FINAL SETTLEMENT SYSTEM (FSS) RULES (fss)

FINAL SETTLEMENT SYSTEM (FSS)

SUBSIDIARY LEGISLATION 372.14

FINAL SETTLEMENT SYSTEM (FSS) RULES

1st January, 1998

LEGAL NOTICE 88 of 1998, as amended by Legal Notices 128 of 1999, 39 of 2000, 297 of

2001, 344 and 425 of 2007, 323 and 426 of 2012, 260 of 2014, 148 of 2018, 246 of 2020 and

66 of 2022.

ARRAGEMENT OF RULES

Rules

General

1 - 2

Payee Status Declaration

Payer’s Registration

4 - 5

Deduction of Tax by Payers

6 - 14

Remittance to the Commissioner of deductions made by payers

15 - 17

Records to be kept and information to be forwarded by payers

18 - 23

Imposition of FSS Additional Tax and Contestation Procedure

Collection, Set-Off and Refunds

25 - 27

Miscellaneous

28 - 37

Schedule A: FS4 Payee Status Declaration

Schedule B: FSS Main Declaration Method

Schedule C: FSS Additional Tax

The title of these rules is the Final Settlement System

(FSS) Rules.

Substituted by

L.N. 297 of 2001;

(Rule 3)

L.N. 344 of 2007;

L.N. 323 of 2012;

L.N. 260 of 2014;

L.N. 66 of 2022.

FINAL SETTLEMENT SYSTEM (FSS)

In these rules, unless the context otherwise requires -

"Act" means the Income Tax Management Act;

"emoluments" means

(i)

any income, including any fringe benefits,

chargeable to tax under article 4(1)(b) of the

Income Tax Act and any income exempt under

article 12 of the said Act which would have been

chargeable under the said article 4(1)(b) but for

the said exemption; and

(ii) any pension arising or received in Malta

chargeable to tax under article 4(1)(d) of the said

Act; and

(iii) any other remuneration payable or fringe

benefits that are provided to an individual for

services rendered by him except where such

individual receives such payment in the course

of his trade, business, profession or vocation or

is otherwise required to be registered for the

purposes of the Value Added Tax Act, in respect

of such services, or where he renders such

services to any individual for domestic and

private purposes;

"fringe benefits" means any benefits provided or deemed to be

provided by reason of an employment or office in terms of the

p r o v i s i o n s o f a r t i c l e 4 ( 1 ) ( b ) o f t h e I n c o m e Ta x A c t o r o f

regulations prescribed under that paragraph;

"paid" means paid directly or indirectly in cash or in kind, and

includes the provision of a fringe benefit, and the terms "payable"

and "payment" shall be construed accordingly;

"paid in cash" includes paid by cheque or draft, credited or

deposited in a bank or other account elsewhere for the benefit, use

or advantage of the payee and any set off against any liability of the

payee, and the terms "payable in cash" and "payment in cash" shall

be construed accordingly;

"payee" means any person to whom emoluments are paid;

"payer" means any person by whom emoluments are paid or

deemed to be paid in terms of the provisions of article 4(1)(b) of

the Income Tax Act or of regulations prescribed under that

paragraph, or who pays, or is liable to pay emoluments whether on

his own account or on behalf of another person and includes

government departments, persons in the public service of Malta,

public corporations and their officials, and other bodies of persons

and their officials;

"qualifying overtime income" shall have the meaning as assigned to

it in the Tax on Overtime Rules;

"rate of tax" includes a nil rate;

"value of fringe benefits" means the value of fringe benefits

determined in accordance with regulations prescribed for the

purposes of article 4(1)(b) of the Income Tax Act.

Payee Status Declaration

Amended by

L.N. 297 of 2001;

(Rule 6)

L.N. 323 of 2012.

FSS MAIN TAX DEDUCTION METHOD

PART I

FSS MAIN CUMULATIVE TAX DEDUCTION FORMULA

(RULE 7(2)(a))

(The FSS Main Cumulative Tax Deduction Formula must be applied by all payers

having ten or more full-time payees on their payroll.)

The appropriate tax deduction to be made under the FSS Main Cumulative Tax

Deduction Formula from em oluments paid to a payee at any pay period is

determined by computing, in respect of each payment, the following four steps

STEP 1- Projected Annual Emoluments (A)

The amount of Total 'Main' Emoluments for the calendar year up to and including

the Current Pay Period (E) is divided by the Current Pay Period Number (C) and

multiplied by the Number of Pay Periods in the Year (N).

A = (E/C) N

Projected

Total 'Main' Emoluments up to

Annual

and including Current Pay Period

Number of Pay

Emoluments =

Periods in the

multiplied by

Current Pay Period Number

Year

STEP 2 - Projected Annual Tax Due (P)

The amount of the Projected Annual Tax Due (P) by the payee is computed on the

basis of the Projected Annual Emoluments arrived at in Step 1. The tax rates set out

in article 56(1)(a) or (b) of the Income Tax Act are applied according to the tax

status of the payee indicated in the Payee Status Declaration Form.

STEP 3 - Total Tax Due up to and including the Current Pay Period (D)

The amount of projected Annual Tax Due (P) calculated in Step 2 is divided by the

Number of Pay Periods in the Year (N) and multiplied by the Current Pay Period

Number (C).

D = (P/N) C

Total Tax Due

up to and

P r o j e c t e d A n n u a l Ta x

= Due

Current Pay Period Number

multiplied by

including the

Number of Pay

Current Pay

Periods in the Year

Period

STEP 4 - Tax Liability deductible for the Current Pay Period (L)

The amount of Total Tax Due up to and including the Current Pay Period (D)

calculated in Step 3 is reduced by the amount of Total Tax Deducted up to the end of

the previous Pay Period (X).

FINAL SETTLEMENT SYSTEM (FSS)

Note: If the amount of Tax Liability deductible for the Current Pay Period (L) in

the above calculation results in a negative figure no tax deduction should be made

for this period. In any other case, the amount of tax deduction shall not exceed fifty

per cent of that part of the emoluments for the period that are payable in cash.

PART II

FSS MAIN TAX DEDUCTION TABLES

(Rule 7 (2)(b))

(The FSS Main Tax Deduction Tables may be applied only by payers having LESS

than ten full-time payees on their payroll and provided such payers do not

concurrently apply the FSS Main Cumulative Tax Deduction Formula in respect of

any pay period during the year.)

Tax deduction under the FSS Main Tax Deduction Tables works out as follows

1. Periodical Calculation

The amount of tax to be deducted from 'Main' emoluments payable to a payee for

each pay period is arrived at by applying the appropriate tax table in the Main Tax

Deduction Tables.

The payer should match the amount of 'Main' emoluments payable for the pay

period with the corresponding tax deduction amount indicated in the relevant Tax

Deduction Table after having taken into account

(i)

the Tax Status of the payee as indicated in the Payee Status Declaration

form (FS4); and

(ii) the duration of the pay period

(i.e

"Weekly",

"Fortnightly",

"Four-weekly" or "Monthly").

2. Year-End Adjustment

In addition to the periodical calculation set out under item 1 above, a Year-End

adjustment is normally required to be made in the final pay period of the year. This

ad justment can b e performed o nly where the comp lete informatio n for its

computation is available to the payer. This data is usually obtained from the payer's

own records relating to the payee but, where the payee has received "Main"

emoluments from previous payers during the same year, such information will be

complete only if the payee produces the relative Statements of Earnings (FS3’s).

The Year-End Adjustment (i.e. the amount of Tax Liability deductible for the

Current Pay Period (L)) is determined by computing the following two steps

STEP 1- Projected Annual Tax Due (P)

The amount of Projected Annual Tax Due (P) by the payee is computed on the

basis of the Total 'Main' Emoluments for the calendar year up to and including the

Current Pay Period (E). The tax rates set out in article 56(1)(a) or (b) of the Income

Tax Act are applied according to the tax status of the payee indicated in the Payee

Status Declaration Form.

STEP 2 - Tax Liability deductible for the Current Pay Period (L)

The amount of Projected Annual Tax Due (P) computed under Step 1 is reduced by

the amount of Total Tax Deducted up to the end of the Previous Pay Period (X).

FINAL SETTLEMENT SYSTEM (FSS)

Note: If the amount of Tax Liability deductible for the Current Pay Period (L) in

the above calculation (i.e. the tax deduction for the last pay period) results in a

negative figure no tax deduction should be made for the last pay period of the year.

In any other case, the amount of tax deduction shall not exceed fifty per cent of that

part of the emoluments for the period that are payable in cash.

FSS MAIN TAX DEDUCTION TABLES

The FSS Main Deduction Tables applicable in accordance with this Part of this

Schedule shall be such tables as the Commissioner may, for the purpose of these

r u l e s , d e c l a r e t o b e a p p l i c a b l e t o t h e r e s p e c t i v e y e a r o f a s s e ss m e n t i n a

communication to the payer or a circular to payers or an official publication or the

official website of the Maltese Government.

(1) A payee in receipt of emoluments, being emoluments

as defined under rule 2(i) and (iii), shall be required to complete

Section 1 of a Payee Status Declaration on the prescribed form set

out in Schedule A and forward the said form in triplicate to the

payer by the 1st January, 1998, and thereafter within seven days

from the commencement of a new source giving rise to such

emoluments or upon any change in the information required to be

given in Part B, C or D of Section 1 thereof.

(2) Failure on the part of the payee to comply with the

provisions of sub-rule (1) shall render any emoluments due to be

paid to him subject to tax deduction at a rate equal to the maximum

rate of tax provided under article 56(1) of the Income Tax Act.

Such rate of deduction shall remain applicable for the period during

which the default continues.

(3) A payer to whom a Payee Status Declaration form has been

forwarded as aforesaid by the payee shall be required to complete

Section 2 of such form. The payer shall submit to the

Commissioner the original copy of such form by the last working

day of the month following that during which the said form was

forwarded to him, retain the payer’s copy for the purposes of any

inspection which may be carried out from time to time in terms of

rule 31, and forward the remaining copy to the payee.

(4) Where the form referred to in this rule has not been

forwarded by the payee, the payer shall nevertheless complete to

the best of his knowledge Section 2 and Part A of Section 1 of the

said form and submit it to the Commissioner for the purposes of

sub-rule (3).

(5) Where the payer submits to the Commissioner the form

referred to in this rule in accordance with sub-rule (4), the

provisions of sub-rule (2) shall still apply.

(6) A payer who, without reasonable excuse, provides

incomplete or incorrect information on the form required to be

submitted under sub-rules (3) or (4), or who fails to submit such

form to the Commissioner shall, in addition to the corresponding

additional tax prescribed in Schedule C, be liable to the payment of

any underdeduction of tax, consequent to such default made in

respect of emoluments paid by him to any payee unless such

amount of tax is otherwise recovered by the Commissioner by the

31st December of the year in respect of which the deduction should

have been made.

(7) Where the form required to be submitted under paragraph

(3) hereof is, for any reason, not considered acceptable by the

Commissioner due to any default on the part of the payee, it shall

be returned to the payer for correction, and unless the payee effects

the necessary corrections in time for the payer to resubmit the form

w it h in f o ur te e n d a ys , t he p a ye r s h a ll ded uc t ta x, f ro m a ny

emoluments subsequently due to be paid to the payee, at a rate

equal to the maximum rate of tax provided under article 56(1) of

the Income Tax Act and such rate of tax deduction shall remain

applicable until the Commissioner otherwise directs.

(8) Where, due to the operation of sub-rules (2) and (7), any tax

has been deducted from emoluments payable to the payee, it shall

be set off against the tax charged on the payee or refunded to him,

as the case may be, in accordance with article 23(2) of the Act.

Payer’s Registration

Amended by

L.N. 297 of 2001.

(Rule 24)

Substituted by

L.N. 425 of 2007.

Amended by

L.N. 323 of 2012;

L.N. 148 of 2018.

FSS ADDITIONAL TAX

DEFAULT

IMPOSITION

FSS RULE

FSS ADDITIONAL TAX

REFERENCE

(Subject to a maximum of €1000

for each default as per article 23 of

the Act)

1. PAYEE STATUS DECLARATION

FORM

T h e p a y e r f a i l s t o s u b m i t t o t h e €2 for every form not submitted as Rule 3

Commissioner the prescribed Payee required

Status Declaration form, relating to OR

each of his payees, in the manner and the amount of €23, whenever the

within such period provided under number of such defaults in any one

rule 3(3) and (4) of these rules.

month does not exceed ten.

2. PAYER REGISTRATION

The payer fails to register as an FSS €115 for default in registering or R u l e 4 a n d

payer as provided under rule 4 and, re-registering as a payer, as the Rule 5(6)

where applicable, to re-register in case may be.

accordance with rule 5(6) of these

rules.

3. MONTHLY PAYMENT ADVICE

T h e p a y e r f a i l s t o f o r w a r d t o t h e €15

Rule 15(2)

Commissioner a monthly payment

and Rule 20

advice (including a nil advice) as

required and within the time prescribed

by rule 15 and in the manner provided

under rule 20.

4. PAYER’S ANNUAL

RECONCILIATION STATEMENT

T h e p a y e r f a i l s t o s u b m i t t o t h e €200

Rule 22

C o m m i s s i o n e r a P a y e r ’s A n n u a l

Reconciliation Statement together

with the original of all Payee

Statements of Earnings as required

under rule 22.

(1) Every person shall, as from the 1st day of January,

1998, register as a payer with the Commissioner within fifteen days

from the date the first emoluments due to be paid by him to a payee

start to accrue, unless such person was registered for the purposes

of the Deduction of Tax (P.A.Y.E.) Rules, prior to the said date and

such registration has not since been cancelled.

(2) A request for registration as a payer shall be made by the

i n di vi d ual carryi n g on a t rad in g , b usi n ess, pro fe ssi on al o r

vocational activity or, in the case of a body of persons, by the

manager or other principal officer, and such registration shall be

effected by completing the appropriate form supplied by the

Commissioner to whom it shall be forwarded together with any

required supporting documentation.

(3) Every person shall, following registration as a payer in

accordance with this rule, report to the Commissioner on the

appropriate form any substantial change affecting the information

previously submitted by him upon registration, and failure to report

such change shall constitute a default against the provisions of sub-

rule (1).

(4) Without prejudice to the obligations imposed on the payer

under the other provisions of these rules, the provisions of sub-

rules (1), (2) and (3) shall likewise apply to a person who has

acquired a going concern which engages individuals to whom

emoluments are payable.

(1) A payer shall, upon ceasing to carry out his functions

as a payer, request the Commissioner to cancel his registration as a

payer.

(2) A request for cancellation in accordance with sub-rule (1)

shall be made by an individual carrying on a trading, business,

professional or vocational activity or, in the case of a body of

persons, by the manager, other principal officer or liquidator, and

such cancellation shall be effected by completing the appropriate

form supplied by the Commissioner wherein the obligations of the

payer requesting cancellation under this rule are clearly set out.

(3)

Prior to any cancellation as a payer, the person making the

request under this rule shall, unless the Commissioner otherwise

directs, be required

(a) to furnish a statement of earnings to all his payees in

accordance with rule 21;

(b) to remit to the Commissioner all outstanding tax

deductions and to forward the relative monthly

payment advice as required under rule 15;

(c) to submit to the Commissioner his annual

reconciliation statement in accordance with rule 22

together with a copy of each statement of earnings

required to be furnished under paragraph (a); and

(d) to provide any other details or information which the

Commissioner may require.

(4) Where a person ceases to carry out his functions as a payer

for a temporary period only, he shall notify the Commissioner

accordingly on the form referred to in sub-rule (2) and unless

otherwise directed by the Commissioner, he shall nonetheless

comply with the provisions of sub-rule (3).

(5) Subject to the other provisions of this rule the

Commissioner may at any time cancel the registration as a payer of

the person making the request and notify him accordingly.

(6) A person who, following his cancellation as a payer in

accordance with the provisions of this rule, recommences paying

emoluments shall be required to request a new registration as a

payer in terms of rule 4.

Deduction of Tax by Payers

(1) Save as provided under rule 3(2) or as otherwise

directed by the Commissioner under sub-rule (2), every payer shall

deduct tax from each payment of emoluments made to a payee, to

the extent that it consists of or includes a payment in cash by

applying, as the case may be, one of the following tax deduction

methods

(a) the FSS Main Tax Deduction Method, in the manner

provided under rule 7 and as set out in Schedule B;

(b) the FSS Part-Time Tax Deduction Method, in the

manner provided under rule 8;

(bb) the FSS Overtime Tax Deduction Method, in the manner

provided under rule 7A;

(c) the FSS Other Emoluments Tax Deduction Method, in

the manner provided under rule 9.

(2) Notwithstanding the provisions of sub-rule (1) regarding

the deduction of tax by payers, the Commissioner may, whenever

he thinks fit, determine a method of tax deduction or direct the

deduction of the amount which should be made or the rate at which

tax is to be deducted in such manner to cover the tax due by the

payee for the year and instruct the payer in writing to effect such

deduction accordingly.

(3) In computing the amount of tax to be deducted in

accordance with sub-rule (1) or as directed by the Commissioner

under sub-rule (2), the payer shall disregard any fraction of a euro

being equal to or less than fifty cents, and round up to one euro any

fraction of a euro exceeding fifty cents.

(1) Tax deduction under the FSS Main Tax Deduction

Method referred to under rule 6(1)(a) and computed in accordance

with Schedule B shall apply in respect of

(a) all local pensions receivable by the payee other than

those regulated by the provisions of sub-rule (3); and

(b) any income from emoluments as defined under rule

2(i) (excluding those payable in respect of part-time

work to which the provisions of article 90A of the

Income Tax Act and of the Part-time Work Rules

apply) indicated by the payee in his Payee Status

Declaration form as constituting the main source of his

emoluments

Provided that where the payee is in receipt of one or more

local pensions as aforesaid, no further emoluments arising to him

shall qualify for tax deduction under the FSS Main Tax Deduction

Method

Provided further that where the payee is not in receipt of

any such pension, he shall, at any one time, indicate only one

source of income from emoluments, as defined under rule 2(i), as

constituting the source to which the said method applies.

(2) Where any payment of emoluments made to a payee is to be

considered for deduction purposes under the FSS Main Tax

Deduction Method referred to in sub-rule (1), the payer shall

compute the amount of tax deduction therefrom by applying either -

(a) the Main Cumulative Tax Deduction Formula; or

(b) the Main Tax Deduction Tables,

in the manner set out in Part I and Part II of Schedule B,

respectively, and in accordance with sub-rule (3).

(3) Notwithstanding the other provisions of this rule, where the

Director of Social Security effects payment of a pension payable

under the Social Security Act to a payee, who is also the recipient

of one or more pensions from any other source, such Director shall,

subject to appropriate information being brought to his notice by

the Commissioner, take into account, for the purpose of tax

deduction, the aggregate amount of the pensions receivable by such

payee and compute the relative amount of the tax to be deducted in

the manner directed by the Commissioner.

(4) Unless the Commissioner otherwise directs, payers paying

emoluments which fall to be considered under the FSS Main Tax

Deduction Method shall, for the purposes of sub-rule (2), compute

the amount of tax deduction by applying the Main Cumulative Tax

Deduction Formula, so however that payers paying emoluments to

less than ten full-time payees may, at any time, on their own

account, opt to make use of the Main Tax Deduction Tables

Provided that no payer may concurrently apply both

methods of computation referred to in sub-rule (2).

(5)

For the purposes of this rule

"full-time payee" means any individual whose emoluments are

subject to tax deduction under the FSS Main Tax Deduction

Method.

(1)When a payer pays emoluments that represent qualifying

overtime income he shall deduct from them tax at the rate of

fifteen cents (€0.15) of every one euro (€1).

(2)

Saving the other provisions of this rule -

(a) qualifying overtime income from which tax has been

so deducted shall not form part of the payee’s

chargeable income and shall not be declared by that

individual in any return filed in accordance with

article 10 of the Act;

(b) the tax deducted in accordance with this rule shall be

final and shall not be available as a credit or set off

against the tax liability of any person or as a refund.

(3) A payee may, at any time, give instructions to the payer not

to apply the FSS Overtime Tax Deduction Method to his overtime

income and may, at any time, revoke such instructions. A notice for

the purpose of this sub-rule shall be given in writing on such form

as may be approved by the Commissioner.

(4) Instructions given to a payer in accordance with this rule

shall have effect as from the date when the notice giving such

instructions is delivered to the payer and shall cease to have effect

as from the date on which the notice of revocation is delivered to

the payer.

(5) Any income derived for overtime that a payee performs

while instructions given as aforesaid have effect shall not be treated

as qualifying overtime income and the provisions these rules shall

apply in respect of such income without reference to sub-rules (1)

and (2) and without reference to article 90B of the Income Tax Act

and to the Tax on Overtime Rules.

(6) A payee may, if he so elects, declare qualifying

employment income from which tax has been deducted in

accordance with sub-rule (1) in a return filed in accordance with

article 10 of the Act together with his other income for the year of

assessment in question, and in that case that income shall be treated

as part of the payee’s chargeable income and subject to tax at the

rates applicable to that payee in accordance with article 56 of the

Income Tax Act without reference to article 90B of that Act. Any

tax deducted from the qualifying overtime income in such a case

shall be available for set-off in accordance with rule 26.

(7) When an individual to whom article 12A of the Act applies

derives qualifying overtime income, and it results to the Commissioner

that an election mentioned in sub-rule (6) produces a benefit to that

individual, sub-rule (6) shall apply as if that individual has made that

election and declared that qualifying overtime income in a return filed

in accordance with article 10 of the Act.

(1) Tax deduction under the FSS Part-Time Tax Deduction

Method referred to under rule 6(1)(b) shall apply in respect of

emoluments payable to a payee in respect of part-time work which

qualifies under the provisions of article 90A of the Income Tax Act

a n d u n d e r t h e P a r t -t i m e Wo r k R u l e s , a n d s h a l l o p e r a t e i n

accordance with the provisions therein contained

Provided that where the payee has reason to believe that his

total income for the relevant year is not expected to exceed the sum

over which he would be liable to tax, he may, at any time, direct the

p a y e r, on t h e P a y e e St a t u s D e c l a r a t i o n f o r m , t o ha v e s u c h

emoluments paid to him without tax deduction as provided in

article 90A(3) of the said Act.

(2) Where the payee who has availed himself of the option

under the proviso to sub-rule (1), has reason to believe that his total

income has reached a sum as would render him liable to tax he

shall, in accordance with the provisions of article 90A(5) of the

Income Tax Act, either

(a) direct the payer, on the Payee Status Declaration form,

to make such deductions from his income deriving

from part-time work for the relevant year so as to

cover the relative tax due by the 31st December of that

year; or

(b) pay such tax due to the Commissioner by not later than

the 31st December of that year.

(3) Where, for the purposes of this rule, the payee fails to direct

the payer on the Payee Status Declaration form, the provisions of

rule 3(2) shall apply.

(1) Tax deduction under the FSS Other Emoluments Tax

Deduction Method referred to under rule 6(1)(c) shall apply in

respect of

(a) any remuneration referred to under rule 2(iii); and

(b) any emoluments considered by the payee as

constituting his other emolument income provided that

such method shall only be availed of where the tax

deduction provisions of rule 7 or of rule 8 do not

apply, or where the Commissioner has so directed in

accordance with rule 6(2).

(2) Save as provided under rule 3(2), emoluments to which the

FSS Other Emoluments Tax Deduction Method applies shall be

subject to tax deduction at a standard rate equivalent to twenty per

cent of the said emoluments

Provided that all payees may, at any time, direct their payer

on the prescribed form to deduct tax at a higher rate.

(3) Notwithstanding the provisions of sub-rule (2), pensioners

and students receiving full-time instruction at any university,

college or other educational establishment or serving an

apprenticeship with a view to qualifying in a trade or profession, in

receipt of emoluments to which the tax deduction method referred

to in this rule applies may, at any time, direct their payer as

aforesaid on the prescribed form not to deduct tax or to deduct tax

from such emoluments at a lower rate than the standard rate laid

down under the said sub-rule

Provided that payees, other than pensioners and students,

may direct their payer to deduct tax from such emoluments at a

lower rate than the said standard rate only after written approval

has been obtained from the Commissioner.

Further to the deductions which a payer shall be required to

make under the FSS Tax Deduction Methods referred to under rule

6(1), the Commissioner may, whenever he thinks fit, determine and

direct the deduction of an amount which should be made

periodically, for the duration of a stated period of time, from any

emoluments paid by a payer to cover any outstanding tax due by a

payee. Notice of this requirement shall be given by the

Commissioner in writing.

(1) Where deductions of tax fall to be made from any

emoluments payable to a payee in accordance with rules 7, 8 or 9,

the amount so deducted shall not, without the consent of the payee,

exceed fifty per cent of that part of the emoluments payable to him

that is payable in cash on any occasion unless article 71 of the

Income Tax Act is applicable or where article 46 of the Act has

been applied.

(2) Without prejudice to the provisions of sub-rule (1) where,

due to the operation of rule 10, the aggregate amount of tax

deductions which falls to be made exceeds fifty per cent of that part

of the gross emoluments payable to a payee that is payable in cash

for any period, the payer shall reduce the amount of the tax

otherwise deductible under rule 10 by an amount equivalent to such

excess.

The provisions contained in rule 6 shall likewise apply

(a) where emoluments, other than pensions, are paid to a

payee after the termination of the relative contract

under which such emoluments are due;

(b) in the event of any emoluments accruing to an

individual being payable at any time after his death to

his heirs or his legal representative, as if the deceased

individual were still alive and payment was being

made to him, notwithstanding any obligation laid upon

the payer under any other law.

(1) Where the payee has reason to believe that the

deductions made by the payer from his emoluments have not been

effected in accordance with these rules, he may in writing bring the

matter to the notice of the Commissioner who shall as soon as may

be, determine the question raised, inform the payee of his decision

and, where necessary, direct action to be taken accordingly

Provided that nothing in this rule contained shall impair the

payee’s rights under Parts V and VI of the Act following service of

the notice of assessment upon him in terms of article 33(1) of the

said Act.

(2) Any matter brought to the notice of the Commissioner in

accordance with sub-rule (1) shall not enable the payer to change

the rate of tax deduction or the amount of tax deductible, before he

is so directed in writing by the Commissioner.

(3) Questions regarding the applicability or otherwise of these

rules in respect of any class of income shall be determined by the

Commissioner.

(1) Where it appears to the Commissioner that the

provisions of these rules have been misapplied or abused by any

person he may, with immediate effect, direct the payer not to make

any further deductions until otherwise directed by him in writing.

(2) Any action taken by the Commissioner in accordance with

sub-rule (1) shall in no way prevent the Commissioner from

imposing any additional tax prescribed under these rules or from

commencing proceedings for any offence against the Income Tax

Acts.

Remittance to the Commissioner of deductions made by payers

(1) Every payer shall, by the last working day of the

month following that during which he has made payments of

emoluments, remit to the Commissioner the total amount of tax

deducted or which should have been deducted therefrom in

accordance with these rules.

(2) The remittance due to be made to the Commissioner under

sub-rule (1) shall be forwarded by the payer together with the

information required to be given on the form referred to in rule 20

which shall be completed and signed by the payer

Provided that, when so directed by the Commissioner, the

payer shall make the said remittance by means of an electronic

payment.

(3) If the remittance required by sub-rule (1) is not received by

the Commissioner by the due date, or if the amount received is less

than that which should have been remitted, the Commissioner shall

determine to the best of his judgement the total amount of the

deduction of tax which should have been remitted by the payer and

serve a default notice upon him in accordance with rule 24

requiring him to pay, in addition to any additional tax imposed

thereby, the amount or the difference, as the case may be, within

the time to be limited by such notice.

Where a payer fails to deduct tax in accordance with the

provisions of these rules from any emoluments and he subsequently

pays to the Commissioner the amount which should have been so

deducted, he may recover that amount, but only that amount, in a

manner approved by the Commissioner, from the payee from whose

emoluments it should have been deducted.

Where the payer has deducted tax at a rate or by an amount

higher than that applicable under these rules and in consequence

excess by tax has been deducted and also remitted to the

Commissioner, and such over-deduction and over-remittance

becomes known to the payer, he shall make immediately a payment

to the payee out of his own funds of an amount corresponding to

such excess

Provided that where the circumstances of the case warrant

an adjustment, and repayment to the payee has been made to the

satisfaction of the Commissioner, the payer shall, on the occasion

of the next remittance to the Commissioner, be entitled to set off

and recoup, from the total amount of tax to be remitted to the

Commissioner, an amount corresponding to that so repaid to the

payee or to claim a refund of the said amount from the

Commissioner.

Records to be kept and information to be forwarded by payers

(1) Every payer shall at all times maintain in respect of

each payee an up-to-date record, showing the following details and

indicating separately the monthly and cumulative totals, as

applicable, relating to emoluments to which any of the three tax

deduction methods referred to under rule 6(1) applies

(a) full name and address;

(b) legally valid identification document or income tax

registration number;

(c) date of payment;

(d) the gross amount paid, distinguishing between the

value of fringe benefits and other emoluments, and the

relative tax deduction made;

(e) the tax, if any, deducted in respect of the payee’s

outstanding tax liability, as directed by the

Commissioner under rule 10; and

(f)

other details or information which the Commissioner

may require.

(2) The record to be maintained in accordance with the

provisions of sub-rule (1) shall be retained and preserved as laid

down in article 23(12) of the Act.

On every occasion that a payer pays emoluments he shall

furnish the payee in receipt of such emoluments with a statement

showing separately

(a) the gross amount for each category of emoluments,

distinguishing between the value of fringe benefits and

other emoluments;

(b) the corresponding amount of tax, if any, deducted

therefrom in accordance with rule 6;

(c) the amount of tax deducted, if any, in respect of the

payee’s outstanding tax liability as directed by the

Commissioner under rule 10;

(d) any other details or information

which

the

Commissioner may require.

FINAL SETTLEMENT SYSTEM (FSS)

Every payer shall prepare and forward, on a form supplied

or approved by the Commissioner, a monthly payment advice

(including a nil advice) for the purposes of rule 15(2) which, apart

from the details relating to the payer’s identity and the name and

place of business, shall contain the following information

(a) the number of payees to whom emoluments have been

paid during the previous month showing separately the

number of payees receiving emoluments referred to

under paragraphs (b) and (c);

(b) the gross amount of emoluments paid to the payees in

respect of part-time employment qualifying under

article 90A of the Income Tax Act;

(bb) the gross amount of emoluments paid to the payees that

represents qualifying overtime income;

(c) the gross amount paid to the payees in respect of

emoluments arising from any other source,

distinguishing between the value of fringe benefits and

other emoluments and showing sub-totals for different

categories of fringe benefits;

(d) the total amount of tax, if any, deducted in respect of

the emoluments referred to under paragraph (b);

(dd) the total amount of tax deducted in respect of the income

referred to under paragraph (bb);

(e) the total amount of tax, if any, deducted in respect of

the emoluments referred to under paragraph (c); and

(f)

the total amount of tax, if any, deducted in respect of

the payees’ outstanding tax liability as directed by the

Commissioner under rule 10.

(1) Every payer shall, in respect of each year, prepare and

forward, for the purposes of and in the manner set out in sub-rule

(2) and on a form supplied or approved by the Commissioner, a

complete and correct Payee Statement of Earnings in quadruplicate

which shall be utilized as follows

(a) the original statement referring to each payee shall be

forwarded to the Commissioner together with the

Payer’s Annual Reconciliation Statement required to

be submitted in accordance with rule 22;

(b) the duplicate and triplicate copies relating to the year

1998 shall be given to the payee by the 31st January of

the following year (one copy to be retained by the

payee and the other copy to be forwarded by the said

payee to the Commissioner together with the return

required to be filed under the provisions of article 10

or 11 of the Act) and similarly for each subsequent

year

Provided that where the contract under which the

emoluments are paid is terminated prior to the 31st day

of December of any year, such copies shall, subject to

the provisions of rule 28, be furnished to the payee or,

in the event of his decease, to his heirs or legal

representative, within seven days from the date of the

said termination;

(c) the quadruplicate copy shall be retained by the payer

for his own records.

(2) The statement of earnings referred to in sub-rule (1) shall

contain the personal particulars concerning the payee's identity and

other information required for income tax purposes and shall show,

as applicable, separate amounts in respect of

(a) the gross amount of the emoluments paid to the payee

in respect of part-time employment qualifying under

article 90A of the Income Tax Act;

(aa) the gross amount of emoluments paid to the payee that

represents qualifying overtime income and the total

number of hours of overtime in respect of which that

income was paid;

(b) the gross amount paid to the payee in respect of

emoluments arising from any other source;

(c) the tax, if any, deducted in respect of the emoluments

referred to under paragraph (a);

(cc) the tax deducted in respect of the income referred to

under paragraph (aa);

(d) the tax, if any, deducted in respect of the emoluments

referred to under paragraph (b); and

(e) the tax, if any, deducted in respect of the payee's

outstanding tax liability, as directed by the

Commissioner under rule 10.

(3) Where a payee has not been provided by his payer with a

Payee Statement of Earnings in accordance with sub-rules (1) and

(2), he may bring the matter to the notice of the Commissioner who

may take remedial action accordingly: however, such omission on

the part of the payer shall not release the payee from his obligation

to forward the return required to be filed under the provisions of

article 10 or 11 of the Act.

(1) Every payer shall, by the 15th February of every year,

submit to the Commissioner a complete and correct Payer’s Annual

Reconciliation Statement relating respectively to the preceding

year, together with the Payee Statement of Earnings required to be

forwarded in respect of each payee in accordance with rule

21(1)(a)

Provided that where a person ceases to carry out his

function as a payer he shall, subject to the provisions of rule 28,

submit such statement by the last working day of the month

f ol l o w i ng t h a t d ur i n g w h i c h h e h a s l a s t m a d e p a y m e nt s o f

emoluments.

(2) Such annual reconciliation statement shall be submitted on

a form supplied or approved by the Commissioner and, apart from

the details relating to the payer's identity and to the name and place

of business, shall contain the following information

(a) the number of payee statements of earnings issued by

the payer in respect of the previous year;

(b) the gross amount of emoluments paid to the payees in

respect of part-time employment qualifying under

article 90A of the Income Tax Act;

(bb) the gross amount of emoluments paid to the payees that

represents qualifying overtime income;

(c) the gross amount paid to the payees in respect of

emoluments arising from any other source;

(d) the total amount of tax, if any, deducted in respect of

the emoluments referred to under paragraph (b);

(dd) the total amount of tax deducted in respect of income

referred to under paragraph (bb);

(e) the total amount of tax, if any, deducted in respect of

emoluments referred to under paragraph (c); and

(f)

the total amount of tax, if any, deducted in respect of

the payees' outstanding tax liability as directed by the

Commissioner under rule 10.

(1) The Commissioner may, at any time, request further

returns or statements for the purposes of these rules in relation to

any specific period or periods and may, furthermore, direct the

payer to provide electronically, in a format approved by the

Commissioner, any information required to be forwarded under

these rules in addition to or in substitution for the requirement to

submit such information on the appropriate form or other statement

in accordance with the provisions of these rules

Provided that where such data is required to be furnished

electronically in substitution for its submission on a form or other

statement, as aforesaid, the payer shall authenticate such data in a

manner as the Commissioner may deem fit.

(2) The Commissioner may exempt any person or class of

persons from complying with any of the provisions of these rules

regarding the submission of returns or statements. Any such

exemption may, at any time, be revoked by the Commissioner.

Imposition of FSS Additional Tax and Contestation Procedure

(1) Where a payer is in default regarding any of the

provisions of these rules as indicated in Schedule C the

Commissioner may, without prejudice to any other action which he

is empowered to take under the provisions of the Income Tax Acts,

impose upon such payer the respective FSS additional tax

prescribed in the said Schedule, advise the payer by means of a

default notice regarding the amount of such additional tax and the

reason for its imposition and require him or his representative to

rectify the default and pay the said tax within ten days from the

date such notice is served upon him in accordance with sub-rule

(2).

(2) The notice referred to in sub-rule (1) may be served on a

payer either personally or by being sent by registered post to his

usual place of abode or business informing him of his rights under

the provisions of sub-rule (3).

(3) If any payer feels aggrieved by a default notice served upon

him under sub-rule (1), he may apply to the Commissioner by a

letter of contestation within ten days from the date the default

notice is served upon him by the Commissioner in accordance with

sub-rule (2).

(4) Where the Commissioner refuses the contestation submitted

by the payer against a default notice or where the payer has failed

to contest such notice as provided in sub-rule (3), the

Commissioner shall inform the payer accordingly and serve him

with a demand notice advising him that unless the latter notice is

contested in a court of law within fifteen days from its date of

service it shall constitute an executive title in terms of article

40(1)(b) of the Act.

(5) Where the Commissioner is satisfied that the default in

respect of which FSS additional tax has been imposed under sub-

rule (1) was not due to any fault or neglect on the part of the payer,

he shall remit the whole of the said additional tax and, in any other

case, may remit such part or all of the said tax as he may think fit

and, in every case he shall inform the payer accordingly.

(6) The payment by a payer of any amount of FSS additional

tax imposed under sub-rule (1) shall in no way exonerate such

payer from paying any outstanding amount due to the

Commissioner or from submitting any documentation, in

accordance with the provisions of these rules.

(7) Where, notwithstanding any action taken by the

Commissioner under this rule, the FSS additional tax remains

outstanding or the default in respect of which such additional tax

has been imposed continues to subsist, as the case may be, the

Commissioner may serve further default notices in accordance with

this rule on the said payer imposing with each successive notice

double the amount of the said additional tax otherwise applicable in

accordance with Schedule C subject to the maximum amount

provided for under article 23(5) of the Act in respect of each

specific default

Provided that each such further notice shall supersede the

previous notice served on the payer for the same default but any

payment made in respect of that previous notice shall be taken into

account accordingly.

Collection, Set-Off and Refunds

(1) Any amount of tax deducted or which should have

been deducted by a payer under these rules during any month shall

be a debt due to Government by the last working day of the month

following that during which the deduction was or should have been

made and shall be recoverable as such together with interest, which

shall be charged as provided in article 44(2A) of the Act;

(2) Without prejudice to any other power vested in him, the

Commissioner may sue any payer in a court of competent

jurisdiction with cost of suit for the recovery of any tax deducted or

which should have been deducted by a payer under these rules and

not remitted to the Commissioner within the prescribed period,

together with interest.

Any tax deduction made in accordance with rule 6 and

remitted to the Commissioner shall, where the relative income has

been declared for tax purposes, be set off for the purpose of

collection against the tax charged in respect of the year of

assessment immediately following that during which the deduction

was made

Provided that where the deductions to be set off as

aforesaid exceed the tax charged for the said year of assessment, as

reduced by any other payment made in its respect, such excess shall

be set off against any outstanding liability for any other year of

assessment, and any remaining excess shall be refunded

Provided further that tax deducted under the FSS Overtime

Tax Deduction Method shall only be available for set-off in the

circumstances mentioned in rule 7A(6) and (7).

(1) A payee shall be entitled to claim a refund of tax

deducted by payers from his emoluments and paid to the

Commissioner under these rules in excess of the amount with

which he is properly chargeable.

(2) Subject to rule 26, claims for refund under this rule shall be

governed by article 48 of the Act.

Miscellaneous

If any payer dies, anything which he would have been

liable to do under these rules shall be done by his heirs, legal

representatives or successors, or, in the case of a payer who paid

emoluments on behalf of another person, by the person succeeding

him, or, if no person succeeds him, by the person on whose behalf

he paid the emoluments.

Where two or more persons are concurrently to be

considered to be the payer in relation to any payee for the purposes

of these rules, the obligations, duties and liabilities imposed on

payers by these rules shall be deemed to have been imposed on

them jointly and severally.

The manager, other principal officer or liquidator of any

body of persons shall be personally answerable for all matters

required to be done under these rules by or on behalf of the body of

persons.

Every payer, when called upon to do so by the

Commissioner or by any person authorised by him in writing, shall

produce for inspection any document or record which he is required

to maintain for the purposes of these rules and, where necessary,

provide copies of such document or record.

Where a payer pays emoluments on behalf of another

person the latter shall provide the payer with all the information

necessary to enable the payer to comply in every way with the

provisions of the Act and of these rules.

(1) Where any amount is paid by the payer to or for the

benefit of a payee in respect of any tax which may be due by the

latter, the gross emoluments from which tax is to be deducted in

accordance with these rules shall be deemed to be equivalent to the

aggregate of the net sum received by the payee and the amount of

tax so paid by the payer.

(2) The provisions of this rule shall also apply in cases where

the payer remits tax to the Commissioner which should have been

deducted from emoluments paid by him but which has not been

deducted, and which is not subsequently recovered by the payer

from the payee.

Where any payment of emoluments to a payee represents

and includes amounts payable on the termination of a contract

giving rise to the payment of emoluments, the amount so payable

shall be subject to tax deduction in accordance with rule 6 and/or

rule 10, and the provisions of rule 11 shall not apply.

Every payer is hereby indemnified against any person

whatsoever for all deductions and payments made by him in

pursuance and by virtue of these rules.

Saving arrangements such as are provided for in rule 33,

any arrangement whereby a payer undertakes not to deduct tax as

required by these rules from any part or all of the emoluments paid

to a payee shall be null and void.

A sufficient number of forms referred to in these rules shall

be made available free of charge by the Commissioner to every

payer on his request. No return, statement, certificate or other

information required to be submitted by these rules shall be deemed

to have been submitted unless it is made on a form supplied or

approved by the Commissioner.

For the purpose of any statement required to be furnished

to th e p a y e e a nd an y f o r m r e qu i r e d t o be f o r wa r de d t o t h e

Commissioner, and for the purpose of calculating any tax that is

required to be deducted from emoluments, the emoluments payable

to a payee for the month of October, 2001 shall be deemed to

include the total value of fringe benefits provided to him during

2001 up to the end of that month to the extent that such value has

not been included in, and tax with respect thereto has not been

deducted from, emoluments paid in any previous month.

FINAL SETTLEMENT SYSTEM (FSS)

FINAL SETTLEMENT SYSTEM (FSS)