Tax Accounts (Income Tax) (Amendment) Rules, 2015

L.N. 183 of 2015

INCOME TAX ACT

(CAP. 123)

Tax Accounts (Income Tax) (Amendment) Rules, 2015

IN EXERCISE of the powers conferred by articles 2 and 96 of

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

(1) The title of these rules is the Tax Accounts (Income Citation.

Tax) (Amendment) Rules, 2015, and these rules shall be read and

construed as one with the Tax Accounts (Income Tax) Rules, S.L.123.101

hereinafter referred to as "the principal rules".

(2) These rules shall be applicable as from the year of

assessment 2015.

Rule 3 of the principal rules shall be amended as follows

Amends rule 3

of the principal

rules.

(a)

in paragraph (k) thereof, for the words "article 31A

of the Act" there shall be substituted the words "articles 31A to

31D of the Act"; and

(b) immediately after paragraph (m) thereof there shall

be added the following proviso

"Provided that with effect from year of assessment

2015 the provisions of paragraphs (c) and (l) shall no

longer be applicable and the amount of chargeable income

the tax on which has been relieved from payment by any

tax credits shall after deducting the tax chargeable thereon

and adding the amount of tax credits utilised to relieve the

payment of such tax be allocated to the Maltese taxed

account.".

Rule 5 of the principal rules shall be amended as follows

Amends rule 5

of the principal

rules.

(a) in paragraph (c) of sub-rule (7) thereof, for the

words "the highest beneficial entitlement" wherever they recur

there shall be substituted the words "the highest percentage

beneficial entitlement", and for the words "the second highest

beneficial entitlement" there shall be substituted the words "the

second highest percentage beneficial entitlement";

(b)

in the proviso to paragraph (c) of sub-rule (7)

thereof, for the words "the parent company’s Maltese Taxed

Account and the Foreign Income Account." there shall be

substituted the words "the parent company’s Maltese Taxed

Account and the Foreign Income Account:";

(c)

immediately after the proviso to paragraph (c) of

sub-rule (7) thereof there shall be added the following new

proviso

"Provided also that the percentage beneficial

entitlement shall be that existing at the end of the

respective accounting period. For the purposes of this sub-

rule, "percentage beneficial entitlement" shall mean the

percentage of the profits available for distribution to the

ordinary shareholders represented by the profits available

for distribution to the holders of those shares.";

(d) sub-rule (8) thereof shall be substituted by the

following

"(8) Where a company derives profits

consisting of interest, royalties, fees or any other

consideration howsoever described from the

granting of loans or any form of credit or from

the provision of services to a related company or

from the use of tangible or intangible assets by a

related company where the profits of the related

company would have been allocated to the

Immovable Property Account, were it not for the

said transaction or transactions, and where such

a transaction or transactions from which such

profits are derived are entered into with the sole

or main purpose of a shareholder or shareholders

of any of the said companies obtaining a refund

of an amount of tax in terms of article 48(4) or

(4A) of the Income Tax Management Act to

which the said shareholder or shareholders

would not have been entitled were it not for the

said transaction or transactions, the provisions of

article 48(10) of the Income Tax Management

Act shall apply.";

(e)

sub-rule (9) thereof shall be substituted by the

following

"(9) (a) For the purpose of sub-rules (7) and (8),

a company shall be deemed to be related to another

company if at the end of the year preceding the relevant

year of assessment both companies are

(i)

resident in Malta; and

(ii) one is a subsidiary of the other or both

are subsidiary companies of a third company,

resident in Malta.

For the purpose of this sub-rule a company shall be

deemed to be a subsidiary of another company, hereinafter

referred to as the "parent company"

(i) if and so long as more than 50% of its

ordinary share capital and more than 50% of its

voting rights are owned directly or indirectly by the

parent company; or

(ii) the parent company is beneficially

entitled either directly or indirectly to more than

50% of any profits available for distribution to the

ordinary shareholders of the subsidiary company;

or

(iii) the parent company would be

beneficially entitled either directly or indirectly to

more than 50% of any assets of the subsidiary

company available for distribution to its ordinary

shareholders on a winding up.

The Commissioner may, in his absolute discretion,

deem a company to be related to another company where,

in his opinion, the relationship between the companies has

been structured with the sole or main purpose of

circumventing the provisions of sub-rule (7) and (8).

(b) Notwithstanding anything contained in these

rules, where during the year immediately preceding year of

assessment 2015 or any year thereafter, as a result of a

change in the direct or indirect shareholders of a company

(hereinafter referred to as "Company A"), or a change in

the rights attached to the shares issued by Company A,

such company becomes related to another company

(hereinafter referred to as "Company B") within the

meaning of paragraph (a) of this sub-rule, the

Commissioner may, on application made by either

Company A or Company B, in his absolute discretion,

determine that such companies are not related to one

another for the purposes of sub-rules (7) and (8)

Provided that the Commissioner will only

issue such determination where, in his opinion, the

relationship between the companies has not been

structured with the sole or main purpose of obtaining any

advantage which has the effect of avoiding, reducing or

postponing liability to tax, or of obtaining any refund or

set-off of tax."; and

(f)

immediately after sub-rule (9) thereof, as amended,

there shall be added the following new sub-rule

"(10) Where a person enters into an

artificial arrangement intended to shift profits

between tax accounts to create an entitlement to

a refund in terms of article 48(4) or (4A) of the

Income Tax Management Act, the provisions of

article 48(10) of the Income Tax Management

Act shall apply.".

Immediately after paragraph (c) of rule 9 of the principal

rules there shall be added the following new paragraph

"(d) When an election as aforesaid has

been made, it shall also apply to all subsequent

years, and may not at any time be renounced

unless, upon being requested, the Commissioner

gives his permission in writing

Provided that the request for the

renunciation of the election may only be made

on such form as the Commissioner may require,

and which request shall indicate acceptance by

all the directors of the company or by the

company secretary where such request is

approved by the board of directors of the

company

Provided also that the Commissioner

shall only give his permission if the company

which has requested permission to renounce the

election re-allocates its profits after tax to its tax

accounts in accordance with the provisions of

these rules from the year of assessment from

which the said election was effective, as if the

said company had never made such election

Provided also that the re-allocation

referred to in this paragraph shall not require the

submission of a further or further returns in

accordance with article 13 of the Income Tax

Management Act, but shall only require a

change in the amounts brought forward in the

return of income of the year of assessment from

which the renunciation shall apply

Provided further that where, at the

time of the request for the renunciation of the

election, the company making such request is in

default of furnishing a return or returns of

income, the Commissioner may impose such

other conditions as he deems fit and reasonable,

and where such company accepts the conditions

laid down by the Commissioner, such conditions

shall be operative notwithstanding any

provisions of these rules and the Act.".

B

€0.54