Voluntary Occupational Pension Scheme Rules, 2017

L.N. 228 of 2017

INCOME TAX ACT

(CAP. 123)

Voluntary Occupational Pension Scheme Rules, 2017

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

96 of the Income Tax Act, the Minister for Finance has made the

following rules:-

(1)

The title of these rules is the Voluntary Citation and

commencement.

Occupational Pension Scheme Rules, 2017.

(2) These rules shall be deemed to have come into force on

1st January, 2017.

For the purposes of these rules

Interpretation.

"an association representing employers" shall also include an

association representing self-occupied persons;

"the Act" means the Income Tax Act;

"the Commissioner" means the Commissioner for Revenue;

"competent authority" means the Malta Financial Services

Authority established by means of the Malta Financial Services Cap. 330

Authority Act;

"European right" means the entitlement of an insurance

undertaking to establish a branch, or provide services, in a Member

State or an EEA State other than that in which it has its head office -

(a)

in accordance with the Treaty as applied in a

Member State or an EEA State; and

(b)

subject to the requirements of the Single Market

Directive and subject to any regulations made under the

Insurance Business Act, or insurance rules issued by the Cap. 403

competent authority pursuant to the Insurance Business Act,

implementing such requirements;

"licence holder" means

(a) in the case of an occupational voluntary retirement scheme

or a personal retirement scheme, a company registered, licensed or

authorised to administer retirement schemes under the Retirement Cap. 514

Pensions Act, or any other law substituting the said Act, or,

(b) in the case of a long term contract of insurance, a company

registered, licensed or authorized to carry on long term business

under the Insurance Business Act and includes a European Insurance

Undertaking carrying on long term business of insurance in Malta in

exercise of a European right;

"long term business" means business of insurance of any of the

classes specified in the Second Schedule to the Insurance Business

Act;

"notice" means notice in writing and "notify" shall be

construed accordingly;

"occupational retirement scheme" means a retirement scheme

established on a voluntary basis for, or by, an employer or a number

of employers, or an association representing employers, jointly or

separately, for the benefit of qualifying employees;

"payer" shall have the same meaning as assigned to it under the

Final Settlement System (FSS) Rules;

"personal retirement scheme" means a retirement scheme

which is not a voluntary occupational retirement scheme and

to which contributions are made for the benefit of an individual;

"qualifying contribution" means a contribution or

payment made to a qualifying scheme in respect of which the

provisions of these rules shall apply;

"qualifying employer" means any person, whether corporate or

unincorporate, and whether vested with legal personality or not,

which employs individuals to carry out the economic activity for

which it is established and which is registered as a payer for the

purposes of the Final Settlement System (FSS) Rules

Provided that for the avoidance of doubt, a qualifying

employer shall also include a self-occupied person;

"qualifying employee" means an individual on whose

behalf or by whom contributions or payments to a qualifying

scheme are made and who fulfils the requirements of rule 4;

"qualifying scheme" means a retirement scheme or a long term

contract of insurance that fulfils the requirements of these rules and

which is approved by the Commissioner;

"self-occupied person" shall have the same meaning as is

assigned to it under the Social Security Act;

"social security contributions" means a contribution payable

under the Social Security Act or which was payable under the Cap.

provisions of the National Insurance Act before the date of its repeal;

"year" means the year immediately preceding a year of

assessment unless the context otherwise requires; and

unless otherwise defined, terms and expressions used in these rules

shall have the meaning assigned to them in the Act, the Insurance Cap. 403

Business Act, or the Retirement Pensions Act or any other law or Cap. 514

laws substituting it or them, as the case may be.

These rules relate to contributions paid to a qualifying Introductory.

scheme or schemes established in the context of an employment

relationship for the purposes of providing retirement benefits to

qualifying employees as prescribed in these rules.

These rules shall apply only in respect of qualifying General

contributions made to a qualifying scheme by or on behalf of any conditions

qualifying

individual who

employees.

(i)

derives chargeable income in terms of article

4(1)(b) of the Act and who is duly registered for Maltese

income tax purposes;

(ii)

is employed by the qualifying employer; and

(iii)

does not benefit under the Highly Qualified S.L. 123.126

Persons Rules.

(1)

A qualifying employer making qualifying Contributions

contributions to a qualifying scheme for the benefit of one or more by

employer.

qualifying employees shall, in respect of each such qualifying

employee and subject to the provisions of these rules, be entitled to a

tax credit amounting to the lower of 15% of the amount of qualifying

contribution paid during a year and one hundred and fifty euro (€150)

or such other amount as may be prescribed by the Minister from time

to time.

(2) The credit referred to in this rule shall be available as a

deduction from the amount of income tax which is due on the

qualifying employer’s chargeable income for the year during which

the contribution or payment to the qualifying scheme or schemes is

made, and any amount thereof which is not so utilised shall be added

to the tax credit for the following year and deemed to be part of that

tax credit, or if there is no such tax credit for that year, be deemed to

be the tax credit for that year and so on for subsequent years.

(3) In the case of a qualifying employer which is a company,

the tax credit utilised in a year shall be deemed to have relieved from

tax so much of the company’s chargeable income which, when

multiplied by the rates of tax at which it was chargeable in that year,

is equal to the tax credit.

(4) For the purposes of the Tax Accounts (Income Tax) Rules,

the amount of chargeable income which is deemed to have been

relieved from tax in accordance with sub-rule (3) shall be allocated to

the company’s Final Tax Account.

(5) Any contributions or payments referred to in sub-rule (1)

made by a qualifying employer for the benefit of a qualifying

employee shall not be deemed to be a benefit provided by the

qualifying employer to the qualifying employee by reason of

employment or office for the purposes of the Fringe Benefits Rules.

(1)

A qualifying employee who also makes qualifying

contributions into the qualifying scheme referred to in rule 5(1) shall,

subject to the provisions of these rules, be eligible for a tax credit

amounting to 15% of the aggregate amount of the qualifying

contributions made during a year, up to a maximum of €150 or such

other amount as may be prescribed by the Minister from time to time.

(2) The tax credit referred to in sub-rule (1) shall only be

available as a deduction from the amount of income tax which is due

on the total income of the qualifying employee for the year during

which the qualifying contribution to the qualifying scheme or

schemes is made

Provided that in the case of a qualifying employee who is

married and is chargeable to tax jointly with his or her spouse in

terms of article 50 of the Act, the said deduction may be availed of

against the income tax which is due on the total income of the married

couple.

(3) The qualifying contributions referred in sub-rule (1)

shall be disclosed in the Payee Statement of Earnings (FS3) that the

payer is required to prepare in terms of rule 21 of the Final

Settlement System (FSS) Rules.

A qualifying scheme shall be one which satisfies the

following conditions

(a)

in the case of an occupational retirement scheme, a

scheme that is registered under the Retirement Pensions Act or

any other law substituting the said Act; or

(b)

in the case of a long term contract of insurance

issued by a licence holder

(i) it provides for the commencement of

payment of benefits to a qualifying individual at an age

not earlier than fifty or not later than the date when the

individual attains the age of seventy or any other age

specified in pension rules applicable to occupational

retirement schemes in terms of the Retirement Pensions Cap. 514

Act or any other law substituting the said Act, except in

those cases where the long term contract of insurance

provides that the payment is made by reason of the

permanent disability or death of the beneficiary; and

(ii) it provides for programmed withdrawal

arrangements as provided for in pension rules issued

under the Retirement Pensions Act or any Act Cap. 514

substituting the said Act.

(1)

Except for payments referred to in sub-rule (5), all Payments

payments received from a qualifying scheme, including for the received

qualifying

avoidance of doubt long term contracts of insurance mentioned in scheme.

rule 7(b), shall constitute pension income for the purposes of article

4(1)(d) of the Act.

(2) The transfer of accumulated pension benefits of a

qualifying employee from an occupational or personal retirement

scheme to a qualifying scheme, shall not constitute a payment that is

chargeable to tax under the provisions of the Act.

(3) Every amount deducted in accordance with sub-rule (2)

shall be a debt due by the licence holder to the Commissioner, and

shall be remitted to the Commissioner together with such forms and

documentation as may be prescribed, within thirty days from the

making of the deduction.

(4) Where a licence holder fails to deduct and pay the tax in

accordance with sub-rules (2) and (3) the provisions of article 73(4)

of the Act and of article 40(1) of the Income Tax Management Act Cap. 372

shall apply mutatis mutandis.

(5) The provisions of this rule shall not apply to

(i)

any capital sum which may be exempt from

taxation in accordance with the provisions of article 12(1)(h)

of the Act; and

(ii)

any sum paid to a qualifying employee before

attaining the age specified in terms of the Retirement Pensions

Act, including where in such case the said individual is no

longer employed by the qualifying employer.

(1)

A qualifying contribution made to a qualifying

scheme which is reported to the Commissioner in accordance with the

provisions of rule 11(2) shall be considered as approved by the

Commissioner for the purposes of article 14(1) (e) of the Act.

(2) Provided that, for any year of assessment, the total

deductions that can be claimed by the qualifying employer in terms of

the provisions of article 14(1)(e) of the Act in respect of qualifying

contributions, shall in respect of each qualifying employee amount to

the lower of the qualifying contribution actually paid and two

thousand euro (€2,000).

(1)

Each licence holder shall notify the Commissioner

in writing prior to accepting qualifying contributions or payments

from a qualifying employer.

(2) Where the qualifying scheme is a long term contract of

insurance, the notification referred to in sub-rule (1) shall include

(a)

a declaration by the licence holder that the long

term contract of insurance satisfies the conditions referred to in

rule 7(b); and

(b)

an undertaking by the licence holder that he shall

inform the Commissioner within fourteen days of any

subsequent change which would result in the long term contract

of insurance no longer satisfying any of the conditions referred

to in rule 7(b).

(3) A licence holder who shall cease to be a licence holder in

terms of the Retirement Pensions Act or the Insurance Business Act,

or ceases to carry on long term business in Malta in exercise of a

European right, shall notify the Commissioner promptly, and in any

case not later than fourteen days from the date when the licence

holder ceases to hold a licence in terms of Retirement Pensions Act or

the Insurance Business Act, or from when it ceases to exercise such

European right.

(4) A licence holder shall at all times keep sufficient records in

respect of qualifying employers and qualifying employees to enable

the requirements of these rules to be satisfied, including full name,

address, and legally valid identification document (or income tax

registration) number of each individual, and details of both spouses in

the case of a married couple.

(1)

The Commissioner may, after giving due notice, Information

require any person who is or who has been a licence holder who provided

Commissioner.

administers or who administered a qualifying scheme, or a qualifying

employer, or a qualifying employee to furnish him within such time

(not being less than fourteen days) as may be provided by the notice,

such information about any qualifying scheme (including copies of or

extracts from any books or other records) or any payments or

contributions thereto as the Commissioner may reasonably require for

the purposes of these rules or to make available for inspection, at a

place within Malta, all relevant documents which are in the

possession or under the control of a licence holder, a qualifying

employer, or a qualifying employee.

(2) Every licence holder shall, by the end of January of the

year following that in which the qualifying contributions to the

qualifying scheme were made, submit to the Commissioner a

statement in electronic format as approved by the Commissioner

showing particulars concerning the qualifying employer and

qualifying employee’s identity, and other information as may be

required for income tax purposes, including but not limited to the

amount contributed or paid by the qualifying employer and, or

qualifying employee to the qualifying scheme and tax deducted and

paid to the Commissioner in accordance with the provisions of rule 8.

(3) Without prejudice to the provisions of rule 8, every licence

holder shall be subject to the provisions of the Final Settlement S.L. 372.14

System (FSS) Rules in respect of payments made from a qualifying

scheme to a qualifying employee which constitute pension income for

the purposes of article 4(1)(d) of the Act.

Without prejudice to the provisions set out in the Social Social Security

Security Act, for the purposes of determining the weekly rates of contributions.

contributions payable under the provisions of that Act, no account

shall be taken of any qualifying contributions paid under the

provisions of these rules.

(1)

Where the Commissioner is of the opinion that any Tax avoidance.

qualifying contributions made into a qualifying scheme was so made

solely or mainly for the purpose of postponing or reducing liability to

tax chargeable under the provisions of article 4(1)(b) of the Act or of

obtaining a tax credit under these rules, he shall, by order in writing,

determine the liability to tax or the entitlement to a tax credit of the

qualifying employee and, or qualifying employer, or of any other

person, for any year of assessment, in such manner and in such

amount as the Commissioner may in his discretion deem necessary in

the circumstances of the case, to nullify or modify the said advantage.

(2) A person who disagrees with an order served upon him as

aforesaid shall have the same rights to object to that order and to

appeal from a decision of the Commissioner refusing that objection as

if that order were an assessment issued under the Income Tax

Management Act and the relevant provisions of that Act relating to

objections and appeals shall apply mutatis mutandis.

€0.72