Exemption from Tax on Property Transfers

L.N. 419 of 2021

INCOME TAX ACT

(CAP. 123)

Exemption from Tax on Property Transfers

(Set-off of Tax Arrears) Rules, 2021

IN EXERCISE of the powers conferred by articles 12(2) and 96

of the Income Tax Act, the Minister for Finance and Employment has

made the following rules: -

The title of these rules is Exemption from Tax on Property Citation.

Transfers (Set-off of Tax Arrears) Rules, 2021.

In these rules, unless the context otherwise requires –

Interpretation.

"gross tax" means the tax chargeable on a transfer in accordance

with article 5A of the Income Tax Act before the exemption allowed

under these rules;

"gross transfer value" means the transfer value determined in

accordance with article 5A of the Income Tax Act; and when a person, Cap. 123.

by means of the same deed, makes more than one transfer of property

to which these rules apply, it means the total transfer value, determined

as aforesaid, of those transfers;

"net transfer value" means the gross transfer value reduced by the

gross tax;

"qualifying payment" means a payment that satisfies the

conditions of sub-rule (1) of rule 5 but not exceeding the amount that

is to be taken into account for the purpose of these rules in accordance

with sub-rules (2) and (3) of that rule;

"relevant tax arrears" means any unpaid amount of

(a) income tax and tax on capital gains due and payable

in terms of articles 4 and 5 of the Income Tax Act for the year of Cap. 123.

assessment 2020 or any previous year of assessment;

(b) tax deducted at source or that should have been

deducted at source in accordance with article 23 of the Income Cap. 372.

Tax Management Act that was due to be remitted to the

Commissioner on or before 31 January 2021;

(c) social security contributions due and payable by an

employer in respect of employed persons in accordance with

article 9 of the Social Security Act that was due to be remitted to

the Commissioner on or before 31 January 2021;

(d) value added tax due and payable in terms of article

21(1) of the Value Added Tax Act in respect of any tax period, as

defined in that Act, that ended on or before the 31 December

2020 and value added tax due and payable in terms of article

21(2) or (3) of that Act that became chargeable on or before the

said date;

(e) interest, additional tax and administrative penalties

due and payable in terms of the provisions of the Income Tax

Acts, the Social Security Act and the Value Added Tax Act in

respect of any arrears mentioned in the preceding paragraphs.

These rules apply to any transfer on which tax is chargeable

in terms of article 5A of the Income Tax Act that is made by means of

a public deed not later than 31 December 2022 by a person who had

acquired that property on or before the 31 March 2021 and who owes

relevant tax arrears.

(1) The relevant tax arrears of a person who makes a

transfer to which these rules apply are those relevant tax arrears that

are shown in the records of the Commissioner for the purposes of the

law in terms of which they became due as a liability incurred directly

by that person and outstanding as on the date on which a qualifying

payment is made and shall not include any amount of tax arrears of

another person even though the first-mentioned person may be liable

for the payment of that amount by reason of his being a director,

manager or other principal officer, or a shareholder, partner, member,

agent or a representative in whatever capacity of that other person.

(2) Notwithstanding the provisions of sub-rule (1), relevant tax

arrears incurred by a deceased person shall be treated as relevant tax

arrears of the heirs in proportion to their respective share of the

inheritance.

(1) Subject to the other provisions of these rules, a person

who makes a transfer to which these rules apply shall be entitled to an

exemption from tax in accordance with these rules if a payment is

made against his relevant tax arrears when all the following conditions

are satisfied

(a) that person has submitted all returns that he was

required to submit in terms of article 10 of the Income Tax

Management Act, rules 20, 21 and 22 of the Final Settlement

System (FSS) Rules and articles 27 and 30 of the Value Added

Tax Act;

(b) the gross tax and the duty on documents and transfers

chargeable in respect of that transfer have been remitted to the

Commissioner as required by the Income Tax Act and the Duty Cap.

123. on Documents and Transfers Act;

(c) that person gives notice to the Commissioner of his

claim for an exemption under these rules, which notice

(i) shall be given to the Commissioner by not later

than three months after the date of that transfer;

(ii) shall be given on such form and in such manner

as the Commissioner may approve and contain all the

information and particulars required by that form;

(d) that person provides such further information and

produces such documents and evidence as the Commissioner

may consider necessary for the proper application of these rules;

(e) the payment against relevant tax arrears is made on or

after the date of that transfer and, when the Commissioner issues

a request for payment for the purpose of these rules, not later

than the time allowed in that request

Provided that the time for payment that may be

allowed in such a request shall not be less than thirty days.

(2) The payment that shall be taken into account for the

purpose of these rules shall not exceed the net transfer value.

(3) When the gross transfer value exceeds the relevant tax

arrears of the transferor, the payment that shall be taken into account

for the purpose of these rules shall not exceed that part of the net

transfer value which, when added to the amount of the exemption

allowed under these rules, is equivalent to the relevant tax arrears,

which part shall be calculated as follows

net transfer value x relevant tax arrears/gross transfer value.

The exemption from income tax allowed under these rules Calculation of

shall be an exemption from the gross tax, or part thereof, in an amount tax exemption.

corresponding to the qualifying payment and shall be calculated as

follows

gross tax x qualifying payment/net transfer value.

(1) The total of a qualifying payment and of the amount

of the respective exemption allowed under these rules shall constitute

a payment by the person who makes the transfer in question which

shall be set off against the relevant tax arrears of that person.

(2) When the amount to be set off in accordance with sub-rule

(1) is less than the relevant tax arrears, it shall be set off against such

categories of the relevant tax arrears as the Commissioner may, in his

discretion, decide, and the set-off shall be without prejudice to the

powers of the Commissioner to take action in accordance with the

relevant provisions of the Income Tax Acts, the Social Security Act

and the Value Added Tax Act for the collection of the balance of the

relevant tax arrears still outstanding after the said set-off.

(3) An exemption allowed under these rules shall not give rise

to any refund, credit or other right except for the set-off mentioned in

this rule.

(4) Notwithstanding anything to the contrary contained in the

Income Tax Acts, the Social Security Act and the Value Added Tax

Act , a payment by means of a set-off in accordance with this rule shall

extinguish any dispute that may be outstanding in respect of the

amount of the arrears that is so paid, and no objection or other

challenge shall be admissible in respect of that amount after the set-off

has been made.

These rules are without prejudice to the provisions of

article 51 of the Income Tax Act and of regulation 6 of the European

Union Anti-Tax Avoidance Directives Implementation Regulations.

€0.36