CONSOLIDATED GROUP (INCOME TAX) RULES

SUBSIDIARY LEGISLATION 123.189

CONSOLIDATED GROUP

(INCOME TAX) RULES

1st January, 2019

LEGAL NOTICE 110 of 2019.

(1)

The title of these rules is the Consolidated Group

(Income Tax) Rules.

(2) These rules shall come into force with effect from year

of assessment 2020 in relation to fiscal units having accounting

periods commencing in calendar year 2019 and subsequent years.

(1)

In these rules, unless the context otherwise

requires

"Act" means the Income Tax Act;

"company" has the same meaning as set out in the definition of

the term in article 2(1) of the Act and includes

(a)

a trust arrangement whose trustee has made an

election in terms of article 27D(1)(a) of the Act; and

(b)

a foundation as defined in the Foundations

(Income Tax) Regulations,

and when applied to a trust arrangement or foundation, the terms

"share", "shareholder", "ordinary shareholder", "capital", "profits

available for distribution" and "winding up" shall be read and

construed so as to mean what is essentially equivalent in nature or

purpose within the context of the said trust or foundation

Provided that the term "company" shall not include

(i)

a foundation whose administrators have made an

election in terms of rule 4 of the Foundations (Income Tax)

Rules;

(ii)

a securitisation

vehicle

in

terms

of

the

Securitisation Act; and

(iii)

a finance leasing company as defined in the

Finance Leasing Rules;

"fiscal unit" means a fiscal unit formed in terms of rule 3 and

shall comprise the principal taxpayer and all its direct and indirect

transparent subsidiaries;

"ignored transactions" shall have the meaning assigned to it in

terms of rule 6(a);

"parent company" means a company that holds shares in

another company (hereinafter, for the purposes of this definition, "the

subsidiary company") that, in the year prior to the year of assessment

in which an election in terms of rule 3(1) is made, meets any two of

the following conditions

(a)

the parent company holds at least ninety-five per

cent (95%) of the voting rights in the subsidiary company;

(b)

the parent company is beneficially entitled to at

least ninety-five per cent (95%) of any profits available for

distribution to the ordinary shareholders of the subsidiary

company;

(c)

the parent company would be beneficially

entitled to at least ninety-five per cent (95%) of any assets of

the subsidiary company available for distribution to its

ordinary shareholders on a winding up

Provided that for the purposes of these rules, a subsidiary

company of a parent company that meets any two of the conditions

set out in paragraphs (a) to (c) of this definition shall be referred to as

a "ninety-five per cent (95%) subsidiary"

Provided further that a ninety-five per cent (95%) subsidiary

shall be referred to as a "one hundred per cent (100%) subsidiary"

where both of the satisfied conditions referred to in the immediately

preceding proviso are satisfied at a percentage of one hundred per

cent (100%) instead of ninety-five per cent (95%)

Provided also that when applied within the context of a trust or

foundation a beneficiary shall only be deemed to have satisfied the

requirements of paragraph (a) of this definition where, and only for

so long as, that beneficiary has a vested right, whether resulting from

the terms of the settlement or the deed of foundation or whether

subsequently arising as a result of the exercise of a power or

discretion by the trustee of the trust or the administrator of the

foundation, to at least ninety-five per cent (95%) of the distributable

income of the trust or foundation and at least ninety-five per cent

(95%) of the capital of the trust or foundation

Provided further that when applied within the context of a cell

company referred to in the first proviso to the definition of

"company" in article 2(1) of the Act, any cell and that part of a cell

company in which non-cellular assets are held (hereinafter "the

core"), shall constitute a parent company and a ninety-five per cent

(95%) subsidiary to the extent that at least ninety-five per cent (95%)

of the voting rights, profits available for distribution to ordinary

shareholders and assets available for distribution to ordinary

shareholders on a winding up in the particular cell or the core are

owned by the same persons and in such case the election made in

terms of rule 3(1) shall indicate which of the cells or the core shall

constitute the parent company and which shall constitute the ninety-

five per cent (95%) subsidiary;

"principal taxpayer" means a company which -

(a)

is not a transparent subsidiary; and

(b)

is the parent company of one or more transparent

subsidiaries

Provided that the principal taxpayer shall at all times be one

that satisfies the conditions applicable to "a company registered in

Malta" as set out in article 2(1) of the Act;

"tax due by the fiscal unit" shall mean the tax due by the fiscal

unit on the chargeable income of the fiscal unit as computed in

accordance with these rules;

"transparent subsidiary" shall have the meaning assigned to it

in terms of rule 3(2)

(2) Any terms not defined in sub-rule (1) shall, unless the

context otherwise requires, have the meaning assigned to them in the

Act.

(1)

A parent company may make an election in

order for itself and its ninety-five per cent (95%) subsidiary to form a

fiscal unit

Provided that the ninety-five per cent (95%) subsidiary must

have its accounting period beginning and ending on the same dates as

the accounting period of the parent company in all the years in which

it forms part of the fiscal unit and in determining whether this

condition is satisfied the provisions of article 18(2) of the Act shall,

mutatis mutandis, apply

Provided further that where the ninety-five per cent (95%)

subsidiary is not a hundred per cent (100%) subsidiary, such election

shall also require the approval of the holders of the equity shares

which are not owned, directly or indirectly, by the parent company.

(2) A ninety-five per cent (95%) subsidiary whose parent

company made an election in terms of sub-rule (1) shall be referred to

as a "transparent subsidiary" for the purposes of these rules.

(3) Where a parent company has made an election in terms

of sub-rule (1) in respect of more than one ninety-five per cent (95%)

subsidiary, each ninety-five per cent (95%) subsidiary in respect of

which the election is made shall form part of the same fiscal unit of

its parent company.

(4) Where a parent company has made an election in terms

of sub-rule (1) in respect of its ninety-five per cent (95%) subsidiary

and the ninety-five per cent (95%) subsidiary is itself a parent

company of one or more transparent subsidiaries, the ninety-five per

cent (95%) subsidiary and its transparent subsidiaries shall join the

fiscal unit of the parent company of the said ninety-five per cent

(95%) subsidiary.

(5) No company shall form part of more than one fiscal unit

at any one time.

(6) An election made in terms of this rule shall be made in

such form as the Commissioner may require. The fiscal unit shall be

registered as such and the principal taxpayer shall assume the rights,

duties and obligations under the Income Tax Acts relative to that

fiscal unit. Save as otherwise may be provided, and without prejudice

to the Final Settlement System (FSS) Rules, during the time that the

fiscal unit exists, the rights, duties and obligations of companies

forming part of that fiscal unit under the Income Tax Acts relating to

those years of assessment for which the said companies form part of

the fiscal unit shall be suspended.

(7) An election made in terms of this rule may be revoked in

such form and under such conditions as the Commissioner may

require.

(8) An election made by a parent company in terms of sub-

rule (1) in respect of its ninety-five per cent (95%) subsidiary shall

become effective as from the year of assessment in which it is made

Provided that if such election is made after the date by when

the said ninety-five per cent (95%) subsidiary is due to file an income

tax return for that year of assessment, the election will enter into

effect as from the following year of assessment.

(1)

Where a ninety-five per cent (95%) subsidiary

joins a fiscal unit by virtue of an election made in terms of rule 3 -

(a)

the balance of any item allowed to be carried

forward thereby under the Act, under any rules made

thereunder or any other tax credits that may be carried forward

in terms of any other law, and

(b)

the balance of any profits allocated to the tax

accounts, excluding the untaxed account, of the ninety-five per

cent (95%) subsidiary,

existing at the end of the basis year preceding that with regard to

which the election for the ninety-five per cent (95%) subsidiary to

join the fiscal unit becomes effective, shall be considered to be a

balance of the principal taxpayer as from the basis year with regard to

which the election for the ninety-five per cent (95%) subsidiary to

join the fiscal unit becomes effective

Provided that where the ninety-five per cent (95%) subsidiary

is not a hundred per cent (100%) subsidiary, the aggregation referred

to in this sub-rule shall be subject to the approval of the holders of the

equity shares which are not owned, directly or indirectly, by the

parent company.

(2) In any circumstance in which the provisions of sub-rule

(1) do not apply, where the balances referred to in sub-rule (1) shall

be retained by the ninety-five per cent (95%) subsidiary, such

balances shall be kept in abeyance and not taken into account for the

purposes of the Act for as long as the ninety-five per cent (95%)

subsidiary remains a transparent subsidiary, after which time such

balances shall once again become available to the ninety-five per cent

(95%) subsidiary without reduction or limitation.

(1)

Where a company (hereinafter "the exiting

company") is a transparent subsidiary and forms part of a fiscal unit

(hereinafter "the old fiscal unit") and the exiting company no longer

remains a ninety-five per cent (95%) subsidiary or no longer has its

accounting period beginning and ending on the same dates as the

principal taxpayer of the fiscal unit it forms part of, it and any of its

transparent subsidiaries, if any, shall be deemed to no longer form

part of the old fiscal unit with effect from the basis year in which that

company no longer remains a ninety-five per cent (95%) subsidiary

or no longer has its accounting period beginning and ending on the

same dates as the principal taxpayer of the said fiscal unit.

(2) If the exiting company is the parent company of one or

more transparent subsidiaries, the exiting company and such

transparent subsidiaries shall be considered to form a separate fiscal

unit (hereinafter "the resulting fiscal unit") if registered as such and,

if so registered, the exiting company shall be considered to be the

principal taxpayer of that fiscal unit with effect from the start of the

basis year in which the exiting company no longer forms part of the

old fiscal unit

Provided that this sub-rule shall not apply where the exiting

company becomes a ninety-five per cent (95%) subsidiary of another

company (hereinafter "the new parent company") and the new parent

company makes an election in respect of the exiting company in

terms of rule 3, in which case the exiting company and its transparent

subsidiaries shall become part of such fiscal unit.

(3) Where an election is revoked in terms of rule 3(7), the

transparent subsidiary whose parent company has revoked the

election shall be deemed an exiting company and the provisions of

this rule shall apply mutatis mutandis to such transparent subsidiary.

CONSOLIDATED GROUP (INCOME TAX)

(4) Where an exiting company ceases to remain part of the

old fiscal unit or where a fiscal unit ceases to exist

(a)

the balance of any trading loss,

unabsorbed deductions for wear and tear, except for

those unabsorbed deductions resulting from assets

referred to in paragraph (b), losses claimed under the

group relief provisions and any other loss, allowance or

otherwise, and the balance of any profits allocated to the

tax accounts, that are considered in terms of these rules

to be balances pertaining to the principal taxpayer, shall

continue, for all intents and purposes of the Act, to

pertain to the company being the principal taxpayer of

the fiscal unit and the relevant provisions of the Act

shall accordingly apply to such losses, unabsorbed

deductions for wear and tear or such other loss,

allowance or otherwise;

(b)

(i)

the cost of any assets

owned by the exiting company or the resulting

fiscal unit, as the case may be, (hereinafter "the

relevant assets") shall be deducted from the cost

of the assets attributable to the principal taxpayer

of the old fiscal unit;

(ii) where the relevant assets

consist of or include assets in respect of which a

deduction in terms of article 14 of the Act has

been claimed by the principal taxpayer or any

company forming part of the old fiscal unit prior

to joining such old fiscal unit, the exiting

company, or the resulting fiscal unit, as the case

may be, shall be entitled to continue claiming a

deduction in respect of the relevant assets in the

same manner and on the same basis as would

have been claimed by the principal taxpayer had

the exiting company or the resulting fiscal unit

continued to form part of the old fiscal unit

Provided that such deduction may only be claimed by

the exiting company or the resulting fiscal unit where the

conditions required to claim that deduction in terms of the Act

are satisfied by the exiting company or the resulting fiscal unit;

(c)

upon the occurrence of any of the events referred

to in articles 5A(12B) or 24(1) of the Act in respect of any

relevant asset, the exiting company or the resulting fiscal unit,

as the case may be, shall prepare a balancing statement and for

this purpose it shall be deemed that

(i)

the asset had been acquired by the

exiting company or the principal taxpayer, as the case

may be, for a cost equal to the original cost at which

such property had been acquired by a company forming

part of the old fiscal unit, and

(ii) the deductions claimed by the exiting

company under paragraphs (f) and (j) of article 14(1) of

the Act shall equal the total of any such deductions

claimed in respect of the property by it, the principal

taxpayer of the old fiscal unit and any other company

forming part of the old fiscal unit irrespective of whether

or not such company still forms part of the old fiscal unit

or otherwise.

(1)

The chargeable income of a fiscal unit for a year

of assessment shall be computed as if such income was derived by the

principal taxpayer and shall be chargeable to tax in the name of the

principal taxpayer at the rate/s applicable thereto

Provided that in computing such chargeable income

(a)

all transactions occurring between two or more

companies forming part of the fiscal unit (including any

receipts, payments, revenues, expenses, transfers of assets,

distributions, accruals or otherwise) in the year preceding the

year of assessment (hereinafter "ignored transactions") shall be

deemed not to have occurred, so however that transactions

falling within the purport of article 5A of the Act or

transactions involving the transfer of shares in a property

company shall in no case fall within the purport of such

ignored transactions

Provided that dividends distributed by a transparent

subsidiary to its parent company out of taxed profits that it

derived prior to it becoming a transparent subsidiary shall not

be considered to be an ignored transaction and shall be deemed

in terms of paragraph (b) to be dividend income derived by the

principal taxpayer of the fiscal unit of which the transparent

subsidiary forms part;

(b)

all income derived by companies forming part of

the fiscal unit in the year preceding the year of assessment and

which are not ignored transactions shall be deemed to be

derived by the principal taxpayer

Provided that any such income shall retain the same

character and shall be deemed to have been derived from the

same source and the same country and be allocated to the same

tax account as if the said income was received by the said

principal taxpayer;

(c)

all

outgoings

and

expenses

incurred

by

CONSOLIDATED GROUP (INCOME TAX)

companies forming part of the fiscal unit in the year preceding

the year of assessment and which are not ignored transactions

shall be deemed to be incurred by the principal taxpayer

Provided that such outgoings and expenses shall be

deductible against income attributable to the principal

taxpayer in accordance, mutatis mutandis, with articles 14 to

26 of the Act, so however that in such case it shall be deemed

that activities or transactions carried on by any person

comprised within the fiscal unit are carried out by the principal

taxpayer

Provided further that, without prejudice to the generality

of the preceding proviso, where any outgoings or expenses

would have been deductible, save for the application of these

rules, against income which is deemed not to have arisen as a

result of the application of the provisions of paragraph (a),

such outgoings or expenses shall be deductible against income

attributable to the principal taxpayer as set out in paragraph

(b), if, in the absence of a fiscal unit

(i)

such outgoings or expenses would have

been deductible against income derived by a company,

and

(ii) the expense resulting from the income

generated by the company referred to in sub-paragraph

(i) would have been deductible in another company

Provided also that if the income referred to in sub-

paragraph (i) consists of a dividend, the provisions of sub-

paragraph (ii) shall be deemed to be satisfied;

(d)

any industrial building, structure or plant and

machinery used or employed in acquiring income by a

company forming part of the fiscal unit shall be deemed to be

so used or employed by the principal taxpayer in acquiring the

said income

Provided that where a company forming part of the

fiscal unit ("the transferor") sells or transfers under an onerous

title any property to another company forming part of the

fiscal unit and such company is required, but for the provisions

of this paragraph, to render a balancing statement in terms of

articles 5A(12B) or 24 of the Act, such sale or transfer of

property shall be deemed not to have occurred and the

transferor shall not be required to render such a balancing

statement

Provided further that deductions in respect of the wear

and tear of the property that was sold or transferred shall

continue to be calculated as though such sale or transfer did

not occur;

(e)

where any property in respect of which

deductions under paragraphs (f) and (j) of article 14(1) of the

Act have been claimed by the principal taxpayer or any

company forming part of the same fiscal unit of the principal

taxpayer is transferred under an onerous title to another

company that does not form part of the fiscal unit, or to

another person, as the case may be, or on the occurrence of the

events set out in article 5A(12B) or in paragraphs (b) and (c) of

article 24(1) of the Act, and the said transfer or event occurs

while the company which owns the said property forms part of

the fiscal unit, the obligation to render a balancing statement in

terms of articles 5A(12B) or 24 of the Act, as the case may be,

shall fall upon the principal taxpayer. In rendering such

balancing statement, it shall be deemed that

(i)

the property had been acquired by the

principal taxpayer for a cost equal to the original cost at

which such property had been acquired by a company

forming part of the fiscal unit, and

(ii) the deductions claimed by the principal

taxpayer under paragraphs (f) and (j) of article 14(1) of

the Act shall equal the total of any such deductions

claimed in respect of the property by it and any other

company forming part of the fiscal unit, irrespective of

whether or not such company still forms part of the

fiscal unit.

(f)

any income or gains derived by a transparent

subsidiary that is not resident in Malta shall be deemed to be

attributable to a permanent establishment of the principal

taxpayer situated outside Malta

Provided that such transparent subsidiary maintains

sufficient substance in terms of physical presence, personnel,

assets or other relevant indicators, as is commensurate with the

type and extent of activity being carried out in the relevant

jurisdiction;

(g)

where any income or gains are derived by a

transparent subsidiary resident in Malta, or a transparent

subsidiary not resident in Malta derives income or gains

arising in Malta, where the principal taxpayer is a person to

which any of sub-paragraphs (i) or (ii) of the proviso to article

4(1)(g) of the Act applies, the following shall be attributable to

the principal taxpayer

(i)

all of the income and gains derived by

the transparent subsidiary resident in Malta, which

income and gains shall be deemed to arise in Malta

Provided that where the transparent subsidiary

resident in Malta is a person to which any of sub-

paragraphs (i) or (ii) of the proviso to article 4(1)(g) of

the Act applies, the income and gains attributable to the

principal taxpayer shall be such income and gains as

arise in Malta and such income as arises outside Malta

but which is received in Malta; and

(ii) all of the income and gains arising in

Malta of the transparent subsidiary which is not resident

in Malta;

(h)

any interest held by a transparent subsidiary in

any body of persons not forming part of the fiscal unit shall be

deemed to be held directly by the principal taxpayer;

(i)

for the purposes of claiming a deduction in terms

of paragraph (o) of article 14(1) of the Act and any rules made

thereunder, the risk capital of the principal taxpayer shall be

deemed to be

(i)

where the principal taxpayer is resident

in Malta, the share capital, any share premium, positive

retained earnings, loans or other debt borrowed by the

undertaking which do not bear interest, and any other

reserves resulting from a contribution to the

undertaking, and any other positive balance which is

shown as equity in the consolidated balance sheet

prepared in terms of rule 11; and

(ii) where the principal taxpayer is not

resident in Malta, that part of the risk capital, as defined

in sub-paragraph (i), of that principal taxpayer that is

attributable to the fiscal unit.

(2) Where the provisions of sub-articles (4) or (4A) of

article 48 of the Income Tax Management Act (hereinafter in this

sub-rule referred to as "the relevant sub-articles") would have applied

to a shareholder of a company that forms part of a fiscal unit upon a

receipt of a dividend from such company and such shareholder is

specifically empowered to consolidate its results pursuant to Maltese

law, the chargeable income of the fiscal unit shall be fully subject to

tax at a rate determined by deducting from the rate referred to in sub-

rule (1), that resulting from dividing the total amounts claimable by

all members of the fiscal unit and, or persons entitled to receive

distributions from the principal taxpayer in terms of the provisions of

the relevant sub-articles, by the chargeable income of the fiscal unit.

(3) The provisions of sub-articles (4) or (4A) of article 48 of

the Income Tax Management Act shall not apply in respect of profits

relative to which the provisions of sub-rule (2) are claimed.

Any foreign tax suffered by a company forming part of

the fiscal unit shall be deemed to have been incurred by the principal

taxpayer, and where evidence of such foreign tax is in the name of a

company forming part of the fiscal unit, it shall be deemed that such

evidence is in the name of the principal taxpayer.

(1)

The principal taxpayer shall be required to

allocate the profits attributable to it in terms of these rules to the same

tax accounts and in the same manner as it otherwise would have, had

it derived those profits directly. The distributable profits of the

transparent subsidiaries shall be allocated to the untaxed account.

(2) For the purposes of paragraph (h) of rule 5(3) of the Tax

Accounts (Income Tax) Rules, it shall be deemed that any immovable

property situated in Malta that is owned by a company forming part

of the fiscal unit is owned by the principal taxpayer.

(3) The principal taxpayer may make an election in terms of

rule 9 of the Tax Accounts (Income Tax) Rules and the provisions of

that rule shall apply mutatis mutandis to the principal taxpayer and

shall be deemed to include also all the other companies forming part

of the fiscal unit.

The investment income provisions set out in articles 32

to 42 of the Act shall not apply to payments of investment income

where the recipient and the payor are companies forming part of the

same fiscal unit.

The principal taxpayer may make a payment to a

transparent subsidiary for any loss, deduction or allowance which is

transferred to the principal taxpayer in terms of rule 4(1) or which

would have been a loss, deduction or allowance of the transparent

subsidiary had it not been part of the fiscal unit of the principal

taxpayer, which payment shall not exceed the amount of such loss,

deduction or allowance and any such payment shall not be taxable in

the hands of the recipient company and shall not be tax deductible for

the payor.

(1)

Every principal taxpayer shall be required for

each year to prepare a consolidated balance sheet and consolidated

profit and loss account covering all the companies in the fiscal unit of

which it is the principal taxpayer up to the day immediately

preceding the commencement of the next following year of

assessment or up to such other day as has been permitted under

article 11(2) of the Act.

(2) Other than for the fact that the companies in the fiscal

unit may be different from the subsidiary undertakings of a parent

company in terms of the Companies Act, the consolidated balance

sheet and consolidated profit and loss account shall comply in every

respect with the applicable provisions of articles 170 and 171 of the

Companies Act, and notwithstanding any exemption granted by that

Act or by any other law, such balance sheet and profit and loss

account shall be accompanied by a report made out by a certified

public auditor as provided by the applicable provisions of articles 179

and 181 of that Act.

(3) Without prejudice to any obligation to prepare audited

financial statements in terms of any other law, where the results of a

company are contained in a consolidated balance sheet and

consolidated profit and loss account prepared in terms of sub-rule (1),

such company shall be exempted from the requirement to prepare an

audited balance sheet and profit and loss account in terms of

paragraph (a) of article 19(4) of the Income Tax Management Act

Provided that no company shall be exempt from the

requirements imposed by the provisions of the Cooperation with

Other Jurisdictions on Tax Matters Regulations.

(1)

Every principal taxpayer shall file a self-

assessment and return in respect of the fiscal unit of which it is the

principal taxpayer in such manner as the Commissioner shall

determine. The provisions of the Act and of the Income Tax

Management Act and of any rules prescribed thereunder shall apply

mutatis mutandis to such self-assessment and return in the same

manner as they apply to any company to which these rules do not

apply.

(2) Where a company other than the principal taxpayer

forms part of a fiscal unit, such company shall be exempted from the

requirement to file a self-assessment and an income tax return

Provided that the provisions of this sub-rule shall only apply

for a year of assessment in respect of which the company formed part

of a fiscal unit for the entire year preceding that year of assessment

and where the chargeable income of that company is deemed to be

derived by the principal taxpayer and is taken into account for the

purposes of determining the total income of such principal taxpayer.

(3)

Where a fiscal unit has been formed

(a)

the principal taxpayer and its hundred per cent

(100%) subsidiaries which are transparent subsidiaries shall be

jointly and severally liable for the payment of tax, additional

tax and interest due by the fiscal unit;

(b)

without prejudice to paragraph (a)

(i)

the tax due by the fiscal unit may be

apportioned between the principal taxpayer and its

hundred per cent (100%) subsidiaries which are

transparent subsidiaries as the principal taxpayer may

determine;

(ii) the tax due by the fiscal unit, or part

thereof, may also be apportioned to a transparent

subsidiary which is a ninety-five per cent (95%)

subsidiary but not a hundred per cent (100%) subsidiary

in accordance with an agreement agreed to by and

between the principal taxpayer and all of the holders of

shares in that ninety-five per cent (95%) subsidiary

which are not held directly or indirectly by the principal

taxpayer.

(1)

Where the tax payable by the principal taxpayer

after taking into account, where applicable, the provisions of rule

6(2), including any applicable tax refund or credit (if any) whether

paid to the principal taxpayer or to its shareholders, in relation to a

fiscal unit (hereinafter "the tax payable by the principal taxpayer")

for any year of assessment, is lower than ninety-five per cent (95%)

of the aggregate of the tax that would have been payable by all the

companies forming part of the fiscal unit on their chargeable income

after any applicable tax refunds or credit (if any) whether paid to the

principal taxpayer or to its shareholders for the same year of

assessment had those companies not formed part of the fiscal unit,

including any tax that was or could have been withheld on investment

income referred to in sub-paragraphs (2), (3) and (4) of article

41(a)(viii) of the Act (hereinafter "the tax payable by all the fiscal

unit companies"), the election made under rule 3 shall be deemed to

have caused an advance to the shareholders of the principal taxpayer

falling within the purport of article 46 of the Act which cannot be set

off and which is equal to the result of the difference between the tax

payable by all fiscal unit companies and the tax payable by the

principal taxpayer divided by the rate set out in article 56(6) of the

Act

Provided that where any of the shareholders is a person, other

than an individual, which is owned and controlled by, directly or

indirectly, or which acts on behalf of an individual who is ordinarily

resident and domiciled in Malta (hereinafter "the beneficial owner")

or a trustee of a trust where the beneficiaries of such trust fall within

the purport of article 61(a)(iii) of the Act (hereinafter "the

beneficiaries"), for the purpose of this rule, the shareholders shall be

deemed to be the beneficial owners or the beneficiaries, as the case

may be.

(2) The advance referred to in sub-rule (1) shall, for the

purposes of article 46 of the Act, be deemed to be a dividend

distributed to the shareholders of the principal taxpayer on the tax

return date following the end of the accounting year in which the

shareholders are deemed to have received the advance and the

provisions of article 46 of the Act shall apply mutatis mutandis in

relation thereto.

(3) Without prejudice to the above, the deemed dividend

referred to in sub-rule (2) shall be deemed to constitute an untaxed

dividend and the provisions of articles 62 to 65 of the Act shall apply

mutatis mutandis in relation thereto

Provided that, for the purposes of article 62(1) of the Act,

where tax is chargeable in respect of such dividend this shall be

deducted at the rate set out in article 56(6) of the Act

Provided further that the proviso to sub-article (2) of article 62

of the Act shall not apply.

(4) Without prejudice to the provisions of article 51 of the

Act or any other general anti-avoidance rules under the Income Tax

Acts, where in relation to a transaction, or to a series of transactions,

the principal taxpayer, the shareholders thereof or the individual

direct or indirect beneficial owners of the principal taxpayer, or any

person which is controlled and beneficially owned directly or

indirectly to the extent of more than fifty per cent (50%) by the same

individuals, 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 this sub-rule, the

Commissioner shall determine the relevant liability to tax in such

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

such benefit or advantage.