on Tax Matters Regulations, 2011

L.N. 295 of 2011

INCOME TAX ACT

(CAP. 123)

Cooperation with Other Jurisdictions

on Tax Matters Regulations, 2011

IN exercise of the powers conferred by articles 52B, 76(4), and

96(1) of the Income Tax Act, together with the powers conferred by

article 58 of the Income Tax Management Act, the Minister of

Finance, the Economy and Investment has made the following

regulations:-

The title of these regulations is the Cooperation with Other

Jurisdictions on Tax Matters Regulations, 2011.

In these regulations, unless the context otherwise requires -

"arrangement" includes -

(a)

any agreement, convention, protocol or EU

Directive pursuant to which Malta may cooperate on tax matters

with another jurisdiction through the exchange of information;

and

(b) any administrative agreement or memorandum of

understanding reached between the competent authority of

Malta and the competent authority of another jurisdiction with

which an arrangement referred to in paragraph (a) of this

definition is in place, provided that such administrative

agreement or memorandum of understanding is not contrary to

the said arrangement;

"authorised representative" means any official who is authorised

to directly exchange information pursuant to an arrangement;

"competent authority" means the authority which has been

designated as such by a jurisdiction with regard to an arrangement;

"entities" includes any body of persons that -

(a)

is resident in Malta;

(b)

is created under Maltese law,

(c)

has a permanent establishment in Malta;

(d)

is a property company or a property partnership; or

(e)

is required to be registered, to be licensed or

otherwise authorised in order to conduct business in Malta;

"express trust" means a trust created voluntarily and

intentionally, either orally or in writing -

(a)

inter-vivos by the settlor executing an act or

instrument of settlement made between the settlor and the

trustees under which the settlor transfers assets to the trustees to

hold subject to the terms of the trusts set out therein;

(b) inter-vivos by the settlor transferring assets to the

trustees and the trustees executing a declaration of trust (to

which the settlor is not a party) whereby the trustees

acknowledge that they hold the assets subject to the terms of the

trusts set out in the instrument; or

(c)

on death by the will of the testator taking effect,

whereby the testator’s executors are directed to transfer all or

part of the testator’s estate to trustees (who may be the

executors) to hold subject to the trusts set out in the will;

"partnership" means any kind of partnership that is not a

company;

"public collective investment scheme" means any collective

investment scheme provided the units, shares or other interests in the

scheme can be readily purchased, sold or redeemed by the public.

Units, shares or other interests in the scheme can be readily

purchased, sold or redeemed "by the public" if the purchase, sale or

redemption is not implicitly or explicitly restricted to a limited group

of investors;

"publicly traded company" means any company whose principal

class of shares is listed on a stock exchange in Malta provided its

listed shares can be readily purchased or sold by the public. Shares

can be purchased or sold "by the public" if the purchase or sale of

shares is not implicitly or explicitly restricted to a limited group of

investors. For the purpose of this definition "principal class of shares"

means the class or classes of shares representing a majority of the

voting power and value of the company;

"requesting authority" means the competent authority of a

jurisdiction with which Malta has an arrangement that is in place;

"share warrants" means a warrant to bearer referred to in article

121 of the Companies Act;

"tax" shall have the meaning found in the relevant arrangement

that is in place with another jurisdiction.

These regulations shall apply in order to ensure the

effective cooperation with other jurisdictions on tax matters where

arrangements that enable such cooperation are in place and shall be

interpreted accordingly.

(1) Entities shall keep updated information that

identifies their owners and the level and type of their respective

ownership stake in such entities. Such information is to be updated

and documented not later than fourteen days from the date that the

entity was notified or from the date the entity becomes aware of there

being a new owner or of any change relating to existing owners. For

the purposes of these regulations, "owners" include -

(a)

in the case of a company, partnership and other any

other body of persons (other than a foundation), the legal

owners; and

(b) in the case of a foundation, the founders, the

administrators, the members of the supervisory council, and the

beneficiaries (where applicable), as well as any other person

with the authority to represent the foundation.

(2) The provisions of sub-regulation (1) do not apply to -

(a)

a publicly-traded company: provided that in the case

of a publicly-traded company that is either resident in Malta or

created under Maltese law, the required ownership information

in relation to such companies is to be kept either by the

company itself or by a stock exchange in Malta; and

(b)

public collective investment schemes.

(3) For the purposes of these regulations -

(a)

where in any instance within an ownership chain,

the legal owner acts on behalf of any other person as a trustee,

fiduciary (including nominee) or under a similar arrangement,

such a legal owner shall have the obligation to keep the

information that identifies such other person;

(b) a company that has issued share warrants in

accordance with article 121 of the Companies Act shall inform

the competent authority in Malta of such issue not later than one

month from the date of publication of these regulations in the

case of share warrants issued before the said date, or fourteen

days after the date of any issue made after the said date. Such

companies shall also keep a register with the information that

identifies the owners of such share warrants. Notwithstanding

any other provision in any Act, a person in possession of a share

warrant shall not be entitled to any rights in relation to such

share warrant unless the relevant company has been provided

with the information that identifies such person. Furthermore,

notwithstanding any other provision in any Act, a transfer of

such share warrant shall not be valid at law if the relevant

company has not been informed within fourteen days of the said

transfer of the information that identifies the new owner.

(4) (a)

Trustees that are established under the laws of Malta

or that are resident in Malta shall take all reasonable measures to

ensure that updated information is kept that identifies the settlor,

other trustees and beneficiaries of express trusts (whether the proper

law of such trusts is that of Malta or elsewhere).

(b) Persons that are established under the laws of Malta

or that are resident in Malta and that are entrusted with the

administration of express trusts (whether the proper law of such trusts

is that of Malta or elsewhere) shall have the same obligations as those

found under paragraph (a).

(5) Information that identifies a person includes -

(a)

in the case of an individual

(i)

the full name and surname;

(ii) the passport number, ID number or tax

identification number;

(iii) date and place of birth if no number referred

to in sub-paragraph (ii) is available; and

(iv) address of residence;

(b)

in the case of persons that are not individuals

(i)

name;

(ii) date of inception or incorporation; and

(iii) registered address.

(6) Information that identifies a person is to be kept in Malta.

However, such records may be kept in a jurisdiction with which Malta

has an arrangement, that would permit exchange of ownership

information.

(7) Individuals (engaged in a trade, business, profession or

vocation), entities and trustees are to ensure that reliable books of

account are kept that -

(a)

correctly explain all transactions of such individual,

entity or trust;

(b) enable the financial position of such individual,

entity or trust to be determined with reasonable accuracy at any

time; and

(c)

allow financial statements to be prepared.

(8) Apart from the books of account referred to in sub-

regulation (7) records to be kept shall further include underlying

documentation, such as invoices, contracts, etc. and should reflect

details of -

(a)

all sums of money received and expended and the

matters in respect of which the receipt and expenditure takes

place;

(b)

all sales and purchases and other transactions; and

(c)

the assets and liabilities of the relevant individual,

entity or trust.

(9) In the case of a company that is considered to be an entity

for the purposes of these regulations, the financial statements are to

be prepared and audited as required under the Companies Act or the

Co-operatives Act, as the case may be.

(10) Accounting records are to be kept in Malta. However, such

records may be kept in a jurisdiction with which Malta has an

arrangement that would permit exchange of information of such

records.

(11) Banks that are considered to be entities for the purposes of

these regulations are to ensure that banking information is kept on all

account-holders in relation to their banking activity in Malta. For the

purposes of these regulations, "banking information" includes all

records pertaining to the accounts as well as to related financial and

transactional information.

(12) The information that is required to be kept in accordance Prompt

with this regulation shall be kept in such a way that it may be transmission

information.

submitted without difficulty to the Commissioner following a request

made pursuant to the provisions of article 10A of the Income Tax Cap. 372.

Management Act. Where, following representations made by the

requested person, the Commissioner is satisfied that for reasons that

are beyond the control of such requested person, information cannot

be submitted within the time limit specified in the original request

made by the Commissioner to such requested person, the

Commissioner shall consider allowing such other time limit as may

be reasonable for the particular case In such cases, the provisions of

regulation 6(1) and (2) shall apply taking into consideration such

other time limit that is determined by the Commissioner.

(13) Entities, trustees and other persons that are required to Retention

keep information, records or documents under any of the provisions period.

of this regulation shall keep such information, records and documents

for a minimum period of nine years from the end of the year in which

the relevant transactions, acts or operations took place (including

where the relevant entity or trust is liquidated or is no longer in

existence). This requirement shall also apply to any person referred to

in regulation 5(1) acting in a professional capacity in relation to any

such information or records that he holds in the carrying on of his

business.

(1) The provisions of article 10A of the Income Tax Access to

Management Act shall be interpreted to give the widest possible information.

powers in order to obtain and provide information to competent

authorities of jurisdictions with which Malta has an arrangement.

Thus, irrespective of any legal obligation that may be imposed on a

person to maintain secrecy of information, the said provisions shall be

construed to mean, inter alia, that the Commissioner has the power to

obtain and provide information referred to in regulation 4 that is held

by or is in the possession or control of person in Malta, including

any -

(a)

bank and other financial institution;

(b)

insurance company;

(c)

person acting in an agency or fiduciary capacity

including nominees and trustees;

(d) lawyer, notary and other independent legal

professional, real estate agent, accountant, auditor, tax advisor,

company service provider, person licensed to carry on

investment business, stockbroker;

(e)

company,

collective

investment

scheme,

partnership, foundation and any other body of persons;

(f)

stock exchange in Malta; and

(g)

regulatory authority or body in Malta

Provided that no person may be requested to provide

information that would disclose any trade, business, industrial or

commercial secret, or information which is the subject of attorney

client privilege or information the disclosure of which would be

contrary to public policy. For the purposes of these regulations,

"information which is the subject of attorney client privilege" means

confidential communications between a client and a lawyer or other

legal representative produced for the purposes of seeking or

providing legal advice or for the purposes of use in existing or

contemplated legal proceedings.

(2) Apart from the powers granted under article 10A of the

Income Tax Management Act, the Commissioner may use any

information-gathering power under the Income Tax Acts, including

those under the provisions of article 20 of the Income Tax

Management Act, to obtain the information requested by the

competent authority of the other jurisdiction, notwithstanding that the

said information may not be required for the purposes of the Income

Tax Acts.

(3) The competent authority in Malta shall arrange for the

carrying out of any administrative enquiries necessary to obtain the

information requested by the requesting authority. Where the relevant

request contains a reasoned request for a specific administrative

enquiry and the competent authority in Malta takes the view that no

administrative enquiry is necessary, it shall immediately inform the

requesting authority of the reasons thereof.

(4) In order to obtain the requested information or to conduct

the administrative enquiry requested, the competent authority in

Malta shall ensure that the same procedures as those that would have

been used when acting on its own initiative (or at the request of

another authority in Malta - where this is applicable) are followed.

(5) For the purposes of these regulations "administrative

enquiry" means those controls, checks and other actions used by the

Commissioner in the performance of his duties when ensuring that the

Income Tax Acts have been properly applied.

(6) In order for the Commissioner to access information,

notice shall be served on a person either personally or by being sent

by registered post to his last known business or private address, and

in the latter case, unless the contrary is proved, shall be deemed to

have been served, in the case of persons resident in Malta, not later

than the third day succeeding the day when posted, and in the case of

persons not so resident, the day succeeding the day on which the

notice would have been received in the ordinary course by registered

post, and in proving such service it shall be sufficient to prove that the

letter containing the notice was properly addressed and posted.

(1) Where there is failure to comply with a request for Penalties.

information made by the Commissioner in relation to a request made

by a requesting authority under the provisions of an arrangement, the

requested person shall be liable to a penalty of -

(a)

two hundred euro (€200) where the information is

submitted late, that is not within the time limit specified within

the Commissioner’s request; and

(b) fifty euro (€50) for every day during which the

default existed: provided that the penalty under this paragraph

shall not exceed in total ten thousand euro (€10,000).

(2) Without prejudice to any action that may be taken in

accordance with the provisions of sub-regulation (1), where -

(a)

failure to comply with a request made by the

Commissioner persists for 183 days from the date of the original

request sent by the Commissioner, and within this period the

Commissioner had sent a reminder; or

(b) the information submitted is found to be incorrect in

such a way that it is misleading or false,

it shall be deemed, for the purposes of article 52 of the Income Tax Cap. 372.

Management Act, that such person has willfully, with intent to evade

or to assist another person to evade tax under the Income Tax Acts,

made use of a fraud, art or contrivance.

(3) Where information is not provided, or is not provided in a

timely manner, because such information has not been kept or

properly updated as required under these regulations, apart from the

actions that may be taken in accordance with the provisions of sub-

regulations (1) and (2), the person that had the duty of keep or update

such information shall be liable to a penalty of one thousand euro

(€1,000). The Commissioner shall remit part or the whole of such

penalty where he is satisfied that the default was due to a reasonable

excuse. A reasonable excuse in this case shall not include a situation

where reliance for keeping or updating such information has been

placed on any other person.

(1) On receipt of a valid request from a requesting

authority, the competent authority in Malta shall notify the person (or

his authorised representative) concerning whom the request is made,

that a request for information concerning him has been received. The

competent authority in Malta shall not effect such notification where -

(a)

the requesting authority specifically requests that no

such notification is made;

(b) the competent authority in Malta determines that the

request is of a highly urgent nature and that notification could

delay the forwarding of information requested; or

(c)

the competent authority in Malta determines that

such notification is reasonably expected to jeopardise the

relevant investigation or audit being carried out in the relevant

jurisdiction.

Any determination made by the competent authority in Malta

under this sub-regulation shall not be questioned in any appeal.

(2) Notwithstanding any other provision in any law to the

contrary, any person that complies with a request under these

regulations shall not be treated as being in breach of any restriction

upon the disclosure of information imposed by any law, contract or

rules of professional conduct. Except as provided in regulation 6, no

civil or criminal action shall be taken against any person that provides

information in accordance with the provision of these regulations.

The competent authority in Malta shall be the Minister

responsible for finance or his authorised representative. An

authorised representative shall be the competent official that is

identified as such and whose name and designation are published on

the website of the Inland Revenue Department.

(1) The competent authority in Malta shall confirm

receipt of a request for information not later than seven working days

from the receipt of such a request.

(2) The competent authority in Malta shall, within one week of

receipt of a request for information, notify the requesting authority of

any deficiencies in the request and of the need for any additional

background information. In such a case, the time limits provided for

in sub-regulation (3) shall start from the day after the competent

authority in Malta receives such additional information.

(3) Unless otherwise agreed to between the two relevant

competent authorities, the competent authority in Malta shall provide

the requesting authority with the requested information not later than

six months from the date of receipt of the request

Provided that where the competent authority in Malta already

holds the information requested, such information shall be submitted

to the requesting authority not later than two months of the date of the

receipt of the relevant request.

(4) Where it becomes evident that the competent authority in

Malta will not be able to provide the information within the time

limits as specified in sub-regulation (3), it shall inform the requesting

authority immediately and in any event, within three months of the

receipt of the request, of the reasons for its failure to do so and the

date by which it considers it might be able to respond. In any case, the

requesting authority shall be given an update of the situation every

three months until the matter is settled.

(5) Where the competent authority in Malta is not in

possession of the requested information and cannot respond to the

request, it shall inform the requesting authority of the reasons thereof

immediately and in any event within one month of receipt of the

request.

(1) The competent authority in Malta shall provide the Certain

requesting authority with the requested information provided that the limitations.

requesting authority has exhausted the usual sources of information

(including all the legally available avenues available to it) which it

could have used in the circumstances for obtaining the information

requested without running the risk of jeopardising the achievement of

its objectives.

(2) The competent authority in Malta may decline to provide

information where

(a)

the requesting authority is unable, for legal reasons,

to provide similar information;

(b) it is not satisfied that the jurisdiction of the

requesting authority has sufficiently adequate safeguards in

place to ensure that the information obtained is treated as

confidential and that such information may only be disclosed to

persons or authorities as provided for in the relevant

arrangement.

B

€0.99