DEDUCTION OF ADDITONAL TAX (OMISSIONS) RULES * (omissions)

SUBSIDIARY LEGISLATION 123.68

DEDUCTION OF ADDITONAL TAX (OMISSIONS)

RULES *

1st January, 2003

LEGAL NOTICE 126 of 2003, as amended by Legal Notice 160 of 2006.

(1) The title of these Rules is Deduction of Additional Tax

(Omissions) Rules.

(2) These rules shall apply in respect of the year of assessment

commencing on the 1st January 2003 and subsequent years of

assessment.

(1)

In these rules

"Act" means the Income Tax Act;

" a d d i t i o n a l t a x " m e a n s t h e a d d i t i o n a l t a x c h a rg e a b l e i n

accordance with the provisions of article 56(12)(c) of the Act and

the provisions of the Schedule in respect of any omission;

"omission" means the omission, or deemed omission, from any

return of income submitted for the purpose of the Income Tax Acts

of any amount which should have been included therein;

"Schedule" means the Schedule to the Act;

"tax professional" means an individual being the holder of a

warrant issued under the Accountancy Profession Act, or a member

of the Malta Institute of Taxation, or a member of the legal

profession in Malta who specialises in taxation, or a partnership of

such individuals the majority of whom are so qualified: provided

that the Commissioner shall be entitled to request such proof as he

may deem appropriate to the effect that an individual qualifies as a

tax professional as aforesaid.

(2) Other words and expressions contained in these rules shall

have the meaning assigned to them in the Income Tax Acts and in

the Schedule to the Act.

(a) Where the Commissioner is satisfied that -

(i)

reasonable care has been taken by the person

preparing and submitting the return or by the

person responsible for its preparation and

submission; or

(ii) the amount of the endangered tax is not material,

he may remit the whole of the additional tax otherwise

due in accordance with the provisions of the Schedule.

*These rules have been revoked by Legal Notice 98 of 2009; however they are to

continue to apply as if they have not been repealed with respect to additional tax

chargeable under article 56(12)(c) for any year of assessment preceding the year of

assessment 2009 - see rule 3 of Legal Notice 98 of 2009.

(b) The Commissioner’s discretion for the purpose of this

rule shall not be questioned in any appeal.

(1) For the purposes of rule 3, in determining whether

reasonable care has been taken in the preparation and submission of

a return, the Commissioner shall take account of

(a) whether a person has sought and relied on the written

advice of a tax professional; and

(b) the complexity of the transaction which has resulted in

an omission from the return or the complexity of the

legal provisions concerned and the difficulties in their

interpretation.

(2) The original written advice, referred to in sub-rule (1)(a), is

to be submitted together with the return by not later than the

relative tax return date.

(3) An advice, referred to in sub-rule (1)(a), furnished by a tax

professional, shall not of itself constitute a binding interpretation of

t he relativ e statu tory provi sions an d v iews on th eir pro per

application.

(4) Rejection by the Commissioner of advice furnished by a tax

professional shall not necessarily imply that a person has not taken

reasonable care, unless the said advice is considered by the

Commissioner to be spurious or frivolous.

Where an omission from a return is rectified by a person by

means of the delivery of a further return made in accordance with

article 13 of the Income Tax Management Act after that person has

been notified in writing by the Commissioner that an enquiry will

be conducted into that person’s tax declarations and liabilities, but

not later than the last day of the month immediately following that

in which the said notification is served, the additional tax shall be

at the rate of one point five per cent (1.5%) of the endangered tax

per month.

Additional tax chargeable shall be reduced by ninety per

cent (90%) of the full amount where the omission -

(a) is of income from an employment or office which is

included in a return submitted to the Commissioner in

accordance with the provisions of the Final Settlement

System (FSS) Rules; or

(b) is of investment income, as defined in the investment

income provisions of the Act, subject to deduction of

tax at source, irrespective of whether such tax has been

deducted or not; or

(c) is of gains from the sale of immovable property

chargeable under article 5 of the Act, and tax at the

stipulated rate has been paid in accordance with article

43 of the Income Tax Management Act and rule 6 of

the Capital Gains Rules.

Where an omission is not due to fraud, art, contrivance or

gross or wilful neglect, the additional tax chargeable for an

omission shall be reduced by fifty per cent (50%) of the full amount

and the circumstances in which the additional tax is to be so

reduced shall include where

(a) a person is or should be aware that an enquiry has been

conducted into his tax declarations and liabilities and

on which the additional tax in respect of the omission

has been reduced according to the provisions of rule 6,

but he again omits, from a return submitted after the

outcome of the enquiry is known, an item which the

enquiry has indicated should have been so included; or

(b) the omission is manifestly contrary to accepted

principles and practices of tax law or accountancy,

including, without limiting the generality thereof

(i)

over-claiming deductions against income

chargeable under article 4(1)(b) of the Act;

(ii) claiming deductions for alimony payments when

no right for such deductions exists;

(iii) failing to declare alimony payments received;

(iv) excessive or unjustified claims for deduction

against rental income.

The reductions contemplated in rules 6 and 7 shall be

applicable to the additional tax chargeable under the Schedule,

whether reduced in accordance with the provisions of rule 5 or not.

Where a reduction of additional tax is effected in

accordance with the provisions of these rules, the applicable rate of

additional tax referred to in item 5 of the Schedule shall be the rate

of additional tax so reduced.

Notwithstanding the provisions of these rules, the

Commissioner may remit such part or all of the additional tax

chargeable for the year of assessment 1999 and any subsequent

year, as he may deem fit, provided that

(a) the Commissioner may impose as a condition for any

such remission the requirement that the person

concerned shall not make another omission within

such period as the Commissioner may establish, as

well as such other conditions as he may deem fit;

(b) should any condition imposed by the Commissioner in

accordance with the provisions of paragraph (a) be

infringed by the person concerned, any reduction of

additional tax granted by the Commissioner in addition

to the reductions contemplated by the other provisions

of these rules shall be forfeited;

(c) if forfeiture is so due, under the provisions of

paragraph (b), any additional reduction made under the

provisions of this rule, but not under the provisions of

the other rules hereof, shall be deemed to have been a

suspension of liability to the said additional tax, and

not the cancellation of the relevant additional tax;

(d) the Commissioner shall communicate in writing to the

person concerned any condition imposed under

paragraph (b), the consequences of infringement of

any such condition and, if such is the case, the fact that

forfeiture has been incurred.

Decisions taken by the Commissioner regarding the

application of these rules shall be subject to objection and appeal in

accordance with the provisions of articles 35 and 37, respectively,

of the Income Tax Management Act only as to whether, for the

purpose of rule 4(4), a tax professional’s advice is to be considered

as spurious or frivolous.