VOLUNTARY OCCUPATIONAL PENSION SCHEME RULES

PENSION SCHEME RULES

SUBSIDIARY LEGISLATION 123.175

VOLUNTARY OCCUPATIONAL PENSION

SCHEME RULES

12th September, 2017

LEGAL NOTICE 228 of 2017, as amended by Legal Notice 114 of 2019

and 3 of 2021.

(1)

The title of these rules is the Voluntary

Occupational Pension Scheme Rules.

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

1st January, 2017.

For the purposes of these rules

"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

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

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

(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

PENSION SCHEME RULES

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 occup ation al 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

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

"year" means the year immediately preceding a year of

PENSION SCHEME RULES

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

Business Act, or the Retirement Pensions Act or any other law or

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

These rules relate to contributions paid to a qualifying

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

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

individual who

(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

Persons Rules.

(1)

A qualifying employer making qualifying

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

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 25% of the amount of qualifying

contribution paid during any year and seven hundred and fifty euro

(€750) 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

PENSION SCHEME RULES

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.

(6) 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.

(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 25% of the aggregate amount of the qualifying

contributions made during any year, up to a maximum of seven

hundred and fifty euro (€750) 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 be

available as a deduction from the amount of tax chargeable on the

income derived by the qualifying employee in the year during which

the qualifying contribution to the qualifying scheme or schemes is

made and shall not exceed the said amount

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 49 of the Act, the said deduction may be availed of

against the amount of tax chargeable on the total income of the

married couple and may not exceed the said amount.

A qualifying scheme shall be one which satisfies the

following conditions

(a)

in the case of an occupational retirement scheme, it

is a scheme that is registered under the Retirement

Pensions Act or any other law substituting that Act

and, in the case of a long term contract of insurance

issued by a licence holder, it provides for

programmed withdrawal of arrangements as

provided for in pension rules issued under the said

Act or law; and

(b)

it provides for the commencement of payment

benefits to a qualifying individual on a date that is

PENSION SCHEME RULES

not earlier than the date on which the individual

attains the age of sixty-one (61) and not later than

the date when the individual attains the age of

seventy (70), except in those cases where the

scheme provides that the payment is made by

reason of the permanent disability or death of the

beneficiary; and

(c)

it satisfies such further conditions as the

Commissioner may deem appropriate to impose.

(1)

Except for payments referred to in sub-rule

(3), all payments received from a qualifying scheme, including for

the avoidance of doubt long term contracts of insurance mentioned

in rule 7, 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)

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

PENSION SCHEME RULES

(a)

a declaration by the licence holder that the long

term contract of insurance satisfies the conditions referred to

in rule 7; 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.

(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, require any person who is or who has been a licence holder

who 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.

PENSION SCHEME RULES

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

licence holder shall be subject to the provisions of the Final

Settlement 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

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

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 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.