Cooperation with Other Jurisdictions on Tax Matters

L.N. 408 of 2014

INCOME TAX ACT

(CAP. 123)

Cooperation with Other Jurisdictions on Tax Matters

(Amendment) Regulations, 2014

IN exercise of the powers conferred by articles 76 and 96 of the

Income Tax Act, the Minister for Finance has made the following

regulations:-

The title of these regulations is the Cooperation with Other

Jurisdictions on Tax Matters (Amendment) Regulations, 2014, and

these regulations shall be read and construed as one with the

Cooperation with Other Jurisdiction on Tax Matters Regulations,

hereinafter referred to as "the principal regulations".

In regulation 2 of the principal regulations, immediately

after the definition "express trusts" there shall be added the following

new definitions

" "FATCA Agreement" means the

Agreement between the Government of the

Republic of Malta and the Government of the

United States of America to Improve

International Tax Compliance and to

Implement the Foreign Account Tax

Compliance Act, in accordance with the

Schedule to the Exchange of Information

(United States of America) (FATCA) Order;

"FATCA Regulations" means regulations

23 to 34, inclusive of both regulations;".

Sub-regulation (2) of regulation 11 of the principal

regulations shall be substituted by the following

"(2) For the purposes of the EU Administrative

Cooperation Directive -

"person" shall mean -

(a)

a natural person;

(b)

a legal person;

(c) where Maltese legislation in force so

provides, an association of persons recognised as

having the capacity to perform legal acts but

lacking the status of a legal person; or

(d) any other legal arrangement of

whatever nature and form, regardless of whether it

has legal personality, owning or managing assets,

which, including income derived therefrom, are

subject to any of the taxes covered by the EU

Administrative Cooperation Directive;

"tax" shall mean all taxes of any kind levied in

Malta except for

(a)

value added tax, customs duties and

excise duties covered by other Union legislation on

administrative cooperation between Member

States;

(b) compulsory

social

security

contributions payable in Malta;

(c)

fees, such as for certificates and other

documents issued by public authorities; and

(d) dues of a contractual nature, such as

consideration for public utilities.".

Immediately after sub-regulation (2) of regulation 12 of Amends

regulation 12 of

the principal regulations there shall be added the following

the principal

regulations.

"(3) When specifically requested by a requesting

authority of an EU Member State, the competent authority in

Malta shall communicate original documents provided that this

is not contrary to the provisions in force in Malta.".

Immediately after regulation 22 of the principal Adds new

regulations to

regulations there shall be added the following new regulations

the principal

regulations.

" Implementa-

(1) The FATCA Agreement and

the FATCA Regulations shall be implemented

interpretation.

and interpreted (unless the context otherwise

requires) in accordance with the guidelines

published on the website of the Inland Revenue

Department under the provisions of article

96(2) of the Income Tax Act.

(2) For the purposes of the FATCA

Regulations, words and expressions shall,

unless the subject in context otherwise requires,

have the same meaning and the same

interpretation

as

the

meanings

and

interpretations contained in the FATCA

Agreement and in the published guidelines

referred to in sub-regulation (1).

A Malta Financial Institution shall

Registration

requirements in

register with the Commissioner for the purposes

relation to

FATCA.

of the FATCA Regulations by 31st December,

2014 or thirty days following which an entity

becomes a Malta Financial Institution,

whichever date is the later.

A Reporting Malta Financial

Obligations of

Reporting

Institution shall

Malta Financial

Institutions.

(a)

have the obligations found in

Article 4(1)(a) to (e) of the FATCA

Agreement as implemented by the FATCA

Regulations;

(b) obtain, where this is required

under the FATCA Agreement

(i) satisfactory

self-

certification documentation; and

(ii) the U.S. TIN of each

Specified U.S. Person, including the

U.S. TIN for pre-existing individual

accounts from 1st January, 2017

onwards.

A Reporting Malta Financial

Use of third

party service

Institution may use third party service providers

provider.

to fulfil its obligations contemplated in the

FATCA Regulations: provided that these

obligations shall remain the sole responsibility

of the Reporting Malta Financial Institution.

A Reporting Malta Financial

Information to

be maintained.

Institution shall maintain the information

specified in Article 2(2)(a) and Article 3(2) of

the FATCA Agreement with respect to all U.S.

Reportable Accounts taking into account the

timing specified in Article 3 of the FATCA

Agreement.

(1) For the purposes of the

Due diligence

obligations.

FATCA Regulations, a Reporting Malta

Financial Institution shall apply the due

diligence procedures specified in Annex 1 of

the FATCA Agreement to identify U.S.

Reportable Accounts and accounts held by

Non-participating Financial Institutions. For

this purpose -

(a)

the due diligence procedures

in respect of Pre-existing Individual

Accounts shall be regulated in accordance

with the provisions of section II of Annex

I of the FATCA Agreement. A Reporting

Malta Financial Institution may elect,

either with respect to all Pre-existing

Individual Accounts or, separately, with

respect to any clearly identified group of

such accounts not to review, identify and

report Pre-existing Individual Accounts

referred to in section II.A of Annex I of

the FATCA Agreement. Such an election

shall be made in such manner as the

Commissioner may determine;

(b) the due diligence procedures

in respect of New Individual Accounts

shall be regulated in accordance with the

provisions of section III of Annex I of the

FATCA Agreement;

(c)

the due diligence procedures

in respect of Pre-existing Entity Accounts

shall be regulated in accordance with the

provisions of section IV of Annex I of the

FATCA Agreement;

(d) the due diligence procedures

in respect of New Entity Accounts shall

be regulated in accordance with the

provisions of section V of Annex I of the

FATCA Agreement.

(2) Notwithstanding the provisions of

sub-regulation (1), and in accordance with the

provisions of Section I paragraph C of Annex 1

of the FATCA Agreement, a Reporting Malta

Financial Institution may opt to rely on

procedures, described in the relevant U.S.

Treasury Regulations to establish whether an

account is a U.S. Reportable Account or an

account held by a Non-participating Financial

Institution

Provided that the Reporting Malta

Financial Institution shall make such an option

separately for each section of the said Annex I

with respect to all relevant Financial Accounts

and it shall inform the Commissioner of this

option on such form and in such manner as the

Commissioner shall determine.

Subject to the provisions of article 19

Retention

obligations.

of the Income Tax Management Act, a

Reporting Malta Financial Institution shall

(a)

retain

the

information

specified in Article 2(2)(a) and Article

3(2) of the FATCA Agreement for a

minimum period of five years starting

from the end of the year to which such

information relates;

(b) retain the information that is

required to be used as evidence in

determining the status of the account

holder under regulation 28 of the FATCA

Regulations for a minimum period of five

years starting from the end of the year to

which such information relates.

(1) A Reporting Malta Financial

Reporting

obligations.

Institution shall annually report the information

specified in Article 2(2)(a) and Article 3(2) of

the FATCA Agreement on U.S. Reportable

Accounts by not later than 30 April after the

end of the calendar year to which such

information relates

Provided that such reporting shall

take into account the timing and exclusions

specified in Article 3 of the FATCA Agreement.

(2) The information shall be reported to

the Commissioner in the manner set out in

guidelines published on the website of the

Inland Revenue Department under the

provisions of article 96(2) of the Income Tax

Act.

The Commissioner may use any

Access to

information.

information-gathering power under the Income

Tax Acts, including those under the provisions

of article 10A and article 20 of the Income Tax

Management Act, to obtain any information

specified in Article 2(2)(a) and Article 3(2) of

the FATCA Agreement, notwithstanding that

the said information may not be required for the

purposes of the Income Tax Acts. The

provisions of this regulation shall be interpreted

widely in the same manner as the interpretation

found in regulation 5.

If a Reporting Malta Financial

Anti-

avoidance.

Institution enters into any transactions or

schemes, the main purpose or one of the main

purposes of which is to avoid any obligation

under the FATCA Agreement or the FATCA

Regulations, these regulations are to have effect

as if such transactions or schemes had not been

entered into.

(1) Where a Reporting Malta

Imposition of

penalties.

Financial Institution fails to comply with any of

the obligations set out in the FATCA Agreement

or the FATCA Regulations, the Reporting Malta

Financial Institution shall be liable to the

following penalties

(a)

where a Reporting Malta

Financial Institution fails to maintain the

information required to be maintained in

terms of Article 2(2)(a) and Article 3(2) of

the FATCA Agreement, to a penalty of

two thousand five hundred euro (€2,500);

(b) where a Reporting Malta

Financial Institution fails to apply the due

diligence procedures specified in Annex I

of the FATCA Agreement to identify U.S.

Reportable Accounts and accounts held by

Non-participating Financial Institutions,

to a penalty of five thousand euro

(€5,000);

(c)

where a Reporting Malta

Financial Institution fails to report the

information required to be reported in

terms of regulation 30 within the time

stipulated in said regulation, to a penalty

of

(i) two

thousand

five

hundred euro (€2,500); and

(ii) one

hundred

euro

(€100) for every day during which

the default existed: provided that this

penalty shall not exceed in total

twenty thousand euro (€20,000);

(d) where a Reporting Malta

Financial Institution fails to report the

information required to be maintained in

terms of Article 2(2)(a) and Article 3(2) of

the FATCA Agreement in a complete and

accurate manner, to a penalty of

(i) in the case of minor

errors -

(aa) two

hundred

euro (€200); and

(bb) fifty euro (€50)

for every day during which

the default existed: provided

that this penalty shall not

exceed in total five thousand

euro (€5,000);

(ii) in

the

case

of

significant non-compliance, fifty

thousand

euro

(€50,000).

Furthermore, where the United

States commences to treat a

Reporting Malta Financial Institution

as a Non-participating Financial

Institution and its details are

published by the IRS, the

Commissioner shall publish details

identifying such an institution on the

website of the Inland Revenue

Department and inform any relevant

regulator in Malta of such;

(e)

where a Reporting Malta

Financial Institution fails to comply with a

request

for

information

by

the

Commissioner made consequent to

regulation 31, to a penalty of

(i) one thousand euro

(€1000); and

(ii) one

hundred

euro

(€100) for every day during which

the default existed: provided that this

penalty shall not exceed in total

thirty thousand euro (€30,000).

(2) Where, notwithstanding any action

taken by the Commissioner under these

regulations, the penalties remain outstanding or

the default in respect of which such penalties

have been imposed continues to subsist, as the

case may be, the Commissioner may serve

further default notices in accordance with this

regulation on the said Reporting Malta

Financial Institution imposing with each

successive notice double the amount of the said

penalties, provided that such penalties shall not

exceed in total fifty thousand euro (€50,000) in

respect of each specific default

Provided that each such successive

notice shall supersede the previous notice

served on the Reporting Malta Financial

Institution for the same default but any payment

made in respect of that previous notice shall be

taken into account accordingly.

(1) The Entities referred to in

Annex II of the

FATCA

Annex II to the FATCA Agreement are to be

Agreement.

treated as exempt beneficial owners or deemed

compliant Foreign Financial Institutions, as the

case may be.

(2) The accounts referred to in Annex II

to the FATCA Agreement are to be excluded

from the definition of Financial Accounts.

(3) Annex II of the FATCA Agreement

may be modified by an arrangement entered

into between the competent authorities of Malta

and the United States

(a)

to include additional Entities

and accounts that present a low risk of

being used by U.S. Persons to evade U.S.

tax and that have similar characteristics to

the Entities and accounts described in the

said Annex II as of the date of signature of

the Agreement; or

(b) to remove Entities and

accounts that, due to changes in

circumstances, no longer present a low

risk of being used by U.S. Persons to

evade U.S. tax. Any such addition or

removal shall be effective on the date of

signature of the said arrangement, unless

otherwise provided therein. Procedures

for reaching such an arrangement may be

included in the arrangement described in

paragraph 6 of Article 3 of the FATCA

Agreement.

(1) Where a person fails to

Contestation

procedure in

comply with any of the obligations set out

relation to

penalties.

under these regulations, the Commissioner shall

advise such person by means of a default notice

regarding the amount of the penalty being

imposed and the reason for its imposition and

require it to rectify the default within ten days

from the date such notice is served upon it in

accordance with sub-regulation (3).

(2) The notice referred to in sub-

regulation (1) may be served on the relevant

person either personally or by being sent by

registered post to its registered office informing

it of its rights under the provisions of sub-

regulation (3).

(3) If a person feels aggrieved by a

default notice served upon him under sub-

regulation (1), he may apply to the

Commissioner by a letter of contestation within

ten days from the date the default notice is

served upon it by the Commissioner in

accordance with sub-regulation (2).

(4) Where the Commissioner refuses the

contestation referred to in sub-regulation (3)

against a default notice or where the person

upon whom the default notice has been served

has failed to contest such notice as provided in

sub-regulation (3), the Commissioner shall

inform the said person accordingly and serve

him with a demand notice advising it that unless

the latter notice is contested in a court of law

within fifteen days from its date of service it

shall constitute an executive title in terms of

article 40(1)(d) of the Income Tax Management

Act. For this purpose only, the relevant penalty

shall be considered to be a tax which should

have been paid.

(5) Where the Commissioner is satisfied

that the default in respect of which the penalties

have been imposed under sub-regulation (1)

were not due to any fault or neglect on the part

of the relevant person, he shall remit the whole

of the said penalties and, in any other case, may

remit such part or all of the said penalties as he

may think fit. In every case the Commissioner

shall inform the said person accordingly.

(6) The payment by any person of any

penalties imposed under these regulations shall

in no way exonerate that person from its

obligations under these regulations.".

€0.99