SECURITISATION TRANSACTIONS (DEDUCTIONS) RULES

SECURITISATION TRANSACTIONS (DEDUCTIONS)

SUBSIDIARY LEGISLATION 123.128

SECURITISATION TRANSACTIONS

(DEDUCTIONS) RULES

12th August, 2011

LEGAL NOTICE 324 of 2011.

The title of these rules is the Securitisation Transactions

(Deductions) Rules.

Words and expressions used in these rules, shall, in so far

as their meanings are not defined by the Income Tax Acts, or unless

the context otherwise requires, have the meaning assigned to them

in the Securitisation Act and in any rules and regulations made

thereunder.

For the purposes of determining the total income of a

securitisation vehicle or for the purpose of ascertaining the income

at t r i b u t a b l e t o a t r u s t w h e r e s u c h se c u r i t i sa t i o n v e h i c l e i s

constituted as a trust created by a written instrument, as the case

may be, income or gains shall be deemed to arise or to have become

realised during the year in which such income or gains fall to be

recognised for accounting purposes. The deductions referred to in

rule 4 shall be deducted in the year in which they fall to be

recognised for accounting purposes.

(1) For the purpose of ascertaining the total income of a

securitisation vehicle, or for the purpose of ascertaining the income

at t r i b u t a b l e t o a t r u s t w h e r e s u c h se c u r i t i sa t i o n v e h i c l e i s

constituted as a trust created by a written instrument, as the case

may be, there shall be deducted, in addition to any relevant

outgoings and expenses which may be deducted under the

provisions of article 14 of the Act, the following outgoings and

expenses

(a) sums payable by the securitisation vehicle to the

originator or assignor -

(i)

for the transfer of securitisation assets to the

said securitisation vehicle; or

(ii) as a result of any risks of the said originator

assumed by the said securitisation vehicle;

(b) premiums, interest or discounts in relation to financial

instruments issued, or funds borrowed, by the

securitisation vehicle to finance the acquisition of

securitisation assets or the assumption of risks; and

(c) any expenditure incurred by the securitisation vehicle

in respect of the day to day administration of the

securitisation vehicle itself, including expenditure

relating to statutory requirements, and of its assets and

risks, including the collection of any relevant claims.

Where the securitisation vehicle opts to delegate such

administration, or part thereof, to another person, the

SECURITISATION TRANSACTIONS (DEDUCTIONS)

amount of expenditure incurred for the services

received from such other person for the performance

of the said administration may be deducted.

(2)

(a) Where, after taking into account the relevant

deductions contemplated in article 14 of the Act and in

sub-rule (1)(a), (b) and (c), tax is chargeable on any

remaining total income of the securitisation vehicle, a

further deduction of an amount equal to the said

remaining total income may be claimed.

(b) Such further deduction may be claimed at the option of

the securitisation vehicle

Provided that the Commissioner is satisfied that the

relevant originator or assignor, or their assigns or successors in

title, has given his irrevocable written consent to the exercise of

such option in relation to the relevant contract. For this purpose,

the securitisation vehicle needs to provide proof of such written

consent giving details of identity of the originator or assignor,

including the tax registration number for Maltese income tax

purposes where applicable, and the place where the control and

management of its business is exercised.

Where it may be considered that a deduction under rule 4 is

already provided for under the provisions of article 14 of the Act,

for the avoidance of doubt, the provisions of rules 3 and 4 shall not

be construed to mean that a relevant outgoing or expense may be

deducted more than once.

(1)

An amount equal to -

(a) such sums payable that are referred to in rule 4(1)(a),

and

(b) such further deduction, together with any amount of

loss incurred in the same year or brought forward from

previous years under a different contract and allowed

as deduction in arriving at the total income before the

said further deduction, in case where the option

referred to in rule 4(2)(b) is exercised,

shall be deemed to be income in the hands of the relevant originator

or assignor, as the case may be, which for the purposes of the

Income Tax Acts, shall be characterised as income falling under the

provisions of article 4(1)(a) of the Act.

(2)

(a) In the case of income referred to in rule 4(1)(a), it shall

be deemed that such income has arisen during the year

in which any relevant securitisation asset was

transferred or the relevant risk was assumed.

(b) In the case where the option referred to in rule 4(2)(b)

was exercised, it shall be deemed that the relevant

income has arisen during the same year that the

deduction was claimed.

(3) The income in the hands of the originator or assignor

referred to in this rule shall be considered to arise in Malta except

SECURITISATION TRANSACTIONS (DEDUCTIONS)

where the control and management of the business of the said

originator or assignor is not exercised in Malta.

(1) Securitisation vehicles shall account separately for

different securitisation contracts such that they may determine the

chargeable income for each contract.

(2) Notwithstanding anything contained in the Income Tax

A c t s o r i n r u l e s o r r e g u l a t i o n s m a d e t h e r e u n d e r, w h e r e a

securitisation vehicle is constituted as a company an amount

equivalent to the additional deduction available in terms of rule

4(2)( b ) shall be allocated to the final tax account of the

securitisation vehicle.

A securitisation vehicle shall be deemed not to constitute

part of a group of companies for the purposes of articles 16 to 22 of

the Act and no entity may benefit from a deduction of losses made

by such a vehicle once it does not remain a securitisation vehicle.

Where in relation to a transaction, or to a series of

transactions, involving at some point a securitisation contract,

sums are determined such that the originator or assignor, or any

person which is controlled and beneficially owned directly or

indirectly to the extent of more than 50% by the same shareholders,

is in a position to obtain an undue advantage which has the effect of

reducing their liability to tax in a manner which is not reconcilable

with the object and purpose of these rules, the Commissioner shall

consider any such transaction, or series thereof, to be a profit-

making scheme for the purposes of the provisions of article 4(1)(a)

of the Act and shall determine the relevant liability to tax in such

manner and in such amount as may be necessary so as to nullify the

said advantage.