Capital Gains (Amendment) Rules, 2017

L.N. 379 of 2017

INCOME TAX ACT

(CAP. 123)

Capital Gains (Amendment) Rules, 2017

IN exercise of the powers conferred by articles 5, 12 and 96 of the Income

Tax Act, the Minister for Finance has made the following rules:-

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

Rules, 2017 and these rules shall be read and construed as one with

the Capital Gains Rules, hereinafter in these rules referred to as "the S.L. 123.27

principal rules".

"

Determination of the % of the market value of the company represented by the transferred shares

Type

Class

Company total

Transferred shares

Nominal

Voting

Nominal

Voting

% of rights to

value

rights

value

rights

profits

distributable

to ordinary

shareholders

(A)

(B)

(C)

(D)

(XX)

C/A*.4 +

D/B*.2 +

E*.4

Percentage of the market value of company

State whether there has been a change in the issued share capital of the

company or in the shareholding rights during the period of eighteen months

preceding the transfer

If the answer to (a) is "yes", state whether the change constituted a

transfer that was subject to duty under article 42B of the Duty on Documents

and Transfers Act

If the answer to (b) is "No", give details of the capital structure and

shareholding rights of the company as existing at the time immediately

preceding that change

Type

Class

Company total

Transferred shares

Nominal

Voting

Nominal

Voting

% of rights to

value

rights

value

rights

profits

distributable

to ordinary

shareholders

(E)

(F)

(G)

(H)

(YY)

G/E*.4 +

H/F*.2 +

Percentage of the market value of company

I*.4

".

€0.54

Rule 2 of the principal rules shall be amended as follows

Amends rule 2

of the principal

rules.

(a) for sub-paragraph (ii) of paragraph (a) of sub-rule (1)

thereof there shall be substitute the following

"(ii) where the immovable property in question was

acquired causa mortis or by means of a donation, its value at the

time of its acquisition, determined in accordance with the

following sub-rules;"

(b) in paragraph (a) of sub-rule (2) thereof, for the words "the

value of immovable property acquired causa mortis" there shall be

substituted the words "the value as at the time of acquisition of

immovable property situated in Malta that was acquired causa

mortis";

(c) in paragraph (a) of sub-rule (3) thereof, for the words "the

value of immovable property acquired causa mortis" there shall be

substituted the words "the value at the time of acquisition of

immovable property situated in Malta that was acquired causa

mortis";

(d) immediately after sub-rule (3) thereof there shall be added

the following new sub-rules

"(3A) Subject to sub-rule (4), the value at the time of

acquisition of immovable property situated in Malta that was

acquired by means of a donation shall be deemed to be the value

declared in the deed of donation.";

"(3B) Subject to sub-rule (4), the value at the time of

acquisition of immovable property situated outside Malta that

was acquired causa mortis or by means of a donation shall be

deemed to be equivalent to the price which that property would

have fetched had it been sold in the open market at the date of

the acquisition."; and

(e) for sub-rule (4) thereof, there shall be substituted the

following sub-rule

"(4) When the total of the value at the time of acquisition

of immovable property that was acquired causa mortis or by

means of a donation and the other deductions allowable in terms

of the foregoing provisions of this rule exceeds the value at

which that property is transferred, the amount that shall be taken

as the value of that property at the time of acquisition shall be

the value determined in accordance with the foregoing sub-rules

of this rule reduced by an amount equivalent to that excess

provided that the value so reduced shall never be less than

For rule 4 of the principal rules there shall be substituted

the following new rule

(1) Subject to the other provisions of

these rules, in computing the gains or profits on the

transfer of any asset to which article 5(1)(a)(ii) of

the Act applies, there shall be taken into account

the cost of acquisition of that asset.

(2) Without prejudice to the generality of

rule 3, in the case of a transfer of intellectual

property or intellectual property rights, the cost of

acquisition shall not include any amount in respect

of which a deduction has been claimed in terms of

article 14(1)(m) of the Act.

(3) When the said asset was acquired causa

mortis or by means of a donation, the cost of

acquisition shall be deemed to be an amount equal

to the price which that asset would have fetched

had it been sold on the open market on the date of

that acquisition. However, where a notice was

given to the Commissioner for the purposes of the

Duty on Documents and Transfers Act in respect

of that acquisition and the value declared in that

notice was lower than the said price, the cost of

acquisition shall be deemed to be equivalent to the

value so declared.".

4. Immediately after rule 4 of the principal rules there shall

be added the following new rule

(1) In the computation of the capital

gains derived by an original shareholder from a

transfer of shares that is made in consequence of

the admission of those shares for trading on an

alternative trading platform, the amount on which

tax is chargeable shall be the amount computed in

accordance with the Act and the other provisions

of these rules multiplied by the percentage

indicated in the second column of the following

table, depending on the level of public

participation in the company in which the shares

are held

Level of public participation

Taxable portion

Less than 10%

100%

At least 10% but less than 15%

75%

At least 15% but less than 20%

50%

At least 20% but less than 25%

25%

25% or more

0%

(2) Subject to the provisions of sub-rule (1),

when a person who is not an original shareholder

transfer shares in a company that have been

admitted for trading on an alternative trading

platform and the level of public participation in the

company is at least 10%, no tax shall be chargeable

on capital gains derived from that transfer.

(3) For the purpose of this rule -

(a)

"alternative trading platform" is

an alternative trading platform, as defined in

Commission Regulation (EU) No 651/2014

of 17 June, 2014, that is operated by a stock

exchange recognized under the Financial

Markets Act;

(b) "level of public participation"

means the percentage of equity shares held

by persons who are not original shareholders

at the end of the day of the transfer in

question;

(c)

"original shareholder" means

(i) a person who was a

shareholder of the company before any

shares in that company were admitted

for trading on an alternative trading

platform;

(ii) the spouse, a direct

descendant or the spouse of a direct

descendant of an original shareholder

described in the other sub-paragraphs;

(iii) a trust or a company,

partnership, foundation or other legal

person whose beneficiaries are, to the

extent of more than 50%, original

shareholders described in the other sub-

paragraphs or which is owned and

controlled, directly or indirectly, to the

extent of more than 50%, by such

original shareholders; or

(iv) a

shareholder

in

a

company who acquired his shares from

an original shareholder described in the

other sub-paragraphs by means of a

transfer causa mortis or any other

transfer to which sub-rule (1) was not

applicable.”.

In paragraph (b) of the second proviso to sub-rule (6) of

rule 5 of the principal rules, for the words "on the date of the

transfer;" there shall be substituted the words "on the date of the

transfer: provided that this paragraph shall not apply if the market

value of the property is less than its book value;".

In the proviso to sub-rule (5) of rule 10 of the principal

rules, immediately after the words "remits that deduction to the

Commissioner within fifteen days of that transfer." there shall be

added the words "The deduction shall be remitted together with the

notice that is required to be presented in accordance with rule 6".

Rule 10A of the principal rules shall be amended as

follows

(a) in sub-rule (2) thereof, for the words "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" there shall be

substituted the words "shall be deemed to constitute final tax or

provisional tax relating to the transfer of the property or any rights

thereon in terms of paragraph (a) or (b), as the case may be, of article

43(1) of the Income Tax Management Act"; and

(b) in sub-rule (4) thereof, immediately after the words "article

43(9)(c) of the Income Tax Management Act" there shall be added the

words "or rule 10B of these rules".

Immediately after rule 10A of the principal rules, there Adds new rule

10B to the

shall be added the following new rule

principal rules.

Without prejudice to rule 10A, where

"Registrar to

withhold tax in

any asset the transfer of which is subject to tax on

the case of

judicial sales

property transfers under article 5A of the Act is

by auction.

sold in a judicial auction, the Registrar of Courts

shall have the same duties with regard to the

withholding and payment of the tax as those that

are imposed on him by article 66 of the Duty on

Documents and Transfers Act in relation to the

duty leviable on transfers causa mortis under the

said Act.".

9. Part 4 of Schedule C to the principal rules shall be Amends

Schedule C of

amended as follows

the principal

rules.

(a)

section I shall be substituted by the Schedule to

these rules;

(b) in item (c) of section II, immediately after the words

"adjustment to the value of immovable property" there shall be

added "(this adjustment can never be less than €0)"; and

(c)

in item (b) of section III, for the words "(higher of

C/A, D/B or Z in Sec I)" there shall be substituted the words

"(higher of (XX) and (YY) in Sec I)".

10. Schedule J to the principal rules shall be amended as Amends

Schedule J of

follows

the principal

rules.

(a)

in the first paragraph that follows the title of the

Schedule, for the words "which is subject to tax on capital gains

under the Income Tax Acts" there shall be substituted the words

"which is subject to tax on capital gains or to the final tax on

property transfers under the Income Tax Acts"; and

(b) in the title of Part 1, immediately after the words "by

article 43(9)(c) of the Income Tax Management Act" there shall

be added the words "or by rule 10B of these rules".