193 tal-2005 - Regolamenti tal-2005 li jemendaw ir-Regolamenti dwar Direttivi ta’ l-Unjoni Ewropea

L.N. 193 of 2005

INCOME TAX ACT

(CAP. 123)

European Union Directives (Amendment) Regulations, 2005

BY virtue of the powers conferred by articles 52B and 96 of the

Income Tax Act, the Prime Minister and Minister of Finance has made

the following regulations>-

(1) The title of these regulations is the European Union

Directives (Amendment) Regulations, 2005 and they shall be read and

construed as one with the European Union Directives Regulations, 2004,

hereinafter referred to as the “principal regulations”.

(2) These regulations shall be deemed to have come into

force on the 1st May, 2004.

Inland Revenue – Malta

Savings Directive Guidelines

Reporting Requirements Specifications

Background

The Inland Revenue has issued guidelines for the implementation of the

European Union Directive 2003/48/EC of 3 June 2003 on taxation of savings

income in the form of interest payments – hereinafter in these Guidelines referred

to as the “Savings Directive”.

The information required by the Inland Revenue Department for the purpose of

the Savings Directive is to be received in electronic format.

Scope of document

This document outlines the process that is to be used by paying agents and

economic operators for the submission of information to the Inland Revenue

Department in line with the Savings Directive.

It includes a brief description of the business process, the file layout and the rules

related to the information that is to be submitted to the Inland Revenue

Department.

Business Process

All Paying Agents are to register for the purposes of the Savings Directive with

the Inland Revenue Department. This means that both Paying Agents who pay

interest income directly to beneficial owners and Paying Agents who receive

income on behalf of beneficial owners are to be registered with the Inland

Revenue Department.

Paying Agents need to submit information to the Inland Revenue Department in

the format described below in electronic format. The electronic file may be

submitted on magnetic media such as diskettes and CD’s.

The information is to be submitted to the Commissioner of Inland Revenue by

28 th February of the year immediately following the year in which the interest

payments were made.

The electronic information submitted will be accompanied by the following

reconciliation form:-

Savings Directive Report Reconciliation Form

Notes regarding Completion

Payors will complete Section A of the reconciliation form with the registration

number given to them by the Inland Revenue for the purposes of this directive.

The Name is the official name of the payor.

The Contact Name, Contact Address, Telephone Numbers and e-mail address (if

applicable) are details of the person responsible for the compilation of

information report submitted to the Inland Revenue.

Section B will contain details of the file information. For each file on the

magnetic media that will be submitted to the Inland Revenue, the file name, the

number of records and the sum of the interests reported (irrespective of the

currency) are to be filled in the appropriate fields.

The form will be completed by the signature, name and date to be filled in by the

person responsible for the compilation of the report.

Data Transfer Requirements

Media

The data maybe transferred on double sided high density diskette (1.44 Mb) or

on a Compact Disk (CD).

The Inland Revenue Department is considering the Internet as a future medium

for these data transfers. Further information regarding this medium shall be

issued in due course.

File Naming Structure

The files submitted by Paying Agents on the CD or diskette shall have a unique

filename, and this shall be in accordance with the following convention

PYR9999XXXZYY99V.txt

Where

PYR9999 = Payi ng Agent Registration Number

XXX = Abbreviation for the Paying Agent given by the Inland

Revenue upon registration for this purpose

Z = Report Type which will always be “S” for the Savings

Directive report

YY = Last two digits of the year for which filename information

relates

99 = Sequential file number

V = Version of the file starting with 1

Examples

(a) Submission of first report in January / February 2006 relating to an interest

payment made in 2005: Filename will be PYR9999XXXS05011.txt.

(b) Submission of additional, new record in February 2006, relating to an

interest payment made in 2005 and inadvertently omitted from the first report

Filename will be PYR9999XXXS05021.txt.

(c) Correction of details of an account reported in (a): Filename will be

PYR9999XXXS05012.txt.

(d) Correction of details of an account reported in (b): Filename will be

PYR9999XXXS05022.txt.

(e) Submission of report in January / February 2007, relating to interest

payments effected in 2006 : Filename will be PYR9999XXXS06031.txt.

Format

All records are to be provided as ‘pipe –delimited’ variable length records. This

means that all leading and trailing zeroes or blanks will be removed from the data

file records.

The Inland Revenue Department will be using the OECD Automatic Exchange of

Information as the main guidelines for the reporting requirements. However the

full OECD format will not be implemented. The record lengths specified below

should be regarded as maximum values allowed and these maximum values are

based on the OECD format. The mandatory data items and related conditions

are also in line with the OECD format.

File preparation and handling procedures allow for the amendment and

replacement of data files. In the event of account details requiring correction for

any reason, the entire file containing the defective records shall be replaced, and

re-issued to the Inland Revenue Department with a revised filename, amended

with the modified records indicated as Type 2 records in field Number 1.

Additional, new records may be submitted in a separate new file with the file

name indicating the correct sequence.

Thus in the earlier example, in the case of (c) and (d), Field No 1 for those

accounts to which the corrections relate will be 2. All other accounts will show 1

in Field No1. In the case of (a), (b) and (e), Field No1 will always show 1.

Record Layout

The Inland Revenue Department needs the following information for each

payment effected to the paying agent or the beneficial owner regarding which,

the following general rules apply

• Where alphabetic characters are required, the Latin Alphabetic characters

only are to be reported;

• Characters that are not alphanumeric such as “, !, @, $, %, &, etc should

never be reported, except for the character “-“.. These characters have

ascii values outside the ranges of 48 to 57 (numeric characters) and 97 to

122 (alphabetic);

• All date formats must be given in ddmmccyy format where dd is day of

month, mm is month and ccyy is the full year of the date (e.g. 1999, 2001);

• Data Requirements are: mandatory (M), mandatory subject to conditions

(C) or optional (O). In the format described below, where a conditional

requirement or validation exists then further explanation is given under the

additional information heading.

IRD

OEC

Field Name

Type

Size Data

Remarks

Field

D

Requir

No

Ref

ement

Document Type

N

M

1= New

Indicator

2 = Correction

Residence Country

A

M

Country Codes ISO 3166

Code of recipient

Type of recipient

N

M

0=Beneficial Owner

1=Paying Agent Article 4

(2)

Pre Jan 2004

N

M

0 = Registered before

Registration

01/01/2004

1 = Registered after

31/12/2003

Paying Agent

AN

M

Inland

Revenue

Registration Code

Registration number of

Paying Agent (PYR999)

Tax Identification

AN

C

Tax Identification Number.

Number of recipient

May be blank as indicated

in Additional information

Date of Birth

N

C

Date format ddmmccyy

Maybe blank if

payment is made to

Paying Agent or

data in Field 6 (TIN) is

given or

Field 4 = 0 i.e Registered

before 01/01/2004

Surname

AN

M

Surname of beneficial

owner or name of paying

agent

receiving

the

income

Other Names

AN

M/C

All Other Names of

beneficial owner or paying

agent

receiving

the

income

Birth City

AN

C

Maybe blank if

payment is made to

Paying Agent or

data in Field 6 is given or

Field 4 = 0 i.e Registered

before 01/01/2004

Birth Country Code

A

C

Country Codes ISO 3166

Maybe blank if TIN is

given or payment received

by a paying agent on

behalf of a beneficial

owner or

Field 4 = 0 i.e Registered

before 01/01/2004

Abode

AN

M

Door

Number

and/or

House Name of beneficial

owner or paying agent

receiving

income

on

behalf of beneficial owner

Street Address

AN

M

Street

Address

of

Beneficial owner or Paying

Agent Receiving Income

City

AN

M

City of

address of

Beneficial owner or Paying

Agent Receiving Income

Postcode

AN

O

Postcode

of

address

Beneficial owner or Paying

Agent Receiving Income

Country Code

A

M

Country Codes ISO 3166

2 of address of Beneficial

owner or Paying Agent

Receiving Income

Other Address

N

O

0=

Residential

or

Type

Business

1=Registered Office

2=Other/Unknown Type

Other address

AN

C

Door

Number

and/or

abode

House Name of other

address

of

beneficial

owner or paying agent

receiving

income

on

behalf of beneficial owner

Other address

AN

C

Street Address of other

Street Address

address

Other Address City

AN

C

City of other address

Other Address

AN

O

Postcode

of

Other

Postcode

Address

Other Address

AN

C

Country Codes ISO 3166

Country Code

2 of other address

Year of date of

N

M

Year for which Interest

Payment

payments were made for

the account in ccyy format

Type of Income

AN

M

As per Rules in Additional

Information

Currency of Paid

A

M

Currency code compliant

Income

with ISO 4217 3

Amount-Major Unit

N

M

Major units of currency

of Income

only, i.e. no decimals, no

number formats and no

currency indicators will be

entered in this field.

Bank Account

AN

M

Relevant

IBAN

Number

(international

Bank

Account number) or any

identification code or the

ISIN code of the debt

Claim

Additional Information

Additional Information

This information may not be given when

Field 4 = 0 i.e. Registered before 01/01/2004

For registrations after 31/12/2003 if TIN is not given then Date of

Birth and Place of Birth have to be provided in fields 7, 10 and

11. Compulsory if information in field 6 (TIN) related to a beneficial

owner is not given. It is optional in the other circumstances

Always mandatory for a beneficial owner. If the recipient is a

paying agent on behalf of a beneficial owner then if the name of

the paying agent fits in field 8 this field may be left blank.

Mandatory if TIN (Field 6) is not given or account registered after

31/12/2003, else optional.

This field is mandatory when the TIN (Field 6) information is not

given or registered after 31/12/2003. Optional in other

circumstances.

Mandatory if Other Address is given (Field 17)

Mandatory if Other Address is given (Field 17)

Mandatory if Other Address is given (Field 17)

Mandatory if Other Address is given (Field 17)

Detailed description of type of Income paid (Article numbers refer

to Articles of the Savings Directive)

First Character must be one of a, b, c, or d where these refer to

Article 8 (2) or briefly

a = interest paid in terms of article 6 (1) (a)

b = interest paid or full amount from proceeds of sale,

redemption or refund in terms of article 6 (1) (b) or (d)

c = interest paid in terms of article 6 (1) (c) income

d = interest paid in terms of article 6 (4)

Second Character must be 1 or 2 where

1= Total amount of Interest or income

2 = Total amount of proceed from sale, redemption or refund

Therefore

a can only have 1 attributed to it

b can have either 1 or 2 attributed to it

c can o nly have 1 attributed to it

d can only have 1 attributed to it

Third Character must be x or y where

x relates to payments made directly to beneficial owners

(Article4(1))

y relates to payments made to paying agents on behalf of

beneficial owners (Article 4(2)).”.

For subregulation (1) of regulation 5 of the principal

regulations, there shall be substituted the following>

“(1) The Directive of 3 June, 2003 adopted by the Council

of the European Communities on the taxation of savings income

in the form of interest payments (2003#48#EC) (hereinafter in this

regulation referred to as the “Savings Directive”) shall have effect

in relation to the Income Tax Acts subject to the provisions of

subregulations (2) to (5) of this regulation and shall be implemented

in accordance with the guidelines contained in Schedules 1 and 2.

The provisions of this regulation shall only be applied from 1st

July, 2005.”.

Immediately after regulation 5 of the principal regulations,

there shall be added the following two schedules>

“SCHEDULE 1

(Regulation 5(1))

Inland Revenue – Malta

Savings Directive Guidelines

Guidelines for the

implementation of the

Savings Directive in Malta

Table of Contents

Table of Contents

1. Aim and Purpose

2. Beneficial Owners

Persons qualifying as beneficial owners

Persons not qualifying as beneficial owners

3. Establishing identity and residence of beneficial owners

Relevance of date of commencement of contractual relations

Establishing identity

3.2.1 Contractual relations started before 1 January, 2004

3.2.2 For contractual relations started on or after 1 January, 2004

Establishing residence

3.3.1 Contractual relations started before 1 January, 2004

3.3.2 For contractual relations started on or after 1 January, 2004

Documentation and acceptable evidence

3.4.1 Copies of documents

3.4.2 Where documentation presented by an individual proves to

be false

Specific issues related to the establishment of identity and residence

3.5.1 Cases of individuals having two passports

3.5.2 Introduced business

Paying Agents

Persons qualifying as paying agents

Residual entities

Article 4(2) paying agents

Election for a residual entity to be treated as a UCITS

Persons not qualifying as paying agents

The Case of Trustees and Personal Representatives

Competent Authority

Interest Payments

Effecting interest payments

6.1.1 Examples of paying agents who make interest payments

6.1.2 Examples of paying agents who secure savings income

payments

Categories of interest payments

6.2.2 Interest and money debts

6.2.3 Article 15 securities

6.2.4 Accrued and capitalised interest

6.2.5 Income from collective investment funds

6.2.5.1 Collective investment funds: distributions

6.2.5.2

Collective investment funds: income realised

at sale or redemption of fund units

6.2.5.3

Obtaining information about funds

6.2.5.4

Funds investing in other funds

6.2.5.5

Umbrella funds

Information reporting by the paying agent

Responsibilities of paying agents and Article 4(2) paying agents

Initial notification

Period to be covered by the report

Information to be reported

Reporting particular interest payments

7.5.1 Interest payments to trustees of Malta trusts who are

resident in specified territories

7.5.2 Interest payments by trustees of Malta trusts

7.5.3 Foreign trusts

7.5.4 Interest payments to deceased investors

7.5.5 Estates of deceased persons: interest payments made by

personal representatives

7.5.6 Reporting on Maltese partnerships where a partner is an

Individual resident in a specified territory

7.5.7 Reporting on partnerships in specified territories

7.5.8 Reporting on joint accounts and holdings

7.5.9 Designated client accounts

7.5.10 Individuals who change address or residence during the year

7.5.11 Whereabouts unknown

7.5.12 Closure of account

Elimination of Double Taxation

Administration Issues

Application of the Savings Directive

Sub-contracting the obligations under the Savings Directive

Record-keeping and retaining evidence

9.3.1 Documentary evidence needed to be kept to demonstrate

that identification and residence obligations have been

performed

9.3.2 Evidence to be kept when accepting an introduced individual

Data Protection Act, Cap. 440

Penalties

Contacts

9.6.1 Questions of interpretation

9.6.2 Questions of administration

Appendix 1

Specified territories as a t 1 May, 2004

Appendix 2

List of related public authorities and international

organisations as at 1 May, 2004

Appendix 3

Pro Forma Letter of Notification of New Permanent Address

1. Aim and Purpose

The ECOFIN Council adopted, on 3 rd June, 2003 a Directive (2003/48/EC) on the

taxation of savings in the form of interest payments – hereinafter in these

Guidelines referred to as the “Savings Directive” 1 . Under the provisions of this

Directive, paying agents are required to report to their tax authorities interest

payments to relevant beneficial owners and residual entities in certain territories.

This information is then to be automatically exchanged with the tax authority of

the territory concerned. Furthermore, the Savings Directive provides for the

elimination of double taxation which may arise as a consequence of a system of

withholding tax which is allowed for a transitional period in the case of Austria,

Belgium, Luxembourg and relevant dependant or associated territories of certain

Member States.

As a consequence to Malta’s accession to the European Union (EU), measures

were put in place for the implementation of this Directive. Through the enabling

provisions of article 52B of the Income Tax Act, regulations have been enacted

(Regulation 5 of L.N. 267 of 2004) which, among other issues, gave effect to the

provisions of the Savings Directive as they apply to income tax. These

regulations came into effect on the 1 st May, 2004.

Beneficial Owners

2.

2.1

Persons qualifying as beneficial owners

Subject to certain exceptions specified by the Savings Directive (see next

paragraph), a “beneficial owner” means an individual who either receives an

interest payment or is an individual for whom an interest payment is secured

[S.D. Art. 2(1)]. This means that the beneficial owner is the individual who –

2.1.1 has either received the payment directly from the paying agent;

2.1.2 or who is the individual on whose behalf the paying agent receives or

secures the payment in accordance with, or awaiting, the individual’s

instructions.

Council Directive 2003/48/EC of 3rd June 2003 on taxation of savings income in the form of interest

payments, OJ No. L157, 26.06.2003, p.38.

2.2

Persons not qualifying as beneficial owners

The Savings Directive specifies those exceptions where an individual who

receives an interest payment, or for whom an interest payment is secured, is not

a beneficial owner. These exceptions are where –

2.2.1 that individual provides satisfactory evidence that he is himself a paying

agent in Malta or in a specified territory [S.D. Art. 2(1)(a)];

2.2.2 that individual provides satisfactory evidence that he acts on behalf of -

(a)

a legal person (e.g. a company) [S.D. Art. 2(1)(b)];

(b)

an entity which is taxed under the general arrangements for

business taxation (e.g. a partnership) [S.D. Art. 2(1)(b)];

(c)

an UCITS or an Article 4(3) UCITS [S.D. Art. 2(1)(b)];

(d)

a residual entity provided he discloses the name and address of

that entity [S.D. Art. 2(1)(b)];

(e)

another individual provided he discloses to the paying agent the

verified details of the other individual’s identity [S.D. Art. 2(1)(c)].

For the purpose of these exceptions, satisfactory evidence includes –

(i)

a written statement on headed paper from the relevant authority; and

(ii)

for 2.2.2(e), a signed statement from the individual.

Furthermore, if a paying agent holds information which gives him reason to

believe that the individua l he pays interest to (or secures interest for) does not

receive the interest for his own benefit because he is acting on behalf of another

individual, the agent should take reasonable steps to establish the identity of the

beneficial owner of the payment [S.D. Art. 2(2)]. What is reasonable will depend

on the circumstances of the case, but it is expected that the said agent should,

as a minimum, contact the individual and ask whether there is another

beneficiary, whether such beneficiary is a beneficial owner, and if so for the

relevant details.

3. Establishing identity and residence of beneficial owners

Paying agents must establish the identity and residence of all individuals they

have reason to believe are beneficial owners. The Savings Directive establishes

minimum standards for this purpose [S.D. Art. 3(1)].

3.1

Relevance of date of commencement of contractual relations

The minimum standards specified by the Savings Directive for the establishment

of identity and residence are different if the contractual relations between the

paying agent and the beneficial owner were established before 1 st January, 2004

or on or after that date.

“Contractual relations” means that the relationship between the paying agent and

the beneficial owner is the subject of a contract or of a series of contracts.

Revised, reissued and superseded contracts are to be considered as a series of

contracts. Only contracts between the beneficial owner and the paying agent are

relevant in this context.

3.2

Establishing identity

3.2.1 Contractual relations started before 1 January, 2004

In this case, a paying agent is required to establish the identity of beneficial

owners on the basis of their name and address. One should obtain this

information from one’s existing records, using the information one already holds,

including any information held for anti-money laundering purposes 2 [S.D. Art.

3(2)(a)]. One is not expected to obtain additional documentary verification about

these individuals’ identity.

If the identity details for such an individual change, one should update one’s

records according to reasonable business practice. One’s obligations under the

Savings Directive for this purpose are, however, limited to the updated details in

one’s records.

Where an individual living in Malta or in a territory that is not a specified territory,

and with whom a paying agent has a pre-1 January, 2004 contractual

relationship, moves permanently to a specified territory, the paying agent will

need to update his records regarding this individual’s new address to fulfil his

obligations under the Savings Directive. However, since he has a pre-1 January,

2004 relationship with the individual, he does not need to obtain any further

information such as the Tax Identification Number (TIN) or the date and place of

birth.

3.2.2 For contractual relations started on or after 1 January, 2004

In this case, the paying agent is required to establish the identity of the beneficial

owner on the basis of the individual’s name, address and TIN. The TIN has to be

the one issued by the country of residence for tax purposes. If there is no TIN or

the TIN is unavailable, the paying agent needs to obtain the date and place of

birth instead [S.D. Art. 3(2)(b)]. Place of birth means the town and country of

birth.

Pursuant to rules under the Prevention of Money Laundering Act (Cap. 373) and Council Directive 91/308/EEC of 10

June 1991 on prevention of the use of the financial system for the purpose of money laundering (OJ L 166, 28.6.1991,

p. 77). Directive as last amended by Directive 2001/97/EC of the European Parliament and of the Council (OJ L 344,

12.2001, p. 76).

The paying agent should verify the individual's name, date and place of birth by

reference to the beneficial owner's passport or official identity card. The address

and TIN may be verified from these documents or, if they do not appear therein,

from other documentary evidence [S.D. Art. 3(2)(b)]. It is important to note that

for the purpose of proper verification, where a paying agent enters into a

contractual relationship that is not a pre-1 January, 2004 relation with a beneficial

owner living outside the specified territories, the paying agent would need to

obtain the passport or identity card of the individual if there is reason to believe

that the individual holds a passport issued by a specified territory.

“Other documentary evidence” in this conte xt means any document that may be

accepted by firms undertaking “Know Your Client” (KYC) checks for anti-money

laundering purposes. If an individual has a legitimate reason for not being able to

present a passport or official identity card, one may accept an alternative proof of

identity, preferably from an official source. The alternative evidence offered must

be a satisfactory proof of personal identity for anti-money laundering “KYC”

purposes.

After the initial verification of identity, changes may be ‘self certified’ (for

example, a written notification of change of address or of a new TIN from the

individual would normally be acceptable “other documentary evidence” of the

change). A certificate of residence for tax purposes issued by the relevant

competent authority is acceptable documentary evidence of TIN or address.

3.3

Establishing residence

3.3.1 For contractual relations started before 1 January, 2004

In this case, a paying agent is required to establish the residence of the

beneficial owner on the basis of their permanent address according to

information from one’s existing records, using the information one already holds,

including any information held for anti-money laundering purposes 3 [S.D. Art.

3(3)(a)]. One is not expected to obtain additional documentary verification about

these individuals’ residence.

If the residence details for such an individual change, one should update one’s

records according to reasonable business practice. One’s obligations under the

Savings Directive are, however, limited to the updated details in one’s records.

Where an individual living in Malta or in a territory that is not a specified territory

and with whom a paying agent has a pre-1 January, 2004 contractual

relationship, moves permanently to a specified territory, the paying agent will

Pursuant to rules under the Prevention of Money Laundering Act (Cap. 373) and Council Directive 91/308/EEC of 10

June 1991 on prevention of the use of the financial system for the purpose of money laundering (OJ L 166, 28.6.1991,

p. 77). Directive as last amended by Directive 2001/97/EC of the European Parliament and of the Council (OJ L 344,

28.12.2001, p. 76).

need to update his records regarding this individual’s new address to fulfil his

obligations under the Savings Directive.

3.3.2 For contractual relations started on or after 1 January, 2004

In this case, residence for the purposes of the Savings Directive is established on

the basis of the individual’s permanent address based on details found in the

individual’s passport or official identity card. In the case of beneficial owners

having a passport or identity card issued by a specified territory but who declare

themselves to be resident in a country that is not Malta or a specified territory,

residence is to be established by means of a certificate of residence for tax

purposes issued by the country in which they have their permanent address. In

the absence of such certificate, the country of residence is to be established on

the basis of the territory that has issued the passport or the official identity card.

Where a paying agent enters into a contractual relationship that is not a pre-1

January, 2004 relation with a beneficial owner living outside the specified

territories, the paying agent would need to obtain the passport or identity card of

the individual if the paying agent has reason to believe that the individual holds a

passport issued by a specified territory.

3.4

Documentation and acceptable evidence

3.4.1

Copies of documents

Under the Savings Directive the paying agent must verify the information held by

reference to the relevant details from the passport, official identity card or other

documentary evidence presented by the individual as appropriate. The paying

agent may however accept copy documents (rather than originals) provided they

are properly certified. This means that (for non-Maltese nationals) the copy

should be certified by an embassy, consulate or high commission of the country

of issue, a lawyer or an attorney. The copies should be dated and signed ‘original

seen'. The paying agent should keep a copy of the documents and make them

available in case of request from the Commissioner of Inland Revenue.

3.4.2

Where documentation presented by an individual proves to be false

The paying agent would not be liable if he had accepted a document in good faith

and had no reason to suspect that the document was false. If he has information

that casts doubt on the authenticity of the documentation presented, he should

take reasonable steps to establish its authenticity. In this case, it would normally

be considered that reasonable steps had been taken if he had followed the

relevant procedures and complied with wider legal obligations.

3.5

Specific issues related to the establishment of identity and residence

3.5.1

Cases of individuals having two passports

Where a person has more than one passport the paying agent should guide

himself as follows

(a)

he should rely on other reliable documents (e.g. official ID card or tax

residence certificate) in order to establish the residence that is most

realistic where –

(i)

one of the passports is issued by Malta and the other by a specified

territory;

(ii)

one of the passports is issued by Malta and the other by a territory

that is not a specified territory;

(iii)

both passports are issued by specified territories;

(b)

the paying agent should consider the specified territory for residence

purposes where one of the passports was issued by a specified territory

and the other was issued by a territory that is not Malta or a specified

territory.

3.5.2

Introduced business

The post-1 January 2004 rules apply where a new reportable individual is

introduced to a paying agent on or after 1 January, 2004.

If a reputable institution certifies that it has completed the identification and

residence procedures and is able to provide the required post-1 January, 2004

information and supporting evidence (that is, a copy of the documents seen), the

paying agent does not need to repeat identity and residence checks. However, if

the paying agent comes across any information that casts doubt on the

information received, he would be expected to take reasonable steps to ensure

the information was accurate.

A “reputable institutution” for this purpose includes Maltese and EU regulated

intermediaries. A non-EU regulated intermediary could also be a reputable

institution for this purpose if one could place reliance on that intermediary for

anti-money-laundering purposes.

4. Paying agents

4.1

Persons qualifying as paying agents

A “paying agent” means an economic operator established in Malta who, in the

course of a business or profession, makes interest payments or secures the

payment of interest to individuals (relevant beneficial owners) or residual entities

in specified territories [S.D. Art. 4(1)]. The paying agent is always ‘the last link in

the payment chain’ before the beneficial owner or residual entity and is the

person that actively initiates a payment directly to a beneficial owner or residual

entity, or, if different, initiates a payment in accordance with his or its instructions.

Thus it is clear that the provisions of the Savings Directive impose obligations on

a number of economic operators such as banks, custodians, certain financial

institutions and financial dealers, businesses and stockbrokers. These provisions

may also apply to those who hold or administer money debts and investments in

collective investment funds on behalf of individuals or residual entities in a

professional capacity such as accountants, lawyers, trustees or nominee

companies.

These obligations do not extend, however, to foreign branches of economic

operators established in Malta. If such foreign branches are situated in a

specified territory, they may constitute paying agents in that specified territory.

Similarly, a Maltese branch of an economic operator established abroad, whether

in a specified territory or in another territory, may constitute a paying agent in

Malta.

4.2

Residual entities

A “residual entity” means an entity established in Malta or in a specified territory

(essentially a body of persons or an organisation but not an individual) which is

not –

(a) a legal person (e.g. a company or other corporate body) [S.D. Art.

4(2)(a)];

(b) taxed under the general arrangements for business taxation (e.g. a

partnership) [S.D. Art. 4(2)(b)];

(c) a UCITS or an Article 4(3) UCITS [S.D. Art. 4(2)(c) and Art. 4(3)].

For the purposes of the Savings Directive, certain Swedish and Finnish entities

(which are normally regarded as legal persons) are treated as residual entities

[S.D. Art. 4(5)]. These entities are –

(i)

in Finland, “avoin yhtiö (Ay)” and “kommandittiyhtiö (Ky)/öppet bolag”

and “kommanditbolag”

(ii)

in Sweden, “handelsbolag (HB)” and “kommanditbolag (KB)”.

4.3

Article 4(2) paying agents

An “Article 4(2) paying agent” means a residual entity which is established in

Malta and which has received an interest payment for the bene fit of a beneficial

owner [S.D. Art. 4(2)].

An Article 4(2) paying agent is therefore a residual entity which receives (not

pays) interest and which has a responsibility similar to those of a paying agent for

securing interest payments on behalf of a beneficial owner.

The classification as an Article 4(2) paying agent is not a matter of choice for a

residual entity. However, a residual entity which is an Article 4(2) paying agent

may apply to be treated as a UCITS (‘undertaking for collective investment in

transferable securities’) for the purposes of the Savings Directive [S.D. Art. 4(3)].

This means that it will be treated as a paying agent rather than as an Article 4(2)

paying agent for the purposes of the Savings Directive.

4.4

Election for a residual entity to be treated as a UCITS

If a residual entity that is an Article 4(2) paying agent wishes to be treated as a

UCITS for the purposes of the Savings Directive, it should write to the Director,

International Taxation at the address shown in paragraph 9.6.1.

The letter should include the following information –

4.4.1 the name and address of the residual entity;

4.4.2 where the application is sent on behalf of a residual entity, the name,

address, telephone number and position within the residual entity of the

person submitting the application;

4.4.3 a statement that the entity

(a) is established in Malta;

(b) is a residual entity;

(c) wishes to be treated as a UCITS for the purposes of the regulations;

4.4.4 a signed and dated declaration by the person making the application that

the information in the letter is to the best of his knowledge complete and

correct.

The Commissioner of Inland Revenue will issue a certificate which will be

effective from a specified date and valid until it is revoked. The certificate can be

revoked at the request of the residual entity.

4.5

Persons not qualifying as paying agents

A person is not a paying agent in relation to a specific payment for the purposes

of the Savings Directive if –

4.5.1 the payment made is not an interest payment (See section 6.); or

4.5.2 the interest payment is not made in the course of a business or

profession; or

4.5.3 the person to whom the interest payment is made is not the beneficial

owner or a residual entity.

4.6

The Case of Trustees and Personal Representatives

Trustees, personal representatives and other persons with similar roles in Malta

can be paying agents if they are acting as such in a business or professional

capacity. A professional person acting on behalf of trustees or personal

representatives may be a paying agent if he receives interest or makes interest

payments on their behalf.

In general, a professional trustee or personal representative qualifies as a paying

agent if a beneficiary of the trust or estate is absolutely entitled to the interest as

it arises (and that beneficiary is a beneficial owner). In practice, this means that

the trustee of a trust will qualify as a paying agent where the trust is such that the

beneficiary has absolute entitlement to the investments of the trust or to any

interest arising from them, either for the whole duration of the trust or for a

specified period of time. In the case of professional personal representatives, this

means that the property in the estate has now vested in the legatees.

A trustee in receipt of an interest payment in relation to a discretionary trust does

not qualify as a paying agent and any distribution by the trustee of a discretionary

trust is not a payment of interest.

Individual trustees or executors in Malta who are not acting in a business or

professional capacity cannot be paying agents. They cannot be Article 4(2)

paying agents as they are individuals.

5. Competent Authority

For the purposes of the Savings Directive, “competent authority” in Malta means

the Commissioner of Inland Revenue.

6. Interest Payments

6.1

Effecting interest payments

An interest payment is made on a payment of interest to another person, or if a

payment of interest is secured for another person. A payment is made by paying

a sum of money owed to or on behalf of another person. A payment is secured if

a sum of money is received by or collected on behalf of another person.

The making or securing of an interest payment requires a significant active

responsibility for ensuring that the payment is made or secured. It is necessary to

have more than a simple passive or supporting role to be a paying agent. In

particular, banks, other financial institutions or other businesses which have a

role in the payment process are not regarded as making a payment if their role is

essentially passive (they act on instructions from others) or auxiliary (they merely

provide services to help the paying agent). Therefore, a bank or similar institution

does not make a payment merely by issuing or sending a cheque, or arranging

for the electronic transfer of funds on behalf of one of its customers. Equally, a

bank or similar institution does not secure a payment merely by clearing a

cheque, arranging for the clearing of a cheque, or receiving an electronic transfer

of funds on behalf of one of its customers.

6.1.1

Examples of paying agents who make interest payments

Persons who make interest payments can include –

6.1.1.1

debtors (in a business rather than a private capacity) themselves;

6.1.1.2

persons who are responsible for making interest payments on behalf of

debtors.

The first example in this category is that of a bank which has outsourced many of

its administrative or back-office functions to an independent contractor. The bank

takes full responsibility for everything that the contractor does and the bank’s

customers are not aware of the contractor’s role or of the fact that the staff with

whom they communicate are employees of the contractor rather than the bank.

The bank in this case is the paying agent. The outsourcing contractor provides

services to the bank but has no responsibility for making interest payments.

The second example in this category is where an issuer of bonds or debentures

has appointed a specialist registrar which is responsible for maintaining all the

records of the bond holders. The specialist registrar also makes the interest

payments to the bond holders using funds provided by the issuer. These funds

are under the control and ownership of the specialist registrar before payment is

made. The specialist registrar is in this case the paying agent. The issuer has

outsourced both essential administrative services and the responsibility for

making interest payments.

6.1.2

Examples of paying agents who secure savings income payments

Persons who secure savings income payments can include –

6.1.2.1

professional nominees and nominee companies;

6.1.2.2

professional persons (such as lawyers or stockbrokers) acting for

beneficial owners or residual entities.

The first example in this category is where a trust company or professional

person is appointed to act as bare trustee by a beneficial owner. The property

includes assets which produce interest payments. In this case, the trust company

or professional person is a paying agent. His responsibilities include the

collection of the interest payment due to the beneficial owner and of the proceeds

of sale or redemption when the assets concerned are sold or redeemed.

The second example in this category is where a stockbroker holds client money

and client assets which produce interest payments (either as interest or when

they are sold or redeemed) using a subsidiary company as nominee. The

stockbroker has permission from the Malta Financial Services Authority to

safeguard and administer investments for his clients and accepts full

responsibility for the safe custody of the assets by the subsidiary company. The

stockbroker is, in this case, the paying agent. He takes responsibility for securing

the interest payment due to his clients and has full control over the subsidiary

company which formally holds the client’s property.

6.2

Categories of interest payments

For the purposes of the Savings Directive, an “interest payment” means broadly

any income which is, contains or is derived from interest. Other types of income

(e.g. company dividends, pensions, rents, trading profits or employment income)

are not considered to be interest payments even where they are derived from

investments that have been made. Interest accumulated or rolled-up in some

way in the disposal proceeds of certain savings instruments also constitutes an

interest payment. Capital gains are not an interest payment. However, capital

gains and other types of income may constitute an interest payment if they are

included in a payment where it is not possible to isolate the amount of interest in

a larger payment.

6.2.2

Interest and money debts [S.D. Art. 6(1)(a)]

All interest earned on debts derived from the lending of money (whether or not

the relevant debt claim is secured by mortgage and whether or not it carries a

right to participate in the debtor’s profit) is included as an interest payment. This

includes interest on bank accounts as well as interest on all types of debt

securities (such as government securities, corporate bonds and debentures).

For the purposes of the Savings Directive, the term interest also includes -

6.2.2.1

premiums and discounts derived from money debts; and

6.2.2.2

prizes (including premium bond prizes) attributable to money debts.

An interest payment does not include any income (including any interest) which

does not arise from a money debt. Examples of payments which are not an

interest payment include –

6.2.2.3

dividends on ordinary shares in a company (unless the company is a

collective investment fund);

6.2.2.4

dividends from preference shares;

6.2.2.5

pensions, annuities and payouts from insurance policies.

There are two types of debt which do not count as money debts for the purposes

of the Savings Directive (and so do not produce interest payments even where

they give rise to interest) –

6.2.2.6

debts which do not arise from a transaction for the lending of money

(for instance where there is a late payment and compensation interest

is paid); and

6.2.2.7

certain debt securities which already existed before 1 March 2001 –

referred to in these guidelines as “Article 15 securities” (see next

paragraph).

Debts which do not arise from a transaction for the lending of money include any

debts arising from ordinary commercial or private transactions to purchase

goods, services or other assets (e.g. land). The main consequence of this

exclusion is that interest on late paid trade debts does not constitute an interest

payment. Penalty charges on late paid debts are also excluded from being an

interest payment.

Client money (whether in designated or undesignated accounts) and collateral

deposited in the course of transactions in financial (and other) markets are

money debts which arise from the lending of money. Interest on such sums

therefore constitutes an interest payment.

6.2.3

Article 15 securities [S.D. Art. 15]

Certain negotiable debt securities are not treated as money debts if they meet

certain conditions for the duration of a transitional period. These securities

(“Article 15 securities”) do not qualify as money debts for all purposes of the

Savings Directive. Interest, premiums and discounts derived from these bonds do

not constitute an interest payment and investment in these bonds is not taken

into consideration in determining whether the relevant thresholds have been

passed in relation to certain income derived from collective investment funds.

A security will be an Article 15 security if –

6.2.3.1

it was first issued before 1 March 2001 or the prospectus was first

approved by the appropriate regulatory authority before that date; and

6.2.3.2

no further issue was made on or after 1 March 2002.

If the bond is a government bond (or issued by a related public authority or an

international organisation – see Appendix 2 to these Guidelines) and a further

issue is made on or after 1 March 2002, the whole of the issue (whether made

before, on or after 1 March 2002) is not an Article 15 security. The whole issue of

the bond is a money debt. If the bond is issued by another type of issuer (e.g. a

commercial company) and a further issue is made on or after 1 March 2002, only

the part of the issue made on or after 1 March 2002 is not an Article 15 security.

This part of the bond issue is treated as a money debt; the rest of the issue

(made before 1 March 2002) is not a money debt.

The transitional period will end no later than 31 December 2010. If a paying

agent cannot ascertain whether or not a security is a Article 15 security, he

should assume that it is not i.e. it should be treated as a money debt in the

normal way.

6.2.4

Accrued and capitalised interest [S.D. Art. 6(1)(b)]

For the purposes of the Savings Directive, an interest payment is considered also

to have been made when a money debt is sold to a paying agent (or an Article

4(2) paying agent) or redeemed by the debtor. Interest added to an account with

a bank when the account is closed is interest in the normal way and treated as

such under the Savings Directive. Accrued interest, premiums and discounts paid

out at the redemption of securities by the issuer, or included in part of the price

paid by a third party purchaser at sale before redemption also constitutes an

interest payment for the purposes of the Savings Directive.

In this respect, economic operators who purchase interest-bearing securities

from relevant payees or residual entities in specified territories or Maltese agents

acting for the seller (e.g. stockbrokers) could qualify as paying agents for the

purposes of the Savings Directive. This could be the case even if these economic

operators are not the paying agent in respect of coupon payments made to the

relevant payee or residual entity selling the securities.

Accrued or capitalised interest is normally considered to arise if –

a security is sold to the paying agent cum dividend (with an entitlement

6.2.4.1

to the next coupon payment) - in those circumstances the price will

include an amount of accrued interest for the period from the last

coupon payment date to the date of transfer of the security;

6.2.4.2

it was purchased by the seller at a discount; or

6.2.4.3

the sale price includes, or takes account of, a premium that is paid on

redemption by the issuer.

If the security is purchased ex dividend (without an entitlement to the next coupon

payment), it will not normally be considered that there is any accrued interest in

the selling price and so there will be no interest payment.

6.2.5

Income from collective investment funds

The interest element included in distributions paid by collective investment funds

also constitutes interest payment for the purposes of the Savings Directive. Such

interest element includes premiums, discounts and other income treated as

interest on a money debt for the purposes of the Savings Directive. It does not,

therefore, include interest on Article 15 securities.

A “collective investment fund” means an investment which is –

(a) an UCITS;

(b) an Article 4(3) UCITS; or

(c) an undertaking for collective investment established outside the EU.

An “UCITS” means an ‘undertaking for collective investment in transferable

securities’ authorised in accordance with the UCITS Directive (Directive

85/611/EEC).

An “Article 4(3) UCITS” is a residual entity which has been given a certificate by

the specified territory in which it is established allowing it to be treated as an

UCITS.

Therefore, distributions and other payments derived from investment funds

established in Malta or in a specified territory constitute interest payments for the

purposes of the Savings Directive if they are made by UCITS (or Article 4(3)

UCITS). Distributions and other payments derived from investment funds which

are not UCITS or Article 4(3) UCITS in Malta or a specified territory does not

constitute interest payments under the Savings Directive.

A non-EU fund should only be regarded as an ‘undertaking for collective

investment’ if the following features are present –

(a) the fund is operated by way of business; and

(b) the investments in the fund are pooled; and

(c) the investors are not involved in its day-to-day management; and

(d) the fund is open-ended (i.e. its capital varies with investments and

withdrawals by investors) and not close-ended (i.e. its capital is fixed).

6.2.5.1 Collective investment funds: distributions [S.D. Art. 6(1)(c)]

For the purposes of the Savings Directive, a distribution by a collective

investment fund contains interest payment if the fund has invested assets in

money debts – excluding Article 15 securities. The Savings Directive specifies

that Member States may opt to exclude from the definition of interest payment

income distributed by collective investment funds that have invested less than

15% of their assets in money debts. The actual threshold for a collective

investment fund therefore, depends on the approach the specified territory in

which the fund is established has taken to implementing the Savings Directive.

For collective investment funds established in Malta, a distribution will contain

interest payment if the fund has invested any of its assets directly or indirectly

(via other collective investment funds or residual entities) in money debts –

excluding Article 15 securities [S.D. Art. 6(6) and Reg. 5(5) L.N. 267 of 2004].

In determining whether there are interest payments in a distribution, it does not

matter whether the distribution is paid out (e.g. a dividend cheque is sent to the

investor), reinvested by the purchase of additional units or shares or added

directly to accumulation units.

6.2.5.2 Collective investment funds: income realised at sale or redemption of fund units

[S.D. Art. 6(1)(d)]

An interest payment also arises when units or shares in a collective investment

fund are sold to a paying agent (or an Article 4(2) paying agent) or redeemed by

the fund. This is analogous to the inclusion of accrued interest in the sale or

redemption price of a security.

An interest payment only arises under this heading if the fund has invested more

than 40% (25% from 1 st January, 2011) of its assets directly or indirectly (via

other collective investment funds or residual entities) in money debts – excluding

Article 15 securities. This applies to all funds and does not depend on any

requirements of the country in which the fund is established.

However, all of the income accumulated by a fund is regarded as an interest

payment if the test is passed. The interest payment is not simply the part of the

accumulated income which would be considered to be interest payment under

the other headings – whether as interest paid, accrued or capitalised interest or

interest payment in distributions from other funds, but the total amount paid for

the relevant sale or redemption [Regulation 5(5) L.N. 267 of 2004].

6.2.5.3 Obtaining information about funds

Paying agents and Article 4(2) paying agents need information about the status

and composition of funds in order to decide whether or not a fund is a collective

investment fund, and if so, whether it passes the 40% test. He should normally

seek information about fund composition in the investment policy laid down in a

fund’s rules or instrument of incorporation (or similar constitutional document).

Failing that, paying agents should consider the actual composition of a fund’s

assets. This information may be obtained from a fund’s report and accounts or

similar published sources. This information can be assumed to remain current

until a further report and accounts become available. If the paying agent is

unable to ascertain whether or not a fund falls above or below the 40% threshold,

he should consider the rele vant threshold to be exceeded.

Paying agents are not expected to inspect original fund documents and may rely

upon copies or on information received in the normal way with other fund

documentation or literature. Paying agents may rely on information from

recognised industry sources (for example, feeds from established information

vendors) to decide whether the 40% test has been passed. This can include

simple statements that the test has been passed where it is clear that the

recognised industry source has obtained the necessary information about the

fund in question from a suitable primary source of information.

6.2.5.4 Funds investing in other funds

Where a fund invests in other funds, a calculation of indirect investment should

be carried out by taking the investment by the fund in question in each of the

other funds and multiplying that number by the percentage investment of the

other fund in money debts. The resulting products should be added to the direct

investment in money debts and the sum divided by the total assets of the fund to

establish the percentage invested in money debts. This percentage can then be

compared with 40% to decide whether the test has been passed.

Example

In the case of a fund which has invested Lm1 million directly in money debts and

Lm3 million in each of three other collective investment funds which in turn

invested 20%, 50% and 80% respectively in money debts, for the purposes of the

Savings Directive, the top level fund would be considered to have invested 55%

directly and indirectly in money debts ((Lm1m + 20%xLm3m + 50%xLm3m +

80%xLm3m)/Lm10m). The top level fund clearly passes the 40% test.

6.2.5.5 Umbrella Funds

A fund which invests in other funds is not the same as an umbrella fund. An

umbrella fund is a mechanism for bringing different, separate funds (usually

referred to as sub-funds) within a single fund organisation. For the purposes of

the Savings Directive, sub-funds are to be treated as separate collective

investment funds and therefore the 40% test is to be applied at the sub-fund

level.

7. Information reporting by the paying agent

7.1

Responsibilities of paying agents and Article 4(2) paying agents

Paying agents are required to notify the Commissioner of Inland Revenue if they

make interest payments to a beneficial owner or a residual entity in a specified

territory. Article 4(2) paying agents established in Malta are required to notify the

Commissioner of Inland Revenue if they receive interest payments for a

beneficial owner.

7.2

Initial notification

Paying agents and Article 4(2) paying agents who need to make a report must

notify the Assistant Director, Computer Section (at the address shown in

paragraph 9.6.2) within 14 days of the end of the tax year in which they make a

reportable payment, unless they have already notified the Commissioner of

Inland Revenue in a previous year. Following the said initial notification, the

Commissioner of Inland Revenue shall issue a registration certificate which will

include a Paying Agent Code.

Once the Commissioner of Inland Revenue has been so notified, a report of

interest payments needs to be submitted to the Commissioner of Inland Revenue

by 28 th February of the year immediately following the year in which the interest

payments were made [Reg. 5(3) L.N. 267 of 2004].

If the paying agent has notified the Commissioner of Inland Revenue but has no

interest payments to report for a particular year, he must make a NIL report.

If the paying agent’s business changes and he ceases to make reportable

interest payments, he should notify the Assistant Director, Computer Section (at

the address shown in paragraph 9.6.2).

7.3

Period to be covered by the report

Reports made during a particular year will cover all of the reportable interest

payments made during the previous calendar year. The period specified will

cover the twelve months January to December.

7.4

Information to be reported

Following the initial notification, a paying agent (including an Article 4(2) paying

agent) is required to report to the Commissioner of Inland Revenue interest

payments made to beneficial owners resident in a specified territory. The

reporting obligations under the Savings Directive apply only to those beneficial

owners whose country of residence is a territory specified in these guidelines. A

list of the specified territories is at appendix 1.

The reportable details for each interest payment are

(i)

details about the paying agent as follows –

(a) own name, address and paying agent code;

(b) whether the paying agent is an Article 4(2) paying agent in

relation to the particular interest payment;

(ii)

details about the beneficial owner as follows -

(a) For individuals with whom the paying agent has contractual

relations that began before 1 January, 2004 the reportable

details about the beneficial owner are –

(1) name;

(2) address; and

(3) country of residence.

(b) For individuals with whom the paying agent has contractual

relations that began on or after 1 January, 2004 and for

individuals where there are no contractual relations, the

reportable details about the beneficial owner are –

(1) name;

(2) address;

(3) country of residence (according to the Savings Directive),

and either

(4) the Tax Identification Number (TIN); or

(5) (if there is no TIN, or if the TIN is unavailable) date and

place of birth.

(iii)

details about the interest payment as follows -

(a) the category of interest payment;

(b) the account number or other information identifying the money

debt or other instrument;

(c) the amount of the interest payment. This amount is the total

amount of interest or income and the total amount of the

proceeds from sale, redemption or refund;

(d) the currency in which the payment was reported.

Paying agents (but not Article 4(2) paying agents) have to report payments they

make to Article 4(2) paying agents and to residual entities in specified territories.

There are no requirements to verify the identity and place of establishment of a

residual entity and the reportable details do not depend on whether a contractual

relationship with the entity was in place before or after 1 January 2004. The

reportable details are-

(a)

the paying agent’s own name, address and paying agent code;

(b)

the name and address of the Article 4(2) paying agent (including

where available the relevant paying agent code) or residual entity

(this must include the country in which the residual entity is

established);

(c)

details about the interest payment as in (iii) above.

Reports are required for all interest payments within the meaning of the Savings

Directive irrespective of whether these payments would be taxed in Malta, the

way in which they would be taxed in Malta or the way in which they would be

taxed in the country of residence of the beneficial owner or residual entity.

In general, PO box, c/o and hold mail addresses are not normally acceptable for

reporting purposes. They may be acceptable in the case that it is the only

address held by the paying agent and there is a pre-1 January, 2004 contractual

relationship with the individual. For post-2003 contractual relationships, these

may only be acceptable if the relevant address constitutes a residential address

for the area in which the individual lives and would allow such individual to be

traced.

7.5

Reporting particular interest payments

7.5.1 Interest payments to trustees of Malta trusts who are resident in specified

territories

A trust constituted under the law of Malta (Malta trust) is not an entity and the

persons to whom the provisions of the Savings Directive may apply are the

trustees. Therefore, if an interest payment is paid to trustees of a Malta trust who

are individuals resident in a specified territory, the paying agent should report the

trustees’ details, unless the trustees fulfil any of the following criteria –

(a) they are paying agents themselves - professional trustees may well be

paying agents themselves, in which case payments to them are not

reportable;

(b) the trustees have provided information that they are acting on behalf of

another individual (the beneficiary) who is a beneficial owner and have

provided the identity details - in this case the paying agent should report

the details of the beneficiary concerned;

(c) the paying agent has reasonable grounds to believe that the trust is a bare

trust (i.e. a trust where the beneficiary has absolute entitlement to the

investments of the trust or to any interest arising from them, either for the

whole duration of the trust or for a specified period of time) - in this case

the paying agent should take reasonable steps to establish from the

trustees who is the beneficial owner.

For post- 2003 trustee accounts, the paying agent should establish the status of

the trust at the outset. For trustees with whom the paying agent has pre-1

January 2004 contractual relations, one should take such action as is

reasonable.

In any case, if he is unable to obtain the relevant details for the beneficiary, the

paying agent should report the trustees’ details. Where there are more than one

trustee resident in specified territories, unless proof is otherwise available, it is to

be assumed that each of the trustee has a right for an equal share of the relevant

interest payment.

7.5.2

Interest payments by trustees of Malta trusts

If a trustee is acting in a professional capacity one may be a paying agent.

Interest payments received by a trustee (who is not acting in a professional

capacity) may be reportable if they are secured for the immediate benefit of a

beneficial owner or residual entity in a specified territory. Usually this means that

the individual or residual entity concerned has a right to the income in the form it

is received by the trust. This is the case for bare trusts.

Distributions made by the trustees of discretionary or accumulation and

maintenance trusts are not interest payments and are not reportable.

7.5.3

Foreign trusts

The status of a foreign trust is determined by the law of the country in which it is

established and the paying agent needs to apply the normal rules to determine

whether the person to whom the payment is made is a beneficial owner or a

residual entity in a specified territory, and whether a report is required. He should

only treat a foreign trust as a residual entity if he is unable to obtain official

evidence that it falls into one of the categories which are excluded from being

residual entities.

Similarly, the normal rules will apply to determine whether a payment from a

foreign trust is an interest payment.

7.5.4

Interest payments to deceased investors

Interest payments which were paid to deceased persons before the date of their

death is reportable in their name and at the last known address, provided the

deceased was a beneficial owner.

Interest payments made to personal representatives are reportable by a paying

agent if one or more of the personal representatives is a beneficial owner. The

paying agent is not required to identify the beneficiary. Interest paid throughout

the period of the administration or executry is reportable.

A paying agent does not need to report interest payments made to personal

representatives if he has been informed that the personal representatives are not

the beneficial owners, and –

•

they are acting on behalf of another individual who is the beneficial owner

and where they also provide the name and address of the individual

(verified as required under the Savings Directive)

•

they are acting on behalf of a residual entity and where they provide the

name and address of the entity.

7.5.5

Estates of deceased persons: interest payments made by personal representatives

Professional personal representatives (e.g. lawyers) may be paying agents and

should make a report if they make interest payments to beneficial owners or

residual entities in specified territories. Personal representatives who are not

acting in a professional capacity are not required to make a report.

Professional personal representatives should report interest payments once the

assets which gave rise to the interest payment have been assigned to a

beneficial owner or residual entity in a specified territory. Only interest payments

made from the date the assets were assigned are reportable. Interest earned on

money in the estate during the administration or executry and distributed as part

of the residue is not reportable.

7.5.6 Reporting on Maltese partnerships where a partner is an individual resident in a

specified territory

Interest payments to Maltese partnerships are not reportable. Maltese

partnerships may, of course, be paying agents in their own right under the

relevant provisions of the Savings Directive.

7.5.7

Reporting on partnerships in specified territories

How a paying agent treats a partnership in a specified territory will depend on its

legal status in the country in which it is established. He should only treat a

partnership as a residual entity if he is unable to obtain official evidence that it

falls into one of the categories which are excluded from being residual entities.

7.5.8

Reporting on joint accounts and holdings

A paying agent should report the identity, residence and account information and

the total amount of interest payment attributable to each beneficial owner or

residual entity in a specified territory. Unless proof to the contrary is available, it

is to be assumed that an equal amount is attributable to each beneficial owner

and residual entity. A paying agent may, however, opt to report the total amount

of the interest payment in relation to the joint account or holding against each of

the beneficial owners or residual entities.

7.5.9

Designated client accounts

If a paying agent is contractually required to make an interest payment to a

professional firm or an individual acting in a professional capacity, he may be

asked to send the payment directly to that firm’s or individual’s client, or transfer

the funds directly to a bank account designated in the name of the client. In these

cases, he sho uld still regard the payment as made to the professional firm or

individual concerned and not to the client. This may mean that the firm or

individual concerned is the paying agent.

If a paying agent is contractually required to make a payment to an individual

who is not acting in a professional capacity and who requests that the payment

be sent directly to another individual or to transfer the funds to a bank account

designated in the name of another individual, he should also regard the payment

as made to the first individual. However, this may be information that the first

individual is not the beneficial owner [S.D. Art. 2(2)].

7.5.10 Individuals who change address or residence during the year

When an individual moves residence during the year, there may be more than

one country of residence and address for the same individual for the reporting

period.

As long as a paying agent reports consistently, he may report either the address

and country of residence at the time the interest payment is made, or the address

and country of residence at the end of the reporting year (31 December).

Where a beneficial owner who is not resident in a specified territory changes

address from a territory that is not a specified territory to a specified territory, the

paying agent needs to, within 10 days from being first notified of the such change

in address, take the necessary action in order to be able to determine whether

the change in address also means a change of residence. Thus in the case of

contractual relations started –

(a) before 1 January, 2004 the paying agent should update his records in

accordance with the provisions of paragraph 3.3.1 by requesting the

individual to confirm whether his or her residence has changed or not;

(b) on or after 1 January, 2004 with persons holding a passport or official identity

card issued by a specified territory, the paying agent must determine whether

the certificate of residence referred to in paragraph 3.3.2 is still valid.

In both the above cases, confirmation of a change in residence should be

obtained by the paying agent on the pro forma letter in Appendix 3 – hereinafter

referred to as the “Appendix 3 letter”. Where the individual does not give the

requested information to the paying agent in this regard (i.e. whether the change

in address means a change in residence), it shall be considered that reasonable

business practice has been followed by the paying agent if at least two requests

for such information have been made. Where such attempts to obtain the

necessary information or documents (e.g. updated tax residence certificate in the

case of contractual relations started on or after 1 January, 2004) fail, the paying

agent shall consider that the change in address signifies a change in residence

and shall inform the individual accordingly.

Where the beneficial owner is late in informing the paying agent of a change in

residence or where attempts to update one’s records have failed, such that the

relevant interest payments cannot be reported in time (i.e. by the 28 th February of

the year immediately following the year in which the interest payments were

made) the paying agent must within the earlier of –

(1) 14 days of receiving the duly filled-in Appendix 3 letter; or

(2) 90 days of the sending of the first letter in the attempt to update one’s record,

submit to the Commissioner of Inland Revenue the following information

(a) name, current address and country of residence of beneficial owner;

(b) address and country of residence prior to change in residence;

(c) date of change in residence;

(d) date when the paying agent became aware of the change in residence;

(e) the information specified hereunder which the paying agent has in hand at the

time such agent became aware of the change in residence –

(i)

reportable account numbers or other information identifying reportable

money debts or other relevant instruments;

(ii)

the relevant categories of interest payment.

7.5.11 Whereabouts unknown

If an interest payment is being reported before the beneficial owner went

‘whereabouts unknown’, the report is to be made on the basis of his last known

address. No report is to be made if the paying agent is unable to make the

interest payment because the investor’s whereabouts are unknown. If

subsequently, the investor’s new address is discovered and the outstanding

interest payment is made, that payment is to be reported in the year the payment

is made with the new address.

7.5.12 Closure of account.

If an account was closed during the year then the paying agent should report the

interest payment if there was a reportable address at the date the account was

closed. Or, if the paying agent holds a later address on his system, it can be

used as the basis for reporting, assuming the address was properly verified

under the appropriate rules.

8. Elimination of Double Taxation

A beneficial owner who is a resident of Malta for the purposes of the Income Tax

Act and who receives an interest payment that was subject to withholding tax in

terms of Article 11 of the Savings Directive, may claim a tax credit of tax so

withheld.

Such a claim may be made in accordance with the provisions of articles 80 to 88

of the Income Tax Act i.e. the unilateral relief provisions.

Notwithstanding the total amount of credit allowed under the provisions of

article 84 of the Income Tax Act, the tax credit claimed may be equal to the

amount withheld [Reg. 5(6) L.N. 267 of 2004].

A claim for refund of the excess amount of tax withheld to the beneficial owner

over that charged in Malta may be claimed under the provisions of article 48 of

the Income Tax Management Act.

9. Administration Issues

9.1

Application of the Savings Directive

In accordance with a Council Decision of 19 July, 2004 on the date of application

of Directive 2003/48/EC on taxation of savings income in the form of interest

payments 4 , the provisions of the Savings Directive will not begin to take effect

until 1 st July, 2005. This effectively means that paying agents need to commence

reporting in the year 2006 for data relating to the period 1 st July, 2005 to 31 st

December, 2005.

9.2

Sub-contracting the obligations under the Savings Directive

A paying agent may sub -contract both the task of completing and updating the

identity and residence details and the preparation and submission of the report.

However, the legal responsibility to establish identity and residence and to

provide accurate and complete information remains with the paying agent. So, if

he decides to sub-contract the work, he will need to be satisfied that the entity

that has been sub -contracted has put adequate arrangements in place.

If the paying agent sub-contracts the preparation and submission of the report,

he is to make sure that the third party who submits the report uses the correct

(the paying agent’s) reference.

There are penalties for supplying incorrect information and responsibility for

Council Decision of 19 July, 2004 on the date of application of Directive 2003/48/EC on taxation of savings

income in the form of interest payments (2004/587/EC), OJ No. L 257, 04.08.2004, p.7.

collecting verifying and reporting the necessary information is of the paying

agent. If it is discovered (for example at audit) that the information reported is

incorrect the action taken will depend on the circumstances of the case.

However, account will be taken of whether the paying agent can show that

reasonable steps were taken to ensure that the sub-contractor had adequate

procedures in place.

9.3

Record-keeping and retaining evidence

9.3.1 Documentary evidence needed to be kept to demonstrate that identification and

residence obligations have been performed

A paying agent must be able to produce, upon a request by the Commissioner of

Inland Revenue, a copy of the documents that were used to verify the identity

and residence of individuals. He must retain these documents for at least 5 years

after the end of the tax year in which the account was closed (or the security has

been sold).

9.3.2

Evidence to be kept when accepting an introduced individual

A paying agent must be able to produce, upon request by the Commissioner of

Inland Revenue, the documents used by the introducer of the business to verify

the identity and residence of individuals and its certification that it has carried out

the identity and residence checks to the required standard. These documents

must be retained for at least 5 years after the end of the tax year in which the

account was closed (or the security has been sold).

9.4

Data Protection Act, Cap. 440

In accordance with Regulation 5(4)(a) of L.N. 267 of 2004, a paying agent is

required to provide the Commissioner of Inland Revenue with information as

prescribed by the Savings Directive, and as explained in these guidelines.

Consequently, non-disclosure provisions as stipulated under article 7 of the Data

Protection Act, Cap. 440 do not apply by virtue of Article 23 (1) (e) and (f) of the

same Act. Any additional information reported for the purposes of the Savings

Directive beyond that prescribed, would not be covered by the exemption

contained in Article 23 of the Data Protection Act .

9.5

Penalties

Paying agents who fail to notify the Commissioner of Inland Revenue may be

subject to the provisions of Part IX of the Income Tax Management Act and to

any applicable administrative penalties which may be contemplated under the

Income Tax Acts.

There may be occasions where a paying agent tries but fails to obtain the

required information from the beneficial owner in time to make the relevant

report. If a paying agent has a reasonable excuse for not having done what he

was required to do, he cannot be considered to have failed to comply and

therefore no penalty could apply.

In order to have a 'reasonable excuse' for not reporting the information a paying

agent must be able to show that reasonable steps were taken to obtain it. What

is reasonable will always depend on the circumstances of the case, but it is

normally expected that a paying agent is able to produce evidence of at least two

requests for the information.

9.6

Contacts

9.6.1 Questions of interpretation

For advice regarding the interpretation of the provisions of the Savings Directive,

Regulation 5 of L.N. 267 of 2004 or of these guidelines, please contact

Director, International Taxation

International Tax Unit

Inland Revenue Department

9.6.2. Questions of administration

For advice about making reports, please contact

Assistant Director, Computer Section

Inland Revenue Department

Appendix 1 – Specified territories as at 1 May 2004

Anguilla

Aruba

Austria

Belgium

British Virgin Islands

Cyprus

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Guernsey

Hungry

Ireland

Isle of Man

Italy

Jersey

Latvia

Lithuania

Luxembourg

Montserrat

Netherlands

Netherlands Antilles

Poland

Portugal

Slovak Republic

Slovenia

Spain

Sweden

Turks and Caicos Isles

United Kingdom

Appendix 2 – List of related public authorities and international

organisations as at 1 May 2004

Belgium

Vlaams Gewest (Flemish Region)

Région wallonne (Walloon Region)

Région bruxelloise/Brussels Gewest (Brussels

Region)

Communauté française (French Community)

Vlaamse Gemeenschap (Flemish Community)

Deutschsprachige Gemeinschaft (German-speaking

Community)

France

La Caisse d.amortissement de la dette sociale

(CADES) (Social Debt Redemption Fund)

L.Agence française de développement (AFD)

(French Development Agency)

Réseau Ferré de France (RFF) (French Rail

Network)

Caisse Nationale des Autoroutes (CNA) (National

Motorways Fund)

Assistance publique Hôpitaux de Paris (APHP)

(Paris Hospitals Public Assistance)

Charbonnages de France (CDF) (French Coal

Board)

Entreprise minière et chimique (EMC) (Mining and

Chemicals Company)

Greece

National Telecommunications Organisation

National Railways Organisation

Public Electricity Company

Italy

Regions

Provinces

Municipalities

Cassa Depositi e Prestiti (Deposits and Loans Fund)

Latvia

Pašvaldibas (Local governments)

Poland

gminy (communes)

powiaty (districts)

województwa (provinces)

zwiazki gmin (associations of communes)

powiatów (association of districts)

województw (association of provinces)

miasto stoleczne Warszawa (capital city of Warsaw)

Agencja Restrukturyzacji i Modernizacji Rolnictwa (Agency for

Restructuring and Modernisation of Agriculture)

Agencja Nieruchomosci Rolnych (Agricultural Property

Agency)

Região Autónoma de Madeira (Autonomous

Region of Madeira)

Região Autónoma dos Açores (Autonomous

Region of Azores)

Municipalities

mestá a obce (municipalities)

Železnice Slovenskej republiky (Slovak Railway Company)

Štátny fond cestného hospodárstva (State Road Management

Fund)

Slovenské elektrárne (Slovak Power Plants)

Vodohospodárska výstavba (Water Economy Building

Company)

Xunta de Galicia (Regional Executive of Galacia)

Junta de Andalucía (Regional Executive of

Andalusia)

Junta de Extremadura (Regional Executive of

Extremadura)

Junta de Castilla-La Mancha (Regional Executive

of Castilla-La Mancha)

Junta de Castilla-León (Regional Executive of

Castilla-León)

Gobierno Foral de Navarra (Regional

Government of Navarre)

Govern de les Illes Balears (Government of the

Balearic Islands)

Generalitat de Catalunya (Autonomous

Government of Catalonia)

Generalitat de Valencia (Autonomous

Government of Valencia)

Diputación General de Aragón (Regional Council

of Aragon)

Gobierno de las Islas Canarias (Government of the

Canary Islands)

Gobierno de Murcia (Government of Murcia)

Gobierno de Madrid (Government of Madrid)

Gobierno de la Comunidad Autónoma del País

Vasco/Euzkadi (Government of the Autonomous

Community of the Basque Country)

Diputación Foral de Guipúzcoa (Regional Council

of Guipúzcoa)

Diputación Foral de Vizcaya/Bizkaia (Regional

Council of Vizcaya)

Diputación Foral de Alava (Regional Council of

Alava)

Ayuntamiento de Madrid (City Council of

Madrid)

Ayuntamiento de Barcelona (City Council of

Barcelona)

Cabildo Insular de Gran Canaria (Island Council

of Gran Canaria)

Cabildo Insular de Tenerife (Island Council of

Tenerife)

Instituto de Crédito Oficial (Public Credit

Institution)

Instituto Catalán de Finanzas (Finance Institution

of Catalonia)

Instituto Valenciano de Finanzas (Finance

Institution of Valencia

International entities

European Bank for Reconstruction and Development

European Investment Bank

Asian Development Bank

African Development Bank

World Bank/IBRD/IMF

International Finance Corporation

Inter-American Development Bank

Council of Europe Social Development Fund

Euratom

European Community

Corporación Andina de Fomento (CAF) (Andean Development

Corporation)

Eurofima

European Coal and Steel Community

Nordic Investment Bank

Caribbean Development Bank

Appendix 3 –Pro Forma Letter of Notification of New Permanent Address

NOTIFICATION OF NEW PERMANENT ADDRESS FOR THE PURPOSES OF THE

EU SAVINGS DIRECTIVE

DATE

TO

FROM

(Surname)

(Name)

(Nationality) ................................................................................................

(Passport/I.D. Card No.)

I/We hereby inform you that with effect from ..........................................................my/our

permanent address has changed as follows

Previous Address

New Address

I/We hereby acknowledge that this is a notification of a change in residence for the

purposes of the EU Savings Directive and that, as a consequence of this change, interest

payments effected to me/us or secured for me/us by yourselves in respect of the

account(s) specified below will be reportable by you to the Maltese Tax Authorities in

terms of the European Union Savings Directive which Malta has adopted and the relevant

Regulations and Guidelines in relation thereto.

I/We confirm that the accounts listed below are all the accounts relevant for the purposes

of the EU Savings Directive held with you

To be filled in by Paying

Agent

CATEGORY

ACCOUNT NUMBER

ACCOUNT TYPE

CATEGORY

OF INCOME

INCOME

OF

CUSTOMER SIGNATURE(S)

TAX IDENTIFICATION NUMBER

To be filled in by Paying Agent

The undersigned declares that the above information is to the best of his/her

knowledge correct and complete.

Signature

Rubber Stamp

Name

Designation

Date