Capital Gains (Amendment) Rules, 2013

L.N. 105 of 2013

INCOME TAX ACT

(CAP. 123)

Capital Gains (Amendment) Rules, 2013

IN exercise of the powers conferred by articles 5 and 96 of the

Income Tax Act, hereinafter referred to as "the Act", the Minister of

Finance, the Economy and Investment has made the following rules:-

The title of these rules is the Capital Gains (Amendment)

Rules, 2013 and they shall be read and construed as one with the

Capital Gains Rules, hereinafter in these rules referred to as "the

principal rules".

Rule 5 of the principal rules shall be amended as follows

(a) in paragraph (c) of sub-rule (2) the words "of that

company:" shall be substituted by the words "of that company;", and

immediately thereafter there shall be added the following new

paragraph

"(d) the aggregate rights to profits available for

distribution attached to them represent at least twenty-five

percent of the total rights to profits available for distribution to

the ordinary shareholders of the company:"

(b) sub-rule (5) shall be substituted by the following

"(5) The market value of shares in a company is a

percentage of the market value of the company to be determined

in accordance with the following formula -

Y = (0.4 x A) + (0.2 x B) + (0.4 x C)

where -

(a) 'Y'

represents

the

percentage

to

be

determined;

(b) ‘A’ is the percentage of the issued share

capital represented by the nominal value of those shares;

(c) ‘B’ is the percentage of the total voting rights

in the company represented by the total voting rights

attached to those shares; and

(d) ‘C’ is the percentage of the profits available

for distribution to the ordinary shareholders represented by

the profits available for distribution to the holder of those

shares

Provided that -

(i) saving proviso (ii), for the purpose of

determining the market value of the shares, where

the percentage determined by the above formula has

decreased as a result of a change in the issued share

capital of that company or a change in rights attached

to such shares, made during the period of eighteen

months preceding the transfer, and such change was

not subject to duty under article 42B of the Duty on

Documents and Transfers Act, it shall be deemed that

such change had not taken place and the market

value of the shares shall be determined by reference

to the market value of the company and the Cap. 364.

percentage determined by the above formula,

calculated by taking into account the values of ‘A’,

‘B’ and ‘C’ as existing at the time immediately

preceding that change;

(ii) the market value of shares that are listed on

a stock exchange recognised under the Financial

Markets Act shall be the last quoted price of those Cap. 345.

shares on that exchange before the date of the

transfer;

(iii) where the transferor submits, together with

Schedule C referred to in sub-rule (10), a share

valuation prepared by an expert (specialist valuer)

who is independent of the company, the

Commissioner may at his absolute discretion accept

such valuation and in such case the market value of

the shares shall be such amount as determined by the

expert. The share valuation shall be accompanied by

the expert’s report which shall include a detailed

description of the methods of valuation which have

been used in determining the market value of the

shares

Provided that the transferor shall only be

authorised to submit a share valuation where

(a) the capital gain differential exceeds ten

per centum (10%); and

(b) the capital gain differential exceeds

thirty thousand euro (€30,000).

For the purpose of this proviso "capital gain

differential" means the difference between the

capital gain computed by applying the formula

prescribed in this sub-rule and the capital gain

computed on the basis of the share valuation;

(iv) Where the Commissioner requires further

particulars for the purposes of enabling him to make

a decision on whether to accept a share valuation

submitted by an authorised transferor, the

Commissioner shall, within thirty days of the receipt

of the share valuation, or of the receipt of any further

particulars previously required under this paragraph,

by written notice, require the applicant to furnish

such further particulars, and if any such notice is not

complied with within thirty days, or such longer

period as the Commissioner may allow, the

Commissioner need not proceed further with the

application;

(v) The Commissioner shall notify his decision

to the transferor in writing within a reasonable time

of receiving the share valuation or, if he gives a

notice under sub-rule (iv), within a reasonable time

after the notice has been complied with.".

Immediately after rule 10 of the principal rules there shall

be added the following new rule

(1) Any third party claiming that

"Sale by

judicial

he holds security or rights which are not

auction.

affected by the rights of the Commissioner in

respect of withholding and payment of tax in

terms of article 43(9)(c) of the Income Tax

Management Act in respect of transfers of

immovable property and any rights thereon in

a sale by judicial auction, shall complete the

relevant parts of the form prescribed in

Schedule J and file the said form in triplicate

with the Registrar of Courts, together with

such documents as may be required to be

attached thereto in terms of the said form. One

of the copies of the form shall be stamped by

the Registrar of Courts in acknowledgement of

the receipt of the said notice.

(2) Within a period of two (2) months

from the date of a sale by judicial auction, any

transferor of immovable property and any

rights thereon in a sale by judicial auction

shall be entitled to complete the relevant parts

of the form prescribed in Schedule J, either

separately or concurrently with the use of the

same form as set out in sub-rule (1), in order to

indicate the tax treatment that should be

applicable to the said transfer, and such form

shall be filed in triplicate with the Registrar of

Courts, together with such documents as may

be required to be attached thereto in terms of

the said form. One of the copies shall be

stamped by the Registrar of Courts in

acknowledgement of the receipt of the said

notice. Where any transferor does not file the

duly completed form prescribed in Schedule J

with the Registrar of Courts in terms of this

sub-rule, any tax deducted by the Registrar of

Courts shall be deemed to constitute

provisional tax (or part thereof, as the case

may be) relating to the transfer of the property

or any rights thereon in terms of article

43(1)(b) of the Income Tax Management Act.

This is without prejudice to any tax payment

or reporting obligations applicable to the

transferor in terms of any of the provisions of

the Income Tax Acts.

(3) On receipt of the form prescribed in

Schedule J in the circumstances set out in sub-

rules (1) and, or (2), the Registrar of Courts,

after ascertaining that the relevant parts

thereof are duly completed and that any

documents required to be attached thereto in

terms of the said form are duly annexed, shall

forward them, together with the application

for withdrawal of funds, to a judge of the

Superior Courts for his decree thereon. One of

the copies of the duly completed form

prescribed in Schedule J, together with the

documents attached thereto and the Court

decree, shall, within a period of not more than

three (3) months after the Court’s decree is

issued, be forwarded by the Registrar of

Courts to the Commissioner.

(4) Where any third party holds any

security or rights which are not affected by the

rights of the Commissioner in respect of

withholding and payment of tax in terms of

article 43(9)(c) of the Income Tax

Management Act in a transfer of immovable

property and any rights thereon in a sale by

judicial auction, but after the satisfaction of all

amounts due in respect of such security or

rights any funds remain from the proceeds of

the sale by judicial auction, the obligations of

the Registrar of Courts in terms of article

43(9)(c) of the Income Tax Management Act

shall be applicable and any tax due to the

Commissioner shall be paid out of such

remaining funds.".

4. Immediately after Schedule F of the principal rules there

Adds Schedule J

to the principal

shall be added the following new Schedule

rules.

"SCHEDULE J

[Rule 10A]

Notice submitted to the Registrar of Courts in terms of Rule 10A of the Capital Gains Rules

Statement to be submitted in respect of sales by judicial auction of immovable property and any rights

thereon the transfer of which is subject to tax on capital gains under the Income Tax Acts.

Part 1 – Details of Third party referred to in article 66 of the Duty on Documents and Transfers

Act, as applicable by article 43(9)(c) of the Income Tax Management Act (claimant)

Name

Address

ROC No (companies only)

Income Tax Reg. No

Part 2 – Details of Transferor

Name

Address

ROC No ( companies only )

No of legally valid

identification document ( individu-

als onl y)*

Part 3 – Details of Immovable Property or any rights thereon which are being transferred

Part 4 – Details of Transfer

Date of transfer

Consideration

Details of judicial auction

Part 5 – Details of rights held by third party

(a)

State which of the following is applicable in the circumstances

(1)

Holder of real rights over the property in question

(2)

Third party in possession of the property

(3)

Holder of a privilege or hypothec registered by a creditor/s of the transferor of

the immovable property and/or any right thereon

(4)

Holder of rights of creditors who have demanded the separation of the

transferor’s estate from that of his heirs

(b)

Indicate the amount due by the transferor to the third party

Attach documentary evidence (appropriately numbered and described) to support your claim.

DOCUMENT REF

DESCRIPTION

Indicate any relevant facts as well as the legal reasoning for the choice set out above

Relying on the documentation

listed above and attached here-

with, I hereby confirm that the

legal reasoning for the above

selected option is sound.

Third party

Advocate

Part 6 – Transferor’s Declaration

The transferor hereby declares that the transfer of immovable property or any rights thereon referred to

above is subject to the following tax treatment

(i)

Exempt from tax in terms of article 5(5)(b) of the Income Tax Act, being

property or an undivided part thereof which has been owned and occupied for

a period of at least 3 years as the transferor’s own residence immediately

preceding the date of transfer and the property is disposed of within 12 months

of vacating the premises

(ii)

Provisional tax equivalent to 7% of the consideration relating to the transfer of

the property or any rights thereon under article 43(1)(b) of the Income Tax

Management Act

(Note: where this paragraph (ii) applies, the transfer must be declared in the

relative income tax return for the year).

(iii)

Full and final payment equivalent to 7% of the consideration or the value of

the transfer of the property or any rights thereon under article 43 (1)(a) of the

Income Tax Management Act

(iv)

Provisional tax equivalent to 7% of the consideration relating to the transfer of

the property or any rights thereon is due under article 43(1)(b) of the Income

Tax Management Act but the Commissioner has issued a permit for reduction

in terms of article 43(3).

(Note: where this paragraph (iv) applies, the permit issued by the

Commissioner is to be attached to this Schedule).

If none of the above is marked by the transferor or if this part is not completed

in full, it shall be deemed that option (ii) has been selected.

Indicate any relevant facts as well as the legal reasoning for the choice set out above

Relying on the information

provided to me, I hereby con-

firm that the legal basis for the

above selected option is cor-

rect.

Advocate

B B 978 978

Part 7 – Declaration

For all intents and purposes of law any and all signatories of this form hereby declare that the entire

contents hereof and all declarations made in this Schedule are true and correct and that they are hereby

furnishing all facts relevant to determine whether the relevant provisions of the Income Tax Acts (Cap.

123 and 372 of the Laws of Malta) and the Duty on Documents and Transfers Act (Cap. 364 of the

Laws of Malta) and any rules issued thereunder are applicable. The signatories of this form further

declare that they are fully aware of the impact and consequences of this declaration in terms of law and

of the statutory rights of the Commissioner in this respect.

Third party

Transferors

The completed Schedule shall be accompanied by a report signed by the holder of a warrant to exercise

the profession of Advocate in the Courts of Justice of Malta, which report shall give assurance in

respect of the legal applicability of the claims made herein by the signatories hereto.

NOTE: Third parties and transferors have the option of filing separate forms in respect of the same

judicial sale by auction. Whenever any specific third party or transferor decides to file a form sepa-

rately from that of any other third party or transferor he may complete only the parts relative to his

claim. In the case of the Third party, all parts except part 6 must be completed; in the case of a trans-

feror, all parts except parts 1 and 5 must be completed.

FOR OFFICIAL USE

DETAILS OF JUDICIAL AUCTION: _________________

(1) CONSIDERATION OF JUDICIAL SALE

(2) AMOUNT PAYABLE TO CREDITORS

(3) AMOUNT DUE TO THE COMMISSIONER

AMOUNT REMITTED TO THE COMMISSIONER

Registrar of Courts ."

€0.81