EUROPEAN UNION DIRECTIVES REGULATIONS

EUROPEAN UNION DIRECTIVES

SUBSIDIARY LEGISLATION 123.74

EUROPEAN UNION DIRECTIVES REGULATIONS

1st May, 2004

LEGAL NOTICE 267 of 2004, as amended by Legal Notices 530 of

2004, 193 of 2005, 60 and 409 of 2007, 95, 426, 472 of 2012, 179 of 2013,

122 and 282 of 2015, and 44 of 2016.

The title of these regulations is the European Union

Directives Regulations.

Added by

L.N. 193 of 2005.

(Regulation 5(1))

Amended by

L.N. 60 of 2007;

L.N. 409 of 2007;

L.N. 426 of 2012.

Savings Directive Guidelines

Guidelines for the implementation of the Savings Directive in Malta

1. Aim and Purpose

2. Beneficial Owners

Persons qualifying as beneficial owners

Persons not qualifying as beneficial owners

3. Establishing identity and residence of beneficial owners

Relevance of date of commencement of contractual relations

Establishing identity

Contractual relations started before 1 January, 2004

For contractual relations started on or after 1 January, 2004

Establishing residence

Contractual relations started before 1 January, 2004

For contractual relations started on or after 1 January, 2004

Documentation and acceptable evidence

Copies of documents

Where documentation presented by an individual proves to be

false

Specific issues related to the establishment of identity and residence

Cases of individuals having two passports

Introduced business

4. Paying Agents

Persons qualifying as paying agents

Residual entities

4.3 Article 4(2) paying agents

Election for a residual entity to be treated as a UCITS

Persons not qualifying as paying agents

The Case of Trustees and Personal Representatives

5. Competent Authority

6. Interest Payments

Effecting interest payments

Examples of paying agents who make interest payments

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Examples of paying agents who secure savings income

payments

Categories of interest payments

Interest and money debts

Article 15 securities

Accrued and capitalised interest

Income from collective investment funds

6.2.4.1

Collective investment funds: distributions

6.2.4.2

Collective investment funds: income realised at

sale or redemption of fund units

6.2.4.3

Obtaining information about funds

6.2.4.4

Funds investing in other funds

6.2.4.5

Umbrella funds

The Directive of 23 July, 1990 adopted by the Council of

the European Communities on the common system of taxation

applicable in the case of parent companies and subsidiaries of

different Member States (90/435/EEC) as amended up to and in

force on the 1st May, 2004 shall have effect in relation to the

Income Tax Acts.

As from 18th January 2012, following the repeal of the above-

mentioned EU Directive 90/435/EEC, EU Directive 2011/96/EU of 30

November 2011 on the common system of taxation applicable in the

case of parent companies and subsidiaries of different Member States

shall have effect in relation to the Income Tax Acts. EU Directive

2011/96/EU shall be read in accordance with the correlation table in

Annex III of that same Directive.

As from 1st January 2016, EU Directive 2014/86/EU of 8th

July 2014 amending Directive 2011/96/EU on the common system

of taxation applicable in the case of parent companies and

subsidiaries of different Member States shall have effect in relation

to the Income Tax Acts.

As from 31st December 2015, EU Council Directive 2015/

121/EU of 27 January 2015 amending Directive 2011/96/EU on the

common system of taxation applicable in the case of parent

companies and subsidiaries of different Member States shall have

effect in relation to the Income Tax Acts.

Added by

L.N. 193 of 2005.

(Regulation 5(1))

Savings Directive Guidelines

Reporting Requirements Specifications

Background

The Inland Revenue has issued guidelines for the implementation of the European

Union Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the

form of interest payments - hereinafter in these Guidelines referred to as the

“Savings Directive”.

The information required by the Inland Revenue Department for the purpose of the

Savings Directive is to be received in electronic format.

Scope of document

This document outlines the process that is to be used by paying agents and

economic operators for the submission of information to the Inland Revenue

Department in line with the Savings Directive.

It includes a brief description of the business process, the file layout and the rules

related to the information that is to be submitted to the Inland Revenue Department.

Business Process

All Paying Agents are to register for the purposes of the Savings Directive with

the Inland Revenue Department. This means that both Paying Agents who pay

interest income directly to beneficial owners and Paying Agents who receive income

on behalf of beneficial owners are to be registered with the Inland Revenue

Department.

Paying Agents need to submit information to the Inland Revenue Department in

the format described below in electronic format. The electronic file may be

submitted on magnetic media such as diskettes and CDs.

The information is to be submitted to the Commissioner of Inland Revenue by

28th February of the year immediately following the year in which the interest

payments were made.

The electronic information submitted will be accompanied by the following

reconciliation form

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Savings Directive Report Reconciliation Form

Notes regarding Completion

Payors will complete Section A of the reconciliation form with the registration

number given to them by the Inland Revenue for the purposes of this directive. The

Name is the official name of the payor.

The Contact Name, Contact Address, Telephone Numbers and e-mail address (if

applicable) are details of the person responsible for the compilation of information

report submitted to the Inland Revenue.

Section B will contain details of the file information. For each file on the magnetic

media that will be submitted to the Inland Revenue, the file name, the number of

records and the sum of the interests reported (irrespective of the currency) are to be

filled in the appropriate fields.

The form will be completed by the signature, name and date to be filled in by the

person responsible for the compilation of the report.

Data Transfer Requirements

Media

The data maybe transferred on double sided high density diskette (1.44 Mb) or on

a Compact Disk (CD).

The Inland Revenue Department is considering the Internet as a future medium for

these data transfers. Further information regarding this medium shall be issued in

due course.

File Naming Structure

The files submitted by Paying Agents on the CD or diskette shall have a unique

filename, and this shall be in accordance with the following convention

PYR9999XXXZYY99V.txt

Where

PYR9999 = Paying Agent Registration Number

XXX = Abbreviation for the Paying Agent given by the Inland

Revenue upon registration for this purpose

Z = Report Type which will always be “S” for the Savings

Directive report

YY = L a s t t w o d i g i t s o f t h e y e a r f o r w h i c h f i l e n a m e

information relates

99 = Sequential file number

V = Version of the file starting with 1

Examples

(a) Submission of first report in January / February 2006 relating to an interest

payment made in 2005: Filename will be PYR9999XXXS05011.txt.

(b) Submission of additional, new record in February 2006, relating to an

interest payment made in 2005 and inadvertently omitted from the first report

Filename will be PYR9999XXXS05021.txt.

(c) Correction of details of an account reported in (a): Filename will be

PYR9999XXXS05012.txt.

(d) Correction of details of an account reported in (b): Filename will be

PYR9999XXXS05022.txt.

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(e) Submission of report in January / February 2007, relating to interest

payments effected in 2006: Filename will be PYR9999XXXS06031.txt.

Format

All records are to be provided as ‘pipe-delimited’ variable length records. This

means that all leading and trailing zeroes or blanks will be removed from the data

file records.

The Inland Revenue Department will be using the OECD Automatic Exchange of

Information as the main guidelines for the reporting requirements. However the full

OECD format will not be implemented. The record lengths specified below should

be regarded as maximum values allowed and these maximum values are based on the

OECD format. The mandatory data items and related conditions are also in line with

the OECD format.

File preparation and handling procedures allow for the amendment and

replacement of data files. In the event of account details requiring correction for any

reason, the entire file containing the defective records shall be replaced, and re-

issued to the Inland Revenue Department with a revised filename, amended with the

modified records indicated as Type 2 records in field Number 1. Additional, new

records may be submitted in a separate new file with the file name indicating the

correct sequence.

Thus in the earlier example, in the case of (c) and (d), Field No 1 for those

accounts to which the corrections relate will be 2. All other accounts will show 1 in

Field No1. In the case of (a), (b) and (e), Field No1 will always show 1.

Record Layout

The Inland Revenue Department needs the following information for each

payment effected to the paying agent or the beneficial owner regarding which, the

following general rules apply

•

Where alphabetic characters are required, the Latin Alphabetic

characters only are to be reported;

•

Characters that are not alphanumeric such as “,!, @, $, %, &, etc.,

should never be reported, except for the character “-“.. These characters

have ascii values outside the ranges of 48 to 57 (numeric characters)

and 97 to 122 (alphabetic);

•

All date formats must be given in ddmmccyy format where dd is day of

month, mm is month and ccyy is the full year of the date (e.g. 1999,

2001);

•

Data Requirements are: mandatory (M), mandatory subject to

conditions (C) or optional (O). In the format described below, where a

conditional requirement or validation exists then further explanation is

given under the additional information heading.

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I R D OECD Field Name

Type

Size D a t a

Remarks

Field Ref

Requirement

No

F001 D o c u m e n t N

M

1 = New

Type Indicator

2 = Correction

F002 R e s i d e n c e A

M

Country Codes ISO 3166

Country Code

of recipient

Ty p e

of N

M

0 = Beneficial Owner

recipient

1 = Paying Agent Article

4(2)

Pre Jan 2004 N

M

0 = Registered before

Registration

01/01/2004

1 = Registered after

31/12/2003

Paying Agent AN

M

Inland

Revenue

Registration

Registration number of

Code

Paying Agent (PYR999)

Ta x

AN

C

Ta x

Identification

Identification

Number. May be blank as

Number of

indicated in Additional

recipient

information

Date of Birth N

C

Date format ddmmccyy

Maybe blank if

payment is made to

Paying Agent or data in

Field 6 (TIN) is given or

Field 4 = 0 i.e Registered

before 01/01/2004

Surname

AN

M

Surname of beneficial

owner or name of paying

agent receiving the

income

Other Names

AN

M/C

All Other Names of

beneficial owner or

paying agent receiving the

income

Birth City

AN

C

Maybe blank if

payment is made to

Paying Agent or data in

Field 6 is given or

Field 4 = 0 i.e Registered

before 01/01/2004

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I R D OECD Field Name

Type Size D a t a

Remarks

Field Ref

Requirement

No

F016 Birth Country A

C

Country Codes ISO 3166

Code

Maybe blank if TIN is

given or payment received

by a paying agent on

behalf of a beneficial

owner or

Field 4 = 0 i.e Registered

before 01/01/2004

Abode

AN

M

Door Number and/or

House Name of beneficial

owner or paying agent

receiving income on

behalf of beneficial owner

F029 Street Address AN

M

Street Address

of

Beneficial owner or

Paying Agent Receiving

Income

F030 City

AN

M

City of address of

Beneficial owner or

Paying Agent Receiving

Income

F032 Postcode

AN

O

Postcode of address

Beneficial owner or

Paying Agent Receiving

Income

F033 Country Code A

M

Country Codes ISO 3166

2 of address of Beneficial

owner or Paying Agent

Receiving Income

F034 Other Address N

O

0 = Residential or

Type

Business

1 = Registered Office

2 = Other/Unknown Type

Other address AN

C

Door Number and/or

abode

House Name of other

address of beneficial

owner or paying agent

receiving income on

behalf of beneficial owner

F036 Other address AN

C

Street Address of other

Street Address

address

F037 Other Address AN

C

City of other address

City

F039 Other Address AN

O

Postcode of Other

Postcode

Address

F040 Other Address AN

C

Country Codes ISO 3166

Country Code

2 of other address

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I R D OECD Field Name

Type Size D a t a

Remarks

Requirement

F088 Ye a r o f d a t e N

M

Year for which Interest

of Payment

payments were made for

the account in ccyy

format

o f AN

M

As

per

Rules

in

Additional Information

F091 C u r r e n c y o f A

M

Currency code compliant

Paid Income

with ISO 4217 3

F092 A m o u n t -

N

M

Major units of currency

Major Unit of

only, i.e. no decimals, no

number formats and no

currency indicators will

be entered in this field

F103 Bank Account AN

105 M

Relevant

IBAN

(international Bank

Account number) or any

identification code or the

ISIN code of the debt

Claim

Additional Information

Additional Information

This information may not be given when

I d e n t i f i c a t i o n Field 4 = 0 i.e. Registered before 01/01/2004

Number (TIN) For registrations after 31/12/2003 if TIN is not given then

Date of Birth and Place of Birth have to be provided in

fields 7, 10 and 11

Compulsory if information in field 6 (TIN) related to a

beneficial owner is not given. It is optional in the other

circumstances

Always mandatory for a beneficial owner. If the recipient

is a paying agent on behalf of a beneficial owner then if

the name of the paying agent fits in field 8 this field may

be left blank

Mandatory if TIN (Field 6) is not given or account

registered after 31/12/2003, else optional

This field is mandatory when the TIN (Field 6)

information is not given or registered after 31/12/2003.

Optional in other circumstances

O t h e r A d d r e s s Mandatory if Other Address is given (Field 17)

O t h e r a d d r e s s Mandatory if Other Address is given (Field 17)

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Additional Information

O t h e r A d d r e s s Mandatory if Other Address is given (Field 17)

O t h e r A d d r e s s Mandatory if Other Address is given (Field 17)

Type of Income Detailed description of type of Income paid (Article

numbers refer to Articles of the Savings Directive)

First Character must be one of a, b, c, or d where these

refer to Article 8(2) or briefly

a = interest paid in terms of article 6(1)(a)

b = interest paid or full amount from proceeds of sale,

redemption or refund in terms of article 6(1)(b) or (d)

c = interest paid in terms of article 6(1)(c) income

d = interest paid in terms of article 6(4)

Second Character must be 1 or 2 where

1= Total amount of Interest or income

2 = Total amount of proceed from sale, redemption or

refund

Therefore: a can only have 1 attributed to it

b can have either 1 or 2 attributed to it

c can only have 1 attributed to it

d can only have 1 attributed to it

Third Character must be x or y where

x relates to payments made directly to

beneficial owners (Article4(1))

y relates to payments made to paying

agents on behalf of beneficial owners

(Article 4(2)).

(Deleted by Legal Notice 472 of 2012).

(1) The Directive 2003/49/EEC of the 3rd June, 2003

adoptedby the Council of the European Communities on a common

system of taxation applicable to interest and royalty payments

made between associated companies of different Member States as

amended by Council Directive 2004/76/EC of the 29th April, 2004

as regards the possibility for certain Member States to apply

transitional provisions for the application of the common system of

taxation applicable to interest and royalty payments made between

associated companies of different Member States, hereinafter in

this regulation referred to as the "Interest andRoyalties Directive",

shall have effect in relation to the IncomeTax Acts.

(2)

For the purposes of Article 3(b) of the Interest and

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Royalties Directive, Malta does not exercise the option to use the

criterion of a minimum holding of voting rights.

(Deleted by Legal Notice 44 of 2016 - but see footnote

hereunder) * .

Council Directive 2013/13/EU of 13 May 2013 adapting

certain directives in the field of taxation by reason of the accession

of the Republic of Croatia shall have effect in relation to the

Income Tax Acts in relation to the following directives

(a) Council Directive 2003/49/EC of 3 June 2003 on a

common system of taxation applicable to interest and

royalty payments made between associated companies

of different Member States;

(b) Council Directive 2009/133/EC of 19 October 2009 on

the common system of taxation applicable to mergers,

divisions, partial divisions, transfers of assets and

exchanges of shares concerning companies of different

Member States and to the transfer of the registered

office of an SE or SCE between Member States; and

(c) Council Directive 2011/96/EU of 30 November 2011

on the common system of taxation applicable in the

case of parent companies and subsidiaries of different

Member States.

* Council Directive (EU) 2015/2060 of 10 November 2015 repealing Council

Directive 2003/48/EC shall have effect in relation to the Income Tax Acts.

Regulation 5 of the principal regulations (that is, these regulations) shall be

deleted with effect from 1 January 2016. However, as provided in paragraph 1 of

Article 1 of the above-mentioned Council Directive (EU) 2015/2016, the following

obligations under Directive 2003/48/EC, as amended by Directive 2006/98/EC

(hereinafter referred to as Directive 2003/48/EC as amended), as reflected in the

said regulation 5 and in Schedules 1 and 2 to the principal regulations shall

continue to apply as provided hereunder

(a) the obligations established under the second sub-paragraph of Article 4(2) of

Directive 2003/48/EC as amended shall continue to apply until 5 October

2016 or until those obligations have been fulfilled;

(b) the obligations under Articles 8 and 9 of Directive 2003/48/EC as amended

shall continue to apply until 5 October 2016 or until those obligations have

been fulfilled;

(c) the obligations under Article 13(2) of Directive 2003/48/EC as amended shall

continue to apply until 31 December 2016;

(d) the obligations under Article 14 of Directive 2003/48/EC as amended, with

regard to withholding tax levied during 2016 and previous years, shall

continue to apply until those obligations have been fulfilled.

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Information reporting by the paying agent

Responsibilities of paying agents and Article 4(2) paying agents

Initial notification

Period to be covered by the report

Information to be reported

Reporting particular interest payments

Interest payments to trustees of Malta trusts who are resident

in specified territories

Interest payments by trustees of Malta trusts

Foreign trusts

Interest payments to deceased investors

Estates of deceased persons: interest payments made by

personal representatives

Reporting on Maltese partnerships where a partner is an

Individual resident in a specified territory

Reporting on partnerships in specified territories

Reporting on joint accounts and holdings

Designated client accounts

Individuals who change address or residence during the year

Whereabouts unknown

Closure of account

Elimination of Double Taxation

Administration Issues

9.1 Application of the Savings Directive

Sub-contracting the obligations under the Savings Directive

Record-keeping and retaining evidence

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9.3.1

Documentary evidence needed to be kept to demonstrate that

identification and residence obligations have been performed

9.3.2

Evidence to be kept when accepting an introduced individual

9.4

Data Protection Act, Cap. 440

9.5

Penalties

9.6

Contacts

9.6.1

Questions of interpretation

9.6.2

Questions of administration

Appendix 1

Specified territories as at 1 May, 2004

Appendix 2

List of related public authorities and international organisations as

at 1 May, 2004

Appendix 3

Pro Forma Letter of Notification of New Permanent Address

1. Aim and Purpose

The ECOFIN Council adopted, on 3rd June, 2003 a Directive (2003/48/EC) on the

taxation of savings in the form of interest payments - hereinafter in these Guidelines

referred to as the “Savings Directive” * . Under the provisions of this Directive,

paying agents are required to report to their tax authorities interest payments to

relevant beneficial owners and residual entities in certain territories. This

information is then to be automatically exchanged with the tax authority of the

territory concerned. Furthermore, the Savings Directive provides for the elimination

of double taxation which may arise as a consequence of a system of withholding tax

which is allowed for a transitional period in the case of Austria, Belgium,

Luxembourg and relevant dependant or associated territories of certain Member

States.

As a consequence to Malta’s accession to the European Union (EU), measures

were put in place for the implementation of this Directive. Through the enabling

provisions of article 52B of the Income Tax Act, regulations have been enacted

(Regulation 5 of L.N. 267 of 2004) which, among other issues, gave effect to the

provisions of the Savings Directive as they apply to income tax. These regulations

came into effect on the 1st May, 2004.

2. Beneficial Owners

2.1

Persons qualifying as beneficial owners

Subject to certain exceptions specified by the Savings Directive (see next

paragraph), a “beneficial owner” means an individual who either receives an interest

payment or is an individual for whom an interest payment is secured [S.D. Art. 2(1)].

This means that the beneficial owner is the individual who -

2.1.1

has either received the payment directly from the paying agent;

2.1.2

or who is the individual on whose behalf the paying agent receives

or secures the payment in accordance with, or awaiting, the

individual’s instructions.

2.2

Persons not qualifying as beneficial owners

*Council Directive 2003/48/EC of 3rd June 2003 on taxation of savings income in the form of interest

payments, OJ No. L157, 26.06.2003, p.38.

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The Savings Directive specifies those exceptions where an individual who

receives an interest payment, or for whom an interest payment is secured, is not a

beneficial owner. These exceptions are where -

2.2.1

that individual provides satisfactory evidence that he is himself a

paying agent in Malta or in a specified territory [S.D. Art. 2(1)(a)];

2.2.2

that individual provides satisfactory evidence that he acts on behalf

of -

(a) a legal person (e.g. a company) [S.D. Art. 2(1)(b)];

(b) an entity which is taxed under the general arrangements for

business taxation (e.g. a partnership) [S.D. Art. 2(1)(b)];

(c) an UCITS or an Article 4(3) UCITS [S.D. Art. 2(1)(b)];

(d) a residual entity provided he discloses the name and address of

that entity [S.D. Art. 2(1)(b)];

(e) another individual provided he discloses to the paying agent

the verified details of the other individual’s identity [S.D. Art.

2(1)(c)].

For the purpose of these exceptions, satisfactory evidence includes -

(i) a written statement on headed paper from the relevant authority; and

(ii) for 2.2.2(e), a signed statement from the individual.

Furthermore, if a paying agent holds information which gives him reason to

believe that the individual he pays interest to (or secures interest for) does not

receive the interest for his own benefit because he is acting on behalf of another

individual, the agent should take reasonable steps to establish the identity of the

beneficial owner of the payment [S.D. Art. 2(2)]. What is reasonable will depend on

the circumstances of the case, but it is expected that the said agent should, as a

minimum, contact the individual and ask whether there is another beneficiary,

whether such beneficiary is a beneficial owner, and if so for the relevant details.

3. Establishing identity and residence of beneficial owners

Paying agents must establish the identity and residence of all individuals they

have reason to believe are beneficial owners. The Savings Directive establishes

minimum standards for this purpose [S.D. Art. 3(1)].

3.1

Relevance of date of commencement of contractual relations

The minimum standards specified by the Savings Directive for the establishment

of identity and residence are different if the contractual relations between the paying

agent and the beneficial owner were established before 1st January, 2004 or on or

after that date.

“Contractual relations” means that the relationship between the paying agent and

the beneficial owner is the subject of a contract or of a series of contracts. Revised,

reissued and superseded contracts are to be considered as a series of contracts. Only

contracts between the beneficial owner and the paying agent are relevant in this

context.

3.2

Establishing identity

3.2.1

Contractual relations started before 1 January, 2004

In this case, a paying agent is required to establish the identity of

beneficial owners on the basis of their name and address. One should

obtain this information from one’s existing records, using the

information one already holds, including any information held for

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anti-money laundering purposes * [S.D. Art. 3(2)(a)]. One is not

expected to obtain additional documentary verification about these

individuals’ identity.

If the identity details for such an individual change, one should

update one’s records according to reasonable business practice.

One’s obligations under the Savings Directive for this purpose are,

however, limited to the updated details in one’s records.

Where an individual living in Malta or in a territory that is not a

specified territory, and with whom a paying agent has a pre-1

January, 2004 contractual relationship, moves permanently to a

specified territory, the paying agent will need to update his records

regarding this individual’s new address to fulfil his obligations

under the Savings Directive. However, since he has a pre-1 January,

2004 relationship with the individual, he does not need to obtain any

further information such as the Tax Identification Number (TIN) or

the date and place of birth.

For contractual relations started on or after 1 January, 2004

In this case, the paying agent is required to establish the identity of

the beneficial owner on the basis of the individual’s name, address

and TIN. The TIN has to be the one issued by the country of

residence for tax purposes. If there is no TIN or the TIN is

unavailable, the paying agent needs to obtain the date and place of

birth instead [S.D. Art. 3(2)(b)]. Place of birth means the town and

country of birth.

The paying agent should verify the individual's name, date and place of

birth by reference to the beneficial owner's passport or a legally valid

identification document. The address and TIN may be verified from

these documents or, if they do not appear therein, from other

documentary evidence [S.D. Art. 3(2)(b)]. It is important to note that

for the purpose of proper verification, where a paying agent enters into

a contractual relationship that is not a pre-1 January, 2004 relation with

a beneficial owner living outside the specified territories, the paying

agent would need to obtain the passport or a legally valid identification

document of the individual if there is reason to believe that the

individual holds a passport issued by a specified territory.

“Other documentary evidence” in this context means any document

that may be accepted by firms undertaking “Know Your Client”

(KYC) checks for anti-money laundering purposes. If an individual

has a legitimate reason for not being able to present a passport a legally

valid identification document, one may accept an alternative proof of

identity, preferably from an official source. The alternative evidence

offered must be a satisfactory proof of personal identity for anti-

money laundering “KYC” purposes.

After the initial verification of identity, changes may be ‘self

certified’ (for example, a written notification of change of address or

of a new TIN from the individual would normally be acceptable

“other documentary evidence” of the change). A certificate of

*Pursuant to rules under the Prevention of Money Laundering Act (Cap. 373) and Council Directive 91/308/

EEC of 10 June 1991 on prevention of the use of the financial system for the purpose of money laundering

(OJ L 166, 28.6.1991, p. 77). Directive as last amended by Directive 2001/97/EC of the European

Parliament and of the Council (OJ L 344, 28.12.2001, p. 76).

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residence for tax purposes issued by the relevant competent

authority is acceptable documentary evidence of TIN or address.

Establishing residence

For contractual relations started before 1 January, 2004

In this case, a paying agent is required to establish the residence of

the beneficial owner on the basis of their permanent address

according to information from one’s existing records, using the

information one already holds, including any information held for

anti-money laundering purposes * [S.D. Art. 3(3)(a)]. One is not

expected to obtain additional documentary verification about these

individuals’ residence.

If the residence details for such an individual change, one should

update one’s records according to reasonable business practice.

One’s obligations under the Savings Directive are, however, limited

to the updated details in one’s records.

Where an individual living in Malta or in a territory that is not a

specified territory and with whom a paying agent has a pre-1

January, 2004 contractual relationship, moves permanently to a

specified territory, the paying agent will need to update his records

regarding this individual’s new address to fulfil his obligations

under the Savings Directive.

For contractual relations started on or after 1 January, 2004

In this case, residence for the purposes of the Savings Directive is

established on the basis of the individual’s permanent address based

on details found in the individual’s passport or a legally valid

identification document. In the case of beneficial owners having a

passport or a legally valid identification document issued by a specified

territory but who declare themselves to be resident in a country that is

not Malta or a specified territory, residence is to be established by

means of a certificate of residence for tax purposes issued by the

country in which they have their permanent address. In the absence of

such certificate, the country of residence is to be established on the

basis of the territory that has issued the passport or a legally valid

identification document.

Where a paying agent enters into a contractual relationship that is not a

pre-1 January, 2004 relation with a beneficial owner living outside the

specified territories, the paying agent would need to obtain the passport

or a legally valid identification document of the individual if the paying

agent has reason to believe that the individual holds a passport

issued by a specified territory.

Documentation and acceptable evidence

Copies of documents

Under the Savings Directive the paying agent must verify the

information held by reference to the relevant details from the passport,

a legally valid identification document or other documentary evidence

*Pursuant to rules under the Prevention of Money Laundering Act (Cap. 373) and Council Directive 91/308/

EEC of 10 June 1991 on prevention of the use of the financial system for the purpose of money laundering

(OJ L 166, 28.6.1991, p. 77). Directive as last amended by Directive 2001/97/EC of the European

Parliament and of the Council (OJ L 344, 28.12.2001, p. 76).

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presented by the individual as appropriate. The paying agent may

however accept copy documents (rather than originals) provided

they are properly certified. This means that (for non-Maltese

nationals) the copy should be certified by an embassy, consulate or

high commission of the country of issue, a lawyer or an attorney.

The copies should be dated and signed ‘original seen'. The paying

agent should keep a copy of the documents and make them available

in case of request from the Commissioner of Inland Revenue.

Where documentation presented by an individual proves to be false

The paying agent would not be liable if he had accepted a document

in good faith and had no reason to suspect that the document was

false. If he has information that casts doubt on the authenticity of the

documentation presented, he should take reasonable steps to

establish its authenticity. In this case, it would normally be

considered that reasonable steps had been taken if he had followed

the relevant procedures and complied with wider legal obligations.

Specific issues related to the establishment of identity and residence

Cases of individuals having two passports

Where a person has more than one passport the paying agent should

guide himself as follows

(a) he should rely on other reliable documents (e.g. official ID

card or tax residence certificate) in order to establish the

residence that is most realistic where -

(i) one of the passports is issued by Malta and the other by a

specified territory;

(ii) one of the passports is issued by Malta and the other by a

territory that is not a specified territory;

(iii) both passports are issued by specified territories;

(b) the paying agent should consider the specified territory for

residence purposes where one of the passports was issued by a

specified territory and the other was issued by a territory that is

not Malta or a specified territory.

Introduced business

The post-1 January 2004 rules apply where a new reportable

individual is introduced to a paying agent on or after 1 January,

2004. If a reputable institution certifies that it has completed the

identification and residence procedures and is able to provide the

required post-1 January, 2004 information and supporting evidence

(that is, a copy of the documents seen), the paying agent does not

need to repeat identity and residence checks. However, if the paying

agent comes across any information that casts doubt on the

information received, he would be expected to take reasonable steps

to ensure the information was accurate.

A “reputable institutution” for this purpose includes Maltese and EU

regulated intermediaries. A non-EU regulated intermediary could

also be a reputable institution for this purpose if one could place

reliance on that intermediary for anti-money-laundering purposes.

4. Paying agents

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4.1

Persons qualifying as paying agents

A “paying agent” means an economic operator established in Malta who, in the

course of a business or profession, makes interest payments or secures the payment

of interest to individuals (relevant beneficial owners) or residual entities in specified

territories [S.D. Art. 4(1)]. The paying agent is always ‘the last link in the payment

chain’ before the beneficial owner or residual entity and is the person that actively

initiates a payment directly to a beneficial owner or residual entity, or, if different,

initiates a payment in accordance with his or its instructions.

Thus it is clear that the provisions of the Savings Directive impose obligations on

a number of economic operators such as banks, custodians, certain financial

institutions and financial dealers, businesses and stockbrokers. These provisions

may also apply to those who hold or administer money debts and investments in

collective investment funds on behalf of individuals or residual entities in a

professional capacity such as accountants, lawyers, trustees or nominee companies.

These obligations do not extend, however, to foreign branches of economic

operators established in Malta. If such foreign branches are situated in a specified

territory, they may constitute paying agents in that specified territory.

Similarly, a Maltese branch of an economic operator established abroad, whether

in a specified territory or in another territory, may constitute a paying agent in Malta.

4.2

Residual entities

A “residual entity” means an entity established in Malta or in a specified territory

(essentially a body of persons or an organisation but not an individual) which is not -

(a) a legal person (e.g. a company or other corporate body) [S.D. Art.

4(2)(a)];

(b) taxed under the general arrangements for business taxation (e.g. a

partnership) [S.D. Art. 4(2)(b)];

(c) a UCITS or an Article 4(3) UCITS [S.D. Art. 4(2)(c) and Art. 4(3)].

For the purposes of the Savings Directive, certain Swedish and Finnish entities

(which are normally regarded as legal persons) are treated as residual entities [S.D.

Art. 4(5)]. These entities are -

(i)

in Finland, “avoin yhtiö (Ay)” and “kommandittiyhtiö (Ky)/öppet

bolag” and “kommanditbolag”

(ii) in Sweden, “handelsbolag (HB)” and “kommanditbolag (KB)”.

4.3

Article 4(2) paying agents

An “Article 4(2) paying agent” means a residual entity which is established in

Malta and which has received an interest payment for the bene fit of a beneficial

owner [S.D. Art. 4(2)].

An Article 4(2) paying agent is therefore a residual entity which receives (not

pays) interest and which has a responsibility similar to those of a paying agent for

securing interest payments on behalf of a beneficial owner.

The classification as an Article 4(2) paying agent is not a matter of choice for a

residual entity. However, a residual entity which is an Article 4(2) paying agent may

apply to be treated as a UCITS (‘undertaking for collective investment in

transferable securities’) for the purposes of the Savings Directive [S.D. Art. 4(3)].

This means that it will be treated as a paying agent rather than as an Article 4(2)

paying agent for the purposes of the Savings Directive.

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4.4

Election for a residual entity to be treated as a UCITS

If a residual entity that is an Article 4(2) paying agent wishes to be treated as a

UCITS for the purposes of the Savings Directive, it should write to the Director,

International Taxation at the address shown in paragraph 9.6.1.

The letter should include the following information -

4.4.1

the name and address of the residual entity;

4.4.2

where the application is sent on behalf of a residual entity, the name,

address, telephone number and position within the residual entity of

the person submitting the application;

4.4.3

a statement that the entity

(a) is established in Malta;

(b) is a residual entity;

(c) wishes to be treated as a UCITS for the purposes of the

regulations;

4.4.4

a signed and dated declaration by the person making the application

that the information in the letter is to the best of his knowledge

complete and correct.

The Commissioner of Inland Revenue will issue a certificate which will be

effective from a specified date and valid until it is revoked. The certificate can be

revoked at the request of the residual entity.

4.5

Persons not qualifying as paying agents

A person is not a paying agent in relation to a specific payment for the purposes of

the Savings Directive if -

4.5.1

the payment made is not an interest payment (See section 6); or

4.5.2

the interest payment is not made in the course of a business or

profession; or

4.5.3

the person to whom the interest payment is made is not the

beneficial owner or a residual entity.

4.6

The Case of Trustees and Personal Representatives

Trustees, personal representatives and other persons with similar roles in Malta

can be paying agents if they are acting as such in a business or professional capacity.

A professional person acting on behalf of trustees or personal representatives may be

a paying agent if he receives interest or makes interest payments on their behalf.

In general, a professional trustee or personal representative qualifies as a paying

agent if a beneficiary of the trust or estate is absolutely entitled to the interest as it

arises (and that beneficiary is a beneficial owner). In practice, this means that the

trustee of a trust will qualify as a paying agent where the trust is such that the

beneficiary has absolute entitlement to the investments of the trust or to any interest

arising from them, either for the whole duration of the trust or for a specified period

of time. In the case of professional personal representatives, this means that the

property in the estate has now vested in the legatees.

A trustee in receipt of an interest payment in relation to a discretionary trust does

not qualify as a paying agent and any distribution by the trustee of a discretionary

trust is not a payment of interest.

Individual trustees or executors in Malta who are not acting in a business or

professional capacity cannot be paying agents. They cannot be Article 4(2) paying

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agents as they are individuals.

5. Competent Authority

For the purposes of the Savings Directive, “competent authority” in Malta means

the Commissioner of Inland Revenue.

6. Interest Payments

Effecting interest payments

An interest payment is made on a payment of interest to another person, or if a

payment of interest is secured for another person. A payment is made by paying a

sum of money owed to or on behalf of another person. A payment is secured if a sum

of money is received by or collected on behalf of another person.

The making or securing of an interest payment requires a significant active

responsibility for ensuring that the payment is made or secured. It is necessary to

have more than a simple passive or supporting role to be a paying agent. In

particular, banks, other financial institutions or other businesses which have a role in

the payment process are not regarded as making a payment if their role is essentially

passive (they act on instructions from others) or auxiliary (they merely provide

services to help the paying agent). Therefore, a bank or similar institution does not

make a payment merely by issuing or sending a cheque, or arranging for the

electronic transfer of funds on behalf of one of its customers. Equally, a bank or

similar institution does not secure a payment merely by clearing a cheque, arranging

for the clearing of a cheque, or receiving an electronic transfer of funds on behalf of

one of its customers.

Examples of paying agents who make interest payments

Persons who make interest payments can include -

6.1.1.1 debtors (in a business rather than a private capacity)

themselves;

6.1.1.2 persons who are responsible for making interest

payments on behalf of debtors.

The first example in this category is that of a bank which has

outsourced many of its administrative or back-office functions to an

independent contractor. The bank takes full responsibility for

everything that the contractor does and the bank’s customers are not

aware of the contractor’s role or of the fact that the staff with whom

they communicate are employees of the contractor rather than the

bank. The bank in this case is the paying agent. The outsourcing

contractor provides services to the bank but has no responsibility for

making interest payments.

The second example in this category is where an issuer of bonds or

debentures has appointed a specialist registrar which is responsible

for maintaining all the records of the bond holders. The specialist

registrar also makes the interest payments to the bond holders using

funds provided by the issuer. These funds are under the control and

ownership of the specialist registrar before payment is made. The

specialist registrar is in this case the paying agent. The issuer has

outsourced both essential administrative services and the

responsibility for making interest payments.

Examples of paying agents who secure savings income payments

Persons who secure savings income payments can include -

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6.1.2.1

professional nominees and nominee companies;

6.1.2.2

professional persons (such as lawyers or stockbrokers)

acting for beneficial owners or residual entities.

The first example in this category is where a trust company or

professional person is appointed to act as bare trustee by a beneficial

owner. The property includes assets which produce interest

payments. In this case, the trust company or professional person is a

paying agent. His responsibilities include the collection of the

interest payment due to the beneficial owner and of the proceeds of

sale or redemption when the assets concerned are sold or redeemed.

The second example in this category is where a stockbroker holds

client money and client assets which produce interest payments

(either as interest or when they are sold or redeemed) using a

subsidiary company as nominee. The stockbroker has permission

from the Malta Financial Services Authority to safeguard and

administer investments for his clients and accepts full responsibility

for the safe custody of the assets by the subsidiary company. The

stockbroker is, in this case, the paying agent. He takes responsibility

for securing the interest payment due to his clients and has full

control over the subsidiary company which formally holds the

client’s property.

Categories of interest payments

For the purposes of the Savings Directive, an “interest payment” means broadly

any income which is, contains or is derived from interest. Other types of income

(e.g. company dividends, pensions, rents, trading profits or employment income) are

not considered to be interest payments even where they are derived from investments

that have been made. Interest accumulated or rolled-up in some way in the disposal

proceeds of certain savings instruments also constitutes an interest payment. Capital

gains are not an interest payment. However, capital gains and other types of income

may constitute an interest payment if they are included in a payment where it is not

possible to isolate the amount of interest in a larger payment.

Interest and money debts [S.D. Art. 6(1)(a)]

All interest earned on debts derived from the lending of money

(whether or not the relevant debt claim is secured by mortgage and

whether or not it carries a right to participate in the debtor’s profit)

is included as an interest payment. This includes interest on bank

accounts as well as interest on all types of debt securities (such as

government securities, corporate bonds and debentures).

For the purposes of the Savings Directive, the term interest also

includes -

6.2.1.1 premiums and discounts derived from money debts; and

6.2.1.2 prizes (including premium bond prizes) attributable to

money debts.

An interest payment does not include any income (including any

interest) which does not arise from a money debt. Examples of

payments which are not an interest payment include -

6.2.1.3 dividends on ordinary shares in a company (unless the

company is a collective investment fund);

6.2.1.4 dividends from preference shares;

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6.2.1.5 pensions, annuities and payouts from insurance policies.

There are two types of debt which do not count as money debts for

the purposes of the Savings Directive (and so do not produce interest

payments even where they give rise to interest) -

6.2.1.6 debts which do not arise from a transaction for the

lending of money (for instance where there is a late

payment and compensation interest is paid); and

6.2.1.7 certain debt securities which already existed before 1

March 2001 - referred to in these guidelines as “Article

15 securities” (see next paragraph).

Debts which do not arise from a transaction for the lending of money

include any debts arising from ordinary commercial or private

transactions to purchase goods, services or other assets (e.g. land).

The main consequence of this exclusion is that interest on late paid

trade debts does not constitute an interest payment. Penalty charges

on late paid debts are also excluded from being an interest payment.

Client money (whether in designated or undesignated accounts) and

collateral deposited in the course of transactions in financial (and

other) markets are money debts which arise from the lending of

money. Interest on such sums therefore constitutes an interest

payment.

Article 15 securities [S.D. Art. 15]

Certain negotiable debt securities are not treated as money debts if

they meet certain conditions for the duration of a transitional period.

These securities (“Article 15 securities”) do not qualify as money

debts for all purposes of the Savings Directive. Interest, premiums

and discounts derived from these bonds do not constitute an interest

payment and investment in these bonds is not taken into

consideration in determining whether the relevant thresholds have

been passed in relation to certain income derived from collective

investment funds. A security will be an Article 15 security if -

6.2.2.1 it was first issued before 1 March 2001 or the prospectus

was first approved by the appropriate regulatory authority

before that date; and

6.2.2.2 no further issue was made on or after 1 March 2002.

If the bond is a government bond (or issued by a related public

authority or an international organisation - see Appendix 2 to these

Guidelines) and a further issue is made on or after 1 March 2002, the

whole of the issue (whether made before, on or after 1 March 2002)

is not an Article 15 security. The whole issue of the bond is a money

debt. If the bond is issued by another type of issuer (e.g. a

commercial company) and a further issue is made on or after 1

March 2002, only the part of the issue made on or after 1 March

2002 is not an Article 15 security. This part of the bond issue is

treated as a money debt[ the rest of the issue (made before 1 March

2002) is not a money debt.

The transitional period will end no later than 31 December 2010. If a

paying agent cannot ascertain whether or not a security is a Article

15 security, he should assume that it is not i.e. it should be treated as

a money debt in the normal way.

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Accrued and capitalised interest [S.D. Art. 6(1)(b)]

For the purposes of the Savings Directive, an interest payment is

considered also to have been made when a money debt is sold to a

paying agent (or an Article 4(2) paying agent) or redeemed by the

debtor. Interest added to an account with a bank when the account is

closed is interest in the normal way and treated as such under the

Savings Directive. Accrued interest, premiums and discounts paid

out at the redemption of securities by the issuer, or included in part

of the price paid by a third party purchaser at sale before redemption

also constitutes an interest payment for the purposes of the Savings

Directive.

In this respect, economic operators who purchase interest-bearing

securities from relevant payees or residual entities in specified

territories or Maltese agents acting for the seller (e.g. stockbrokers)

could qualify as paying agents for the purposes of the Savings

Directive. This could be the case even if these economic operators

are not the paying agent in respect of coupon payments made to the

relevant payee or residual entity selling the securities.

Accrued or capitalised interest is normally considered to arise if -

6.2.3.1 a security is sold to the paying agent cum dividend (with

an entitlement to the next coupon payment) - in those

circumstances the price will include an amount of

accrued interest for the period from the last coupon

payment date to the date of transfer of the security;

6.2.3.2 it was purchased by the seller at a discount; or

6.2.3.3 the sale price includes, or takes account of, a premium

that is paid on redemption by the issuer.

If the security is purchased ex dividend (without an entitlement to

the next coupon payment), it will not normally be considered that

there is any accrued interest in the selling price and so there will be

no interest payment.

Income from collective investment funds

The interest element included in distributions paid by collective

investment funds also constitutes interest payment for the purposes

of the Savings Directive. Such interest element includes premiums,

discounts and other income treated as interest on a money debt for

the purposes of the Savings Directive. It does not, therefore, include

interest on Article 15 securities.

A “collective investment fund” means an investment which is -

(a) an UCITS;

(b) an Article 4(3) UCITS; or

(c) an undertaking for collective investment established outside

the EU.

An “UCITS” means an ‘undertaking for collective investment in

transferable securities’ authorised in accordance with the UCITS

Directive (Directive 85/611/EEC).

An “Article 4(3) UCITS” is a residual entity which has been given a

certificate by the specified territory in which it is established

allowing it to be treated as an UCITS.

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Therefore, distributions and other payments derived from

investment funds established in Malta or in a specified territory

constitute interest payments for the purposes of the Savings

Directive if they are made by UCITS (or Article 4(3) UCITS).

Distributions and other payments derived from investment funds

which are not UCITS or Article 4(3) UCITS in Malta or a specified

territory does not constitute interest payments under the Savings

Directive.

A non-EU fund should only be regarded as an ‘undertaking for

collective investment’ if the following features are present -

(a) the fund is operated by way of business; and

(b) the investments in the fund are pooled; and

(c) the investors are not involved in its day-to-day management;

(d) the fund is open-ended (i.e. its capital varies with investments

and withdrawals by investors) and not close-ended (i.e. its

capital is fixed).

6.2.4.1 Collective investment funds{ distributions [S.D. Art.

6(1)(c)]

For the purposes of the Savings Directive, a distribution

by a collective investment fund contains interest payment

if the fund has invested assets in money debts - excluding

Article 15 securities. The Savings Directive specifies that

Member States may opt to exclude from the definition of

interest payment income distributed by collective

investment funds that have invested less than 15% of

their assets in money debts. The actual threshold for a

collective investment fund therefore, depends on the

approach the specified territory in which the fund is

established has taken to implementing the Savings

Directive. For collective investment funds established in

Malta, a distribution will contain interest payment if the

fund has invested any of its assets directly or indirectly

(via other collective investment funds or residual entities)

in money debts - excluding Article 15 securities [S.D.

Art. 6(6) and Reg. 5(5) L.N. 267 of 2004].

In determining whether there are interest payments in a

distribution, it does not matter whether the distribution is

paid out (e.g. a dividend cheque is sent to the investor),

reinvested by the purchase of additional units or shares or

added directly to accumulation units.

6.2.4.2 Collective investment funds: income realised at sale or

redemption of fund units [S.D. Art. 6(1)(d)]

An interest payment also arises when units or shares in a

collective investment fund are sold to a paying agent (or

an Article 4(2) paying agent) or redeemed by the fund.

This is analogous to the inclusion of accrued interest in

the sale or redemption price of a security.

An interest payment only arises under this heading if the

fund has invested more than 40% (25% from 1st January,

2011) of its assets directly or indirectly (via other

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collective investment funds or residual entities) in money

debts - excluding Article 15 securities. This applies to all

funds and does not depend on any requirements of the

country in which the fund is established.

However, all of the income accumulated by a fund is

regarded as an interest payment if the test is passed. The

interest payment is not simply the part of the accumulated

income which would be considered to be interest payment

under the other headings - whether as interest paid,

accrued or capitalised interest or interest payment in

distributions from other funds, but the total amount paid

for the relevant sale or redemption [Regulation 5(5) L.N.

267 of 2004].

Obtaining information about funds

Paying agents and Article 4(2) paying agents need

information about the status and composition of funds in

order to decide whether or not a fund is a collective

investment fund, and if so, whether it passes the 40% test.

He should normally seek information about fund

composition in the investment policy laid down in a

fund’s rules or instrument of incorporation (or similar

constitutional document).

Failing that, paying agents should consider the actual

composition of a fund’s assets. This information may be

obtained from a fund’s report and accounts or similar

published sources. This information can be assumed to

remain current until a further report and accounts become

available. If the paying agent is unable to ascertain

whether or not a fund falls above or below the 40%

threshold, he should consider the rele vant threshold to be

exceeded.

Paying agents are not expected to inspect original fund

documents and may rely upon copies or on information

received in the normal way with other fund

documentation or literature. Paying agents may rely on

information from recognised industry sources (for

example, feeds from established information vendors) to

decide whether the 40% test has been passed. This can

include simple statements that the test has been passed

where it is clear that the recognised industry source has

obtained the necessary information about the fund in

question from a suitable primary source of information.

Funds investing in other funds

Where a fund invests in other funds, a calculation of

indirect investment should be carried out by taking the

investment by the fund in question in each of the other

funds and multiplying that number by the percentage

investment of the other fund in money debts. The

resulting products should be added to the direct

investment in money debts and the sum divided by the

total assets of the fund to establish the percentage

invested in money debts. This percentage can then be

compared with 40% to decide whether the test has been

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passed.

Example

In the case of a fund which has invested €2,340,000

directly in money debts and €7,020,000 in each of three

other collective investment funds which in turn invested

20%, 50% and 80% respectively in money debts, for the

purposes of the Savings Directive, the top level fund

would be considered to have invested 55% directly and

indirectly in money debts ((€2,340,000 + 20% x

€7,020,000 + 50% x €7,020,000 + 80% x €7,020,000)/

€23,400,000). The top level fund clearly passes the 40%

test.

Umbrella Funds

A fund which invests in other funds is not the same as an

umbrella fund. An umbrella fund is a mechanism for

bringing different, separate funds (usually referred to as

sub-funds) within a single fund organisation. For the

purposes of the Savings Directive, sub-funds are to be

treated as separate collective investment funds and

therefore the 40% test is to be applied at the sub-fund

level.

7. Information reporting by the paying agent

Responsibilities of paying agents and Article 4(2) paying agents

Paying agents are required to notify the Commissioner of Inland Revenue if they

make interest payments to a beneficial owner or a residual entity in a specified

territory. Article 4(2) paying agents established in Malta are required to notify the

Commissioner of Inland Revenue if they receive interest payments for a beneficial

Initial notification

Paying agents and Article 4(2) paying agents who need to make a report must

notify the Assistant Director, Computer Section (at the address shown in paragraph

9.6.2) within 14 days of the end of the tax year in which they make a reportable

payment, unless they have already notified the Commissioner of Inland Revenue in a

previous year. Following the said initial notification, the Commissioner of Inland

Revenue shall issue a registration certificate which will include a Paying Agent

Once the Commissioner of Inland Revenue has been so notified, a report of

interest payments needs to be submitted to the Commissioner of Inland Revenue by

28th February of the year immediately following the year in which the interest

payments were made [Reg. 5(3) L.N. 267 of 2004].

If the paying agent has notified the Commissioner of Inland Revenue but has no

interest payments to report for a particular year, he must make a NIL report.

If the paying agent’s business changes and he ceases to make reportable interest

payments, he should notify the Assistant Director, Computer Section (at the address

shown in paragraph 9.6.2).

Period to be covered by the report

Reports made during a particular year will cover all of the reportable interest

payments made during the previous calendar year. The period specified will cover

the twelve months January to December.

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7.4 Information to be reported

Following the initial notification, a paying agent (including an Article 4(2) paying

agent) is required to report to the Commissioner of Inland Revenue interest

payments made to beneficial owners resident in a specified territory. The reporting

obligations under the Savings Directive apply only to those beneficial owners whose

country of residence is a territory specified in these guidelines. A list of the specified

territories is at Appendix 1.

The reportable details for each interest payment are

(i)

details about the paying agent as follows -

(a) own name, address and paying agent code;

(b) whether the paying agent is an Article 4(2) paying agent in

relation to the particular interest payment;

(ii) details about the beneficial owner as follows -

(a) For individuals with whom the paying agent has contractual

relations that began before 1 January, 2004 the reportable details

about the beneficial owner are -

(1) name;

(2) address; and

(3) country of residence.

(b) For individuals with whom the paying agent has contractual

relations that began on or after 1 January, 2004 and for

individuals where there are no contractual relations, the

reportable details about the beneficial owner are -

(1) name;

(2) address;

(3) country of residence (according to the Savings Directive),

and either

(4) the Tax Identification Number (TIN); or

(5) (if there is no TIN, or if the TIN is unavailable) date

and place of birth.

(iii) details about the interest payment as follows -

(a) the category of interest payment;

(b) the account number or other information identifying the money

debt or other instrument;

(c) the amount of the interest payment. This amount is the total

amount of interest or income and the total amount of the proceeds

from sale, redemption or refund;

(d) the currency in which the payment was reported.

Paying agents (but not Article 4(2) paying agents) have to report payments they

make to Article 4(2) paying agents and to residual entities in specified territories.

There are no requirements to verify the identity and place of establishment of a

residual entity and the reportable details do not depend on whether a contractual

relationship with the entity was in place before or after 1 January 2004. The

reportable details are -

(a) the paying agent’s own name, address and paying agent code;

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(b) the name and address of the Article 4(2) paying agent (including where

available the relevant paying agent code) or residual entity (this must

include the country in which the residual entity is established);

(c) details about the interest payment as in (iii) above.

Reports are required for all interest payments within the meaning of the Savings

Directive irrespective of whether these payments would be taxed in Malta, the way

in which they would be taxed in Malta or the way in which they would be taxed in

the country of residence of the beneficial owner or residual entity.

In general, PO box, c/o and hold mail addresses are not normally acceptable for

reporting purposes. They may be acceptable in the case that it is the only address

held by the paying agent and there is a pre-1 January, 2004 contractual relationship

with the individual. For post-2003 contractual relationships, these may only be

acceptable if the relevant address constitutes a residential address for the area in

which the individual lives and would allow such individual to be traced.

Reporting particular interest payments

Interest payments to trustees of Malta trusts who are resident in

specified territories

A trust constituted under the law of Malta (Malta trust) is not an

entity and the persons to whom the provisions of the Savings

Directive may apply are the trustees. Therefore, if an interest

payment is paid to trustees of a Malta trust who are individuals

resident in a specified territory, the paying agent should report the

trustees’ details, unless the trustees fulfil any of the following

criteria -

(a) they are paying agents themselves - professional trustees may

well be paying agents themselves, in which case payments to

them are not reportable;

(b) the trustees have provided information that they are acting on

behalf of another individual (the beneficiary) who is a

beneficial owner and have provided the identity details - in

this case the paying agent should report the details of the

beneficiary concerned;

(c) the paying agent has reasonable grounds to believe that the

trust is a bare trust (i.e. a trust where the beneficiary has

absolute entitlement to the investments of the trust or to any

interest arising from them, either for the whole duration of the

trust or for a specified period of time) - in this case the paying

agent should take reasonable steps to establish from the

trustees who is the beneficial owner.

For post-2003 trustee accounts, the paying agent should establish the

status of the trust at the outset. For trustees with whom the paying

agent has pre-1 January 2004 contractual relations, one should take

such action as is reasonable.

In any case, if he is unable to obtain the relevant details for the

beneficiary, the paying agent should report the trustees’ details.

Where there are more than one trustee resident in specified

territories, unless proof is otherwise available, it is to be assumed

that each of the trustee has a right for an equal share of the relevant

interest payment.

Interest payments by trustees of Malta trusts

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If a trustee is acting in a professional capacity one may be a paying

agent. Interest payments received by a trustee (who is not acting in a

professional capacity) may be reportable if they are secured for the

immediate benefit of a beneficial owner or residual entity in a

specified territory. Usually this means that the individual or residual

entity concerned has a right to the income in the form it is received

by the trust. This is the case for bare trusts.

Distributions made by the trustees of discretionary or accumulation

and maintenance trusts are not interest payments and are not

reportable.

Foreign trusts

The status of a foreign trust is determined by the law of the country

in which it is established and the paying agent needs to apply the

normal rules to determine whether the person to whom the payment

is made is a beneficial owner or a residual entity in a specified

territory, and whether a report is required. He should only treat a

foreign trust as a residual entity if he is unable to obtain official

evidence that it falls into one of the categories which are excluded

from being residual entities.

Similarly, the normal rules will apply to determine whether a

payment from a foreign trust is an interest payment.

Interest payments to deceased investors

Interest payments which were paid to deceased persons before the

date of their death is reportable in their name and at the last known

address, provided the deceased was a beneficial owner.

Interest payments made to personal representatives are reportable by

a paying agent if one or more of the personal representatives is a

beneficial owner. The paying agent is not required to identify the

beneficiary. Interest paid throughout the period of the administration

or executry is reportable.

A paying agent does not need to report interest payments made to

personal representatives if he has been informed that the personal

representatives are not the beneficial owners, and -

•

they are acting on behalf of another individual who is the

beneficial owner and where they also provide the name and

address of the individual (verified as required under the

Savings Directive)

•

they are acting on behalf of a residual entity and where they

provide the name and address of the entity.

Estates of deceased persons: interest payments made by personal

representatives

Professional personal representatives (e.g. lawyers) may be paying

agents and should make a report if they make interest payments to

beneficial owners or residual entities in specified territories.

Personal representatives who are not acting in a professional

capacity are not required to make a report.

Professional personal representatives should report interest

payments once the assets which gave rise to the interest payment

have been assigned to a beneficial owner or residual entity in a

specified territory. Only interest payments made from the date the

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assets were assigned are reportable. Interest earned on money in the

estate during the administration or executry and distributed as part

of the residue is not reportable.

7.5.6 Reporting on Maltese partnerships where a partner is an individual

resident in a specified territory

Interest payments to Maltese partnerships are not reportable.

Maltese partnerships may, of course, be paying agents in their own

right under the relevant provisions of the Savings Directive.

7.5.7 Reporting on partnerships in specified territories

How a paying agent treats a partnership in a specified territory will

depend on its legal status in the country in which it is established.

He should only treat a partnership as a residual entity if he is unable

to obtain official evidence that it falls into one of the categories

which are excluded from being residual entities.

7.5.8 Reporting on joint accounts and holdings

A paying agent should report the identity, residence and account

information and the total amount of interest payment attributable to

each beneficial owner or residual entity in a specified territory.

Unless proof to the contrary is available, it is to be assumed that an

equal amount is attributable to each beneficial owner and residual

entity. A paying agent may, however, opt to report the total amount

of the interest payment in relation to the joint account or holding

against each of the beneficial owners or residual entities.

7.5.9 Designated client accounts

If a paying agent is contractually required to make an interest

payment to a professional firm or an individual acting in a

professional capacity, he may be asked to send the payment directly

to that firm’s or individual’s client, or transfer the funds directly to a

bank account designated in the name of the client. In these cases, he

should still regard the payment as made to the professional firm or

individual concerned and not to the client. This may mean that the

firm or individual concerned is the paying agent.

If a paying agent is contractually required to make a payment to an

individual who is not acting in a professional capacity and who

requests that the payment be sent directly to another individual or to

transfer the funds to a bank account designated in the name of

another individual, he should also regard the payment as made to the

first individual. However, this may be information that the first

individual is not the beneficial owner [S.D. Art. 2(2)].

7.5.10 Individuals who change address or residence during the year

When an individual moves residence during the year, there may be

more than one country of residence and address for the same

individual for the reporting period.

As long as a paying agent reports consistently, he may report either

the address and country of residence at the time the interest payment

is made, or the address and country of residence at the end of the

reporting year (31 December).

Where a beneficial owner who is not resident in a specified territory

changes address from a territory that is not a specified territory to a

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specified territory, the paying agent needs to, within 10 days from

being first notified of the such change in address, take the necessary

action in order to be able to determine whether the change in address

also means a change of residence. Thus in the case of contractual

relations started -

(a) before 1 January, 2004 the paying agent should update his

records in accordance with the provisions of paragraph 3.3.1

by requesting the individual to confirm whether his or her

residence has changed or not;

(b) on or after 1 January, 2004 with persons holding a passport or

official identity card issued by a specified territory, the paying

agent must determine whether the certificate of residence

referred to in paragraph 3.3.2 is still valid.

In both the above cases, confirmation of a change in residence

should be obtained by the paying agent on the pro forma letter in

Appendix 3 - hereinafter referred to as the “Appendix 3 letter”.

Where the individual does not give the requested information to the

paying agent in this regard (i.e. whether the change in address means

a change in residence), it shall be considered that reasonable

business practice has been followed by the paying agent if at least

two requests for such information have been made. Where such

attempts to obtain the necessary information or documents (e.g.

updated tax residence certificate in the case of contractual relations

started on or after 1 January, 2004) fail, the paying agent shall

consider that the change in address signifies a change in residence

and shall inform the individual accordingly.

Where the beneficial owner is late in informing the paying agent of a

change in residence or where attempts to update one’s records have

failed, such that the relevant interest payments cannot be reported in

time (i.e. by the 28th February of the year immediately following the

year in which the interest payments were made) the paying agent

must within the earlier of -

(1) 14 days of receiving the duly filled-in Appendix 3 letter; or

(2) 90 days of the sending of the first letter in the attempt to

update one’s record,

submit to the Commissioner of Inland Revenue the following

information

(a) name, current address and country of residence of beneficial

owner;

(b) address and country of residence prior to change in residence;

(c) date of change in residence;

(d) date when the paying agent became aware of the change in

residence;

(e) the information specified hereunder which the paying agent

has in hand at the time such agent became aware of the change

in residence -

(i) reportable account numbers or other information

identifying reportable money debts or other relevant

instruments;

(ii) the relevant categories of interest payment.

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7.5.11 Whereabouts unknown

If an interest payment is being reported before the beneficial owner

went ‘whereabouts unknown’, the report is to be made on the basis

of his last known address. No report is to be made if the paying

agent is unable to make the interest payment because the investor’s

whereabouts are unknown. If subsequently, the investor’s new

address is discovered and the outstanding interest payment is made,

that payment is to be reported in the year the payment is made with

the new address.

7.5.12 Closure of account

If an account was closed during the year then the paying agent

should report the interest payment if there was a reportable address

at the date the account was closed. Or, if the paying agent holds a

later address on his system, it can be used as the basis for reporting,

assuming the address was properly verified under the appropriate

rules.

8. Elimination of Double Taxation

A beneficial owner who is a resident of Malta for the purposes of the Income Tax

Act and who receives an interest payment that was subject to withholding tax in

terms of Article 11 of the Savings Directive, may claim a tax credit of tax so

withheld.

Such a claim may be made in accordance with the provisions of articles 80 to 88 of

the Income Tax Act i.e. the unilateral relief provisions.

Notwithstanding the total amount of credit allowed under the provisions of article

84 of the Income Tax Act, the tax credit claimed may be equal to the amount

withheld [Reg. 5(6) L.N. 267 of 2004].

A claim for refund of the excess amount of tax withheld to the beneficial owner

over that charged in Malta may be claimed under the provisions of article 48 of the

Income Tax Management Act.

9. Administration Issues

9.1

Application of the Savings Directive

In accordance with a Council Decision of 19 July, 2004 on the date of application

of Directive 2003/48/EC on taxation of savings income in the form of interest

payments * , the provisions of the Savings Directive will not begin to take effect until

1st July, 2005. This effectively means that paying agents need to commence

reporting in the year 2006 for data relating to the period 1st July, 2005 to 31st

December, 2005.

9.2

Sub-contracting the obligations under the Savings Directive

A paying agent may sub-contract both the task of completing and updating the

identity and residence details and the preparation and submission of the report.

However, the legal responsibility to establish identity and residence and to provide

accurate and complete information remains with the paying agent. So, if he decides

to sub-contract the work, he will need to be satisfied that the entity that has been

sub-contracted has put adequate arrangements in place.

If the paying agent sub-contracts the preparation and submission of the report, he

*Council Decision of 19 July, 2004 on the date of application of Directive 2003/48/EC on taxation of

savings income in the form of interest payments (2004/587/EC), OJ No. L 257, 04.08.2004, p.7.

EUROPEAN UNION DIRECTIVES

is to make sure that the third party who submits the report uses the correct (the

paying agent’s) reference.

There are penalties for supplying incorrect information and responsibility for

collecting verifying and reporting the necessary information is of the paying agent.

If it is discovered (for example at audit) that the information reported is incorrect the

action taken will depend on the circumstances of the case. However, account will be

taken of whether the paying agent can show that reasonable steps were taken to

ensure that the sub-contractor had adequate procedures in place.

9.3

Record-keeping and retaining evidence

9.3.1

Documentary evidence needed to be kept to demonstrate that

identification and residence obligations have been performed

A paying agent must be able to produce, upon a request by the

Commissioner of Inland Revenue, a copy of the documents that were

used to verify the identity and residence of individuals. He must

retain these documents for at least 5 years after the end of the tax

year in which the account was closed (or the security has been sold).

9.3.2

Evidence to be kept when accepting an introduced individual

A paying agent must be able to produce, upon request by the

Commissioner of Inland Revenue, the documents used by the

introducer of the business to verify the identity and residence of

individuals and its certification that it has carried out the identity

and residence checks to the required standard. These documents

must be retained for at least 5 years after the end of the tax year in

which the account was closed (or the security has been sold).

9.4

Data Protection Act, Cap. 440

In accordance with Regulation 5(4)(a) of L.N. 267 of 2004, a paying agent is

required to provide the Commissioner of Inland Revenue with information as

prescribed by the Savings Directive, and as explained in these guidelines.

Consequently, non-disclosure provisions as stipulated under article 7 of the Data

Protection Act, Cap. 440 do not apply by virtue of article 23(1)(e) and (f) of the same

Act. Any additional information reported for the purposes of the Savings Directive

beyond that prescribed, would not be covered by the exemption contained in article

23 of the Data Protection Act.

9.5

Penalties

Paying agents who fail to notify the Commissioner of Inland Revenue may be

subject to the provisions of Part IX of the Income Tax Management Act and to any

applicable administrative penalties which may be contemplated under the Income

Tax Acts.

There may be occasions where a paying agent tries but fails to obtain the required

information from the beneficial owner in time to make the relevant report. If a

paying agent has a reasonable excuse for not having done what he was required to

do, he cannot be considered to have failed to comply and therefore no penalty could

apply.

In order to have a 'reasonable excuse' for not reporting the information a paying

agent must be able to show that reasonable steps were taken to obtain it. What is

reasonable will always depend on the circumstances of the case, but it is normally

expected that a paying agent is able to produce evidence of at least two requests for

the information.

9.6

Contacts

EUROPEAN UNION DIRECTIVES

Questions of interpretation

For advice regarding the interpretation of the provisions of the

Savings Directive, Regulation 5 of L.N. 267 of 2004 or of these

guidelines, please contact

Director,

International Taxation,

International Tax Unit

Inland Revenue Department.

Questions of administration For advice about making reports, please

contact

Assistant Director,

Computer Section,

Inland Revenue Department.

Appendix 1

Specified territories as at 1 May 2004 (*or as from such date indicated)

British Virgin Islands

Bulgaria (*as from 1 January 2007)

Czech Republic

EUROPEAN UNION DIRECTIVES

Luxembourg

Montserrat

Netherlands

Netherlands Antilles

Romania (*as from 1 January 2007)

Slovak Republic

Turks and Caicos Isles

United Kingdom

Appendix 2

List of related public authorities and international organisations as at 1 May 2004

Vlaams Gewest (Flemish Region)

Région wallonne (Walloon Region)

Région bruxelloise/Brussels Gewest (Brussels Region)

Communauté française (French Community)

Vlaamse Gemeenschap (Flemish Community)

Deutschsprachige Gemeinschaft (German-speaking Community)

La Caisse d.amortissement de la dette sociale (CADES) (Social Debt

Redemption Fund)

L.Agence française de développement (AFD) (French Development

Agency)

Réseau Ferré de France (RFF) (French Rail Network)

Caisse Nationale des Autoroutes (CNA) (National Motorways Fund)

Assistance publique Hôpitaux de Paris (APHP) (Paris Hospitals

Public Assistance)

Charbonnages de France (CDF) (French Coal Board)

Entreprise minière et chimique (EMC) (Mining and Chemicals

Company)

National Telecommunications Organisation

National Railways Organisation

Public Electricity Company

Regions

Provinces

Municipalities

EUROPEAN UNION DIRECTIVES

Cassa Depositi e Prestiti (Deposits and Loans Fund)

Pašvaldibas (Local governments)

gminy (communes)

powiaty (districts)

województwa (provinces)

zwiazki gmin (associations of communes)

powiatów (association of districts)

województw (association of provinces)

miasto stoleczne Warszawa (capital city of Warsaw)

Agencja Restrukturyzacji i Modernizacji Rolnictwa (Agency for

Restructuring and Modernisation of Agriculture)

Agencja Nieruchomosci Rolnych (Agricultural Property Agency)

Região Autónoma de Madeira (Autonomous Region of Madeira)

Região Autónoma dos Açores (Autonomous Region of Azores)

Municipalities

mestá a obce (municipalities)

Železnice Slovenskej republiky (Slovak Railway Company)

Štátny fond cestného hospodárstva (State Road Management Fund)

Slovenské elektrárne (Slovak Power Plants)

Vodohospodárska výstavba (Water Economy Building Company)

Xunta de Galicia (Regional Executive of Galacia)

Junta de Andalucía (Regional Executive of Andalusia)

Junta de Extremadura (Regional Executive of Extremadura)

Junta de Castilla-La Mancha (Regional Executive of Castilla-La

Mancha)

Junta de Castilla-León (Regional Executive of Castilla-León)

Gobierno Foral de Navarra (Regional Government of Navarre)

Govern de les Illes Balears (Government of the Balearic Islands)

Generalitat de Catalunya (Autonomous Government of Catalonia)

Generalitat de Valencia (Autonomous Government of Valencia)

Diputación General de Aragón (Regional Council of Aragon)

Gobierno de las Islas Canarias (Government of the Canary Islands)

Gobierno de Murcia (Government of Murcia)

Gobierno de Madrid (Government of Madrid)

Gobierno de la Comunidad Autónoma del País Vasco/Euzkadi

(Government of the Autonomous Community of the Basque Country)

Diputación Foral de Guipúzcoa (Regional Council of Guipúzcoa)

Diputación Foral de Vizcaya/Bizkaia (Regional Council of Vizcaya)

Diputación Foral de Alava (Regional Council of Alava)

Ayuntamiento de Madrid (City Council of Madrid)

Ayuntamiento de Barcelona (City Council of Barcelona)

Cabildo Insular de Gran Canaria (Island Council of Gran Canaria)

Cabildo Insular de Tenerife (Island Council of Tenerife)

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Instituto de Crédito Oficial (Public Credit Institution)

Instituto Catalán de Finanzas (Finance Institution of Catalonia)

Instituto Valenciano de Finanzas (Finance Institution of Valencia)

International European Bank for Reconstruction and Development

European Investment Bank

Asian Development Bank

African Development Bank

World Bank/IBRD/IMF

International Finance Corporation

Inter-American Development Bank

Council of Europe Social Development Fund

Euratom

European Community

Corporación Andina de Fomento (CAF) (Andean Development

Corporation)

Eurofima

European Coal and Steel Community

Nordic Investment Bank

Caribbean Development Bank

Appendix 3 - Pro Forma Letter of Notification of New Permanent Address

NOTIFICATION OF NEW PERMANENT ADDRESS FOR THE PURPOSES OF

THE EU SAVINGS DIRECTIVE

FROM: (Surname) ...........................................................................................

(Name)

(Nationality) ..........................................................................................

(Passport/Legally Valid Identification Document No.) ...........................

I/We hereby inform you that with effect from ........................................................

my/our permanent address has changed as follows

Previous Address: ...............................................................................................

New Address

EUROPEAN UNION DIRECTIVES

I/We hereby acknowledge that this is a notification of a change in residence for

the purposes of the EU Savings Directive and that, as a consequence of this change,

interest payments effected to me/us or secured for me/us by yourselves in respect of

the account(s) specified below will be reportable by you to the Maltese Tax

Authorities in terms of the European Union Savings Directive which Malta has

adopted and the relevant Regulations and Guidelines in relation thereto.

I/We confirm that the accounts listed below are all the accounts relevant for the

purposes of the EU Savings Directive held with you

To be filled in by Paying

Agent

ACCOUNT NUMBER

ACCOUNT TYPE

CATEGORY OF

INCOME

CUSTOMER SIGNATURE(S)

TAX IDENTIFICATION NUMBER

To be filled in by Paying Agent

The undersigned declares that the above information is to the best of his/her

knowledge correct and complete.

Signature

.......................................... Rubber Stamp

Name

Designation

Date

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