are

allocated to a taxed account must first be deducted against such

income.

I NC O M E TA X

For the purpose of ascertaining the total income of any

person no deduction shall be allowed in respect of -

(a) domestic or private expenses other than those specifically

allowed by this Act;

(b) any outgoings and expenses to the extent to which they

are not wholly and exclusively incurred in the

production of the income and, in the case of gains or

profits chargeable under article 4(1)(b), not being

furthermore necessarily incurred in the performance of

the duties of the relative employment or office;

(c) any loss, diminution, exhaustion or withdrawal of

capital, any sum employed or intended to be employed

as capital or any expenditure for a capital purpose or

of a capital nature save as provided in article 14 and

23;

(d) the cost of any improvements;

(e) any loss or expense which is recoverable under any

insurance or contract of indemnity;

(f)

rent of any premises or part of premises not paid for

the purpose of producing the income;

(g) any payments of a voluntary nature;

(h) any interest, discount or premium paid or payable to a

person not resident in Malta where -

(i)

the person not resident in Malta derives or

benefits from the said interest, discount or

premium, directly or indirectly, from the

granting of loans or from any form of credit to

finance

the

acquisition,

development,

construction, refurbishment, renovation of

immovable property situated in Malta or any

right thereon including professional fees related

thereto (including fees related to the acquisition

of finance) and any other matter which increases

or enhances the value of such immovable

property or any right thereon; and

(ii) the said interest, discount or premium is exempt

from tax under the provisions of article

12(1)(c)(i); and

(iii) the payor of the interest, discount or premium is

a person related to the person not resident in

Malta.

For the purpose of this paragraph a person is deemed

to be related to a person not resident in Malta if

(i)

that person and the person not resident in Malta

are, directly or indirectly, controlled or

beneficially owned to the extent of more than

10% by the same persons; or

(ii) that person owns, directly or indirectly, more than

10% of the ordinary share capital or voting rights of

the person not resident in Malta;

(i)

any payment the making of which constitutes a

criminal offence or, in the case of a payment made

outside Malta, would constitute a criminal offence if

made in Malta.

PART V

SPECIAL PROVISIONS

(1) Where any person derives gains or profits wholly or in

part from the business of insurance as insurer, then, so far as

concerns the gains or profits derived by such person from the

business of insurance, the total income of such person shall, as

from the year of assessment 2000 be ascertained as follows

(a) in the case of a person carrying on general business,

other than a person carrying on long term business, the

total income shall be ascertained by taking for the year

immediately preceding the year of assessment -

(i)

technical provisions at the commencement of the

year;

(ii) the equalisation reserve at the commencement of

the year;

(iii) gross premiums written;

(iv) reinsurance recoveries received;

(v) income from investments received and

receivable and interest income earned;

(vi) profits or gains from the sale or disposal of

investments;

(vii)

capital gains subject to tax under the provisions

of this Act;

(viii) realised differences on exchange;

(ix) other technical income including commissions,

allowances and fees received and receivable;

(x) profits or gains not falling under any of the

foregoing sub-paragraphs,

and deducting from the aggregate of the above the

aggregate of the following

(xi)

technical provisions at the end of the year;

(xii) the equalisation reserve at the end of the year;

(xiii) the deductions allowable under Part IV of this

Act, including

(1) claims paid;

(2) reinsurance premiums paid;

*Applicable from year of assessment 2019.

I NC O M E TA X

(3)

losses from

the

sale

or

disposal

of

investments;

(b) in the case of a person carrying on long term business,

either exclusively or in addition to general business,

the total income derived from the general business

shall be ascertained as provided in paragraph (a) and

the total income derived from the long term business

shall be ascertained by taking for the year immediately

preceding the year of assessment -

(i)

income from investments received and

receivable and interest income earned, other

than those of a long term fund;

(ii) capital gains subject to tax under the provisions

of this Act, not being gains derived from a long

term fund;

(iii) commissions, allowances and fees received and

receivable not credited to a long term fund;

(iv) profits or gains from the sale or disposal of

investments not relating to a long term fund;

(v) realised differences on exchange not relating to a

long term fund;

(vi) the surplus in a long term fund which shall be

ascertained by taking -

(1)

technical provisions at the commencement of

the year;

(2)

gross premiums written;

(3)

reinsurance recoveries received;

(4)

income from investments received and

receivable and interest income earned,

relating to the long term fund;

(5)

profits or gains from the sale or disposal of

investments, which gains or profits shall, for

the purposes of this paragraph, in all cases

be deemed to be gains or profits falling

within the purport of article 4(1)(a), so

however that where any investments were

capital assets as at the thirty-first (31st) day

of December 2008, the cost of acquisition of

such investments for the purpose of this

paragraph shall be the market value

applicable thereto as at that date;

(6)

capital gains subject to tax under the

provisions of this Act and derived from the

transfer of assets other than investments

referred to in sub-paragraph (5) and realized

differences on exchange relating to the long

term fund;

(7)

other

technical

income

including

commissions, allowances and fees received

and receivable;

and deducting from the aggregate of the above

the aggregate of the following

(8)

the deductions allowable under Part IV

relating to the income of the long term fund

including -

(i) claims, maturities and surrenders paid,

including, for the avoidance of doubt,

the tax paid by the insurer in respect

of determinable amounts due in

relation to contracts of long term

business in terms of sub-article (2);

(ii) reinsurance premiums paid;

(iii) other technical charges including

commissions and allowances paid and

payable;

(9) losses from the sale or disposal of

investments and other assets of the long term

fund referred to in sub-paragraphs (5) and

(6), so however that where any investments

were capital assets as at the thirty-first (31st)

day of December 2008, the cost of

acquisition of such investments for the

purpose of this paragraph shall be the market

value applicable thereto as at that date; and

(10) technical provisions at the end of the year;

(vii) gains or profits not falling under any of the

foregoing paragraphs not being gains or profits

derived from a long term fund,

and deducting from the aggregate of the above -

(viii) the deductions allowable under Part IV of this

Act and which have not been taken into account

in the determination of the surplus in a long term

fund; and

(ix) any deficit arising out of the computation in sub-

article (1)(b)(vi)

Provided that where the person is not resident in Malta and

the gains or profits accrue in part in Malta and in part outside

Malta, the total income on which tax shall be payable shall -

(a) in the case of a person doing general business, be

ascertained as provided for in sub-article (1)(a)(i) to

(xiii) on the business carried on in or from Malta;

(b) in the case of a person carrying on long term business,

be ascertained by taking the surplus in the long term

fund computed in accordance with sub-article

(1)(b)(vi) of the business earned in or from Malta;

(c) in determining the total income as aforesaid, any

income from investments held outside Malta to back

Malta business, where such income cannot be readily

ascertained, shall be computed by taking a proportion

I NC O M E TA X

of the person’s worldwide investment income in the

year preceding the year of assessment equal to the

proportion which the investments as aforesaid bore to

the person’s worldwide investments.

(2)

(a) Where, in relation to a contract of long term business,

a determinable amount becomes due by an insurer on

o r a f t e r t h e f i r s t d a y o f J a n u a r y, 1 9 9 9 , a n d t h e

policyholder is a person resident in Malta, the insurer

shall pay tax at the rate of fifteen per cent (15%) on the

profit attributable to such contract which profit shall be

deemed to have accrued during the period from the

first d ay of Janu ary, 19 99 , or th e d at e w hen t he

contract was commenced, whichever date is the later,

to the date on which the amount becomes due.

For the purposes of this sub-article "a

determinable amount" means an amount payable by an

insurer in the event of a maturity, surrender or in any

other circumstance, other than a death claim, or a

claim referring to a critical illness or a permanent total

disability, specified in the contract, as the case may be,

where the total amount payable can be determined in

whole or in part on the date it becomes due and

whether payment is effected in one lump sum or

otherwise.

(b)

(i)

The profit referred to in paragraph (a) shall be

calculated by taking the total determinable

amount due to be paid by the insurer and

subtracting therefrom the total amount of

premiums paid within the period referred to in

paragraph (a), and in those cases where the

contract commenced before the first day of

January, 1999, subtracting also an amount equal

to the actuarial valuation of the contract on this

date. The profit so calculated shall not be

affected by any other provision of this Act and

no person shall be charged to further tax on such

profits.

(ii) An insurer shall, not later than the thirty-first

day of March, 1999, forward in writing to the

Commissioner a list of contracts of insurance

relating to long term business, other than

contracts of term insurance, outstanding on the

first day of January, 1999, and indicating, in

respect of each such contract, the actuarial

valuation on that date. The list shall not specify

the identity of the policyholder or the

beneficiaries there under.

For the purposes of this sub-article, "term

insurance" means a contract of insurance which

provides solely for the payment by the insurer of a sum

of money or other consideration upon the happening of

death within a term which is specified in the contract,

and which is not extendible by any of the parties

thereto.

(c) The insurer shall render an account to the

Commissioner of all tax paid in accordance with the

provisions of this sub-article, but shall not specify the

identity of the policyholders or beneficiaries. Every

amount of tax due to be so paid shall be a debt due

from the insurer to the Commissioner payable not later

than the fourteenth day following the end of the month

in which the amount becomes due as aforesaid and

shall be recoverable as such. Where the insurer fails to

pay the above mentioned tax, the provisions of article

73(4) and of article 40(1) of the Income Tax

Management Act shall apply mutatis mutandis.

(3) Notwithstanding the provisions of sub-articles (1) and (2), a

non-resident person carrying on long term business of insurance

who derives gains or profits accruing in part in Malta and in part

outside Malta and who has ceased to issue new contracts of long

term insurance before the first day of January, 1999, may elect to

have the chargeable income from the long term business of

insurance computed by taking, for the year immediately preceding

the year of assessment, the investment income relating to that

business less the management expenses including commission

incurred in relation thereto in a proportion which the premiums

received in Malta bore to the total premiums received by such

person in Malta and elsewhere

Provided that such election shall be irrevocable and shall be

notified in writing to the Commissioner by not later than the 31st

day of March, 1999

Provided further that where such a person issues new

contracts of long term insurance on or after the 1st January, 1999,

the election shall cease to have effect in respect of the year of

assessment following the year in which the first new contract is

issued and in respect of subsequent years of assessment.

(4)

(a) For the purposes of computing the surplus or deficit

arising out of the computation in sub-article (1)(b)(vi),

no account shall be taken of income and deductions

relating to linked long term business of insurance in so

far as they relate to the linked portion of a contract of

insurance.

(b) Any tax payable under sub-article (2) shall, in the case

of a linked long term contract of insurance, be

computed by reference to the profit attributable to the

unlinked portion of a contract of insurance and any

references to "a determinable amount" and "premiums"

shall be construed as references to the amount due and

premiums paid on the unlinked portion of a contract of

insurance.

(5)

(a) Subject to the provisions of paragraph (b), the

provisions contained in Part IV shall apply to persons

referred to in sub-article (1) provided that in

determining what deductions are allowable under this

article there shall be excluded any deductions allowed

under any other Part of this Act.

(b) Deleted by Act VII.2018.19. *

(6) For the purposes of this article and of article 41, the term

"linked portion of a contract of insurance" means the portion of a

linked long term contract of insurance the benefits of which are

determined by reference to the value of, or the income from,

property of any description (whether or not specified in the

contracts) or by reference to fluctuations in, or in an index of, the

value of property of any description (whether or not so specified)

and "unlinked portion of a contract of insurance" means the portion

of a linked long term contract of insurance the benefits of which are

not so determined.

(7) Words and expressions used in this article and in other parts

of this Act which relate to business of insurance, shall, in so far as

their meanings are not defined by this Act, have the meanings

assigned to them in the Insurance Business Act, the Insurance

Distribution Act, and any rules and regulations made thereunder.

(8) Notwithstanding anything contained in the provisions of

sub-article (1), the Minister may, by rules, prescribe the manner in

which the total income referred to in the said sub-article (1) should

be determined, so as to take into account

(a) the provisions of any Directive of the European Union

governing solvency requirements applicable to persons

carrying on the business of insurance;

(b) the provisions of any International Financial Reporting

Standard (IFRS) as adopted by the European Union,

governing accounting for contracts of insurance;

(c) any modification of the provisions of any directive or

financial reporting standard referred to in paragraphs

(a) and, or (b) may be permitted in terms of

International Financial Reporting Standards (IFRSs) as

adopted by the European Union.

Notwithstanding the provisions contained in the Income

Tax Acts, the Minister may make rules regulating the tax treatment

of companies and their members and other similar bodies or

persons concerning mergers and divisions of companies, transfer of

assets between companies, a transfer between a company and a person

who is related to it in such manner as may be prescribed and exchange

of shares concerning companies and for the purposes of this article

(a) "merger" shall mean an operation whereby

-

one or more companies, on being dissolved

without going into liquidation, transfer all their

assets and liabilities to another existing

company in exchange for the issue to their

shareholders of securities representing the

*Applicable from the year of assessment 2019.

capital of that other company, and, if applicable,

a cash payment not exceeding such percentage

as may be prescribed of the nominal value, or, in

the absence of a nominal value, of the

accounting par value of those securities,

-

two or more companies, on being dissolved

without going into liquidation, transfer all their

assets and liabilities to a company that they

form, in exchange for the issue to their

shareholders of securities representing the

capital of that new company, and, if applicable,

a cash payment not exceeding such percentage

as may be prescribed of the nominal value, or in

the absence of a nominal value, of the

accounting par value of those securities,

-

a company, on being dissolved without going

into liquidation, transfers all its assets and

liabilities to the company holding all the

securities representing its capital;

(b) "division" shall mean an operation whereby a

company, on being dissolved without going into

liquidation, transfers all its assets and liabilities to two

or more existing or new companies, in exchange for

the pro rata issue to its shareholders of securities

representing the capital of the companies receiving the

assets and liabilities and, if applicable, a cash payment

not exceeding such percentage as may be prescribed of

the nominal value or, in the absence of a nominal

value, of the accounting par value of those securities;

(c) "transfer of assets" shall mean an operation whereby a

company transfers without being dissolved all or one

or more branches of its activity to another company in

exchange for the transfer of securities representing the

capital of the company receiving the transfer;

(d) "exchange of shares" shall mean an operation whereby

a company acquires a holding in the capital of another

company such that it obtains a majority of the voting

rights in that company in exchange for the issue to the

shareholders of the latter company, in exchange for

their securities, of securities representing the capital of

the former company, and, if applicable, a cash payment

not exceeding such percentage as may be prescribed of

the nominal value or, in the absence of a nominal

value, of the accounting par value of the securities

issued in exchange;

(e) "transferring company" shall mean the company

transferring its assets and liabilities or transferring all

or one or more branches of its activity;

(f)

"receiving company" shall mean the company

receiving the assets and liabilities or all or one or more

branches of the activity of the transferring company;

(g) "acquired company" shall mean the company in which

a holding is acquired by another company by means of

an exchange of securities;

(h) "acquiring company" shall mean the company which

acquires a holding by means of an exchange of

securities;

(i)

"branch of activity" shall mean all the assets and

liabilities of a division of a company which from an

organizational point of view constitute an independent

business, that is to say an entity capable of functioning

by its own means.

(1) Where at least one of the trustees of a trust is a person

resident in Malta, tax shall be payable on any income attributable to

a trust accruing or deriving in the year immediately preceding the

year of assessment commencing on such date as the Minister

responsible for finance may, by notice in the Government Gazette,

appoint and for each subsequent year.

(2) For the purposes of this article, "income attributable to a

trust" means the aggregate of any relevant income referred to in

article 4 which has accrued to or is derived by a trustee or trustees

of a trust from property which was settled in such trust and from

property which was acquired in the administration of such trust

including any income from the employment of such property.

The trustee of a trust shall be answerable for doing all

matters and things required to be done under the Income Tax Acts

for the purposes of the determination, assessment and payment of

tax in connection with the income attributable to a trust. Where two

or more persons act in the capacity of trustees of the same trust,

they shall be jointly and severally so answerable.

27D.(1)(a)The trustee of a trust that has been granted authorisation

under article 43(3) of the Trusts and Trustees Act or that

is not required to obtain such authorisation in terms of the

provisions of article 43(6) of that Act, where such

trustee is a person resident in Malta (hereinafter a

resident trustee) may elect, in accordance with the

provisions of this sub-article, to have the income

attributable to a trust treated in the manner provided

for in paragraph (c). Such election, which shall be

i r r e v oc ab l e , is to b e e ff ec t ed o n t h e d a t e o f t he

establishment of such trust, or the date of appointment

of the said resident trustee, whichever is the later, and

is to be made on such form and under such conditions

as may be prescribed. The said trustee shall submit

such form to the Commissioner not later than thirty

days from the date of the establishment of such trust or

the appointment of a resident trustee whichever is the

later.

(b) An election as provided for in this sub-article may

only be made where the trust is established by a

written instrument which specifically provides that the

income attributable to a trust shall comprise only of

income in the form of royalties, dividends, capital

gains, interest, rents or any other income from

investments. For the purposes of paragraph (c), such

income shall not constitute income from a trade,

business, profession or vocation.

(c) Where an election has been made in accordance with

the provisions of this sub-article, the trustee of such

trust shall compute the chargeable income in relation

to the income attributable to a trust for the relevant

year of assessment as if such income was derived by a

company ordinarily resident and domiciled in Malta.

Tax thereon shall be charged at the rate specified in

article 56(6) and payable in the same manner

applicable to such companies. Distributable profits

shall be allocated in the same manner applicable to

such companies and distributions of such allocated

profits to beneficiaries of such trust shall be treated as

if they were dividends distributed to shareholders of

such a company. For the purposes of this sub-article,

distributable profits of a trust shall mean the total

profits which would be available for distribution to the

beneficiaries resulting from the income attributable to

a trust. The trustee shall keep all records and submit

all returns and documents to the Commissioner as is

required in the case of such companies. Where the

Income Tax Acts require documents which are to

comply with the Companies Act, the trustee shall

submit similar documents, certified by a certified

public auditor, and which are either provided for under

the Trusts and Trustees Act or, in the absence of such

provision, which comply as far as is possible, with the

Companies Act.

(2) The trustee of a trust where such trustee is a person in

possession of a valid licence issued in terms of the Banking Act or

the Financial Institutions Act may apply to the Commissioner for a

determination that property has been settled into such trust as a

result or consequence of another transaction or set of transactions,

and that the duration of such trust is of a temporary nature lasting

only until such time as is necessary so that the said transaction or

transactions may be effectively concluded. Such an application may

be made on such form and under such conditions as may be

prescribed. Where the Commissioner makes, at his discretion, such

a determination -

(i)

no deduction or exemption contemplated by this

Act shall be allowable or granted in relation to

the income attributable to a trust; and

(ii) the said income shall be taxable at the rate

specified in article 56(6); and

(iii) the tax payable as provided for in this sub-article

shall not be reduced whether by way of relief of

double taxation or otherwise, and no set-off or

credit shall be made or allowed in respect of

such tax. The resulting tax shall be payable by

such time as may be prescribed; and

(iv)

the trustee of such trust shall declare such

income and property settled in trust on such

form as may be prescribed and no further

disclosure of such income shall be required by

the beneficiaries of such trust; and

(v)

no further tax shall be payable on such income.

(3)

(a) Where neither an election in accordance with sub-

article (1) nor a determination in accordance with sub-

article (2) has been made the provisions of paragraphs

(b), (c), (d) and (e) shall apply.

(b) In the case where -

(i)

all the income attributable to a trust consists of

income either arising outside Malta or income

referred to in article 12(1)(c); and

(ii) all the beneficiaries of the trust are persons who

are either not ordinarily resident in Malta or not

domiciled in Malta, or are persons whose

income is totally exempt from tax under the

provisions of article 12,

it shall be deemed that such income is not income

attributable to a trust but is income derived directly by

such beneficiaries, and that where the income arising

outside Malta is received in Malta by the trustee of the

trust, it shall be deemed to be received in Malta by

such beneficiaries. The trustee shall notify the

beneficiary of such income and shall inform him of his

duties under the Income Tax Acts.

(c) In the case where the income attributable to a trust

comprises solely income referred to in paragraph (b)(i)

or dividends distributed out of the profits allocated to

the foreign income account or out of the profits of an

international trading company which were derived by

such company whilst it was an international trading

company, or both such income and dividends, and all

the beneficiaries of such trust are persons not resident

in Malta, and the trustee of such trust provides the

Commissioner with a certificate as referred to in

article 5(3) of the Income Tax Management Act, it

shall be deemed that such income does not constitute

income attributable to a trust and that such income is

derived directly by such beneficiaries

Provided that the income referred to in this paragraph

shall also include dividends paid out of profits

allocated to any of the taxed accounts.

(d) Without prejudice to the provisions of paragraphs (b)

and (c), capital gains derived in accordance with the

provisions of article 5 from the transfer of property

settled in trust in the administration of such trust or in

the distribution or reversion of such property shall

form part of the income attributable to a trust.

(e) The chargeable income in relation to the income

attributable to a trust shall be computed as if the trust

was a person that is ordinarily resident and domiciled

in Malta but shall exclude amounts of income

attributable to a trust allocated to beneficiaries as

determined in accordance with the provisions of sub-

article (4).

(4)

For the purpose of sub-article (3)(e) -

(a) amounts of income attributable to a trust allocated to

beneficiaries shall consist of -

(i)

amounts over which beneficiaries had a vested

right in the year immediately preceding the year

of assessment; and

(ii) amounts over which an entitlement had been

bestowed to beneficiaries other than in the

manner referred to in subparagraph (i), and

where such entitlement had been so bestowed by

the end of the year immediately preceding the

year of assessment; and

(iii) amounts representing income attributable to a

trust for the year of assessment which were

distributed to beneficiaries by the end of the year

immediately preceding the year of assessment,

and which amounts do not form part of the

amounts referred to in subparagraphs (i) and (ii).

(b) In order that the amounts referred to in paragraph (a)

may be excluded in terms of sub-article (3)(e), the

trustee must ensure that -

(i)

the return referred to in article 24A of the

Income Tax Management Act has been submit-

ted in accordance with the provisions of that

same article; and

(ii) he has furnished the beneficiaries in question

with a certificate indicating, for the relative year

of assessment and where applicable, the relevant

amounts referred to in paragraph (a) on such

form and giving such additional details as may

be prescribed; and

(iii) where the amounts referred to in paragraph (a)(i)

and (ii) were not distributed to the beneficiaries

by the 31st March following the end of the year

immediately preceding the relevant year of

assessment, a payment of tax has been made on

behalf of the beneficiaries equivalent to the tax

which would result were the said amounts

charged to tax at the rate specified in article

56(6). Where such distribution is not made by

the said date, this tax becomes a debt due from

the relevant trustee to the Commissioner payable

by not later than the 30th June following the end

of the said year. The tax so paid shall be

available as a credit against the beneficiary’s tax

liability, or for a refund as the case may be, for

the relevant year of assessment.

(5) Except as provided in article 56(4), tax shall be charged

upon the chargeable income in relation to the income attributable to

a trust at the rate specified in article 56(6).

(6)

(a) Where foreign tax has been paid on the income

attributable to a trust, such tax shall be deemed to have

been paid by a trustee of such trust, whether it was paid

by a trustee or a beneficiary of such trust.

(b) A claim for relief of double taxation with respect to the

tax referred to in paragraph (a), may only be made

through the provisions of articles 79 to 88. Any

reference in these articles to a person shall, for the

purposes of this sub-article, be deemed to be a

reference to a trustee of a trust while any reference to

income or income of a person, shall be deemed to be a

reference to the income attributable to a trust.

(7) Unless otherwise provided for in this article, no person

shall be charged to further tax under this Act in respect of income

attributable to a trust which has been charged to tax in accordance

with the provisions of sub-articles (1), (2) and (3).

(8)

(a) Amounts allocated to beneficiaries referred to in sub-

article (4)(a) shall be aggregated with other income of

the said beneficiaries for the purposes of article 4 and

tax shall be charge d accordingly for the year of

assessment commencing on such date as the Minister

r e s p o n s i b l e f o r f i n a n c e m a y, b y n o t i c e i n t h e

Government Gazette, appoint and for each subsequent

year of assessment.

(b) Amounts allocated to beneficiaries referred to in sub-

article (4)(a) shall be treated as income derived by the

beneficiary at the time it vests, or the beneficiary

becomes entitled to it, or it is distributed, as the case

may be.

(c) Income distributed to beneficiaries shall retain its

character as to type and country of source. A claim for

relief of double taxation with respect to such income

m a y b e m a d e i n ac c or d a n c e w i t h t h e p r o v i s i o n s

referred to in article 74 notwithstanding that foreign

tax may have been paid by the trustee or the beneficiary

himself

Provided that the provisions of this sub-article shall apply

mutatis mutandis where none of the trustees of a trust is a person

resident in Malta and the beneficiaries of the such trust include

persons that are -

(i) ordinarily resident and domiciled in Malta; or

(ii) ordinarily resident or domiciled in Malta and the

relevant income is received in Malta.

(9)

(a) For the purposes of this article the terms "beneficiary",

"settlor", "trust" and "trustee" shall have the meaning

assigned to them by article 2 of the Trusts and Trustees

Act.

(b) Words and expressions used in this article and in other

parts of the Income Tax Acts which relate to the

income attributable to a trust, shall, in so far as their

meanings are not defined by the Income Tax Acts, have

t h e m ea n i n g a s s i g n e d t o t h em i n t h e Tr u s t s a n d

Trustees Act and any rules and regulations made

thereunder.

(10) (a) Where in the opinion of the Commissioner,

transactions involving a trust are carried out with the

sole or main purpose of reducing the amount of tax

payable by a person, the Commissioner shall disregard

such trust and the income of such person shall be

determined as if it had been derived without the

involvement of such trust.

(b) Article 57 of the Income Tax Management Act shall

apply mutatis mutandis in the circumstances relating to

trustees. References in that article to -

(i)

"warrant holder" shall be construed as references

to any person acting as trustee as provided for

under the Trusts and Trustees Act;

(ii) "Board" shall be construed as references to the

Malta Financial Services Authority;

(iii) "article 14(1)(a)(i) of the Accountancy

Profession Act" shall be construed as references

to article 51 of the Trusts and Trustees Act;

(iv) "documents" shall be construed as references to

any document required to be produced by a

trustee in relation to a trust under Maltese law;

(v)

"1st January, 1998" shall be construed as

references to the date of the coming into force of

the Trusts and Trustees Act.

The Minister may make regulations in relation to the tax

treatment of a found ati on, i ncl uding th e appl icati on of t he

provisions of this Act relating to trusts, settlors and beneficiaries of

trusts to foundations, their founders and beneficiaries thereunder,

as well as to any persons who are donors of property to

foundations, and generally for the better application of this Act to

foundations.

The Minister may make regulations in relation to the tax

treatment of any conversion of a legal person into another legal

form or into a trust as is referred to in article 21 of the Second

Schedule to the Civil Code.

(1) Notwithstanding anything to the contrary contained in the

Income Tax Acts or any rules or regulations made thereunder, the

provisions of this article shall apply to any person that has elected

under article 5A(3)(j), by means of a declaration made in accordance

with the said article, to exclude the transfer of immovable property from

the scope of article 5A.

(2) Income derived during the year preceding the year of

assessment from the transfer of immovable property forming part of a

project, in respect of which an election under article 5A(3)(j) has been

made, shall be deemed to constitute separate chargeable income to be

taxed separately at the rate of thirty-five cents (€0.35) on every euro.

For the purpose of this article, where a person owns more than one

project each project shall be deemed to constitute a separate and distinct

source of income.

(3) The provisional tax payment as referred to in article 43(1)(b) of

the Income Tax Management Act shall be equivalent to 8% of the

consideration relating to the transfer of the property forming part of the

project

Provided that in the case where the said property was acquired

by the transferor before the 1st January, 2004 the said provisional tax

payment shall be equivalent to 10% of the said consideration.

(4) Provisional tax paid referred to in sub-article (3), during or in

respect of the year preceding any year of assessment, shall be set-off for

the purposes of collection against the tax charged on the chargeable

income referred to in sub-article (2), and in respect of the said year of

assessment, and if there is an excess after the aforesaid set-off has been

made, such excess shall be set-off for the purposes of collection against

the tax charged on other sources of income, as may be allowed under the

provisions of the Income Tax Acts, in respect of the said year of

assessment, and if there is an excess after the aforesaid set-off has been

made, such excess shall be refunded in accordance with the provisions

of article 48 of the Income Tax Management Act

Provided that an amount of provisional tax paid during or in

respect of the year preceding any year of assessment as determined by

the following formula (hereinafter referred to as "unutilised provisional

tax"), shall not be available for set-off against the tax charge in respect

of other sources of income as aforesaid and shall not be available for

refund for any purposes of the Income Tax Acts

Unutilised provisional tax = (0.625 x A) - B

Where -

(i)

''A'' is the total provisional tax paid as referred to in

sub-article (3), during or in respect of the year

preceding any year of assessment; and

(ii)

''B'' is the tax charged on the chargeable income

referred to in sub-article (2), and in respect of the

same year of assessment

Provided further that where the amount determined in

accordance with the said formula is a negative amount,

such amount shall be taken to be zero.

(5) Unutilised provisional tax for any year of assessment shall be

carried forward to subsequent years of assessment, and set-off for the

purpose of collection only against the tax charged on the chargeable

income referred to in sub-article (2) for subsequent years of assessment

Provided that the maximum amount that shall be available for

set-off as aforesaid in any subsequent year of assessment shall not

exceed an amount determined by the following formula

Where -

(i)

''Y'' represents the amount to be determined;

(ii)

''C'' is the tax charged on the chargeable income

referred to in sub-article (2) in respect of the

particular subsequent year of assessment; and

(iii) ''D'' is the total provisional tax paid as referred to in

sub-article (3), during or in respect of the year

preceding the same year of assessment

Provided that where the amount determined in accordance

with the said formula is a negative amount, such amount

shall be taken to be zero.

(6) The amount of a loss, computed as provided in sub-article (7),

incurred by a person during the year preceding the year of assessment

from the transfer of immovable property forming part of a project as

referred to in sub-article (2), which, if it had been a profit, would have

been assessable under this Act, shall not be set off against capital gains

or income from other sources, including income derived from the

transfer of immovable property forming part of other projects, for the

year preceding the year of assessment or any subsequent years of

assessment, and shall not be treated as an allowable loss for the purpose

of the group relief provisions, but shall be carried forward and set off

only against what would otherwise have been the chargeable income

referred to in sub-article (2) for subsequent years in succession.

(7) In computing the loss referred to in sub-article (6), account shall

be taken of all deductions wholly and exclusively incurred in the

production of the income referred to in sub-article (2), which would

have been allowable under the paragraphs of article 14(1), except

paragraphs (f), (g) and (j), if it had been a profit.

(8) For the purpose of ascertaining the chargeable income referred

to in sub-article (2), subject to sub-article (6), no losses provided for

under article 14(1)(g), whether arising before election from the source to

which this article applies, or from any other source, or claimed under

the group relief provisions, shall be allowable as a deduction against the

said income.

(9) No person in receipt of a dividend distributed out of profits

charged to tax under sub-article (2) shall be entitled to a refund or set-off

of the tax paid by the company distributing the said dividend. For the

purpose of this sub-article where the person in receipt of the said

dividend is another company such dividend shall be deemed to be

profits charged to tax under sub-article (2).

(10) Every company registered in Malta shall allocate the

distributable profits derived from transfers to which this article applies,

and on which tax is payable in accordance with this article, to the final

tax account. The said distributable profits shall be determined in such

manner as may be prescribed.

(1) Subject to the provisions of article 12(1)(k), where a

person not resident in Malta carries on the business of shipowner or

charterer and any ship owned or chartered by him calls at a port in

Malta, his full profits arising from the carriage of passengers,

mails, livestock or goods shipped in Malta shall be deemed to

accrue in Malta

Provided that this article shall not apply to goods which are

brought to Malta solely for transhipment.

(2) Where for any accounting period such person produces the

certificate mentioned in sub-article (3), the profits arising in Malta

from his shipping business for such period, before deducting any

allowances for depreciation, shall be a sum bearing the same ratio

to the sums receivable in respect of the carriage of passengers,

mails, livestock and goods shipped in Malta as the ratio for the said

period shown by the certificate of the total profits to the total sum

receivable by him in respect of the carriage of passengers, mails,

livestock and goods.

(3) The certificate shall be one issued by or on behalf of any

income tax authority with regard to which the Commissioner is

satisfied that it computes and assesses the full profits of the non-

r e s i d e n t pe r s o n fr o m h i s sh i p pi n g bu s in e s s , o n a b a s is n o t

materially different from that prescribed by this Act, and shall

certify for any accounting period as regards such business -

(a) the ratio of the profits or, where there are no profits, of

the loss, as computed for the purposes of income tax

by that authority, without making any allowance by

way of depreciation, to the total sums receivable in

respect of carriage of passengers, mails, livestock or

goods; and

(b) the ratio of the allowance for depreciation as computed

by that authority to the said total sums receivable in

respect of the carriage of passengers, mails, livestock

and goods.

(4) Where at the time of assessment, the provisions of sub-

article (2) cannot for any reason be satisfactorily applied, the

profits arising in Malta may be computed on a fair percentage of

the full sum receivable on account of the carriage of passengers,

mails, livestock and goods shipped in Malta

Provided that where any person has been assessed for any

year of assessment by reference to such percentage, he shall be

entitled to claim at any time within six years after the end of such

year of assessment that h is liabi lity to t ax fo r th at year be

recomputed on the basis provided by sub-article (2).

(5) Where the Commissioner decides that the call of a ship

belonging to a particular non-resident shipowner or charterer at a

port in Malta is casual and that further calls by that ship or others in

the same ownership are improbable, the provisions of this article

shall not apply to the profits of such ship and no tax shall be

chargeable thereon.

(1) The provisions of this Act relating to non-resident

shipowners and charterers, including the provisions relating to their

agents, shall apply mutatis mutandis to any person not resident in

Malta who carries on the business of the transmission of messages

by cable or wireless telegraphy, and to the agent of such person.

(2) Where a person owns, leases, or operates any one or more

aircraft or aircraft engine (irrespective of the country of

registration of the said aircraft or aircraft engine) which is used for

or employed in the international transport of passengers or goods,

any income of such person which is derived or otherwise arises

from the ownership, leasing, or operation of such aircraft or aircraft

engine shall, for the purposes of the Income Tax Acts, be deemed to

have arisen outside Malta regardless of whether the aircraft may

have called at, or operated from, any airport in Malta.

(1) Notwithstanding anything to the contrary contained in

this Act, the provisions of this article shall apply in the case of any

of the following

(a) a diocese, including, in respect of any income accruing

to him or vested in him by reason of his office, the

bishop thereof;

(b) a parish;

(c) a church not falling under the jurisdiction of a parish

and not due to be dealt with under paragraph (d);

(d) an ecclesiastical community as defined in sub-article

(9) hereof;

(e) a province or similar division of any religious order;

and each of the aforesaid is in this article referred to as "entity"

Provided that the Commissioner may, in such circumstances

and subject to such conditions as he may deem appropriate, treat as

one entity any two or more of the entities aforesaid.

(2) There shall be brought to charge to tax in the hands of any

entity to which this article applies the income accruing to or

derived by such entity as well as the income accruing to or derived

by any associated, linked or allied institution, foundation, bequest,

or other similar organisation or body of persons.

(3) The total gross receipts on revenue account of any entity to

which this article applies, ascertained in accordance with the

provisions of sub-article (2), shall be deemed to be receipts of a

trade or business and the entity shall be chargeable accordingly

Provided that the provisions of article 14(1)(g) shall not

apply in respect of any such entity.

(4) In the case of any ecclesiastical community, there shall be

included in the gross receipts on revenue account any income

received in his own right by any individual member thereof during

the year immediately preceding the year of assessment

Provided that any part of such income which is in excess of

two thousand and three hundred and thirty euro (€2,330) shall be

excluded.

(5) An entity shall be chargeable to tax in respect of its income

for the year immediately preceding any year of assessment on the

greater of the following two amounts

(a) the income from all sources ascertained in accordance

with the provisions of sub-articles (2), (3) and (4);

(b) that part of the income chargeable to tax under the

provisions of article 4(1)(c), (d) and (e) to which there

shall be added, in the case of an ecclesiastical

community, the income received in his own right by

any individual member thereof; in ascertaining the

total amount of the income as aforesaid -

(i)

the provisions of sub-article (2) shall be taken

into account;

(ii) no deductions shall be allowed in respect of

expenses or other charges other than ground-rent

and other burdens on immovable property;

(iii) there shall be excluded such part of the income

received in his own right by any individual

member of an ecclesiastical community which is

in excess of two thousand and three hundred and

thirty euro (2,330).

(5A) An ecclesiastical community shall be entitled to a further

deduction against its income as established under sub-article (5)

equivalent to two thousand and three hundred and thirty euro

(2,330) in respect of every individual who was a member thereof

during the year immediately preceding the year of assessment

Provided that no such deduction shall be allowed under this

sub-article in respect of any individual member who receives

remuneration or other income from the ecclesiastical community of

which he is an individual member.

(6) The provisions of sub-articles (4), (5) and (5A) shall not

a ff e c t t h e l i a b i l i t y t o t a x o f a n y i n d i v i d u a l m e m b e r o f a n

ecclesiastical community on any income received by him in his

own right.

(7)

For the purposes of this article -

(a) a parish which is entrusted to an ecclesiastical

community shall be deemed to be a separate entity

from the said community;

(b) where more than one ecclesiastical community belong

to the same religious order, each such community shall

be dealt with as a separate entity for the purposes of

this article if it is so considered by the statute of the

order;

(c) the province or similar division of a religious order

shall be deemed to be a separate entity from any of the

communities falling under that order;

(d) where an entity to which this article applies operates

on its own account a trading or commercial

undertaking, including a school, printing press,

hospital or cinema, the entity and the undertaking shall

be chargeable to tax separately and only the entity

shall be dealt with in accordance with the provisions of

this article, the undertaking being considered and dealt

with as a separate body of persons for all purposes of

this Act

Provided that -

(i)

no profits or other income arising from the said

undertaking in favour of the entity shall be

included with the gross receipts of the entity for

the purpose of any of the provisions of this Act;

(ii) no deductions shall be allowed in computing the

total income of the undertaking in respect of any

payments made to the entity on account of any

expenses or charges whatsoever;

(e) total gross receipts on revenue account in all cases

shall include income chargeable to tax in accordance

with the provisions of article 4.

(8) Where any income accrues to or is in any way vested in the

head of a diocese in virtue of his office and does not actually

constitute personal gains or profits of the said head, such income

together with any income accruing to or vested in the diocese,

shall, for the purposes of this article, be deemed to be derived by

one separate entity under the management and control of the head

of the diocese; and the income accruing to the Archbishop of Malta

a n d t o t h e B i s h o p o f G o z o i n v i r t u e o f t h e i r o ff i c e s h a l l ,

notwithstanding any other provision of the law, be deemed to be six

thousand and five hundred and fifty euro (6,550) and three

thousand and five hundred euro (3,500) per annum respectively, or

such higher sum as the Minister responsible for finance, from

information given or otherwise obtained, determines to be the

income received by them in virtue of their office, and the said

income shall be added for assessment purposes to their personal

income

Provided that the Commissioner shall grant such relief from

the tax to any other person or entity as will, in his opinion, prevent

the said amounts of six thousand and five hundred and fifty euro

(6,550) and three thousand and five hundred euro (3,500) (or any

higher sums determined as aforesaid) being brought to charge both

in the hands of the said bishops and in the hands of any other

person or entity in the same year of assessment.

(9)

For the purposes of this article and of article 56(4) -

"ecclesiastical community" means a number of individuals living

together in a community in accordance with the rules of a religious

order recognised as such by the Commissioner;

"individual member", in relation to an ecclesiastical community,

means any individual, lay or religious, who formed part of such

community on the thirty first day of December during the year

immediately preceding the year of assessment.

The income of a person arising from a dividend paid by a

company liable to tax under this Act shall, where such tax has been

deducted therefrom, be the gross amount before making such

deduction; where no such deduction has been made, the income

arising shall be the amount of the dividend increased by an amount

on account of such taxes corresponding to the extent to which the

profits, out of which the said dividend has been paid, have been

charged with such taxes.

(1) Notwithstanding any other provision of the Income

Tax Acts or any regulations issued thereunder, this article shall

apply where any person rents immovable property to the Housing

Authority for a period of not less than ten years.

(2) The tax chargeable in the circumstances mentioned in sub-

article (1) shall be at the rate of 5% of the gross rental income

received. Such tax shall be final and not be available as a credit

against the tax liability of the said person or refundable to him in

any way.

(3) The Housing Authority shall deduct the tax mentioned in

sub-article (2) when making any payments of rent to which this

article applies and shall render an account to the Commissioner of

all amounts so deducted specifying amounts and details of the

recipient.

(4) The Housing Authority shall remit the tax deducted in

a c c o r da n c e w i t h su b - a r t i c l e ( 3 ) , t o g e t h e r w i t h t h e a c c ou n t

mentioned in the said sub-article, to the Commissioner by the

fourteenth day following the end of the month during which the

rent was paid.

(1) Notwithstanding any other provision of the Income

Tax Acts or any regulations made thereunder, this article shall

apply where any person who is an owner of immovable property

rents such property to a person receiving rent subsidy under any

scheme administered by the Housing Authority and the said owner

is registered with the Housing Authority for this purpose and

complies with any conditions imposed by the Housing Authority.

(2) The tax chargeable in the circumstances mentioned in sub-

article (1) shall be at the rate of 10% of the gross rental income

received. Such tax shall be final and not be available as a credit

against the tax liability of the said person or refundable to him in

any way.

(3) The Housing Authority shall deduct the tax from the rent

subsidy mentioned in sub-article (1) and shall render an account to

the Commissioner of all such amounts deducted specifying

amounts together with the details of the person receiving the rent.

(4) The Housing Authority shall remit the tax collected in

a c c o r d a n c e w it h s u b - a r t i c l e ( 3) , t o g e t h e r w i t h t h e a c c o u nt

mentioned in the said sub-article, to the Commissioner by the

fourteenth day following the end of the month during which the

rent subsidy was paid.

(1) Notwithstanding any other provision of the Income

Tax Acts, this article shall apply to any person who is the owner of

immovable property which has been restored in accordance with

any scheme issued for this purpose by the Malta Environment and

Planning Authority providing for the restoration of grade 1 or grade

2 scheduled property or property situated in an urban conservation

area, provided that the said person complies with any conditions

imposed by the Malta Environment and Planning Authority in

connection with such scheme and submits such forms and

documentation as the Commissioner may require.

(2) Where the person referred to in sub-article (1) rents

immovable property in the circumstances mentioned in the said

sub-article, the tax chargeable shall be at the rate of 10% of the

gross rental income received where the rent is for a residential

purpose, and at the rate of 15% of the gross rental income received

where the rent is for a commercial purpose. Such tax shall be final

and not be available as a credit against the tax liability of the said

person or refundable to him in any way. The tax as aforesaid shall

be remitted to the Commissioner, together with the forms and

documentation referred to in sub-article (1) by not later than the

30th June of the year following that to which the income refers.

(3) The Malta Environment and Planning Authority shall

provide the Commissioner with a yearly account of the details of all

persons who availed themselves of any such scheme and such

account shall be provided in such manner as the Commissioner may

require.

(1) Notwithstanding any other provision of the Income

Tax Acts or any regulations made thereunder, the provisions of this

article shall apply where, during a relevant year, any person rents a

tenement.

(2) The tax chargeable in the circumstances mentioned in sub-

article (1) shall, at the option of the person referred to in the said

sub-article, be at the rate of fifteen cents (0.15) on every euro of the

gross rental income received. Such tax shall be final and

notwithstanding any other provision of the Income Tax Acts, no

set-off or refund shall be granted to any person in respect of the tax

so charged

Provided that the tax chargeable on rent derived from a long

private residential lease shall be abated in such circumstances and by

such amounts as may be prescribed.

(3) Where the option referred to in sub-article (2) has been

exercised, such income shall be deemed to constitute separate

chargeable income for the purpose of the Income Tax Acts and

shall no t form part of t he ch argeab le income of the person

exercising the said option and where such person is an individual

he shall not be required to declare such income, in any return made

pursuant to the Income Tax Acts.

(4) Where a person, in a relevant year, derives rental income

from the letting of more than one tenement and the option referred

to in sub-article (2) has been exercised for such year, the said sub-

article shall apply to the total rental income received in the said

year from all the tenements let out by such person.

(5) Irrespective of whether the option referred to in sub-article

(2) is exercised or not, where an enquiry has been conducted and

the Commissioner determines that any rental income which should

have been declared was not so declared, such income shall be

charged to tax at the rate of 35 cents (0.35) on every euro of the

gross rental income received and such tax shall be in addition to

any interest and additional tax payable under the Income Tax Acts.

Such tax shall be final and notwithstanding any other provision of

the Income Tax Acts, no set-off or refund shall be granted to any

person in respect of the tax so charged.

(6) Every company resident in Malta shall allocate the

distributable profits resulting from income to which this article

applies, and on which tax is payable in accordance with this article,

to the final tax account.

(6A) Where an individual has failed to declare rental income

derived from a tenement leased as a residence or garage during the

relevant period in any return and such individual opts to declare

such rental income in the relevant form referred to in article

42(4)(c) of the Income Tax Management Act, which is required to

be submitted by not later than the 30th June 2015, and pays the tax

referred to in sub-article (2) of this article on such rental income, it

shall be deemed for the purpose of the Income Tax Acts that such

rental income was received during basis year 2014. The individual

exercising the said option shall pay to the Commissioner the tax in

such manner as may be prescribed in accordance with the

provisions of article 42 of the Income Tax Management Act

Provided that where an individual exercises the said option

and declares rental income for more than one year, the total amount

subject to the tax referred to in sub-article (2) of this article shall

not exceed an amount determined as follows

Y = (a / b) x 2

Where -

(a) "Y" represents the amount to be determined;

(b) "a" is the total rental income declared in the said

relevant form;

(c) "b" is the number of years comprised in the relevant

period in respect of which rental income is declared

Provided also that where following an enquiry there is

evidence that an individual who exercises the option referred to in

this sub-article has overstated the amount of rental income declared

in the relevant form for the purpose of obtaining a tax advantage,

the preceding proviso shall not apply and the total amount of rental

income declared in the said form shall be subject to tax at the rate

of 15%.

For the purpose of this sub-article "relevant period" means

the period of eight years preceding basis year 2013.

(7) The person exercising the option referred to in sub-article

(2) shall pay to the Commissioner the tax referred to in the said

sub-articles in such manner as may be prescribed in accordance

with the provisions of article 42 of the Income Tax Management

Act.

(8)

For the purposes of this article

(a) "tenement" means -

(i)

a tenement, not being a commercial tenement as

defined in article 1525 of the Civil Code, which

consists of either a dwelling house or part

thereof which is to be occupied or is occupied as

a home or residence by the occupier or a garage;

or

(ii) a "commercial tenement" or a "club", both terms

having the meaning assigned to them

respectively in article 1525 of the Civil Code,

when the property is not rented to or from a

related body of persons, and for the purpose of

this sub-paragraph -

(A) a body or persons is related to an

individual if it is owned or controlled,

directly or indirectly, as to more than

twenty-five percent by that individual; and

(B) two bodies of persons are related if they

are owned or controlled, directly or

indirectly, as to more than twenty-five

percent by the same persons;

(b) "relevant year" means the calendar year during which

the gross rental income is received

(c) "rents" shall include ground rents, whether from an

urban or rural tenement.

(1) Notwithstanding any other provision of the Income

Tax Acts except for article 31B, this article shall apply, in such

manner as may be prescribed, where any person who is an owner of

immovable property rents such property to another person for at

least seven years under a scheme administered by the Housing

Authority, and the said owner is registered with the Housing

Authority for this purpose and complies with any conditions

imposed by the Housing Authority.

(2) The tax chargeable in the circumstances mentioned in sub-

article (1) shall be at the rate of 5% of the gross rental income

received. Such tax shall be final and not be available as a credit

against the tax liability of the said person or refundable to him in

any way.

(1)

Notwithstanding any other provision of the Income

Tax Acts, the provisions of this article shall apply to royalties derived

on or after 1 January 2021 by an individual in his capacity as author of

a qualifying literary work by virtue of his title to the copyright on that

work conferred by the Copyright Act.

(2) The tax on the royalties to which this article applies shall be

chargeable, at the option of the individual who derives those

royalties

(a) when the royalties were derived before the 1st January

2023, at the rate of fifteen cents (€0.15) on every euro

of the gross amount of the royalties; and

(b) when the royalties were derived on or after 1st January

2023, at the rate of seven point five percent (7.5%) of

the gross amount of the royalties,

and such tax shall be final and no set-off or refund shall be granted

to any person in respect of the tax so charged.

(3)

The option referred to in sub-article (2) shall be exercised by

means of the submission of a notice to the Commissioner and the

payment of the tax calculated in accordance with that sub-article by not

later than the 30th of April of the relative year of assessment, or such

other date as may be prescribed, on such form and in such manner as

the Commissioner may approve.

(4)

An individual who, in any year, derives royalties to which

this article applies may only exercise the option referred to in sub-

article (2) in respect of the full amount of those royalties and an option

that refers only to a part of those royalties shall be invalid.

(5)

When an individual exercises the option referred to in sub-

article (2), the royalties to which the option refers shall be deemed to

constitute separate chargeable income and shall not form part of the

total income of that individual and the said individual shall not be

required to declare such royalties in any return made pursuant to the

Income Tax Acts except as provided in this article.

(6)

In this article

(a) the terms "author" and "ISBN" have the meanings

assigned to them in the National Book Council

(Establishment) Order; and

(b)

"qualifying literary work" means a publication which

bears an ISBN and which is a novel, story, poetical

work, text book, treatise, history, biography,

encyclopaedia or dictionary that is eligible for

copyright in terms of the Copyright Act.

Notwithstanding anything to the contrary contained in this

Act, articles 32A to 42, both inclusive, and which together with this

article are referred to as "the investment income provisions", shall

apply wherever the context so requires.

A payor shall register as such with the Commissioner in

such manner as may be prescribed.

(1) A payor shall deduct tax from every payment to a

recipient of investment income, howsoever made, at a rate of

fifteen cents (€0.15) on every euro of such payment

Provided that where the recipient derives, or is deemed to have

derived pursuant to the provisions of article 43(6)(a) or (b), investment

income referred to in article 41(a)(viii), tax shall be deducted at the

rate specified in article 56(6) or such other rate as may be prescribed

and rules may also be prescribed on how the investment income

provisions are to be applied in particular circumstances.

(2) A payor shall render an account to the Commissioner of all

amounts so deducted, and, subject to the provisions of sub-article

(3), every amount deducted shall be a debt due from such payor to

the Commissioner payable not later than the fourteenth day

following the end of the month in which the payment was made and

shall be recoverable as such.

(2A) A payor shall render an account to the Commissioner of all

payments of investment income falling under the provisions of this

article made during any year. The account shall be submitted to the

Commissioner by the 31st January following the year in which the

investment income is paid. Such account shall include details of the

recipient’s name, address and the income tax registration number as

wel l as th e am ount of invest ment incom e pai d, and th e t ax

deducted, by the payor to the recipient during that year

Provided that a payor shall not be required to render an

account to the Commissioner once nine years have elapsed following

the end of the year in which the investment income becomes payable.

(3) The payor shall upon making a payment of investment

income furnish each recipient with a certificate in a form

acceptable to the Commissioner setting forth the gross amount paid

by the payor, and the tax deducted.

(4) Where a payor makes a payment of investment income to a

person not resident in Malta (and therefore not a recipient within

the definition contained in article 41(c)), the payor shall be obliged

to obtain a certificate of non-residence from the person receiving

such payment in such form as the Commissioner shall require.

(5) For the purposes of the investment income provisions, tax

shall be deducted on the amount of the investment income before

*Applicable from the year of assessment 2019.

†Applicable from the year of assessment 2019.

deducting any foreign tax, whether charged directly or by way of

witholding.

(6) Where the tax deductible in accordance with the provisions

of this article is not remitted to the Commissioner within the time

stipulated in sub-article (2), or an account is not rendered to the

Commissioner in the manner required under this article, the payor

shall be guilty of an offence and shall be liable on conviction to a fine

(multa) of not more than twenty-three thousand euro (€23,000).

(1) A payor shall not deduct tax under article 33 where a

recipient elects under the provisions of article 35, to be paid

investment income without such deduction being made.

(2) A payor shall render an account to the Commissioner of all

payments of investment income made during any year in respect of

which an election has been made. The account shall be submitted to

the Commissioner by the 31st January following the year for which

the election has been made, or within thirty days of the request,

whichever date is later. Such account shall include details of the

recipient’s name, address and the income tax registration number as

well as the amount of investment income paid gross by the payor to

the recipient during that year

Provided that a payor shall not be required to render an

account to the Commissioner once nine years have elapsed

following the end of the year in which the investment income

becomes payable.

(3) Where an account is not rendered to the Commissioner in

the manner required under this article, the payor shall be guilty of an

offence and shall be liable on conviction to a fine (multa) of not more

than twenty-three thousand euro (€23,000).

(1) Except in respect of investment income referred to in

article 41(a)(viii)(2), (3) and (4), a recipient may elect to be paid

investment income without deduction of tax being made and such

an election shall be made in writing and sent to the payor.

(2) Subject to the provisions of sub-article (3), an election will

be effective as from fourteen days following the receipt of such

notice of election by the payor. Such an election may be revoked at

the option of the recipient by notice in writing and such revocation

shall be effective as from fourteen days following the receipt by the

payor of such notice.

(3) An election made on the opening of a bank account in

respect of which investment income is payable, or on the purchase

of bonds, loan stock, debentures, or any other instrument in respect

of which the investment income is payable, or on any transaction

giving rise to capital gains within the meaning of article 41(a)(v),

shall have immediate effect.

*Applicable from year of assessment 2019

Where an election under the provisions of article 35 has

been made, a recipient shall, subject to the provisions of article 12

of the Income Tax Management Act, declare the investment income

to which the election relates on his tax return for the relevant year

of assessment and where a declaration is made as aforesaid any tax

due shall be determined as if the investment income provisions had

not been enacted.

Where any tax has been withheld under article 33(1), such

tax shall not be available as a credit against the recipient’s tax

liability or for a refund, as the case may be, for the relevant year of

assessment.

Except in respect of a year of assessment for which an

election under article 35 applies, it shall be presumed, so far as the

tax liability of the recipient is concerned, that a deduction and

payment which ought to have been made pursuant to the provisions

of article 33 have been made.

Where the presumption referred to in article 38 applies

(a) a recipient who is an individual shall not be obliged to

disclose the existence of the investment income in any

return made pursuant to the provisions of this Act, and

(b) no person shall be charged to further tax in respect of

the investment income under this Act.

(1)

Where a payor fails to deduct and pay tax in

accordance with the investment income provisions, the provisions

of article 73(4) of this Act and of article 40(1) of the Income Tax

Management Act shall apply mutatis mutandis.

(2) The provisions of article 39 of this Act and the provisions

of article 17 of the Income Tax Management Act shall not be

applicable, and a payor shall not be bound by a duty of professional

secrecy on a request for information by the Commissioner where

investment income referred to in article 41(a)(iv), 41(a)(vii) and

41(a)(viii)(1) are derived from a person, other than a physical

person that is not resident in Malta is paid to a recipient provided

that

(a) the asset from which the investment income is derived

is not a qualifying asset as defined in the provisions of

article 9B; and

(b) the recipient has not declared, in accordance with the

provisions of the relevant laws as defined in the

provisions of article 9B, income and transfers referred

to in article 9B(2)(a) to (c) in relation to the asset from

which the investment income is derived.

(3) Any person (hereinafter in this sub-article referred to as the

"first person") who is in a position to receive or be deemed to have

received the income referred to in article 41(a)(viii)(2), (3) and (4)

(a) shall inform in writing the person who would be the

payor of such income if the first person were to receive

or be deemed to have received such income, that in

such an eventuality the first person would be the

recipient of that income; and

(b) when the first person has received or has been deemed

to have received such income, he shall, unless the

payor has paid the tax in accordance with the

investment income provisions, pay such tax himself

within seven days from the date that the payor should

have paid the tax; and

(c) without prejudice to any other provisions of the

Income Tax Acts, any such person who does not make

the payment referred to in paragraph (b) when he

ought to have made it shall, in addition to the payment

of the tax due, be liable to pay additional tax of seven

per cent of the amount of such tax for every month or

part thereof that the tax remains unpaid commencing

from the month in which the tax should have been paid

and any payment made by the said person in respect of

the tax payable by him in terms of this sub-article shall

first be applied against any additional tax due thereon.

(4) The provisions of sub-article (3) shall not be applicable

when the person referred to therein proves to the satisfaction of the

Commissioner that he did not know and could not reasonably have

known that he was a recipient and for this purpose it shall be

presumed that such person was fully cognisant of the provisions

and implications of the Income Tax Acts.

(5) Where the payor has not deducted or paid the tax from the

income referred to in article 41(a)(viii)(2), (3) and (4), the

provisions of articles 38 and 39 shall not be applicable.