Reduction of Additional Tax (Omissions) Rules, 2003

L.N. 126 of 2003

INCOME TAX ACT

(CAP. 123)

Reduction of Additional Tax (Omissions) Rules, 2003

IN exercise of the powers conferred by article 96 and by sub-item

(e) of item 3 of the Schedule to the Income Tax Act, hereinafter referred

to as “the Act”, the Minister of Finance and Economic Affairs has made

the following rules>-

(1) The title of these rules is the Reduction of Additional

Tax (Omissions) Rules, 2003.

(2) These rules shall apply in respect of the year of

assessment commencing on the 1st January 2003 and subsequent years

of assessment.

(1) In these rules>-

“additional tax” means the additional tax chargeable in

accordance with the provisions of article 56(12)(c) of the Act and

the provisions of the Schedule in respect of any omission<

“omission” means the omission, or deemed omission, from

any return of income submitted for the purpose of the Income Tax

Acts of any amount which should have been included therein<

“Schedule” means the Schedule to the Act<

“tax professional” means an individual being the holder of a

warrant issued under the Accountancy Profession Act (Cap 281),

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) Other words and expressions contained in these rules

shall have the meaning assigned to them in the Income Tax Acts and in

the Schedule to the Act.

Full remission of

(a)

Where the Commissioner is satisfied that>-

additional tax.

(i) reasonable care has been taken by the person preparing

and submitting the return or by the person responsible for its

preparation and submission< or

(ii) the amount of the endangered tax is not material,

he may remit the whole of the additional tax otherwise due in accordance

with the provisions of the Schedule.

(b) The Commissioner’s discretion for the purpose of this

rule shall not be questioned in any appeal.

(1) For the purposes of rule 3 hereof, in determining whether Where a person has

reasonable care has been taken in the preparation and submission of a taken

care.

return, the Commissioner shall take account of>-

(a) whether a person has sought and relied on the written

advice of a tax professional< and

(b) the complexity of the transaction which has resulted in

an omission from the return or the complexity of the legal

provisions concerned and the difficulties in their interpretation.

(2) The original written advice, referred to in item (a) of

sub-rule (1) hereof is to be submitted together with the return by not

later than the relative tax return date.

(3) An advice, referred to in item (a) of sub-rule (1) hereof,

furnished by a tax professional, shall not of itself constitute a binding

interpretation of the relative statutory provisions and views on their

proper application.

(4) Rejection by the Commissioner of advice furnished by

a tax professional shall not necessarily imply that a person has not taken

reasonable care, unless the said advice is considered by the

Commissioner to be spurious or frivolous.

Where an omission from a return is rectified by a person by Reduction of

additional tax on

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

13 of the Income Tax Management Act after that person has been notified disclosure.

in writing by the Commissioner that an enquiry will be conducted into

that person’s tax declarations and liabilities, but not later than the last

day of the month immediately following that in which the said

notification is served, the additional tax shall be at the rate of one point

five per cent (1.5%) of the endangered tax per month.

Additional tax chargeable shall be reduced by ninety per cent

(90%) of the full amount where the omission>-

(a) is of income from an employment or office which is

included in a return submitted to the Commissioner in accordance

with the provisions of the Final Settlement System (FSS) Rules,

1998< or

(b) is of investment income, as defined in the investment

income provisions of the Act, subject to deduction of tax at source,

irrespective of whether such tax has been deducted or not< or

(c) is of gains from the sale of immovable property

chargeable under article 5 of the Act, and tax at the stipulated rate

has been paid in accordance with article 43 of the Income Tax

Management Act and rule 6 of the Capital Gains Rules, 1993.

Where an omission is not due to fraud, art, contrivance or

gross or wilful neglect, the additional tax chargeable for an omission

shall be reduced by fifty per cent (50%) of the full amount and the

circumstances in which the additional tax is to be so reduced shall include

where>-

(a) a person is or should be aware that an enquiry has been

conducted into his tax declarations and liabilities and on which

the additional tax in respect of the omission has been reduced

according to the provisions of rule 6 hereof, but he again omits,

from a return submitted after the outcome of the enquiry is known,

an item which the enquiry has indicated should have been so

included< or

(b) the omission is manifestly contrary to accepted principles

and practices of tax law or accountancy, including, without limiting

the generality thereof>

(i) over-claiming deductions against income

chargeable under article 4(1)(b) of the Act<

(ii) claiming deductions for alimony payments when

no right for such deductions exists<

(iii) failing to declare alimony payments received<

(iv) excessive or unjustified claims for deduction

against rental income.

The reductions contemplated in rules 6 and 7 shall be applicable Applicability of

reduction in

to the additional tax chargeable under the Schedule, whether reduced in additional tax.

accordance with the provisions of rule 5 hereof or not.

Where a reduction of additional tax is effected in accordance Maximum

additional tax

with the provisions of these rules, the applicable rate of additional tax chargeable.

referred to in item 5 of the Schedule shall be the rate of additional tax

so reduced.

Nothing contained in these rules shall prevent the Certain powers of

Commissioner from exercising any power vested in him to remit such the Commissioner.

part or all of the additional tax chargeable as he may deem fit, provided

that>

(a) the Commissioner may impose as a condition for any

such remission the requirement that the person concerned shall

not make another omission within such period as the Commissioner

may establish, as well as such other conditions as he may deem fit<

(b) should any condition imposed by the Commissioner in

accordance with the provisions of paragraph (a) hereof 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 these rules shall be forfeited<

(c) if forfeiture is so due, under the provisions of sub-rule

(b) hereof, any additional reduction made under the provisions of

this rule, but not under the provisions of the other rules hereof,

shall be deemed to have been a suspension of liability to the said

additional tax, and not the cancellation of the relevant additional

tax<

(d) the Commissioner shall communicate in writing to the

person concerned any condition imposed under sub-rule (b) hereof,

the consequences of infringement of any such condition and, if

such is the case, the fact that forfeiture has been incurred.

Decisions taken by the Commissioner regarding the Appeals.

application of these rules shall be subject to objection and appeal in

accordance with the provisions of articles 35 and 37, respectively, of

the Income Tax Management Act only as to whether, for the purpose of

rule 4(4) hereof, a tax professional’s advice is to be considered as

spurious or frivolous.

Mitbug[ fl-Istamperija tal-Gvern – Printed at the Government Printing Press