Tax Credit (Electronic Business) Rules, 2005 (electronicbusiness)

L.N. 333 of 2005

INCOME TAX ACT

(CAP. 123)

Tax Credit (Electronic Business) Rules, 2005

IN exercise of the powers conferred by articles 14(2) and 96 of the

Income Tax Act, hereinafter referred to as “the Act”, the Prime Minister

and Minister of Finance has made the following rules>-

(1) The title of these rules is the Tax Credit (Electronic

Business) Rules, 2005.

(2) These rules shall apply in respect of qualifying

expenditure incurred on or after the 1 st January, 2005.

(3) The equivalent of the benefits under the scheme shall

be an amount specifically appropriated in Government’s financial

estimates for a particular financial year.

In these rules, unless the context otherwise requires –

“allowable expenditure” has the meaning assigned to it in

rule 9<

“approved project” means a project approved in accordance

with rule 5, as subject to any conditions that may be applicable in

terms of rule 5(2)<

“company” means a company, as defined in the Act, that

qualifies as a small or medium-sized enterprise>

Provided that with respect to qualifying expenditure

incurred as from such date as the Minister responsible for finance

may prescribe, “company” shall also include a company as defined

in the Act that does not qualify as a small or medium sized

enterprise<

“content” means the presentation and interlinking of

information and data held in textual or graphical formats<

“the Corporation” means the Malta Enterprise Corporation<

“eligible developer” means a company that is mainly and

substantially engaged in the development, upgrading, maintenance

and integration of systems, internally designed or acquired, that

enable or facilitate the processing of business transactions over an

electronic medium between two third parties or the international

dissemination of content through electronically accessed media<

“eligible user” means a small or medium-sized enterprise

which carries on a trade, business profession or vocation and which

incurs or intends to incur qualifying expenditure for or in connection

with the development or acquisition of content, mainly resulting

in the sale of its tangible goods or services through business

transactions processed over a publicly accessible electronic

medium<

“maximum qualifying expenditure” has the meaning assigned

to it in rule 6<

“project period” means the period commencing on the earliest

date of commencement and ending on the latest date of completion

of the project in question as determined in terms of rule 7(1)(d)<

“qualifying company” means an eligible developer or an

eligible user<

“qualifying expenditure” means expenditure incurred in the

carrying out of an approved project for -

(i) the acquisition, construction, development or

improvement, by an eligible developer, of any immovable

property or industrial structure, including related labour costs

which are capitalised as part of the cost of such acquisition,

construction, development or improvement<

(ii) the acquisition of plant and machinery, excluding

motor vehicles, works of art, antiques and any assets whose

use is wholly or mainly of a decorative nature or whose cost

is related to their intrinsic value rather than to their specific

usefulness for a qualifying project<

(iii) the acquisition by an eligible developer of

intellectual property rights from third parties under open

market conditions the cost of which is amortisable<

“qualifying project” means a project carried out or to be carried

out by a qualifying company for the creation, development or

acquisition of systems of information and content referred to in

the definition of eligible developer.

(1) Subject to the other provisions of these rules, when a

qualifying company incurs allowable expenditure in the carrying out of

an approved project, it becomes entitled to claim a tax credit in

accordance with these rules.

(2) The said tax credit shall be in addition to and without

prejudice to the right of that company to a deduction, if any, that may

be allowable in respect of the said expenditure in accordance with the

provisions of article 14 of the Act.

(1) When a qualifying company incurs or intends to incur

qualifying expenditure in carrying out a qualifying project it may apply

to the Corporation for the approval of that project.

(2) An application under this rule shall be made on such

form as may be acceptable to the Corporation and shall>

(a) provide such particulars of the applicant as are necessary

to determine whether it qualifies or not as a small and medium

sized enterprise<

(b) indicate the line of economic activity to which the project

is linked and in respect of which the company proposes to claim a

tax credit under these rules<

(c) describe the project, its purpose and the expected date

of its commencement and its duration<

(d) contain a description of each item of qualifying

expenditure that the applicant has incurred or intends to incur in

the carrying out of the project, which items shall be grouped

according to the categories of expenditure listed in the definition

of qualifying expenditure<

(e)

grant the authorisation referred to in sub-rule (3)<

(f) contain such other information, breakdowns and details,

and be accompanied by such documents and certifications as the

Corporation may require<

(g) be made by not later than three months prior to the

company’s tax return date for the year of assessment that

immediately follows the first year in which the company incurs

the expenditure to which the application refers.

(3) The authorisation referred to in sub-rule (2)(e) shall -

(a) grant to the Corporation and its officers access to any

premises or works as the Corporation may consider necessary in

order to ascertain any matter relevant to the approval of an

application and the right to a tax credit under these rules<

(b) authorise the Corporation to disclose to the

Commissioner any information and to pass on to the Commissioner

originals or copies of any documents and records that the

Corporation may have obtained in connection with the application.

(1) When the Corporation is satisfied that a project to which Approval of project.

an application made under rule 4 refers is a bona fide qualifying project

and that the application complies with the requirements of these rules,

it may approve the project and proceed to make a determination and

issue a letter of approval as provided in rules 6 and 7>

Provided that–

(a) the Corporation shall not approve any project after the

31 st December, 2008 or after such earlier date as the Corporation

may specify by means of a notice in the Gazette<

(b) the Corporation shall not approve a project whose

expected duration is more than thirty-six months.

(2) The Corporation may make the approval of a project

subject to such conditions as it may consider appropriate.

When the Corporation approves a project it shall determine Determination of

the extent to which, in its opinion, the expenditure referred to in the maximum

qualifying

application constitutes qualifying expenditure and is necessary and expenditure.

reasonable in the light of the purpose for which it is intended to be

incurred, and the amount so determined shall constitute the maximum

qualifying expenditure.

(1) In respect of every approved project the Corporation shall Letter of approval.

issue a letter of approval showing>

(a)

particulars of the applicant<

(b) a description of the project, with such conditions as the

Corporation may have considered appropriate pursuant to rule 5(2)<

(c) the maximum qualifying expenditure for each item of

expenditure, indicating the category under the definition of

“qualifying expenditure” in rule 2 to which each such item belongs<

(d) the maximum aggregate State aid intensity to which the

applicant is entitled<

(e) the earliest date by which the project must commence

and the latest date by which it must be completed<

(f) the shortest period for which the investment must be

retained in terms of rule 9(2)<

(g) the line of economic activity in respect of which the

project was approved<

(h) such other particulars as the Corporation may consider

appropriate.

(2) The Corporation shall deliver the letter of approval to

the applicant and a copy thereof to the Commissioner.

(3) The Corporation shall issue the said letter of approval

by not later than the company’s relative tax return date.

(1) Upon the completion of the approved project and not

later than sixty days therefrom, the company shall deliver to the

Corporation a certificate drawn up by a person who is recognised by

the Corporation as competent for this purpose, showing>

(a)

the date of completion of the project<

(b) the amount of allowable expenditure, indicating the

applicable description under the definition of “allowable

expenditure” in rule 2 to which each item belongs<

(c) whether, where applicable, the conditions that may have

been made applicable to the project in terms of rule 5(2) have

been observed.

(2) Where the approved project includes qualifying

expenditure listed under paragraph (i) of the definition of “qualifying

expenditure” in rule 2, the certificate referred to in sub-rule (1) shall be

accompanied by a statement written by the architect under whose

direction or supervision the works were carried out, confirming that the

expenditure was incurred in the carrying out of the project as approved.

(3) The company shall, within the time limit set out in sub-

rule (1), deliver a copy of the certificate and, where applicable, of the

accompanying statement, to the Commissioner.

(4) The Commissioner may, after receiving a copy of the

certificate, request an independent opinion from the Corporation or any

other competent technical person regarding the contents thereof.

(1) Expenditure shall constitute allowable expenditure if and Allowable

expenditure.

to the extent that it meets all the following conditions>

(a) it is qualifying expenditure actually incurred by a

company in carrying out an approved project and is not reimbursed

to or otherwise recoverable by it<

(b) it is an item of expenditure to which a letter of approval

issued under rule 7 refers, which does not exceed the maximum

qualifying expenditure for that item, and in respect of which any

conditions that may have been made applicable in terms of rule

5(2) have been satisfied<

(c) it was incurred during the project period and for the

purpose for which the project was approved<

(d) it is correctly, clearly and separately recorded in the

records of the company and supported by documentary evidence.

(2) The investment represented by allowable expenditure

shall be retained within the company for at least five years after the

termination of the project period.

(3) If an investment or part thereof is not retained within

the company for the period referred to in sub-rule (2), the amount of

expenditure corresponding to that investment or part thereof, as the

case may be, that is not so retained shall be deemed to have never

constituted allowable expenditure and the provisions of rule 11 shall

apply.

(1) The tax credit due for a year of assessment under these Calculation of the

rules shall be equivalent to the following percentages of the allowable tax credit.

expenditure incurred in the year immediately preceding that year of

assessment –

(a) in the case of expenditure incurred by an eligible

developer>

(i) if it relates to capital expenditure for the acquisition

of information technology hardware and software, 17.5%<

(ii) if it relates to other capital expenditure, 10.5%<

(b) in the case of expenditure incurred by an eligible user,

10. (1) Il-kreditu ta’ taxxa dovut g[al sena ta’ stima ta[t dawn

ir-regoli jkun daqs il-perçenta;;i li ;ejjin ta’ l-infieq permissibbli minfuq

fis-sena li ta[bat minnufih qabel dik is-sena ta’ stima –

(a)

f’ka] ta’ infieq li jsir minn ]viluppatur eli;ibbli>

(i) jekk ikun dwar infieq kapitali g[all-akkwist ta’

hardware u software ta’ teknolo;ija ta’ l-informatika, 17.5%<

(ii) jekk ikun dwar infieq kapitali ie[or, 10.5%<

(b) f’ka] ta’ nfieq li jsir minn kumpannija eli;ibbli, 17.5%.

(2) Minkejja d-disposizzjonijiet tas-subregola (1), il-kreditu

ta’ taxxa dovut lil kumpannija dwar pro;ett approvat ma g[andux

jaqbe], fit-total tieg[u -

(a) fil-ka] ta’ intrapri]a ]g[ira jew ta’ daqs medju, [amsin

fil-mija ta’ l-ispi]a totali tal-pro;ett in kwistjoni u konformament

ma’ l-Artiklu 4 tar-Regolament tal-Kummissjoni (KE) Nru 70#2001

dwar l-applikazzjoni ta’ l-Artikli 87 u 88 tat-Trattat tal-Komunità

Ewropea g[al g[ajnuna li ting[ata mill-Istat lil intrapri]i ]g[ar u

ta’ daqs medju, kif emendat sussegwentement< u

(b) fil-ka] ta’ kull kumpannija o[ra, 40% ta’ l-ispi]a totali

tal-pro;ett in kwistjoni, kalkolat b’referenza g[all-ekwivalenti ta’

l-g[otja netta>

I]da meta l-kumpannija in kwistjoni tkun [adet g[ajnuna mill-

Istat dwar nfieq mag[mul fit-twettiq tal-pro;ett b’mod li ma jkunx

dak provdut f’dawn ir-regoli, il-limitu msemmi fil-paragrafu (a)

jew (b), skond il-ka], g[andu jonqos bil-valur ta’ dik l-g[ajnuna>

I]da wkoll il-kumpannija g[andha tkun unikament

responsabbli g[all-korrettezza tal-kalkolu tat-tnaqqis imsemmi,

meta dan ikun japplika.

(3) Il-kreditu ta’ taxxa g[andu jing[ata b[ala tnaqqis mit-

taxxa li g[andha tit[allas fuq il-qlieg[ u l-profitti li jkunu ;ejjin biss

mill-attivitajiet li g[alihom ikun sar l-investiment li jirreferi g[alih il-

pro;ett approvat u ma jing[atax b[ala kreditu kontra taxxa li g[andha

tit[allas fuq qlieg[ u profitti minn xi g[ajn o[ra, u kull ammont ta’

kreditu ta’ taxxa dovut g[al xi sena ta’ stima li jibqa’ mhux maqtug[

g[al dik is-sena jista’ jittie[ed ’il quddiem u jitnaqqas mit-taxxa li jkollha

tit[allas fi snin sussegwenti fuq income minn dawk l-attivitajiet>

I]da kull parti tal-kreditu ta’ taxxa li tibqa’ mhux me[uda

sas-sena ta’ stima 2013 ma g[andhiex tittie[ed ’il quddiem u l-jedd

g[al kreditu ta’ taxxa dwaru jintilef.

(4) Meta kumpannija tikkwalifika, dwar sena ta’ stima, g[al

kreditu ta’ taxxa kemm ta[t l-Att dwar il-Promozzjoni ta’ Negozji kif

ukoll ta[t id-disposizzjonijiet ta’ dawn ir-regoli, hija g[andha tie[u l-

kreditu ta’ taxxa ta[t l-Att dwar il-Promozzjoni ta’ Negozji qabel ma

ssir xi tpaçija dwar il-kreditu ta’ taxxa ta[t dawn ir-regoli.

(5) Kreditu ta’ taxxa dovut skond dawn ir-regoli ma jo[loq

ebda jedd g[al [las lura.

11. (1) Fiç-çirkostanzi msemmija fir-regoli 9(3) il-kreditu ta’

taxxa in kwistjoni g[andu jit[assar jew ji;i kalkolat mill-;did, skond

il-ka].

(2) It-t[assir jew il-kalkolazzjoni mill-;did ta’ kreditu ta’

taxxa jo[loq obbligu tal-kumpannija li t[allas ammont ta’ taxxa, bi ]jieda

ma’ kull debitu ie[or ta’ taxxa, li jkun daqs it-tnaqqis fil-kreditu ta’

taxxa li jirrizulta mit-t[assir jew kalkolazzjoni mill-;did, u dak l-ammont

jitqies taxxa li g[andha tit[allas ta[t l-Att g[as-sena ta’ stima li ti;i

minnufih wara dik li fiha tissussisti l-kawza g[al dak it-t[assir jew

kalkolazzjoni mill-;did, u hekk g[andha ti;i dikjarata u m[allsa mill-

kumpannija in kwistjoni.

Kumpannija li ting[atalha ittra ta’ approvazzjoni skond ir-

regola 7 g[andha tag[ti lill-Korporazzjoni, mhux aktar tard minn xahrejn

wara d-data tal-prospett tat-taxxa relattiv, kopja tal-prospett tat-taxxa

g[al dik is-sena ta’ stima li fiha jkun jista’ jintalab g[all-ewwel darba l-

kreditu ta’ taxxa relattiv skond dik l-approvazzjoni u g[al kull sena ta’

stima sussegwenti li fiha jkun jista’ jibqa’ jintalab dak il-kreditu ta’

taxxa, irrispettivament minn jekk il-benefiççju jintu]ax jew le.

(1) Meta l-Korporazzjoni to[ro; ittra ta’ approvazzjoni lil

kumpannija skond ir-regola 7, din tista’, minn ]mien g[al ]mien, tag[mel

revi]jonijiet ta’ kotba u dokumenti, tag[mel spezzjonijiet fuq il-post

fil-bini ta’ dik il-kumpannija u tag[mel sorveljanza o[ra skond kif

jidhrilha li jkun me[tie; g[all-g[anijiet ta’ dawn ir-regoli u g[al kull

[a;a li tkun rilevanti g[all-applikazzjoni li tkun ;iet approvata.

(2) B’]ieda mad-database li tin]amm ta[t id-

disposizzjonijiet tar-Regolamenti ta’ l-2001 dwar il-Promozzjoni tan-

Negozju, il-Korporazzjoni g[andha ]]omm ukoll database ta’ kull

g[ajnuna mog[tija lil, jew mitluba minn, kumpannija ta[t dawn ir-regoli

g[al g[axar snin mid-data li fiha tkun ing[atat g[ajnuna individwali

g[all-a[[ar darba, sabiex –

(a) tivverifika jekk id-disposizzjonijiet ta’ dawn ir-regoli

jkunux ;ew osservati<

(b) tag[ti lill-Bord ta’ Sorveljanza fuq G[ajnuna Mog[tija

mill-Istat dik l-informazzjoni li dan ikun jista’ je[tie;< u

(ç) tinforma lill-Kummissarju jekk il-krediti mitluba skond

dawn ir-regoli jkunux ;ew kalkolati tajjeb.

Minkejja d-disposizzjonijiet l-o[ra ta’ dawn ir-regoli, il- Poteri tal-

Kummissarju jista’ jag[mel dak l-ist[arri; u dawk il-verifiki li huwa Kummissarju

jqis adatti skond id-disposizzjonijiet ta’ l-Atti dwar it-Taxxa fuq l-

Income, u g[andu l-jedd, wara li jikkonsulta lill-Korporazzjoni, li ma

jippermettix kreditu ta’ taxxa jekk l-applikanti tikser xi disposizzjoni

ta’ l-Atti dwar it-Taxxa fuq l-Income jew l-Att dwar is-Sigurtà Soçjali

jew xi le;islazzjoni sussidjarja mag[mula ta[thom.

Ebda kreditu ta’ taxxa ma jkun dovut lil kumpannija ta[t Prospett tat-taxxa

dawn ir-regoli g[al xi sena ta’ stima jekk dan ma jintalabx fil-parti elettroniku.

adatta ta’ prospett tat-taxxa mibg[ut b’mezzi elettroniçi sa mhux iktar

tard mid-data tal-prospett tat-taxxa relattiv.

Biex ikun hemm jedd g[all-benefiççju ta[t dawn ir-regoli Kundizzjonijiet

ulterjuri.

g[andhom ji;u osservati wkoll il-kundizzjonijiet ulterjuri li ;ejjin>

(a) ma jkunux qed jintalbu u sussegwentement ma jintalbux

xi benefiççji o[ra minn xi persuna fuq l-istess attività jew pro;ett

ta[t xi li;i o[ra li tag[ti skemi ta’ inçentivi fiskali<

(b) id-debiti kollha ta’ taxxa, inklu]i ammonti dovuti dwar

taxxa ta’ l-FSS kif ukoll kontribuzzjonijiet tas-sigurtà soçjali, dovuti

sa ]-]mien ta’ l-applikazzjoni, [lief g[al xi taxxa li dwarha jkun

hemm kwistjoni, g[andhom ikunu t[allsu jew ikunu qeg[din

jit[allsu skond ftehim formali mag[mul mal-Kummissarju.

5%.

(2) Notwithstanding the provisions of sub-rule (1), the tax

credit due to a company in respect of an approved project shall not

exceed, in the aggregate, –

(a) in the case of a small or medium sized enterprise, 50%

of the total cost of the project in question and in conformity with

Article 4 of Commission Regulation (EC) No 70#2001 on the

application of Articles 87 and 88 of the EC Treaty to State aid to

small and medium-sized enterprises, as subsequently amended<

and

(b) in the case of any other company, 40% net grant

equivalent of the total cost of the project in question>

Provided that where the company in question has benefited

from any State aid in respect of expenditure incurred in the carrying

out of the project, other than as provided for in these rules, the

threshold referred to in paragraph (a) or (b), as the case may be,

shall be reduced by the value of that other benefit<

Provided further that the correct calculation of the said

reduction, where applicable, shall be the sole responsibility of the

company.

(3) The tax credit shall be availed of by way of a deduction

from the tax chargeable on gains or profits derived solely from the

activities for which the investment to which the approved project refers

is made, and shall not be allowable as a credit against tax chargeable on

gains or profits from any other source< and any amount of tax credit due

for a year of assessment that is not so absorbed in that year may be

carried forward and deducted from the tax chargeable in subsequent

years on income from the said activities>

Provided that any part of the tax credit that is not availed of

up to the year of assessment 2013 shall not be carried forward and the

right to a tax credit in respect thereof will lapse.

(4) Where, for a year of assessment, a company qualifies

for a tax credit under the Business Promotion Act and also under the

provisions of these rules, it shall avail itself of the tax credit under the

Business Promotion Act before any set-off is made in respect of the tax

credit due under these rules.

(5) A tax credit due in accordance with these rules shall not

give rise to a right for any refund.

11. (1) In the circumstances mentioned in rules 9(3) the tax Reversal or

recalculation of tax

credit in question shall be reversed or recalculated, as the case may be. credit.

(2) The reversal or recalculation of a tax credit shall give

rise to an obligation of the company to pay an amount of tax, in addition

to any other tax liability, equivalent to the reduction in the tax credit

resulting from the reversal or recalculation, and such amount shall be

deemed to be tax chargeable under the Act for the year of assessment in

which the cause for the reversal or recalculation subsists, and shall be

reported and paid by the company in question accordingly.

12. A company to whom a letter of approval has been issued in Submission of copy

of tax return to the

terms of rule 7 shall submit to the Corporation, by not later than two Corporation.

months after the relative tax return date, a copy of the tax return for the

earliest year of assessment for which the relative tax credit may first be

claimed in terms of the said approval and for each subsequent year of

assessment for which the said tax credit remains available to it under

these rules, irrespective of whether the benefit is utilised or not.

13. (1) When the Corporation issues a letter of approval to a Monitoring by the

Corporation.

company in terms of rule 7, it may, from time to time, make such reviews

of books and documents, hold on-site inspections on premises of that

company and make such other monitoring as it may consider necessary

for the purposes of these rules and for any matter relevant to an approved

application.

(2) In addition to the database kept under the provisions of

the Business Promotion Regulations, 2001, the Corporation shall also

keep a database of all assistance provided to, or claimed by, a company

under these rules for ten years from the date on which the last individual

assistance was granted, in order to enable it to –

(a) verify whether the provisions of these rules have been

complied with<

(b) provide the State Aid Monitoring Board with such

information as it may require< and

(c) inform the Commissioner whether the credits claimed

in terms of these rules have been properly calculated.

14. Notwithstanding the other provisions of these rules, the

Commissioner may make such enquiries and verification as he deems

fit in accordance with the provisions of the Income Tax Act, and shall,

after consulting the Corporation, have the right not to allow any tax

credit if any default is committed by the applicant in respect of any

provision of the Income Tax Act or the Social Security Act or any

subsidiary legislation issued thereunder.

15. No tax credit shall be due to a company under these rules for

a year of assessment unless it is claimed in the appropriate section of a

tax return submitted by electronic means by not later than the relative

tax return date.

16. The following further conditions must also be fulfilled for

eligibility to the benefit under these regulations>

(a) no other benefits are being claimed or may subsequently

be claimed by a person on the same activity or project under any

other legislation granting fiscal incentive schemes<

(b) all tax liabilities including amounts due in respect of

FSS tax as well as social security contributions due up to the time

of the application, except for any tax still in dispute, must have

been settled or is being settled in accordance with a formal

agreement drawn up with the Commissioner.

17. Insofar as they provide for and regulate benefits for small

and medium-sized enterprises, these rules are prescribed and shall be

applied in accordance with Commission Regulation (EC) No. 70#2001

on the application of Articles 87 and 88 of the EC Treaty to State aid to

small and medium-sized enterprises, as subsequently amended.

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