TAX CREDIT (ELECTRONIC COMMERCE) RULES (electroniccommerce)

SUBSIDIARY LEGISLATION 123.85

TAX CREDIT (ELECTRONIC COMMERCE) RULES

1st January, 2005

LEGAL NOTICE 333 of 2005, as amended by Legal Notice 55 of 2008.

(1) The title of these rules is the Tax Credit (Electronic

Commerce) Rules.

(2) These rules shall apply in respect of qualifying expenditure

incurred on or after the 1st January, 2005. *

(3) The equivalent of the benefits under the scheme shall be an

amount specifically appropriated in Government’s financial

estimates for a particular financial year.

In these rules, unless the context otherwise requires -

"the Act" means the Income Tax Act;

"allowable expenditure" has the meaning assigned to it in rule 9;

"approved project" means a project approved in accordance with

rule 5, as subject to any conditions that may be applicable in terms

of rule 5(2);

"the Corporation" means the Malta Enterprise Corporation;

"eligible user" means a small or medium-sized enterprise which

carries on a trade, business, profession or vocation and which

incurs or intends to incur a qualifying expenditure for or in

connection with a qualifying project;

"maximum qualifying expenditure" has the meaning assigned to

it in rule 6;

"project period" means the period commencing on the earliest

date of commencement and ending on the latest date of completion

of the project in question as determined in terms of rule 7(1)(d);

"qualifying expenditure" means expenditure incurred in the

carrying out of an approved project for the acquisition of tangible

and intangible assets consisting of computer hardware or software

or website development services for or in connection with the

development of e-commerce systems that enable the sale of

tangible goods or services through business transactions processed

over a publicly accessible electronic networks;

"qualifying project" means a project carried out or to be carried

out by an eligible user for the creation, development or acquisition

of an e-commerce system that enables the sale of tangible goods or

services over publicly accessible electronic networks.

*Note, however, that amendments introduced by Legal Notice 55 of 2008 apply with

effect from year of assessment 2009 in respect of qualifying expenditure incurred on

or after the 1st January, 2008. - Vide Legal Notice 55 of 2008

TAX CREDIT (ELECTRONIC COMMERCE)

(1) Subject to the other provisions of these rules, when an

eligible user incurs allowable expenditure in the carrying out of an

approved project, it becomes entitled to claim a tax credit in

accordance with these rules.

(2) The said tax credit shall be in addition to and without

prejudice to the right of that eligible user to a deduction, if any, that

may be allowable in respect of the said expenditure in accordance

with the provisions of article 14 of the Act.

(1) When an eligible user incurs or intends to incur

qualifying expenditure in carrying out a qualifying project it may

apply to the Corporation for the approval of that project.

(2) An application under this rule shall be made on such form

as may be acceptable to the Corporation and shall

(a) provide such particulars of the applicant as are

necessary to determine whether it qualifies or not as a

small and medium sized enterprise;

(b) indicate the line of economic activity to which the

project is linked and in respect of which an eligible

user proposes to claim a tax credit under these rules;

(c) describe the project, its purpose and the expected date

of its commencement and its duration;

(d) contain a description of each item of qualifying

expenditure that the applicant has incurred or intends

to incur in the carrying out of the project, which items

shall be grouped according to the categories of

expenditure listed in the definition of qualifying

expenditure;

(e) grant the authorisation referred to in sub-rule (3);

(f)

contain such other information, breakdowns and

details, and be accompanied by such documents and

certifications as the Corporation may require;

(g) be made by not later than three months prior to the

eligible user’s tax return date for the year of

assessment that immediately follows the first year in

which the eligible user incurs the expenditure to which

the application refers.

(3)

The authorisation referred to in sub-rule (2)(e) shall -

(a) grant to the Corporation and its officers access to any

premises or works as the Corporation may consider

necessary in order to ascertain any matter relevant to

the approval of an application and the right to a tax

credit under these rules;

(b) authorise the Corporation to disclose to the

Commissioner any information and to pass on to the

Commissioner originals or copies of any documents

and records that the Corporation may have obtained in

connection with the application.

(1) When the Corporation is satisfied that a project to

which an application made under rule 4 refers is a bona fide

qualifying project and that the application complies with the

requirements of these rules, it may approve the project and proceed

to make a determination and issue a letter of approval as provided

in rules 6 and 7

Provided that -

(a) the Corporation shall not approve any project after the

31st December, 2008 or after such earlier date as the

Corporation may specify by means of a notice in the

Gazette;

(b) the Corporation shall not approve a project whose

expected duration is more than thirty-six months.

(2) The Corporation may make the approval of a project subject

to such conditions as it may consider appropriate.

When the Corporation approves a project it shall determine

the extent to which, in its opinion, the expenditure referred to in the

application constitutes qualifying expenditure and is necessary and

reasonable in the light of the purpose for which it is intended to be

incurred, and the amount so determined shall constitute the

maximum qualifying expenditure.

(1) In respect of every approved project the Corporation

shall issue a letter of approval showing

(a) particulars of the applicant;

(b) a description of the project, with such conditions as the

Corporation may have considered appropriate pursuant

to rule 5(2);

(c) the maximum qualifying expenditure for each item of

expenditure, indicating the category under the

definition of "qualifying expenditure" in rule 2 to

which each such item belongs;

(d) the maximum aid to which the applicant is entitled;

(e) the earliest date by which the project must commence

and the latest date by which it must be completed;

(f)

the shortest period for which the investment must be

retained in terms of rule 9(2);

(g) the line of economic activity in respect of which the

project was approved;

(h) such other particulars as the Corporation may consider

appropriate.

(2) The Corporation shall deliver the letter of approval to the

applicant and a copy thereof to the Commissioner.

(3) The Corporation shall issue the said letter of approval by

not later than the eligible user’s relative tax return date.

(1) Upon the completion of the approved project and not

later than sixty days therefrom, the eligible user shall deliver to the

Corporation a certificate drawn up by a person who is recognised

by the Corporation as competent for this purpose, showing

(a) the date of completion of the project;

(b) the amount of allowable expenditure, indicating the

applicable description under the definition of

"allowable expenditure" in rule 2 to which each item

belongs;

(c) whether, where applicable, the conditions that may

have been made applicable to the project in terms of

rule 5(2) have been observed.

(2) The eligible user shall, within the time limit set out in sub-

rule (1), deliver a copy of the certificate and, where applicable, of

the accompanying statement, to the Commissioner.

(3) The Commissioner may, after receiving a copy of the

certificate, request an independent opinion from the Corporation or

any other competent technical person regarding the contents

thereof.

(1) Expenditure shall constitute allowable expenditure if

and to the extent that it meets all the following conditions

(a) it is qualifying expenditure actually incurred by an

eligible user in carrying out an approved project and is

not reimbursed to or otherwise recoverable by it;

(b) it is an item of expenditure to which a letter of

approval issued under rule 7 refers, which does not

exceed the maximum qualifying expenditure for that

item, and in respect of which any conditions that may

have been made applicable in terms of rule 5(2) have

been satisfied;

(c) it was incurred during the project period and for the

purpose for which the project was approved;

(d) it is correctly, clearly and separately recorded in the

records of the eligible user and supported by

documentary evidence.

(2) The investment represented by allowable expenditure shall

be retained by the eligible user for at least three years after the

termination of the project period.

(3) If an investment or part thereof is not retained by the

eligible user for the period referred to in sub-rule (2), the amount of

expenditure corresponding to that investment or part thereof, as the

case may be, that is not so retained shall be deemed to have never

constituted allowable expenditure and the provisions of rule 11

shall apply.

(1) The tax credit due for a year of assessment under these

rules shall be equivalent to 100% of the value of the eligible

expenditure up to a maximum of twelve thousand euro (€12,000)

for every eligible project.

(2) Notwithstanding the provisions of sub-rule (1), the total aid

due to an eligible user in respect of an approved project shall not

exceed in the aggregate two hundred thousand euro (€200,000)

over a rolling three fiscal year period in terms of Commission

Regulation (EC) No. 1998/2006 on the application of Articles 87

and 88 of the EC Treaty to de minimis aid

Provided that where the eligible user in question has

benefited from any state aid in respect of expenditure incurred in

the carrying out of the project, other than as provided for in these

rules, the said threshold of two hundred thousand euro (€200,000)

shall be reduced by the value of that other benefit

Provided further that the correct calculation of the said

reduction, where applicable, shall be the sole responsibility of the

eligible user.

(3) The tax credit shall be availed of by way of a deduction

from the tax chargeable on gains or profits derived solely from the

activities for which the investment to which the approved project

refers is made, and shall not be allowable as a credit against tax

chargeable on gains or profits from any other source; and any

amount of tax credit due for a year of assessment that is not so

absorbed in that year may be carried forward and deducted from the

tax chargeable in subsequent years on income from the said

activities

Provided that any part of the tax credit that is not availed of

up to the year of assessment 2013 shall not be carried forward and

the right to a tax credit in respect thereof will lapse.

(4) Where, for a year of assessment, an eligible user qualifies

for a tax credit under the Business Promotion Act and also under

the provisions of these rules, it shall avail itself of the tax credit

under the Business Promotion Act before any set-off is made in

respect of the tax credit due under these rules.

(5) A tax credit due in accordance with these rules shall not

give rise to a right for any refund.

(1) In the circumstances mentioned in rule 9(3) the tax

credit in question shall be reversed or re-calculated, as the case

may be.

(2) The reversal or re-calculation of a tax credit shall give rise

to an obligation of the eligible user to pay an amount of tax, in

addition to any other tax liability, equivalent to the reduction in the

tax credit resulting from the reversal or recalculation, and such

amount shall be deemed to be tax chargeable under the Act for the

year of assessment in which the cause for the reversal or

recalculation subsists, and shall be reported and paid by the eligible

user in question accordingly.

An eligible user to whom a letter of approval has been

issued in terms of rule 7 shall submit to the Corporation, by not

later than two months after the relative tax return date, a copy of

the tax return for the earliest year of assessment for which the

relative tax credit may first be claimed in terms of the said approval

and for each subsequent year of assessment for which the said tax

credit remains available to it under these rules, irrespective of

whether the benefit is utilised or not.

(1) When the Corporation issues a letter of approval to an

eligible user in terms of rule 7, it may, from time to time, make

such reviews of books and documents, hold on-site inspections on

premises of that eligible user and make such other monitoring as it

may consider necessary for the purposes of these rules and for any

matter relevant to an approved application.

(2) The Corporation shall also keep a database of all assistance

provided to, or claimed by, an eligible user under these rules for ten

years from the date on which the last individual assistance was

granted, in order to enable it to -

(a) verify whether the provisions of these rules have been

complied with;

(b) provide the State Aid Monitoring Board with such

information as it may require; and

(c) inform the Commissioner whether the credits claimed

in terms of these rules have been properly calculated.

Notwithstanding the other provisions of these rules, the

Commissioner may make such enquiries and verification as he

deems fit in accordance with the provisions of the Income Tax Act,

and shall, after consulting the Corporation, have the right not to

allow any tax credit if any default is committed by the applicant in

respect of any provision of the Income Tax Act or the Social

Security Act or any subsidiary legislation issued thereunder.

No tax credit shall be due to an eligible user under these

rules for a year of assessment unless it is claimed in the appropriate

section of a tax return submitted by electronic means by not later

than the relative tax return date.

The following further conditions must also be fulfilled for

eligibility to the benefit under these regulations

(a) no other benefits are being claimed or may

subsequently be claimed by a person on the same

activity or project under any other legislation granting

fiscal incentive schemes;

(b) all tax liabilities including amounts due in respect of

FSS tax as well as social security contributions due up

to the time of the application, except for any tax still in

dispute, must have been settled or is being settled in

accordance with a formal agreement drawn up with the

Commissioner.

Insofar as these rules provide for and regulate benefits for

small and medium sized enterprises, they are prescribed and shall

be applied in accordance with Commission Regulation (EC) No.

1998/2006 on the application of Articles 87 and 88 of the EC

Treaty to de minimis aid, as subsequently amended.