ASSIGNMENTS OF RIGHTS ACQUIRED UNDER A PROMISE OF SALE AGREEMENT RULES

PROMISE OF SALE AGREEMENT

SUBSIDIARY LEGISLATION 123.198

ASSIGNMENTS OF RIGHTS ACQUIRED UNDER A

PROMISE OF SALE AGREEMENT RULES

12th May, 2020

LEGAL NOTICE 191 of 2020, as amended by Legal Notices 461 of

2020, 490 of 2021 and 99 of 2023.

(1)

The title of these rules is Assignments of Rights

Acquired under a Promise of Sale Agreement Rules.

(2)

These rules shall apply to any assignment that is made on

or after 1 January 2020 of rights acquired in terms of a promise of sale

of immovable property situated in Malta as referred to in article

5A(2)(d) of the Act.

In these rules, unless the subject or context otherwise

requires

"the Act" means the Income Tax Act;

"the final tax portion" and "the excess portion" mean that

they are portions of the consideration for an assignment as

described in rule 6;

"notice of the assignment" means the notice that is

required to be given in terms of rule 3(1)(b).

(1)

An assignment to which these rules apply shall

not be valid for the purposes of any law unless

(a)

it is made by means of a written agreement signed

by the assignor and the assignee and authenticated by a notary

or an advocate;

(b)

notice of the assignment thereof, is given to the

Commissioner in accordance with sub-rules (2) and (3);

(c)

payment of the tax is made in accordance with

these rules.

(2)

The notice of the assignment shall be signed by the

assignor and the assignee and authenticated by the notary or the

advocate who authenticates the relative written agreement and shall be

in such form and contain such information as the Commissioner may

require or approve.

(3)

The notice of the assignment shall be furnished to the

Commissioner in three (3) copies within twenty-one (21) days from

the date of the relative written agreement.

PROMISE OF SALE AGREEMENT

(1)

In the computation of the income derived from an

assignment to which these rules apply, deductions shall only be

allowable in respect of the following expenses, to the extent that they

are incurred by the assignor and are not reimbursed or reimbursable by

any other person

(a)

brokerage fees in respect of the said assignment;

(b)

where the assignor was not a party to the promise

of sale in question but had acquired his rights from another

person in terms of a previous valid assignment, the

consideration, if any, which he may have paid to that other

person for the acquisition of those rights in terms of that

previous assignment.

(2)

The expenses mentioned in sub-rule (1) shall not be

allowable as a deduction unless

(a)

the assignor produces to the notary or advocate

who authenticates the written agreement a signed receipt that

shows the date of the payment, the name, identification

document number and address of the person to whom the

payment was made and the amount paid;

(b)

as regards the payment of a consideration for a

previous assignment as mentioned in sub-rule (1)(b), the

assignor of the subsequent assignment also produces to the said

notary or advocate a copy of the agreement under which the

previous assignment had been made;

(c)

the said notary or advocate records the details

mentioned in paragraph (a) in the notice of the assignment and

produces to the Commissioner, together with that notice, a

certified copy of the receipt mentioned in paragraph (a) as well

as, where applicable, a certified copy of the previous assignment

mentioned in paragraph (b).

(1)

When the consideration for an assignment to

which these rules apply does not exceed one-hundred thousand euro

(€100,000), the income derived from that assignment, computed in

accordance with rule 4, shall be subject to tax at the rate of fifteen euro

cents (€0.15) for every euro or part thereof.

(2)

The tax mentioned in sub-rule (1) shall be final and shall

be separate and distinct from that paid or payable under any other

provisions of the Act or of the Income Tax Management Act. It shall

not be available as a credit against the tax liability of any other person

or as a refund.

PROMISE OF SALE AGREEMENT

(3)

The income derived from an assignment mentioned in

sub-rule (1) shall not form part of the total income of the person

deriving that income. Any loss that may be incurred in any such

assignment shall not be available by way of deduction from or set off

against income derived from any other assignment or from any other

source. When the assignor is an individual, he shall not be required to

disclose that income in any return made pursuant to article 10 of the

Income Tax Management Act. When the assignor is a company

resident in Malta, it shall allocate the distributable profits derived from

the assignment to its final tax account.

(4)

The tax chargeable on the income derived from an

assignment mentioned in sub-rule (1) shall be due by the assignor and

shall be paid to the notary or advocate who authenticates the relative

written agreement. The said notary or advocate shall remit the tax to

the Commissioner within twenty-one (21) days of the relative

assignment and, in default, shall be liable for the tax jointly and

severally with the assignor

Provided that the liability of the said notary or advocate

in terms of this rule shall be limited to the amount of tax payable by

reference to the information provided by the parties as recorded in the

notice of the assignment.

When the consideration for an assignment to which these

rules apply exceeds one-hundred thousand euro (€100,000), the first

one-hundred thousand euro (€100,000) shall constitute the final tax

portion and the amount by which the consideration exceeds one-

hundred thousand euro (€100,000) shall constitute the excess portion.

The deductions allowable in terms of rule 4 shall be apportioned and

tax shall be chargeable separately on each of the two (2) portions as

provided for in rules 7 and 8.

(1)

The deduction allowable against the final tax

portion is the amount obtained by multiplying the total deductions

allowable in terms of rule 4 by one-hundred thousand (100,000) and

dividing the result by the full consideration.

(2)

The tax on the final tax portion, after the deduction

mentioned in sub-rule(1), shall be charged at the rate of fifteen euro

cents (€0.15) for every euro or part thereof.

(3)

The provisions of sub-rules (2), (3) and (4) of rule 5 shall

apply to the tax chargeable under this rule in the same manner as they

apply to the tax on an assignment mentioned in rule 5(1).

(1)

The deduction allowable against the excess

portion is an amount equivalent to the difference between the total

deductions allowable in respect of the assignment in question in terms

of rule 4 and the deduction allowable in accordance with rule 7(1).

PROMISE OF SALE AGREEMENT

(2)

The excess portion, after the deduction mentioned in sub-

rule (1), shall form part of the assignor’s chargeable income for the

year of assessment in question and shall be subject to tax at the

appropriate rate or rates in terms of article 56 of the Act. It shall

represent income to which article 4(1)(a) of the Act applies and shall be

disclosed as such by the assignor in a return filed in accordance with

the provisions of the Income Tax Management Act together with his

other income.

(3)

An amount equivalent to seven percent (7%) of the excess

portion after the deduction mentioned in sub-rule (1) shall be payable

by the assignor by way of provisional tax on account of the tax

chargeable in accordance with this rule. The said provisional tax shall

be paid to the notary or advocate who authenticates the relative

agreement in writing in addition to the tax payable on the final tax

portion.

(4)

The said notary or advocate shall remit the provisional tax

collected in accordance with sub-rule (3) to the Commissioner within

twenty-one (21) days of the relative assignment together with the tax

collected in accordance with rule 5 and, in default, shall be liable for

the tax jointly and severally with the assignor

Provided that the liability of the said notary or advocate in

terms of this rule shall be limited to the amount of tax chargeable by

reference to the information provided by the parties as recorded in the

notice of the assignment.

(5)

The provisions of article 43(4)(b) of the Income Tax

Management Act shall apply to provisional tax paid in accordance with

this rule.

(1)

For the purpose of rule 6, in determining if the

consideration for the assignment exceeds one-hundred thousand euro

(€100,000)

(a)

when rights are assigned to two (2) or more

persons conjointly or in undivided parts, the value of the

consideration shall be deemed to be the total consideration paid

or payable by all those persons;

(b)

when rights are assigned by two (2) or more

persons conjointly or in undivided parts, the value of the

consideration shall be deemed to be the total consideration paid

or payable to all those persons;

(c)

when rights acquired under a promise of sale are

assigned by means of more than one (1) transaction entered into

between the same parties, the said rights shall be deemed to have

been assigned by means of one (1) assignment for the total

PROMISE OF SALE AGREEMENT

consideration paid or payable in terms of all the transactions in

questions.

(2)

This rule is without prejudice to article 51 of the Act.

The provisions of article 19 of the Income Tax

Management Act shall apply to a person who makes an assignment to

which these rules apply in the same manner as they apply to any other

person carrying on a trade, business, profession or vocation.

(1)

Notwithstanding the provisions of the foregoing

rules, when income derived from an assignment to which these rules

apply, including income derived from a transaction intended to be an

assignment of rights acquired under a promise of sale of immovable

property situated in Malta as referred to in article 5A(2)(d) of the Act

but which, in terms of rule 3, is not a valid assignment, has not been

reported or has not been reported fully and correctly in a notice of the

assignment furnished to the Commissioner, the full amount of that

income shall be charged to tax at the rate of thirty-five euro cents

(€0.35) on every euro of that income.

(2)

The tax chargeable in accordance with sub-rule (1),

reduced by the amount of the tax that may have been paid in

connection with the assignment in question in accordance with the

other provisions of these rules, shall be payable upon demand with

interest as provided in article 44(2A) of the Income Tax Management

Act, which interest shall be deemed to have commenced running from

the date of the assignment. The provisions of rule 5(2) shall apply to

any tax chargeable in accordance with this rule.

(3)

A person who is served with a demand for payment of

tax determined in accordance with this rule shall have the rights of

objection and appeal in the same manner as a person served with a

notice of an assessment made under article 31 of the Income Tax

Management Act.

Notwithstanding the foregoing provisions, the income

derived from an assignment to which these rules apply that is made

after the 31st December 2020 shall be subject to tax at the rate

mentioned in rule 5 and in accordance with the provisions of that rule,

regardless of the amount of the consideration for that assignment and

without reference to rules 6, 7, 8 and 9.