INCOME TAX (DEDUCTIONS) RULES

SUBSIDIARY LEGISLATION 123.07

INCOME TAX (DEDUCTIONS) RULES

1st January, 2001

LEGAL NOTICE 322 of 2001, as amended by Legal Notices 100 and 409

of 2007, 369 of 2009 and 229 of 2024

The title of these rules is the Income Tax (Deductions)

Rules.

In these rules, unless the context otherwise requires -

"Act" means the Income Tax Act;

"benefit" has the same meaning assigned to it under the Fringe

Benefits Rules;

"emoluments" has the same meaning assigned to it under the FSS

Rules;

"Fringe Benefits Rules" means the Fringe Benefits Rules, or any

other rules prescribed under the Income Tax Act in replacement

thereof;

"FSS Rules" means the Final Settlement System (FSS) Rules, or

any other rules prescribed under the Income Tax Management Act

in replacement thereof;

"qualifying income" means the income produced through the use or

employment of the intellectual property or intellectual property rights

chargeable to tax in accordance with the provisions of the Income Tax

Acts before claiming the deductions contemplated in rule 6(1)(b) or

(2), as may be applicable, and article 14(1)(o) of the Act.

(1) Where any vehicle to which this rule applies was

acquired at a cost exceeding €14,000 in a year immediately

preceding any year of assessment and such vehicle is used and

employed in the production of the income, any deduction in respect

of wear and tear and any initial deduction with respect to the

vehicle under the provisions of article 14(1)(f) and (j) of the Act

and any allowance due or charge made with respect to the vehicle

under the provisions of article 24 of the Act shall be computed as if

the cost of acquisition were €14,000.

(2) Where any vehicle to which this rule applies is leased to a

person in a year immediately preceding any year of assessment

commencing on or after the 1st January, 2002 and such vehicle is

used and employed in the production of that person’s income, and

where the listed price of that vehicle exceeds €14,000, any

deduction that may be claimed by that person under the provisions

of article 14(1) of the Act in respect of payments made for the lease

of that vehicle shall not exceed the result obtained by multiplying

the said lease payments by €14,000 and dividing the result by the

listed price of that vehicle

Provided that -

(a) where the vehicle is used in terms of an arrangement

whereby the burden of wear and tear is on the lessee,

no deduction shall be allowable in respect of the lease

payments;

(b) the provisions of this subrule (2) shall not apply where

the vehicle is used by the said person, or on his behalf,

on an occasional basis for a period of less than seven

days during the year in question otherwise than as a

replacement for another vehicle leased to him;

(c) where a leased vehicle is temporarily replaced by

another vehicle for a period of less than thirty

consecutive days without any change in the amount of

lease payments, this subrule (2) shall apply during the

period of replacement as if the reference to the listed

of the first-mentioned vehicle, but when a change in

the amount of lease payments is made on account of

such replacement or where the period of replacement

is thirty consecutive days or more, this subrule (2)

shall apply during the said period by reference to the

listed price of the second-mentioned vehicle.

(3)

For the purpose of subrule (2) -

(a) the listed price of a vehicle is the price shown for a

vehicle of that same or comparable make and model in

a price list drawn up or approved by the Commissioner

for the purposes of the Fringe Benefits Rules increased

by the cost of any optional accessories that may be

fitted in the vehicle;

(b) a vehicle shall be deemed to be leased to a person if it

is used by him or on his behalf under any arrangement

whereby a payment is made or due to another person

as consideration for the said use;

(c) "lease payments" means the total of the payments

made or due by a person during the year in question as

consideration for the use of a vehicle and any other

costs that may be incurred or reimbursed by him in the

said year in connection with the said use, including

insurance, licences, repairs and servicing, but

excluding fuel and garaging.

(4) This rule applies to any mechanically propelled vehicle

constructed or adapted as a means of transport for individuals, but

shall not apply to a vehicle of a type not commonly used as a

private vehicle and unsuitable to be so used, or to a vehicle used by

the person claiming a deduction referred to in this rule wholly or

mainly for the purpose of hire to or the carriage of members of the

public in the ordinary course of his trade or business

Provided that for any year of assessment commencing on

or after the 1st January, 2002 this rule shall, moreover, not apply to

a vehicle used by the person claiming a deduction referred to in this

rule wholly or mainly for driving instruction in the ordinary course

of his trade or business.

(1) When a person pays emoluments in a year immediately

preceding any year of assessment commencing on or after the 1st

January, 2002, and such payment represents out goings and

expenses incurred wholly and exclusively in the production of his

income, the deductions that may be allowed in respect thereof for

that year of assessment under article 14(1) of the Act shall not

exceed the amount of the said outgoings and expenses that relate to

emoluments that have been duly accounted for.

(2) Without prejudice to subrule (1), a deduction under article

14(1) of the Act relating to the provision of a fringe benefit falling

under Part C (Category 2 Benefits - Use of Property) of the Fringe

Benefits Rules shall not exceed the lower of

(a) the outgoings and expenses, determined in accordance

with the relevant provisions of Part IV of the Act,

incurred in the provision of the said fringe benefit; and

(b) the value of that fringe benefit as determined in

accordance with the said rules without, however, any

reduction in the value contemplated in subrule 24(5) of

the said rules with respect to any rent paid by the

beneficiary

Provided that where any rent or other consideration

is paid by the beneficiary it shall constitute income in

the hands of the provider of the benefit.

(3) The following provisions of this subrule shall apply,

without prejudice to subrule (1), for determining the deduction, if

any, that may be allowed to a person under article 14(1) of the Act

relating to the provision of a fringe benefit consisting in a transfer

of an asset to which Part D (Category 3 Benefits - Other Benefits)

of the Fringe Benefits Rules applies

(a) where the asset is one in respect of which any

deduction had been allowed to that person under the

provisions of article 14(1)(f) and (j) of the Act, no

deduction shall be allowed in respect of the provision

of the said fringe benefit: provided that in the

balancing statement required for the purposes of

article 24 of the Act -

(i)

where the said asset has been transferred at no

consideration it shall be treated as having been

put out of use for no value; and

(ii) where the said asset has been transferred at a

consideration it shall be treated as having been

sold for that consideration,

and a balancing allowance shall be allowed or a

balancing charge shall be made accordingly;

(b) where the asset is one in respect of which no deduction

had been allowed to that person under any of the

provisions of article 14(1)(f) and (j) of the Act, the

deduction in respect of the provision of the fringe

benefit shall not exceed the cost at which the provider

of the benefit had acquired that asset, including any

costs incurred by the employer in transferring that

asset: provided that any consideration paid by the

beneficiary shall constitute income in the hands of the

employer;

(c) where the transfer is one which falls within the scope

of the provisions of article 5 of the Act, no deduction

shall be allowed under the provisions of article 14 of

the Act in respect of the provision of the fringe

benefit: provided that the gains or profits derived from

the said transfer shall be determined in accordance

with the provisions of the said article 5 without

reference to the value of the fringe benefit.

(4) For the purpose of this rule emoluments shall not be

deemed to have been duly accounted for except to the extent that

their value has been correctly reported in the Payee Statement of

Earn ings an d th e Pay er ’s A nnual Reconci liati on Statem ent

prepared in terms of the FSS Rules with respect to the relevant year

and furnished to the Commissioner by not later than twelve months

after the relevant time limit prescribed under the said Rules.

(5) When a person pays emoluments to his or her spouse, such

emoluments are allowable as a deduction in accordance with the

provisions of article 14(1) of the Act, as long as such person

complies with the requirements of sub-rules (1) and (4) of this rule

and the spouse receiving the said emoluments has paid social

security contributions on the basic wage or salary received.

Except as otherwise provided in the Fringe Benefits Rules,

the value of a benefit determined in accordance with those rules

shall be deemed to be net of all outgoings and expenses incurred by

the beneficiary in connection with that benefit, and no further

deduction shall be allowed to that person under article 14(1) of the

Act in respect of that benefit.

* (1) Where any person claims a deduction in accordance

with the second proviso to article 14(1)(m) of the Act in respect of

expenditure of a capital nature on intellectual property or any

intellectual property rights (hereinafter referred to as

"expenditure"), the amount deductible in respect of any year of

assessment shall be computed as follows

(a)

there shall be deducted that part of the said

expenditure which would otherwise have been deductible by

reference to the minimum period allowed in accordance with

the first proviso to article 14(1)(m) of the Act; and

(b)

there shall also be deducted that part of the said

expenditure remaining after computing the deduction in

accordance with paragraph (a)

Provided that where the deduction or a part thereof

allowable in accordance with paragraph (b) cannot for any year be

*These rules shall apply with effect from the year of assessment 2024.

given effect to in full because there is no or insufficient qualifying

income in that year of assessment, the expenditure provided for in said

paragraph (b) shall not be available for deduction against any other

income for the said year, or available for surrender in accordance with

articles 16 to 22 of the Act, but shall be carried forward for deduction

and be added to the deduction due for the following year and be

deemed to be part of that deduction, or if there is no such deduction for

that year, be deemed to be the deduction for that year and so on for

subsequent years

Provided further that, subject to the provisions of the

third proviso to article 14(1)(m) of the Act, the aggregate of the

deductions made in accordance with paragraphs (a) and (b) shall not in

any case exceed the amount of the said expenditure.

(2)

With respect to the year of assessment 2024, a claim for

deduction in accordance with the second proviso to article 14(1)(m) of

the Act may also be made with respect to any expenditure brought

forward during the said year which, due to the provisions of the first

proviso to article 14(1)(m) of the Act, had not been so deducted in the

years of assessment preceding the year of assessment 2024, and in

such case, the amount deductible in respect of the year of assessment

2024 and any subsequent year of assessment shall be computed as

follows

(a)

there shall be deducted that part of the said

expenditure which would otherwise have been deductible by

reference to the period chosen in preceding years of assessment

and allowed in accordance with the first proviso to article

14(1)(m) of the Act; and

(b)

there shall also be deducted that part of the said

expenditure remaining after computing the deduction in

accordance with paragraph (a)

Provided that where the deduction or part thereof

allowable in accordance with paragraph (b) cannot for any year be

given effect to in full because there is no or insufficient qualifying

income in that year of assessment, the expenditure under this part shall

not be available for deduction against any other income for the said

year, or available for surrender in accordance with articles 16 to 22 of

the Act, but shall be carried forward for deduction and added to the

deduction due for the following year and shall be deemed to be part of

that deduction, or if there is no such deduction for that year, be deemed

to be the deduction for that year and so on for subsequent years

Provided further that, subject to the provisions of the

third proviso to article 14(1)(m) of the Act, the aggregate of the

deductions made in accordance with paragraphs (a) and (b) in

conjunction with any other deductions made in the years of assessment

preceding the year of assessment 2024 shall not in any case exceed the

amount of the said expenditure.

(3) For the avoidance of doubt, nothing in sub-rules (1) and (2)

shall be construed as allowing any person to deduct or carry forward

the expenditure in circumstances where the deduction of such would

not have otherwise constituted an allowable loss in accordance with

article 14(1)(g) of the Act.