INCOME TAX [CAP. 123.

CHAPTER 123
INCOME TAX ACT
To impose a Tax upon Incomes. Amended by:
XVII. 1994.35.

1st January, 1949

ACT LIV of 1948, as amended by Acts: VI of 1953, XX of 1955, V of 1958; Emergency
Ordinance XV of 1958; Ordinances: VIII and XVI of 1959, XXV of 1960, XXIV and XLI of
1961, XXV of 1962; Legal Notice 4 of 1963; Acts: X and XIV of 1963; V of 1964; Legal Notice
46 of 1965; Acts: XXXI of 1966, XXVII of 1967, VIII of 1969, XXVIII and XXXV of 1972, X
and XX of 1973, XLIX and LVIII of 1974; Legal Notice 148 of 1975; Acts: XLII of I975, XXII,
XXIV and XXXIX of 1976, XXVI of 1977, XXVIII of 1978, XXI of 1980, IX and XL of 1981, IX
and XIII of 1983; XIV of 1984, VIII of 1987; XXXI of 1988, XIX of 1989, XXXVI of 1990, VIII
of 1991, XIII of 1992, XVIII of 1993, I and XVII of 1994, XXII of 1995, XX of 1996, V, XVII of
1998, IX of 1999 and XI of 2000; Legal Notice 238 of 2000; Acts IV and IX of 2001, II of 2002,
II of 2003, II, III and XIII of 2004, II and IX of 2005, II of 2006, and II, IV, IX, XIII and XXXII
of 2007; Legal Notice 409 of 2007; Acts II and XVII of 2009; Legal Notice 98 of 2009; Acts I
and XIX of 2010; Legal Notice 336 of 2010; Acts IV, XVI and XXII of 2011, and V of 2012;
Legal Notice 218 of 2012; and Acts III of 2013, and XII, XXII, XXIII and XXXVII of 2014.

ARRANGEMENT OF ACT

Articles
Part I. Preliminary 1-3
Part II. Imposition of Income Tax 4-11
Part III. Exemptions 12-13
Part IV. Deductions 14-26
Part V. Special Provisions 27-52
Part VI. Personal Deductions 53-55
Part VII. Rate of Tax 56
Part VIII. Tax Rebate 57-58
Part IX. Persons Assessable 59-73
Part X. Relief of Double Taxation 74-95
Part XI. Power to make Rules 96
 2 CAP. 123.] INCOME TAX

PART I

PRELIMINARY

Short title. 1. The short title of this Act is the Income Tax Act.
Interpretation. 2. (1) In this Act, and in any rules made under this Act,
Amended by: unless the subject or context otherwise requires -
V. 1958.2;
XV.1958.2; "a company registered in Malta" shall mean a company which is
XXV. 1960.2;
XXV.1962.2,4,5; resident in Malta or a company which, although not resident in
L.N. 46 of 1965; Malta, carries on any activity in Malta and in the case of a company
VIII.1969.2;
XLIX.1974.2; which is neither incorporated nor resident in Malta shall mean a
LVIII.1974.68; company that is registered for this purpose with the Commissioner
XXII.1976.4; in such manner as may be prescribed;
XXIV.1976.2;
XXVI.1977.2; "body of persons" means any body corporate, including a
XXVIII. 1978.2;
XXI.1980.2; company, and any fellowship, society or other association of
IX.1983.2; persons, whether corporate or unincorporate, and whether vested
XVIII.1993.2; with legal personality or not;
XVII. 1994.4;
XX.1996. 2; "bonus shares" means and includes the paid-up value of shares
XVII.1998.70;
IX.1999.14; distributed by a company to its shareholders to the extent to which
IX. 2001.21; the paid-up value represents a capitalization of profits;
II. 2002.42;
II. 2003.7; "certified public auditor" means an individual who holds a
II. 2007.3;
IV. 2007.7; warrant to act as auditor issued under the Accountancy Profession
IX. 2007.2; Act, or a partnership of auditors duly registered under the said Act,
L.N. 409 of 2007; provided such individual is not disqualified and in the case of a
I. 2010.10;
IV. 2011.7; partnership none of the partners is an individual who is disqualified
XXII. 2011.5; for appointment as auditor or from holding such appointment on
V. 2012.9; any of the grounds mentioned in article 153 of the Companies Act;
III. 2013.18.
Cap. 281. "chargeable income" means the total income of any person for
Cap. 386.
any year;
"collective investment scheme" means any scheme or
Cap. 370. arrangement which is licensed under the Investment Services Act;
"Commissioner" means the Commissioner for Revenue;
"Commonwealth" has the same meaning as is assigned to it in
article 124 of the Constitution of Malta;
"company" means -
Cap. 386. (a) any partnership constituted under the Companies Act
Cap. 168. or under the Commercial Partnerships Ordinance,
being either a partnership en commandite, the capital
of which is divided into shares, or a limited liability
company or any company constituted as such under
any other law in force in Malta:
Provided that in the case of a cell company as defined
S.L. 386.10 in the Companies Act (Cell Companies Carrying on
Business of Insurance) Regulations, (in this proviso
referred to as ‘the Regulations’) as may be amended
from time to time, or in any other law or regulations
replacing the Regulations, for all intents and purposes
of the Income Tax Acts, every cell of a cell company
and that part of a cell company in which non-cellular
 INCOME TAX [CAP. 123. 3

assets are held, shall each be deemed to be a separate

company and any words and expressions in the Income
Tax Acts which are relevant to a company shall be
construed accordingly. The interpretation of such
words and expressions insofar as applicable to a cell
company shall be made on the basis of the relevant
provisions of the Regulations;
(b) any body of persons constituted, incorporated or
registered outside Malta, and of a nature similar to the
aforesaid partnerships;
(c) any co-operative society duly registered as such under
the appropriate law for the time being in force in
Malta;
"continental shelf" has the same meaning as is assigned to it in
the Continental Shelf Act; Cap. 194.

"debenture interest" means interest payable by a company under

or by virtue of a debenture or a debenture trust deed, whether in the
form of a mortgage or any other instrument or document
acknowledging indebtedness;
"distributable profits" shall mean the total profits which are
available for distribution by a company registered in Malta under
the laws for the time being in force in Malta, and the distributable
profits shall, for the purposes of this Act, be allocated to the
following accounts, that is to say, final tax account, immovable
property account, foreign income account, Maltese taxed account,
and untaxed account, and for the purposes of this definition these
accounts shall comprise the distributable profits as set out in the
respective definitions:
Provided that in the case of a company which is neither
incorporated nor resident in Malta the distributable profits shall be
the profits attributable to the activities of such company in Malta
and in respect of which it has registered with the Commissioner
less any of such profits which the company has distributed in
previous years;
"dividend" includes -
(a) bonus shares
(b) any distribution made by a partnership en commandite
the capital of which is divided into shares, or by a
partnership anonyme, to its partners or shareholders,
respectively, and any amount credited to them as
partners or shareholders; and
(c) any distribution made by a co-operative society to its
members and any amount credited to them as
members, including any patronage refund, bonus
certificate or bonus share, made, paid or allotted in
accordance with the law regulating such societies for
the time being in force in Malta;
"equity holding" shall mean a holding of the share capital in a
company which is not a property company, when the shareholding
 4 CAP. 123.] INCOME TAX

entitles the shareholder to at least any two of the following rights

(hereinafter referred to as "equity holding rights"):
(i) a right to votes;
(ii) a right to profits available for distribution to
shareholders; and
(iii) a right to assets available for distribution on a
winding up of that company,
and "equity shares", "equity shareholder" and "equity
shareholding" shall be construed accordingly:
Provided that the Commissioner shall be entitled to
determine that an equity holding exists even where such holding is
not a holding of the share capital in a company or does not consist
solely of such a holding of share capital, but where it can be
demonstrated that in substance there is at any time an entitlement to
at least two of the equity holding rights;
"final tax account" shall mean the taxed account to which an
amount of distributable profits which suffered tax, calculated in
such manner and in such amount as may be prescribed, shall be
allocated before any distributable profits are allocated to any other
taxed account;
"foreign income account" shall, with effect from the year
immediately preceding the year of assessment 1996, mean any of
the following categories of distributable profits arising in that year
and in subsequent years to the extent that they result from taxable
income:
(a) profits resulting from royalties and similar income
arising outside Malta and from dividends, capital gains,
interest, rents, income or gains derived from a
participating holding or from the disposal of such holding
other than a participating holding in a company resident
in Malta, or in a partnership en commandite the capital
of which is not divided into shares which is resident in
Malta, and any other income derived from investments
situated outside Malta, which are liable to tax in Malta
and shown as part of the company’s chargeable income
Cap. 372. in the return made pursuant to article 10 of the Income
Tax Management Act, and are receivable by a company
registered in Malta not being a company registered under
Cap. 330. the Malta Financial Services Authority Act, and
(b) profits resulting from investments, assets or liabilities
situated outside Malta to a company not registered under
Cap. 330. the Malta Financial Services Authority Act, and either
licensed as a bank in Malta or in possession of a licence
Cap. 376. granted under the provisions of the Financial
Institutions Act; and
(c) all profits or gains of a company registered in Malta,
which are liable to tax in Malta and shown as part of
the company’s chargeable income in the return made
Cap. 372. pursuant to article 10 of the Income Tax Management
Act and attributable to a permanent establishment
 INCOME TAX [CAP. 123. 5

(including a branch) situated outside Malta, and for

these purposes "profits or gains" shall be calculated as
if the permanent establishment is an independent
enterprise operating in similar conditions and at arm’s
length; and
(d) profits resulting from dividends paid out of the foreign
income account of another company registered in
Malta; and
(e) profits or gains resulting to a company registered in
Malta authorised under article 7 of the Insurance
Business Act, not being a company registered under Cap. 403.
the Malta Financial Services Authority Act, from the Cap. 330.
business of insurance in relation to risks situated
outside Malta:
Provided that this provision shall apply exclusively to
companies which allocated profits to the foreign
income account on the basis of this paragraph for any
year of assessment up to and including year of
assessment 2007, and such companies shall only be
entitled to continue allocating profits on the basis of
this paragraph up to and including year of assessment
2011:
Provided that in the case of a company referred to in
paragraph (e) of this definition, any profits or gains which would,
in accordance with the above provisions, stand to be allocated to
the foreign income account will, for any financial year, not be so
allocated unless such profits or gains arise in the year immediately
preceding the year of assessment 2000 and in subsequent years:
Provided further that in the case of a company which is
licensed as a bank in Malta or which forms part of a banking group
as defined below, any profits which would, in accordance with the
above provisions, stand to be allocated to the foreign income
account will, for any financial year, not be so allocated unless:
(a) more than ninety-five per cent of its average daily
deposits throughout the financial year are taken from
persons who are not residents in Malta; and
(b) where the company forms part of a banking group,
such group meets, on a consolidated basis, the
requirement specified in paragraph (a) above.
For the purposes of this proviso:
(a) "banking group" shall comprise only Maltese
registered companies, at least one of which must be a
bank licensed in Malta, and which companies are
members of a banking group of companies. Two
companies shall be deemed to be members of a
banking group of companies if one is the ten per cent
affiliate of the other or both are ten per cent affiliates
of a third company. For this purpose, a company shall
be deemed to be a ten per cent affiliate of another
company (parent company):
 6 CAP. 123.] INCOME TAX

(i) if and so long as more than ten per cent of its

ordinary share capital and more than ten per cent
of its voting rights are owned directly or
indirectly by the parent company; or
(ii) the parent company is beneficially entitled either
directly or indirectly to more than ten per cent of
any profits available for distribution to the
ordinary shareholders of the affiliate company;
or
(iii) the parent company would be beneficially
entitled either directly or indirectly to more than
ten per cent of any assets of the affiliate
company available for distribution to its
ordinary shareholders on winding up:
Provided that notwithstanding the above
provisions, a company which has been acquired by a
bank in satisfaction of a debt and which does not
otherwise form part of the bank’s business shall be
deemed not to form part of a banking group;
(b) ''average daily deposits'' shall be computed by taking
the total deposits at the end of each day for the
financial year and dividing such amounts by the
number of days in that financial year and average daily
deposits taken from persons who are not resident in
Malta shall be computed in like manner. The word
''deposits'' shall have the meaning assigned to it in the
Cap. 371. Banking Act;
(c) the amount of the consolidated average daily deposits
of a banking group shall include only deposits
accepted by companies forming part of the banking
group placed by persons other than such companies:
Provided further, that in the case of an international trading
company, the profits which would, in accordance with the above
provisions, stand to be allocated to the foreign income account will,
for any financial year, not be so allocated:
Provided further that notwithstanding anything contained in
this Act or in any rules made thereunder any profits derived up to
the 31 December 2010 by a company which was resident in Malta
prior to the 1 January 2007 (other than a company which has
exercised its option in terms of paragraph (i)(2) of the proviso to
Cap. 372. article 48(4A)(b) of the Income Tax Management Act) which would
have been allocated to the foreign income account had such profits
been brought to charge to tax in the year of assessment 2007 shall
be allocated to the foreign income account;
"immovable property account" shall mean the taxed account to
which distributable profits which have suffered tax and which are
not allocated to the final tax account calculated in such manner as
may be prescribed, shall be allocated before any distributable
profits are allocated to the other taxed accounts;
"incapacitated person" means any minor, lunatic, idiot, insane
 INCOME TAX [CAP. 123. 7

person or person under tutorship or curatorship;

"income" except for the purposes of article 4(1) and Part V of
this Act shall include capital gains as defined in article 5;
"industrial building or structure" includes a building used as a
hotel and a car park. For the purpose of this definition:
(a) the word "hotel" includes any number of constructions
suitably furnished and equipped, with accommodation
in single or double bedrooms, provided that such
constructions are grouped together and have in
common ancillary hotel services and amenities within
a single and defined parcel of land and are operated by
a common management for the accommodation and for
the use of guests against payment;
(b) the word "car park" refers to a structure of a
commercial nature available to the general public,
which is the main income generating activity of any
person claiming any deductions in its respect under
article 14(1)(f) or (j), and which is first used for this
purpose after the 1st January 2012;
"international trading company" means a company registered in
Malta by not later than 31 December 2006 which is engaged solely
in carrying on trading activities with persons outside Malta who are
not resident in Malta and which has its objects expressly limited to
such trading activities as well as to such acts and activities as are
necessary for the conduct of its operations from Malta. The
following activities shall be allowable activities of an international
trading company:
(a) purchases for export of goods manufactured,
assembled or processed in Malta provided that such
purchases are not made from a person who owns
directly or indirectly more than fifteen per cent of the
ordinary share capital of the said international trading
company;
(b) trading with companies registered in Malta under the
Malta Financial Services Authority Act; Cap. 330.

(c) trading with other international trading companies;

and
(d) the management of companies resident in Malta whose
business is restricted to affiliated insurance and where
such business is carried on exclusively with non-
residents;
(e) the provision of management, administration or other
services to collective investment schemes resident in
Malta where such schemes are marketed exclusively
outside Malta and are licensed or exempt from
Cap. 370.
licensing under the Investment Services Act; and
(f) the provision of ship management services by companies
whose activities and objects solely comprise the
management of ships which are of not less than one
 8 CAP. 123.] INCOME TAX

thousand nett tons and which are engaged in the carriage

of goods or passengers:
Provided that a company shall not be, in the year
immediately preceding a year of assessment, an
international trading company if it claims a benefit
under any provision of a law, other than the Income
Tax Acts, which has the effect of reducing its
chargeable income or its rate of tax for the said year of
assessment, and in such case, notwithstanding the
provisions of article 52(8)(a), any ruling which had
been notified under the provisions of article 52(5)
shall become void. This proviso shall have effect
notwithstanding that the relevant law deems that such
benefit is granted under any of the provisions of the
Income Tax Acts:
Provided that the company has not opted to cease
to be an international trading company pursuant to
Cap. 372. article 48(4A)(b)(i)(1) of the Income Tax Management
Act:
Provided further that notwithstanding any other
provisions of this Act or any other law including the
provisions of article 52(8) of this Act no company
shall be an international trading company with effect
from 1 January 2011;
"loss" in relation to a trade, business, profession, or vocation
means loss computed in like manner as profits;
"Malta" means the Island of Malta, the Island of Gozo and the
other islands of the Maltese Archipelago, including the territorial
waters thereof and the continental shelf;
"Maltese taxed account" means any of those profits of a company
that are not included in the foreign income account and:
(a) which have suffered tax; or
(b) which have been exempt from tax under the provisions
of any Maltese law and where the distribution of such
profits by the company is also exempt from tax in the
hands of the shareholders:
Provided that this paragraph shall cease to apply with
effect from year of assessment 2008;
"married couple" refers to two spouses who contracted marriage
in accordance with the legal provisions of the country where the
marriage was executed;
"married individual" refers to a male individual who has a wife
or a female individual who has a husband, living with him or with
her respectively, as the case may be;
"participating holding" shall mean a holding which arises where:
(a) a company holds directly at least ten percent of the
equity shares of a company whose capital is wholly or
partly divided into shares, which holding confers an
 INCOME TAX [CAP. 123. 9

entitlement to at least ten percent of any two of the

following:
(i) right to vote;
(ii) profits available for distribution; and
(iii) assets available for distribution on a winding up:
Provided that the Commissioner shall be entitled to
determine that the provisions of this paragraph are
satisfied even where the said minimum level of
entitlement exists in the circumstances referred to in
the proviso to the definition of "equity holding";
(b) a company is an equity shareholder in a company and
the equity shareholder company is entitled at its option
to call for and acquire the entire balance of the equity
shares not held by that equity shareholder company to
the extent permitted by the law of the country in which
the equity shares are held; or
(c) a company is an equity shareholder in a company and
the equity shareholder company is entitled to first
refusal in the event of the proposed disposal,
redemption or cancellation of all of the equity shares
of that company not held by that equity shareholder
company; or
(d) a company is an equity shareholder in a company and
is entitled to either sit on the Board or appoint a person
to sit on the Board of that company as a director; or
(e) a company is an equity shareholder which holds an
investment representing a total value, as on the date or
dates on which it was acquired, of a minimum of one
million, one hundred and sixty-four thousand euro
(€1,164,000) (or the equivalent sum in a foreign
currency) in a company and that holding in the
company is held for an uninterrupted period of not less
than 183 days; or
(f) a company is an equity shareholder in a company and
where the holding of such shares is for the furtherance
of its own business and the holding is not held as
trading stock for the purpose of a trade:
Provided that a holding of a company in -
(a) a partnership en commandite the capital of which is
not divided into shares constituted under the
Companies Act, not being a property partnership, or Cap. 386.
(b) a body of persons which is constituted, incorporated or
registered outside Malta, not being a property
partnership, and is of a nature similar to a partnership
en commandite the capital of which is not divided into
shares constituted under the Companies Act, or Cap. 386.
(c) a collective investment vehicle constituted,
incorporated or registered outside Malta and which is
not resident in Malta, where the liability of investors
10 CAP. 123.] INCOME TAX

in such scheme is limited to the amount invested by

them,
shall be deemed to constitute a participating holding if it satisfies
the provisions of any of paragraphs (a) to (f) above which shall
apply mutatis mutandis to such holding. For the purposes of this
proviso, the terms "equity shares" or "shares" shall be construed as
referring to the capital in the said body of persons or collective
investment scheme which entitles the holder to at least two of the
following rights:
(i) a right to vote;
(ii) a right to profits available for distribution; and
(iii) a right to assets available for distribution on a
winding up of the said body of persons,
and the term "equity shareholder" shall be construed accordingly:
Provided that the Commissioner shall be entitled to
determine that an equity holding exists even where the particular
company does not have a holding in the share capital in a company
or does not consist solely of such a holding of share capital, but it
can demonstrate that in substance it holds an entitlement to at least
two of the equity holding rights:
Provided further that in the case of a holding falling within
the purport of paragraph (a) above, the provisions of the said
paragraph shall be deemed to be satisfied even where the minimum
level of entitlement referred to in that paragraph exists at any time
by reference to the circumstances referred to in the proviso to the
definition of "equity holding";
"passive interest or royalties" shall mean interest or royalty
income which is not derived, directly or indirectly, from a trade or
business, where such interest or royalties have not suffered or
suffered any foreign tax, directly, by way of withholding, or
otherwise, at a rate of tax which is less than five per cent (5%);
"person" includes -
(a) a body of persons; and
(b) a responsible spouse in accordance with article 49;
"petroleum" means crude oil of whatever density, natural gas and
other hydrocarbons and substances that may be extracted therefrom;
"portfolio investment" is an investment in securities such as
shares, bonds, and such like instruments and which is held as one of
many such investments for the purpose of investment by risk
spreading where such an investment is not a strategic investment
and is made with no interest in and without the intention of
influencing the management of the company invested in and in
addition is made only to follow the share price and dividend policy
of the company invested in to maximise investment returns and to
sell the investment as soon as it appears that the shares may lose
value;
"prescribed" means prescribed by rule under this Act;
 INCOME TAX [CAP. 123. 11

"property company'' shall mean a company which owns

immovable property situated in Malta or any real rights thereon or a
company which holds, directly or indirectly, shares or other
interests in any entity or person, which owns immovable property
situated in Malta or any real rights thereon where five percent or
more of the total value of the said shares or other interests so held
is attributable to such immovable property or rights:
Provided that where a company, entity or person carrying on a
trade or business owns immovable property situated in Malta or any
real rights thereon, consisting only of a factory, showroom, warehouse
or office used solely for the purpose of carrying on such trade or
business, such company, entity or person shall, for the purpose of this
definition, be treated as not owning immovable property if not more
then fifty percent of the value of its assets consist of immovable
property situated in Malta or any rights over such property and it does
not carry on any activity the income from which is derived directly or
indirectly from immovable property situated in Malta;
"property partnership" shall mean a partnership as defined in
article 5(1)(b) which owns immovable property situated in Malta,
or any real rights thereon, or a partnership which, directly or
indirectly, holds shares or other proprietary interests in any entity
or person, which owns immovable property situated in Malta, or
any real rights thereon, where five percent or more of the total
value of the said shares or other proprietary interests so held is
attributable to such immovable property or rights:
Provided that where a partnership, entity or person carrying
on a trade or business owns immovable property situated in Malta, or
any real rights thereon, consisting only of a factory, showroom,
warehouse or office used solely for the purpose of carrying on such
trade or business, such partnership, entity or person shall, for the
purpose of this definition, be treated as not owning immovable
property if not more then fifty percent of the value of its assets consist
of immovable property situated in Malta, or any real rights over such
property, and it does not carry on any activity the income from which
is derived directly or indirectly from immovable property situated in
Malta;
"resident in Malta" when applied to an individual means an
individual who resides in Malta except for such temporary absences
as to the Commissioner may seem reasonable and not inconsistent
with the claim of such individual to be resident in Malta; when
applied to a body of persons, means any body of persons the control
and management of whose business are exercised in Malta,
provided that a company incorporated in Malta on or after 1st July
1994 shall be resident in Malta and any other company
incorporated in Malta shall be resident in Malta from 1st January
1995 where the management and control of the business of the
company is exercised outside Malta;
"scholarship" includes a bursary, an award, a grant or an
endowment of a similar nature, given or established for educational
purposes;
"self assessment" has the meaning assigned to it in sub-articles
 12 CAP. 123.] INCOME TAX

(2) and (3) of article 10 of the Income Tax Management Act;

"the Special Commissioners" means the Commissioners
Cap. 372. appointed by the President of Malta under article 34 of the Income
Tax Management Act;
"tax" means the income tax imposed by the Income Tax Acts;
"taxed account" and "taxed accounts" shall mean any or all of the
final tax account, immovable property account, foreign income
account, Maltese taxed account and untaxed account;
"tax return date" with respect to a person for a year of assessment
means the date prescribed pursuant to article 10(1) of the Income
Cap. 372. Tax Management Act for the submission by that person of the
return of income for that year of assessment;
"tax settlement date" has the meaning assigned to it in article
Cap. 372. 42(1A) of the Income Tax Management Act;
"the Income Tax Acts" shall collectively mean this Act and the
Income Tax Management Act;
"total income" means the aggregate amount of the income of any
person from the sources specified in Part II of this Act, remaining
after allowing the exemption under Part III and the deductions
under Part IV, and computed in accordance with the provisions of
Part V:
Provided that, subject to the provisions of article 12(3)(b)
Cap. 372. of the Income Tax Management Act, any income which is not
required to be disclosed and is not disclosed in accordance with the
provisions of the Income Tax Acts shall not form part of total
income;
"untaxed account" shall consist of those profits (or losses as the
case may be), which represent the total distributable profits (a
positive amount) or the total accumulated losses (a negative
amount) as the case may be, and deducting therefrom the total sum
of the amounts allocated to other taxed accounts;
"year of assessment" means the period of twelve months
commencing on the first day of January, 1949 and each subsequent
period of twelve months.
(2) Words and expressions used in this Act which are not
known to the law of Malta but are known to the English Law, shall,
s o f a r a s m a y b e n e c e s s a r y t o g i v e e ff e c t t o t h i s A c t a n d
consistently with the provisions thereof, have the meaning assigned
to them in the English Law and be construed accordingly.

Administration of 3. The administration of this Act shall be vested in the

Act. Commissioner, and the provisions of articles 3 and 4 of the Income
Substituted by:
XXXV. 1972.2. Tax Management Act shall apply to the Commissioner in the
Added by: exercise of his powers and functions under this Act.
XVII. 1994.5.
Cap. 372.
 INCOME TAX [CAP. 123. 13

PART II

IMPOSITION OF INCOME TAX

4. (1) Subject to the provisions of this Act, income tax shall Charge of Income
be payable at the rate or rates specified hereafter for the year of Tax.
Amended by:
assessment commencing on 1st January, 1993 but only with respect XXV. 1960.4;
to any capital gains made on or after the 25th November, 1992 and VIII. 1969.3;
XXXV. 1972.3;
for each subsequent year of assessment upon the capital gains as XLII. 1975.2;
defined in article 5 accruing or derived from Malta or elsewhere, XXVIII. 1978.4;
and whether received in Malta or not, and for the year of IX. 1983.4;
XIII. 1983.5;
assessment commencing on 1st January, 1949 and for each VIII. 1987.2;
subsequent year of assessment upon the income of any person XXXI. 1988.2;
accruing in or derived from Malta or elsewhere, and whether XIX. 1989.3;
XXXVI. 1990.2;
received in Malta or not in respect of - XVIII. 1993.3.
Renumbered by:
(a) gains or profits from any trade, business, profession or XVII. 1994.2.
vocation, for whatever period of time such trade, Amended by:
XVII. 1994.4;
business, profession or vocation may have been XX. 1996.3;
carried on or exercised including the profit arising XI. 2000.3;
from the sale by any person of any property acquired IX. 2001.22;
II. 2003.8;
by him for the purpose of profit-making by sale, or II. 2004.7;
from the carrying on or carrying out of any profit- L.N. 409 of 2007.
making undertaking or scheme;
(b) gains or profits from any employment or office,
including the value of any benefit provided by reason
of any employment or office; and -
(i) for the purpose of this paragraph the Minister
responsible for finance may by regulations
prescribe the circumstances in which a person
shall be treated as receiving a benefit from
another person provided by reason of an
employment or office and the value of any such
benefit;
(ii) where in terms of the said regulations a person is
treated as receiving a benefit provided by virtue
of an employment or office after the termination
thereof and that benefit has the nature of a
pension the benefit shall be treated as a pension
and the value determined in accordance with the
said regulations shall constitute income
chargeable to tax under paragraph (d).
(c) dividends, premiums, interest (which includes any
gains from any sum of money in whatever currency
deposited with a person carrying on the business of
banking under the Banking Act in any account Cap. 371.
whatsoever) or discounts:
Provided that, notwithstanding any other provision of
this Act, such income of a company from an offshore
banking subsidiary company shall constitute income
chargeable to tax under paragraph (a) and the
provisions of article 56(6) shall apply to such income;
(d) any pension, charge, annuity or annual payment;
14 CAP. 123.] INCOME TAX

(e) rents, royalties, premiums and any other profits arising

from property;
(f) Repealed by Act XX of 1996;
(g) gains or profits not falling under any of the foregoing
paragraphs:
Provided that:
(i) in the case of income arising outside Malta to a
person who is not ordinarily resident in Malta or
not domiciled in Malta, the tax shall be payable
on the amount received in Malta;
(ii) no tax shall be payable on capital gains arising
outside Malta to a person who is not ordinarily
resident in Malta or not domiciled in Malta or to
a person who is charged to tax at the rate of
fifteen cents (0.15) in the euro as laid down in
article 56(11);
(iii) in the case of any person who is charged to tax at
the rate of fifteen cents (0.15) in the euro as laid
down in article 56(11), the tax shall be payable
only on any income or capital gains arising in
Malta and on any amount of income arising
outside Malta and received in Malta.
(2) Any sum realized under any insurance against a loss of
profits shall be taken into account in the ascertainment of any
profits or income.
(3) Where a person carries on in Malta an agricultural,
manufacturing or other productive undertaking, the following
provisions shall have effect, that is to say:
(a) if such person sells any product of the undertaking, in
a wholesale market, outside Malta or for delivery
outside Malta, whether the contract is made within
Malta or outside Malta, the full profits arising from the
sale shall be deemed to be income of such person
accruing in or derived from Malta:
Provided that if it is shown to the satisfaction of the
Commissioner that the profit has been increased
through treatment of the product outside Malta other
than handling, grading, blending, sorting, packing or
disposal, such increase of profits shall not be deemed
to be income accruing in or derived from Malta;
(b) if such person otherwise disposes of, uses or deals
with any product of the undertaking, outside Malta, the
profit which might have been obtained if such person
had sold the product to the best advantage in a
wholesale market outside Malta shall be deemed to be
the profit arising from such disposal, dealing or use,
and to be the income of such person accruing in or
derived from Malta.
(4) Where a body of persons carries on a club or similar
 INCOME TAX [CAP. 123. 15

institution and receives from its members not less than one half of
its gross receipts on revenue account (including entrance fees and
subscriptions), it shall not be deemed to carry on a business; but
where less than one half of its gross receipts are received from
members, the whole of the income from transactions both with
members and others (including entrance fees and subscriptions)
shall be deemed to be receipts from a business, and the body of
persons shall be chargeable either in respect of the profits
therefrom or in respect of the income which would be assessable if
it were not deemed to carry on a business whichever is the greater.
In this sub-article ''members'' in relation to a body of
persons means those persons who are entitled to vote at a general
meeting of the body at which effective control is exercised over its
affairs.
Nothing in this sub-article shall operate to annul or reduce
an exemption granted in article 12, save as provided in sub-article
(1)(l) thereof.
(5) Where under the provisions of article 24, a balancing
charge falls to be made, the amount thereof shall be deemed to be
income chargeable with tax under this Act.
(6) Subject to the provisions of sub-article (7), on the winding
up, in full or in part, of any pension, saving, provident or other
society or fund approved by the Commissioner for the purposes of
article 53(1)(b)(ii), the following provisions shall have effect:
(a) any refund, reimbursement, gratuity, bonus, payment,
compensation or other return or benefit paid or
accruing to any person as a consequence of winding up
shall, notwithstanding anything to the contrary
contained in this Act or in any law, document, deed,
contract, agreement or other instrument, be deemed to
constitute income chargeable to tax in the hands of the
said pension, saving, provident or other society or fund
in the year of assessment in which it is granted or so
accrues, and not to constitute income chargeable to tax
in the hands of the person to whom it is paid or
accrues; and
(b) no refund, reimbursement, gratuity, bonus, payment,
compensation or other return or benefit shall be paid as
aforesaid before payment has been effected of the tax
chargeable in accordance with the provisions of this
sub-article.
(7) Sub-article (6) shall not apply -
(i) to any benefit, or value thereof, chargeable with
tax under sub-article (6) and which is paid or
payable to members of the said pension, saving,
provident or other society or fund, or other
beneficiaries claiming through or under them, in
accordance with the conditions under which the
said pension, saving, provident or other society
or fund was approved by the Commissioner;
 16 CAP. 123.] INCOME TAX

(ii) to any capital sum exempt from tax under article

12(1)(g).
Profits or income 4A. When a person -
prior to a change in
residence or (i) changes his residence and becomes resident in
domicile. Malta and he was at no time domiciled or
Added by:
I. 2010.11. resident in Malta prior to such change in
residence; or
(ii) changes his domicile and becomes domiciled in
Malta and he was at no time domiciled or
resident in Malta prior to such change in
domicile; or
(iii) is "a company resulting from the merger" which
is registered in Malta as set out in regulation
3(2) of the Cross-border Mergers of Limited
S.L. 386.12 Liability Companies Regulations (hereinafter
referred to as "Cross-border Mergers
Regulations") and none of the assets owned by
the company on the day of the merger was
owned by any merging company which is
domiciled and, or resident in Malta at any time
prior to the date of the particular merger,
and has made an election for the purpose of this paragraph by
notice in writing to the Commissioner, all assets which are situated
outside Malta and which were acquired by him, or in the case of a
company resulting from the merger, by any non-resident merging
company, prior to the above-mentioned change in domicile or
residence or prior to the entry into force of the merger (each of
which shall hereinafter be referred to as "occurrence"), shall be
deemed, for the purpose of calculating any income that would not
have been subject to tax had it arisen before the particular
occurrence would have taken place, to be assets acquired on the
date of the particular occurrence, at a cost which is proved to the
satisfaction of the Commissioner to be the market value which it
had on the date of the said occurrence:
Provided that such an election shall not be available unless
the particular person exercises the election by not later than the end
of the year of assessment immediately following the basis year in
which the occurrence takes place.
 INCOME TAX [CAP. 123. 17

5.(1) (a) Capital gains derived by a person from the transfer of a Capital gains.
capital asset shall be charged under article 4(1). Added by:
XVIII. 1993.4.
Notwithstanding anything contained in any other part Renumbered by:
of this Act, such gains shall be ascertained as laid XVII. 1994.2.
Amended by:
down in this article and in such manner as may be XVII. 1994.7;
prescribed. The capital gains to which the provisions XXII. 1995.2;
of this article shall apply are: XX. 1996.4;
V. 1998.8;
(i) gains or profits arising from any transfer of the XVII. 1998.70;
XI. 2000.4;
ownership or usufruct of any immovable IX. 2001.23;
property or the assignment or cession of any II. 2004.8;
rights over such property; XIII. 2004.51;
II. 2006.7;
(ii) gains or profits arising from the transfer of the II. 2009.10;
ownership or usufruct of or from the assignment I. 2010.12;
IV. 2011.8;
or cession of any rights over any securities, V. 2012.10;
business, goodwill, business permits, copyright, L.N. 218 of 2012;
III. 2013.19;
patents, trademarks and trade-names and any XII. 2014.13.
other intellectual property; and
(iii) gains or profits arising from a transfer of the
beneficial interest in a trust in accordance with
the provisions of subarticle (19). For the
purposes of this subparagraph, "transfer of the
beneficial interest in a trust" shall include a
transfer of a full or partial beneficial interest in a
trust and any alienation of any such full or
partial interest as a result of a disclaimer of such
interest or as a result of a person not remaining a
beneficiary of such trust;
(iv) gains or profits arising from a transfer of
securities as provided for in subarticle (9A) and
from a transfer of value in securities as provided
for in subarticle (13)(b)(ii); and
(v) gains or profits arising from the transfer of the
ownership or usufruct of or from the assignment
or cession of any rights over any interest in a
partnership. For the purposes of this
subparagraph "transfer" shall mean:
(a) a transfer of a full or partial interest and
any alienation of any such full or partial
interest in a partnership; and
(b) a deemed transfer of an interest in the
partnership. Where a person acquires or
increases a partnership share there is a
deemed transfer of an interest in the
partnership to that partner from the other
partners;
(b) In this article -
"partnership" means -
(a) any partnership constituted under the Companies Cap. 386.
Act or under the Commercial Partnerships Cap. 168.
Ordinance, being either a commercial
partnership en nom collectif or a commercial
 18 CAP. 123.] INCOME TAX

partnership en commandite the capital of which

is not divided into shares;
(b) except for the purposes of sub-paragraph (v)(b),
any other partnership having a legal personality
distinct from that of its members constituted,
incorporated or registered under any other law in
force in Malta;
(c) any body of persons constituted, incorporated or
registered outside Malta, and of a nature similar
to the aforesaid partnerships;
(d) a European Economic Interest Grouping (EEIG)
formed pursuant to the provisions of the
S.L. 386.08 Companies Act (European Economic Interest
Grouping) Regulations;
"partnership share" means the share to which a person
is entitled in the income of the partnership and to
assets available for distribution on a winding up of the
partnership;
"transfer" includes any assignment, sale, emphyteusis
or sub-emphyteusis, partition, donation, settlement of
property on trust, distribution and reversion of
property settled on trust, sale by instalments, and any
alienation under any title including any redemption,
liquidation or cancellation of units or shares in a
collective investment scheme as defined in article 2 of
Cap. 370. the Investment Services Act and maturity or surrender
of linked long term policies of insurance, and any
occurrence that is deemed to be a transfer in
accordance with the provisions of subarticles (9A) and
(13)(b), and for the avoidance of doubt includes any
transfer of an asset by a company to its shareholders, or
by a commercial partnership en nom collectif or
commercial partnership en commandite the capital of
which is not divided into shares to its members, in the
course of winding up the company or partnership or in
the course of a distribution of assets to its shareholders or
partners pursuant to a scheme of distribution, but does
not include a transfer causa mortis; and
"securities" shall mean shares and stocks and such like
instrument that participate in any way in the profits of
the company and whose return is not limited to a fixed
rate of return, units in a collective investment scheme
Cap. 370. as defined in article 2 of the Investment Services Act,
and units and such like instruments relating to linked
long term business of insurance.
(2) For the purpose of ascertaining the gains or profits arising
from any transfer of immovable property in terms of sub-article
(1)(a)(i) -
(a) there shall be deducted in such manner and amount as
may be prescribed, the cost of acquisition, the inflation
element, any ground-rent paid on the property and for
 INCOME TAX [CAP. 123. 19

which a deduction is not due to the taxpayer under any

other provision of this Act, maintenance,
improvements, other expenses that have increased the
value of the immovable property since it was acquired
and other expenses directly related to the transfer;
(b) any transfer of immovable property by means of a
deed of exchange shall be considered as if separate
deeds of transfer were taking place between the parties
to the deed;
(c) where immovable property is granted on emphyteusis
or sub-emphyteusis for a period exceeding fifty years,
or extendable to such periods, the following rules shall
apply:
(i) where the premium exceeds the cost of
acquisition in accordance with paragraph (a)
hereof, such excess shall be deemed to be gains
or profits;
(ii) where the cost of acquisition in accordance with
paragraph (a) hereof exceeds the premium such
excess shall be deductible from the gains or
profits arrived at in accordance with sub-
paragraph (iii) hereof;
(iii) no account shall be taken of any ground-rent or
increase in ground-rent involved in the transfer
unless and until such ground-rent or increase in
ground-rent is redeemed, or the directum
dominium or sub directum dominium, as the case
may be, is transferred and in such case the gains
or profits shall be deemed to be the price of
redemption or sale less any deduction in
accordance with sub-paragraph (ii) hereof;
(d) (i) a transfer shall not include a contract of partition
where no owelty is due to any of the co-
partitioners, and upon a transfer of any property
by a co-partitioner the cost of acquisition shall be
deemed to be the cost of acquisition of the
property in question at the time of acquisition by
the co-partitioner;
(ii) for the purposes of this paragraph only the
immovable property held in common and
partitioned shall be taken into account, and
where money or other movables held in common
is assigned to a co-partitioner in consideration
for the reduction in the share of immovables
assigned to him the partition shall be deemed to
be one where an owelty has been paid;
(iii) where a person receives an owelty on a contract
of partition he shall be deemed to have made
capital gains as is equivalent to as much of the
increase in the value of the property between the
time of the acquisition by the co-partitioners and
20 CAP. 123.] INCOME TAX

the time of partition, so however that tax on

capital gains shall only be payable at the time of
partition on such part of the capital gains made
as is not included in the increase in the value of
the property assigned to that co-partitioner
between the time of acquisition by the co-
partitioner and the partition, and where such co-
partitioner transfers the property assigned to him
the cost of acquisition shall be deemed to be the
cost of acquisition of the immovables when
acquired by the co-partitioners before the
partition;
(iv) where a co-partitioner pays an owelty at the time
of the partition, he shall be deemed to have made
no capital gain at the time of the partition, and
where such co-partitioner transfers any
immovable property assigned to him in the
partition, the cost of acquisition shall be deemed
to be such portion of the sum of the cost of
acquisition of the co-partitioner’s share of all the
immovables partitioned together with the owelty
paid on the contract of partition, as is equivalent
to the portion of the value of the immovable
transferred to the total value of immovables
assigned to the co-partitioner in the deed of
acquisition;
(e) a donation shall be considered as a deemed sale made
at the market value of the property at the time of
transfer. Provided that no tax shall be payable where
the donation is made by a person to:
(i) his spouse, descendants and ascendants in the
direct line and their relative spouses, or in the
absence of descendants to his brothers or sisters
and their descendants, or
(ii) philanthropic institutions approved for the
purposes of article 12(1)(e);
(f) without prejudice to the provisions of article 12(1)(e),
where the property referred to in paragraph (e) is
disposed of by the donee within five years of the
donation, the donee shall be charged on the gain
ascertained in accordance with the provisions of this
article by taking into account the cost of acquisition of
the property at the time it was acquired by the donor;
where the property is sold by the donee after the lapse
of five years the cost of acquisition shall be deemed to
be the value of the property as declared in the deed of
donation;
(g) gains and profits relating to a transfer by donation,
settlement of property in trust, or distribution or
reversion of property settled in trust means the
difference in the market value of the property at the
time of the donation, settlement, distribution or
 INCOME TAX [CAP. 123. 21

reversion and the cost of acquisition of the property at

the time of acquisition of the property by the donor,
settlor or trustee as the case may be. The relevant
instrument pursuant to which the said transfers were
effected shall include a declaration of the said market
value.
(3) For the purpose of ascertaining the gains or profits arising
from any transfer of property in terms of sub-article (1)(a)(ii):
(a) the acquisition cost of shares acquired before the 25th
November, 1992 shall be valued either on the Equity
method of share valuation (net asset value) based on
the last accounts submitted to the Commissioner by the
18th December, 1992 by taking into account the value
of immovable property existing in the said accounts
and adjusted in terms of sub-article (2)(a) or on the
actual purchase price, whichever is the higher;
(b) listed shares quoted on a stock exchange on the 25th
November, 1992 shall be valued at the price existing
on that date; and in the case of shares quoted in foreign
currency, the rate of exchange (middle rate of the
Central Bank) on that date shall be used;
(c) shares acquired after the 25th November, 1992, shall
be valued on the cost of acquisition:
Provided that with respect to shares acquired under a
share option scheme the cost of acquisition shall be
established in accordance with such rules as may be
made by the Minister responsible for finance:
Provided further that where an amount standing to the
credit of any of a company’s reserve accounts, other
than a capital redemption reserve and profits available
for distribution, is applied in paying up to any extent
any shares allotted by the company, the cost of
acquisition of such shares shall be zero:
Provided also that the acquisition cost of shares resulting
from a conversion of a partnership into a company as
referred to in article 45B shall be the cost of acquisition
of the interest (representing those shares) held in the
partnership that had been converted into the said
company;
(d) where on a share transfer the rights pertaining to those
shares are changed in any way, the transfer value of the
shares shall be taken as if no such change has been
made;
(e) any transfer consisting of an exchange shall be
considered as if two separate transfers were taking
place; and
(f) the provisions of sub-article (2)(d), (e), (f) and (g)
shall apply mutatis mutandis to this sub-article;
 22 CAP. 123.] INCOME TAX

(g) in the case of a transfer of shares listed on a stock

Cap. 345. exchange recognised under the Financial Markets Act,
not being securities in a collective investment scheme
and not being exempt from tax under the provisions of
sub-article (6)(b):
(i) the transfer value shall in no case exceed the
market value of the said shares immediately
upon being admitted to listing, and
(ii) the cost of acquisition taken into account shall
be the cost of acquisition of the original shares:
For the purpose of this paragraph "original shares"
shall have the same meaning assigned in sub-article
(6)(b).
(3A) For the purpose of ascertaining the gains or profits arising
from any transfer of property in terms of sub-article (1)(a)(v):
(a) the acquisition cost in each of the circumstances
mentioned in this paragraph shall, subject to any
adjustments that may be prescribed, be determined as
follows:
(i) the acquisition cost of an interest acquired from
an existing partner shall be the actual purchase
price;
(ii) the acquisition cost of an interest acquired causa
mortis shall be the lower of the value declared in
a deed of transfer causa mortis and the price
which that interest would have fetched had it
been sold on the open market on the date of that
acquisition;
(iii) the acquisition cost of an interest acquired by
way of a capital contribution made to the
partnership shall be the amount or value of such
contribution;
(iv) the acquisition cost of an interest resulting from
a conversion of a company into a partnership as
referred to in article 45A shall be the cost of
acquisition of the shares (representing that
interest) held in the company that had been
converted into the said partnership:
Provided that where the said shares consist of
shares whose return is limited to a fixed rate of
return the acquisition cost shall be taken to be
zero; and
(b) any transfer consisting of an exchange shall be
considered as if two separate transfers were taking
place; and
(c) the provisions of subarticle (2)(d), (e), and (f) and shall
apply mutatis mutandis to this subarticle.
(4) The provisions of sub-article (2)(d) shall apply mutatis
mutandis where the assets partitioned include both assets under
sub-article (1)(a)(i) and (ii).
 INCOME TAX [CAP. 123. 23

(5) The provisions of sub-article (1)(a)(i) shall not apply to

gains or profits relating to transfer of immovable property:
(a) where a copy of the relevant deed of transfer dated
prior to the 25th November, 1992 or of the relevant
promise to transfer or acquire also dated prior to the
25th November, 1992, made in favour of the
transferee, has been duly registered with the Inland
Revenue Department by the 1st December, 1992 and a
certificate to that effect has been issued by the
Commissioner or, in the case of a deed of transfer, the
deed has been duly enrolled in the Public Registry by
the 1st December, 1992;
(b) where the Commissioner is satisfied that the property
or undivided part of the property has been owned and
occupied for a period of at least three years as the
transferor’s own residence immediately preceding the
date of transfer and provided that the property is
disposed of within twelve months of vacating the
premises;
(c) for the purposes of paragraph (b) "own residence"
means the principal residence owned by the taxpayer
or his spouse being a dwelling house which has been
the owner’s only or main residence. A garage attached
to or underlying a house or a block of flats, or a garage
of not more than thirty square metres situated within
five hundred metres of the dwelling house, and
transferred through the same deed with the principal
residence shall be deemed to be included as part of the
residence. The period of residence includes the
physical occupation of the premises and any absences
from Malta such as on account of foreign employment,
illness, holiday or study. Any part of the house which
is used exclusively for commercial purposes for any
time within two years of the transfer shall not be
considered as "own residence" and this part shall be
apportioned on the basis of the area occupied for this
purpose as a proportion of the whole area of the
relative dwelling house;
(d) where the property was taken over by Government and
in respect of which a declaration by the President of
Malta has been issued in terms of the Land Acquisition
(Public Purposes) Ordinance before the 25th Cap. 88.
November, 1992;
(e) where the property is assigned between spouses
consequent to a judicial or consensual separation or a
divorce;
(f) where the property formed part of the community of
acquests between the spouses or was otherwise owned
in common between them and is assigned to one of the
spouses on the dissolution of the community or is
partitioned between the spouses, or the surviving
 24 CAP. 123.] INCOME TAX

spouse and the heirs of the deceased spouse;

(g) where the property is assigned on emphyteusis for fifty
years or less.
(6) The provisions of sub-article (1)(a)(ii) shall not apply to
gains or profits relating to:
(a) (deleted by Act II. 2009.10.);
(b) transfer of shares listed on a stock exchange
Cap. 345. recognised under the Financial Markets Act, not being
securities in a collective investment scheme:
Provided that the exemption provided for in this
paragraph shall not apply where the transfer is made
by a person who held the said shares or the original
shares, immediately before the said shares or the
original shares were admitted to listing: For the
purpose of this paragraph "original shares" means the
shares held by a person which have been admitted to
listing and which represent the shares being
transferred:
Provided further that where such person held shares in
a company immediately prior to their listing and also
acquired further listed shares in the said company after
the initial listing of shares in the company, any transfer
of shares made by such person shall first be deemed to
be a transfer of the shares acquired after the initial
listing:
Provided also that the provisions of the immediately
preceding provisos shall only apply where the shares
transferred were admitted to listing on or after the 1st
January, 2010;
(c) transfer of securities listed on a stock exchange
Cap. 345. recognised under the Financial Markets Act being
securities in a collective investment scheme held in a
prescribed fund as defined in article 41A(b);
(d) transfer of units and such like instruments relating to
linked long term business of insurance where the
benefits are wholly determined by reference to the
value of, or income from, securities to which either
paragraph (b) or (c) applies;
(e) property transferred in the circumstances listed in
subarticle (5)(e) and (f).
(6A) The provisions of subarticle (1)(a)(v) shall not apply to gains
or profits relating to property transferred in the circumstances referred
to in subarticle (5)(e) and (f).
(7) Where a person is entitled to capital allowances under
article 14(1)(f) and (j) in respect of a capital asset which is sold at a
price exceeding its cost of acquisition and any improvements made
thereto, the cost of acquisition shall be computed on the cost of
acquisition and the cost of any improvement made thereto.
 INCOME TAX [CAP. 123. 25

(8) Where an asset referred to in sub-article (1)(a) used in a

business for a period of at least three years is transferred and
replaced within one year by an asset used solely for a similar
purpose in the business, any capital gains realised on the transfer
shall not be taxed but the cost of acquisition of the new asset shall
be reduced by the said gain. When the asset is disposed of without
replacement, the income, whether chargeable under this article or
under article 4(1)(a), shall take into account the transfer price and
the cost of acquisition reduced as aforesaid:
Provided that, unless otherwise authorised by the
Commissioner, provisional tax as provided in article 43(1)(b) of that
Act shall be payable on any transfer to which this sub-article applies:
Provided further that if the capital gain exceeds the cost of
acquisition of the replacement property any excess is to be taxable in
the year in which the replacement property was acquired and the cost
of acquisition of the replacement property to be taken into account on
a subsequent transfer will be zero.
(9) (i) Where an asset is transferred from one company to
another company and such companies are:
(a) deemed to be a group of companies for the
purposes of article 16, or
(b) controlled and beneficially owned directly or
indirectly to the extent of more than fifty per
cent by the same shareholders,
it shall be deemed that no loss or gain has arisen from
t h e t r a n s f e r. In ascertaining the income, whether
chargeable under this article or under article 4(1)(a),
where such an asset is subsequently transferred by a
company to another company which does not fall
within the provisions of paragraphs (a) or (b), or to
another person, as the case may be, the base cost and
the date of acquisition of the asset that would be
considered shall be the original cost and the date when
it was acquired before the transfer from the first
company, being the company within the group, took
place:
Provided that the Minister may by rules prescribe
conditions for the relief envisaged in this subarticle that
are different from those provided for in this paragraph,
and those rules shall apply to transfers that are made after
such date as may be prescribed.
(ii) Where an asset falling under the circumstances
referred to in paragraph (i) is in the form of immovable
property which is transferred by a company to another
company that falls within the provisions of sub-
paragraphs (a) and (b) of the said paragraph, or of rules
prescribed in accordance with the said paragraph, or
where the said immovable property is subsequently
transferred to another company which does not fall
within the said provisions, or to another person, as the
 26 CAP. 123.] INCOME TAX

case may be, the notary publishing the relative deed of

transfer shall attach to the said deed a notice made in
such manner and containing such details as may be
prescribed by the Minister.
(iii) Where the asset referred to in paragraph (i) consists of
immovable property situated in Malta or shares in a
property company, the provisions of this subarticle
shall only apply where the individual direct or indirect
beneficial owners of the companies referred to in
paragraph (i) are the same and each such individual
holds, directly or indirectly, substantially the same
percentage interest in the nominal share capital and
voting rights in each of the said companies. For the
purpose of this paragraph the proviso to the definition of
''property company'' in article 2(1) shall not apply:
Provided that for the purpose of this paragraph an
individual is deemed to hold substantially the same
percentage interest in the nominal share capital and
voting rights in each of the said companies where the
difference between the percentage interest held in each
company does not exceed twenty percent:
Provided further that where an individual holds,
directly or indirectly, less than twenty percent of the
nominal share capital and voting rights in only one of
the said companies, such individual shall, for the
purpose of this paragraph, not be taken into account in
determining whether the individual direct or indirect
beneficial owners of the said companies are the same:
Provided also that if more than one individual holds,
directly or indirectly, less than twenty percent of the
nominal share capital and voting rights in only one of
the said companies, the previous proviso shall not
apply where together such individuals hold, directly or
indirectly, twenty percent or more of the nominal share
capital and voting rights in that company:
Provided also that the whole of this paragraph shall not
apply, where the companies referred to in paragraph (i)
are directly or indirectly owned as to eighty percent or
more by a company whose securities are listed on a
Cap. 345. stock exchange recognised under the Financial
Markets Act.
(iv) Where an asset, qualifying for tax relief under this
article, is transferred from one company to another
company and the company acquiring the asset issues
shares in exchange for the acquired asset, whether to
the transferring company or to any other person, the
cost of acquisition of the said shares shall, for the
purpose of calculating the gains or profits derived from
the subsequent transfer of the said shares, be reduced
(but not below zero) by an amount determined by
deducting from the transfer value of the asset its cost
 INCOME TAX [CAP. 123. 27

of acquisition to the transferring company:

Provided that this paragraph shall not apply where the
said asset is charged to tax under the provisions of sub-
article (9A) of this article or article 5A(12A).
(9A) (a) If a company ("the chargeable company") holds shares
in a company, which had been acquired from another
company, and such acquisition was exempt from tax
under subarticle (9), this subarticle shall apply if the
chargeable company ceases to be a member of the
original group before the lapse of six years from the
date of the said acquisition. References in this
subarticle to a company ceasing to be a member of a
group do not apply to cases where a company ceases to
be a member of the original group by being wound up
or dissolved or in consequence of another member of
the original group being wound up or dissolved:
Provided that where a company ceases to be a member
of the original group by being wound up or dissolved,
for the purpose of determining whether the chargeable
company ceases to be a member of the original group
under paragraph (b), such company shall be deemed to
have remained in existence.
(b) The chargeable company shall cease to be a member of
the original group, if such company and the company
from which it had acquired the shares referred to in
paragraph (a) no longer satisfy the provisions of
subarticle (9)(i) and (iii) and such determination shall
be made by reference to the same individuals referred
to in paragraph (iii) of the said subarticle taken into
account in determining whether the two companies
referred to in this paragraph satisfied the provisions of
subarticle (9)(i) and (iii) on the date of the acquisition
referred to in paragraph (a):
Provided that where the acquisition referred to in
paragraph (a) took place before the 1st January 2010,
subarticle (9)(iii) shall be disregarded for the purpose
of determining whether a company ceases to be a
member of a group:
Provided further that where the chargeable company
ceases to be a member of the original group, solely as
a result of a change in the direct or indirect individual
shareholders of the company from which it had
acquired the shares referred to in paragraph (a), the
chargeable company shall, for the purpose of this
paragraph, not be treated as ceasing to be a member of
the original group as a result of such change, so
however that for the purpose of determining whether
the chargeable company ceases to be a member of the
original group it shall be deemed that such change had
not taken place and such determination shall be made
by reference to the same individuals referred to in sub-
 28 CAP. 123.] INCOME TAX

article (9)(iii) taken into account in determining

whether the chargeable company and the company
from which it had acquired the shares satisfied the
provisions of sub-article (9)(i) and (iii) on the date of
the acquisition referred to in paragraph (a).
(c) For the purpose of this subarticle the term "original
group" shall mean the two companies referred to in
paragraph (b), and the individual direct or indirect
beneficial owners of the said companies who were
taken into account in determining whether the
provisions of subarticle (9)(i) and (iii) had been
satisfied on the date of the acquisition referred to in
paragraph (a):
Provided that where the two companies referred to in
this paragraph are directly or indirectly owned as to
eighty percent or more by a company whose securities
are listed on a stock exchange recognised under the
Cap. 345. Financial Markets Act, the term "original group" shall
mean the two companies referred to above and the
company whose securities are listed on the said stock
exchange as existing on the date of the acquisition
referred to in the paragraph (a):
Provided further that where an individual acquires
shares in terms of a donation exempt from tax under
the provisions of subarticle (2)(e), or a transfer causa
mortis, such individual shall be deemed for all the
purposes of this subarticle to have held such shares
from the date such shares were previously acquired in
an acquisition preceding the date of the donation or the
transfer causa mortis.
(d) When the chargeable company ceases to be a member
of the group it shall be treated for all the purposes of
this article as if, immediately after its acquisition of
the shares referred to in paragraph (a), it had
transferred and immediately re-acquired the shares at
that time.
(e) The base cost and the date of acquisition of the shares
that is taken into account for the purpose of
determining any gain or loss shall be the original cost
and the date when the shares had previously last been
acquired by a company by means of a transfer that did
not qualify for an exemption in terms of subarticle (9)
or by means of an allotment, which ever is the later.
(f) (i) For the purpose of ascertaining the gains or
profits arising under this subarticle, the
acquisition cost of shares acquired before the
25th November, 1992 shall be valued either on
the Equity method of share valuation (net asset
value) based on the last accounts submitted to
the Commissioner by the 18th December, 1992
or on the actual purchase price, whichever is the
 INCOME TAX [CAP. 123. 29

higher.
(ii) Shares acquired on or after the 25th November
1992, shall be valued on the cost of acquisition:
Provided that where an amount standing to the credit
of any of a company’s reserve accounts other than a
capital redemption reserve and profits available for
distribution, is applied in paying up to any extent any
shares allotted by the company, the cost of acquisition
of such shares shall be zero.
(g) Any gain or loss on the transfer referred to in
paragraph (d) shall be treated as accruing to the
chargeable company immediately before the company
ceases to be a member of the group in accordance with
paragraph (b).
(h) For the purpose of paragraph (a) the term "shares in a
company" shall mean shares in a company which, on the
date of the acquisition referred to in the said paragraph
owned, directly or indirectly, any immovable property
situated in Malta or any real rights thereon and the said
property or any part thereof is still, directly or indirectly,
owned by such company on the date it ceases to be a
member of the group in accordance with the provisions of
paragraph (b). For the purpose of this paragraph a
company is treated as indirectly owning immovable
property if it holds, directly or indirectly, shares or other
interests in any entity or person, which owns immovable
property situated in Malta or any real rights thereon
where five percent or more of the total value of the said
shares or other interests so held is attributable to such
immovable property or rights.
(i) Where in accordance with paragraph (d) the
chargeable company is treated as having transferred
and immediately reacquired the shares, and a
chargeable gain or a capital loss accrues to the
chargeable company on the deemed transfer, the
chargeable gain or capital loss accruing on the deemed
transfer shall be treated as accruing not to the
chargeable company but to a related company
("company A") if -
(i) at the time of accrual, company A was
incorporated in Malta, and
(ii) a joint election under this paragraph is made by
the chargeable company and company A to treat
the chargeable gain or capital loss as accruing to
company A, and
(iii) such joint election is made by notice given to the
Commissioner not later than twelve months after
the end of the accounting period of the
chargeable company or company A (whichever
is the earlier) in which the time of accrual fell,
and
 30 CAP. 123.] INCOME TAX

(iv) provisional tax payable in accordance with

Cap. 372. article 43 of the Income Tax Management Act, is
paid by company A at a rate of thirty-five
percent of the market value of the shares deemed
transferred within the period prescribed in the
said article.
For the purpose of this paragraph company A is related
to the chargeable company if both companies form a
group for the purposes of subarticle (9) at the time of
accrual and "time of accrual" means the time at which,
by virtue of paragraph (d), the gain or loss is treated as
accruing to the chargeable company.
(10) (a) A capital loss shall be computed in the same manner as
a capital gain.
(b) Any loss resulting from the transactions falling under
sub-article (1) shall not be set off against other income
for the year of assessment but shall be carried forward
and set off against capital gains in respect of
subsequent years of assessment until the full loss is
absorbed.
(c) Bad debts incurred in relation to the said transactions
proved to the satisfaction of the Commissioner to have
become bad during the year immediately preceding the
year of assessment, notwithstanding that such bad
debts were due and payable prior to the
commencement of the said year, shall be allowed as a
deduction against the capital gains in the year in which
they were incurred and if there are no gains for that
year shall be carried forward and set off against future
gains:
Provided that all sums recovered in respect of amounts
previously allowed as bad debts shall be treated as gains for the
purposes of this article and charged accordingly for the year in
which they are recovered.
(11) The gains or profits from any transaction chargeable under
paragraph of article 4(1)(a) shall not be chargeable again as capital
gains in relation to the same transaction under this article.
(12) (a) The market value of an asset shall be the price which
that asset would fetch if sold on the open market at the
time of transfer;
(b) where the market value of an asset is required to be
determined by the Commissioner he may seek the
opinion or assistance of any appraiser, architect or
other valuer; and
(c) the person making the appraisement or valuation on
behalf of the Commissioner shall for the purpose of
carrying out the task so entrusted to him be deemed to
be a person serving in the Department of the
Commissioner and as having an official duty under
this Act.
 INCOME TAX [CAP. 123. 31

(13) (a) Where a person transfers an asset which, at the time of

acquisition, formed an undivided part of a larger asset
(hereinafter in this paragraph referred to as "the whole
asset"), the deductions allowable in ascertaining the
gain arising from that transfer shall be equivalent to
such proportion of the cost of acquisition of the whole
asset and of the other deductions that would be due in
terms of this article had that person transferred the
whole asset, as the consideration for the transfer bears
at the time of the transfer to the market value of the
whole asset.
(b) (i) A reduction of the share capital of a company
shall be deemed to be a transfer of such
proportion of the holding of the owner as is
equal to the proportion of the reduction of the
capital of the company and shall constitute a
gain or loss for the purpose of this article in the
year in which such reduction is effected:
Provided that where there is a proportionate
reduction in the shareholding of all the
shareholders, such that the proportion of the
shareholding of each shareholder with respect to
number, type, class, voting rights and value of
shares is equal before and after the reduction is
effected, it shall be deemed that no loss or gain
has arisen from the transfer.
(ii) Where the market value of shares held by a
person ("the transferor") in a company has been
reduced as a result of a change in the issued
share capital of such company, or a change in
voting rights attached to such shares, and such
value passes into other shares in or rights over
the company held by any other person ("the
transferee"), the transferor shall be deemed to
have made a transfer of such value so reduced to
the transferee. Any gains or profits shall be
calculated by taking into account the difference
between the market value of the shares held
immediately before and after the said change:
Provided that this paragraph shall not apply
where the change in the issued share capital or
change in voting rights does not produce any
change in the individual direct or indirect
beneficial owners of the said company and in the
proportion in the value of the said company
represented by the shares owned beneficially
directly or indirectly by each such individual:
Provided further that this paragraph shall not
apply where the change in the issued share
capital consists of an allotment of shares in a
company as a result of an exchange of shares on
a restructuring of holdings exempt from tax
 32 CAP. 123.] INCOME TAX

under the provisions of subarticle (14):

Provided also that this paragraph shall not apply
where the said company is a company whose
securities are listed on a stock exchange
Cap. 345. recognised under the Financial Markets Act:
Provided also that this paragraph shall not apply
where the transfer of value is made by the
transferor to a person referred to in subarticle
(2)(e)(i):
Provided also that this paragraph shall not apply
where the said company is not a "property
company" and it can be shown to the satisfaction
of the Commissioner that the said change is
effected for bona fide commercial reasons and
does not form part of a scheme or arrangements
of which the main purpose, or one of the main
purposes is avoidance of liability to tax. For the
purpose of this paragraph the proviso to the
definition of ''property company" in article 2(1)
shall not apply.
(c) On any subsequent transfer of the shares referred to in
paragraph (b)(i), the cost of acquisition shall be
deemed to be the residual part of the cost of
acquisition not taken into account on the reduction of
capital.
(14) Where a transfer involving the exchange of shares on
restructuring of holding upon mergers, demergers, divisions,
amalgamations and reorganisation takes place it shall be deemed
that no loss or gain has arisen from such transfer and the cost of
acquisition upon a subsequent transfer of the original shares or the
new shares shall be deemed to be the cost of acquisition of the original
shares.
For the purposes of this subarticle -
"original shares" means shares held before and involved in
the restructuring, and
"new shares" means, in relation to any original shares, the
shares in the company which, as a result of the restructuring, represent
the original shares:
Provided that the provisions of this subarticle shall only
apply in such manner and in such circumstances as may be
prescribed by the Minister:
Provided further that the first proviso hereof shall not apply
to divisions and mergers where the draft terms of the said divisions
and mergers had been forwarded to the Registrar of Companies for
Cap. 386. registration in terms of the provisions of the Companies Act on or
prior to the 24th November, 2003 and the Registrar had published
the relevant statement in the Government Gazette in terms of the
said Act on or prior to the 31st December, 2003, provided that a
copy of the relative publication is attached to the relative deed.
 INCOME TAX [CAP. 123. 33

(15) Where a business or a partnership en nom collectif, as a

going concern is incorporated into a limited liability company,
which is beneficially owned to the extent of not less than seventy-
five per cent by the same person who owned the business or the
partnership en nom collectif and there is a transfer of assets it shall
be deemed that no loss or gain has arisen from the transfer.
Provided that where such assets are subsequently transferred by the
company, the base cost and date of acquisition of the assets that
would be considered, whether chargeable under this article or under
article 4(1)(a), shall be the original cost and the date when it was
acquired before the first transfer took place:
Provided further that this article shall apply only where an
individual or a partnership en nom collectif transfers to a company
a business as a going concern, together with the whole assets of the
business, or together with the whole of those assets other than cash,
and the business is so transferred wholly in exchange for shares
issued by the company to the person transferring the business:
Provided also that for the purpose of computing any
chargeable gain accruing on the disposal of the said shares, the cost of
acquisition taken into account shall be reduced by any chargeable gain
that would have resulted on the transfer of the said business had this
subarticle and article 5A not been applied.
(16) For the purposes of this article the value of the usufruct and
of the nuda proprietas shall be computed in accordance with the
provisions set out in the Duty on Documents and Transfers Act. Cap. 364.

(17) The Minister may make rules making provision for the
purpose of removing the effect of any scheme made for the purpose
of avoiding, reducing or postponing any tax due under this article,
and in addition the Minister may make rules providing that any
transfer of any right referred to in subarticle (1) shall only be valid
if it is made by agreement in writing and if payment of such portion
of the provisional tax on the capital gains due thereon is made as
may be prescribed and if the said agreement is registered in such
manner as may be prescribed with such authority as may be
prescribed.
(18) On the settlement of property on trust, where the trust is Settlement of
established or evidenced by means of a written instrument it shall property.
be deemed, for the purposes of this article that -
(a) no transfer had taken place where the sole settlor is
also the sole beneficiary of such trust;
(b) such property had been donated directly by the settlor
of such trust to the beneficiaries that are persons other
than the settlor himself:
Provided that -
(i) the relevant trust instrument specifically
provides that the beneficiaries have an
irrevocable vested right to receive all the
property settled in trust as specified in the said
written instrument; and
(ii) the relevant trust instrument specifically
 34 CAP. 123.] INCOME TAX

provides that the beneficiaries are, in relation to

each settlor, persons referred to in subarticle
(2)(e)(i), whether they are in existence or not at
the time of such settlement, or are persons
referred to in paragraph (e)(ii) of the said
subarticle in each case, such persons being either
alone or with the settlor himself; and
(iii) the beneficiaries include persons who are in
existence at the time of the settlement of such
property on trust;
(c) no loss or gain had arisen:
Provided that -
(i) the relevant trust instrument specifically
provides that the beneficiaries of such trust
comprise only persons referred to in subarticle
(2)(e)(i), whether they are in existence or not at
the time of such settlement, in relation to each
settlor and may also include the said settlor
himself; and
(ii) the beneficiaries of such trust include at the time
of such settlement a person who by reason of an
interdiction, incapacitation, or of a physical or
mental impairment, or by reason of an irregular
or dissolute lifestyle is substantially limited in
his ability to administer or manage the property
settled in trust, or include at the time of such
settlement a person who by reason of a physical
or mental impairment is or may become unable
to fully provide for his own maintenance, and
where the trustee of such trust provides the
Commissioner with the necessary evidence
proving such interdiction, incapacitation,
impairment or inability in the form of medical
certificates, court orders or any other relevant
documents which the Commissioner may deem
necessary; and
(iii) the beneficiaries of such trust include persons
who are in existence at the time of the settlement
of such property.
Transfers of (19) (a) For the purposes of the provisions of subarticle
beneficial interest. (1)(a)(iii), gains or profits shall be deemed to arise on
the date of the execution of a written instrument
(hereinafter in this subarticle referred to as "transfer
instrument") whereby there is a transfer of the
beneficial interest in a trust which includes taxable
trust property. For the purposes of this subarticle
"taxable trust property" means property referred to in
subarticle (1)(a)(i) and (ii):
Provided that this phrase includes only such property,
the transfer of which, had it been carried out directly
by the relevant beneficiary, would have given rise to
 INCOME TAX [CAP. 123. 35

gains or profits chargeable to tax in accordance with

the provisions of this Act.
(b) The gain or profit arising from the transfer of the
beneficial interest in a trust which has taxable trust
property shall be equal to the consideration for the said
beneficial interest as declared in the relevant transfer
instrument. No deductions shall be allowable against
the consideration payable to the transferor.
(c) The gain or profit that is determined in accordance
with paragraph (b) shall be taxable at the rate specified
in article 56(6). No relief, reduction, credit or set-off of
any kind shall be made in respect of such tax.
(d) In addition to the requirements laid down in Sub-Title
VII of Title VI of Part II of Book Second of the Civil Cap. 16.
Code, any person transferring the beneficial interest in
a trust which includes taxable trust property shall,
within forty-five days of the date on which the transfer
instrument was executed, provide the trustee of such
trust with an authenticated copy of the said transfer
instrument and shall require the trustee to collect an
amount of tax equal to the tax determined in
accordance with the provisions of paragraph (c) for
onward payment to the Commissioner.
(e) The tax so collected by the trustee from the transferor
in accordance with the provisions of paragraph (d)
shall be a debt due from the trustee to the
Commissioner payable by not later than the fourteenth
day following the end of the month in which the trustee
had collected the tax. Together with this payment, the
trustee shall provide the Commissioner with -
(i) an account of the gains or profits together with a
list of all the assets making up the taxable trust
property on the date the transfer instrument was
executed on such form as may be prescribed;
(ii) an authenticated copy of the relevant transfer
instrument; and
(iii) a copy of the last financial statements of the
trust.
(f) The trustee of the relevant trust shall, by not later than
fifteen days from the date when he receives
acknowledgement from the Commissioner of receipt of
the tax and documents referred to in paragraph (e),
furnish the parties to the transfer instrument with a
certificate evidencing that the tax has been paid and
that his obligations under paragraph (e) have been
fulfilled.
(g) Notwithstanding the provisions of Sub-Title VII of
Title VI of Part II of Book Second of the Civil Code, Cap. 16.
any transfer of a beneficial interest in a trust which
includes taxable trust property shall not take place and
 36 CAP. 123.] INCOME TAX

shall not have any effects for the purposes of any law
unless the said transfer is made by means of a transfer
instrument and unless the transferor and the trustee
have fulfilled their obligations in accordance with the
provisions of paragraphs (d) and (e).
Cap. 372. (h) Subject to the provisions of article 10A of the Income
Tax Management Act, the person transferring the
beneficial interest in a trust which includes taxable
trust property shall not be obliged to disclose the
existence of such gains or profits in any return made
pursuant to the provisions of the Income Tax Acts and
no further tax shall be payable on such gains or profits.
(i) The provisions of this article shall not apply -
(i) where the Commissioner is satisfied that an
irrevocable disclaimer of a beneficial interest
was not effected with the sole or main purpose
of avoiding, reducing or postponing liability to
tax and where he has, at his discretion, ordered
in writing that the provisions of this article are
not applicable to such a disclaimer;
(ii) to any transfer of beneficial interest in a trust
where the trustee holds property solely for the
purpose of a designated commercial transaction
as defined in subarticle (24).
Transfers of (20) (a) Where, in the administration of a trust, the trustee
property in the transfers property of such trust, gains shall be
administration of
trusts. ascertained in accordance with the provisions of this
article and the cost of acquisition shall be determined
in accordance with the provisions of paragraphs (b)
and (c).
(b) In the case where such property had been settled in
trust in any of the circumstances described in
subarticles (18) and (24) where the settlor is also a
beneficiary of the trust, the cost of acquisition shall be
equal to the cost of acquisition of such property at the
time it was originally acquired by the settlor of such
trust. Where the property had been settled in the
circumstances described in subarticle (18)(a) or
subarticle (24)(a), it shall be deemed for the purposes
of this article that the settlor has directly transferred
such property.
(c) Subject to the provisions of paragraph (b), the cost of
acquisition shall be the cost of acquisition at the time
when such property was first acquired as trust property
of that trust whether by way of settlement or otherwise.
Distribution of (21) (a) For the purposes of this article, property is distributed
property settled on to beneficiaries of a trust when the trustee transfers
trust.
property of a trust to any beneficiary of such trust
provided that such transfer does not constitute a
reversion of property settled on trust as defined in
subarticle (22)(a).
 INCOME TAX [CAP. 123. 37

(b) Where property which had been settled on trust is

distributed to the beneficiaries it shall be deemed that
for the purpose of this article -
(i) no transfer took place in the case where such
property had been settled in the circumstances
described in subarticle (18)(b) provided that the
property was distributed to beneficiaries which
were not settlors of the trust;
(ii) property distributed to persons referred to in
subarticle (2)(e)(i) in relation to the settlor, was
donated directly by the settlor to such
beneficiaries where such property had been
settled in the circumstances described in
subarticle (18)(c);
(iii) notwithstanding the relevant deeming provisions
of subarticle (18), such property was donated
directly by the original settlor of that property to
such beneficiaries where such property had been
settled in the circumstances described in
subarticle (18)(b) and (c) and was subsequently
distributed to a beneficiary that was also a
settlor of such trust:
Provided that the said beneficiary is a person
referred to in subarticle (2)(e)(i) in relation to
the said original settlor who had owned such
property prior to its settlement in trust.
(c) The provisions of subarticle (20) shall apply mutatis
mutandis in the circumstances of a distribution of
property as they apply to the transfer of property in the
administration of a property of a trust.
(22) (a) For the purpose of this article, property settled on trust Reversion of
reverts where there is a transfer to a person who is the property to settlor.
settlor of a trust (even where such person is a
beneficiary of that same trust) of property which had,
immediately before its settlement into such trust, been
owned by that same settlor.
(b) Where property which had been settled in trust in the
circumstances described in subarticle (18) reverts back
to the settlor, notwithstanding the relevant deeming
provisions of subarticle (18), it shall be deemed for the
purposes of this article that such property had never
been settled into such trust.
(c) Where property had been settled into trust in
circumstances other than those described in paragraph
(b), and where such property reverts back to the settlor
for the reasons referred to in article 16 of the Trusts Cap. 331.
and Trustees Act, it shall be deemed for the purpose of
this article that no loss or gain had arisen in the event
of such reversion.
(d) The provisions of subarticle (20) shall apply mutatis
 38 CAP. 123.] INCOME TAX

mutandis in the circumstances of a reversion of

property settled on trust as they apply to the transfer of
property in the administration of a property of a trust.
Subsequent (23) In the case of a subsequent transfer of property by a settlor
transfers by settlors or beneficiary, as the case may be -
or beneficiaries.
(a) where such property had reverted to such settlor; or
(b) where such property was distributed to the
beneficiaries, and where -
(i) such distribution was deemed, in accordance
with the provisions of this article, to be a direct
donation from the settlor of the trust to the said
beneficiaries of such trust; and
(ii) such property is transferred by such
beneficiaries within the period of time referred
to in subarticle (2)(f) from the date of such
deemed donation;
capital gains shall be ascertained in accordance with the provisions
of this article by taking into account the cost of acquisition of such
property at the time it was originally acquired by the settlor of the
trust before the relevant settlement.
Transfers (24) (a) No transfer of the property shall be deemed to have
involving changes taken place -
in trustees and
particular (i) on the settlement of property consisting of
commercial
reasons. shares in one company when the settlor who
owned the said shares prior to the settlement
thereof on trust is also the sole beneficiary of the
trust;
(ii) on the settlement of property consisting of
shares in one company when the settlement is
made by more than one settlor, and the said
settlors are the only beneficiaries of the trust,
and the beneficiaries are entitled to benefit in
accordance with the terms of the trust in the
same proportion as they would have done as
settlors;
(iii) on the reversion to the settlors of the shares
referred to in subparagraphs (i) and (ii) in the
same proportion which the settlors would have
been entitled to when the property was owned by
them as settlors immediately prior to the
settlement;
(iv) upon the transfer of shares in one company
purchased by a trustee with money settled in
trust by a settlor for the purpose of acquiring,
purchasing or subscribing to such shares, when
the said transfer is made to the sole beneficiary
of the trust who is also the original settlor;
 INCOME TAX [CAP. 123. 39

and in each case, the trustee is a person authorised or

not required to be so authorised to act as a trustee in
terms of articles 43 and 43A of the Trusts and Trustees Cap. 331.
Act.
(b) No transfer of the property of a trust shall be deemed
to have taken place where the trustee of such trust
transfers all the property of such trust, which transfer
involves only a change in the trustee of such trust and
there is no change in the beneficiaries or in the
beneficial interest.
(c) No loss or gain shall be deemed to have arisen where
property is settled into a trust and where the trustee
holds such property for the purpose of designated
commercial transactions or where such property so
settled reverts to the settlor. Where such property is
transferred by the trustee of such trust to its
beneficiaries (or to any person through a judicial sale
or otherwise), the cost of acquisition shall be the cost
at which the settlor of such trust had acquired the said
property. In such a case, the provisions of subarticle
(10) can be availed of by the settlor in the same
manner as if the transfer of the property by the trustee
had been made directly by the settlor himself. Where
such property is not so transferred but reverts to the
settlor, or where the settlor waives his right to a
reversion of the property, and there is a subsequent
transfer of such property, the cost of acquisition shall
be the cost at which the settlor had acquired the said
property prior to its settlement into the said trust.
Subject to the approval of the Commissioner, the
provisions of this paragraph shall also be applicable
where a property is settled into a trust for the purpose
of a commercial transaction not being a designated
commercial transaction. For the purposes of this
paragraph, "designated commercial transactions"
means the custody of investment instruments, the
establishment or holding of real or personal security
interests (including hypothecs, privileges, pledges and
guarantees), and any other commercial transaction
which may be prescribed, while "commercial
transaction" shall have the meaning assigned to it in
article 2 of the Trusts and Trustees Act.
(25) (a) Where a person that is authorised or not required to be Transfers of shares
so authorised to act as a trustee in terms of articles 43 involving fiduciary
relationships.
and 43A of the Trusts and Trustees Act holds in its own Cap. 331.
name shares in a company on behalf of the beneficial
owner of such shares, and where such person transfers
or otherwise disposes of the beneficial ownership of
such shares to a third party, such a transaction shall be
deemed to constitute a transfer of shares for the
purposes of this article.
 40 CAP. 123.] INCOME TAX

(b) Where a change in the registered holder of shares in a

company does not involve a change in the beneficial
ownership thereof, such change shall not be deemed to
constitute a transfer of shares for the purposes of this
article provided that the registered holder of such
shares remains a person authorised or not required to
be so authorised to act as a trustee in terms of articles
Cap. 331. 43 and 43A of the Trusts and Trustees Act.
(c) For the purposes of this subarticle "beneficial owner"
means a person who is the real owner of, or who is
otherwise beneficially entitled to, the shares which are
subscribed or held on his behalf and in his interest by a
person authorised or not required to be so authorised to
act as a trustee in terms of articles 43 and 43A of the
Cap. 331. Trusts and Trustees Act and "beneficial ownership"
shall be construed accordingly.
(d) When the shares referred to in this subarticle are
transferred either by the trustee to a person other than
the settlor or by the settlor to a third party after the
shares have reverted to the settlor, the acquisition cost
shall be deemed to be the cost of acquisition of the
shares by the settlor when the shares were originally
purchased or subscribed by the settlor prior to the
shares being settled into the trust.
Power to make (26) The Minister may make regulations determining the method
rules. of calculation of capital gains in relation to transfers involving
trusts and to prescribe any matter that may be prescribed in relation
to such transfers.

Property transfers. 5A. (1) Notwithstanding any other provision of the Income
Added by: Tax Acts, tax shall be chargeable and payable on any transfer to
II. 2006.8.
Amended by: which this article applies in such amount, at such rate and in such
II. 2007.4; manner as provided herein.
IV. 2007.8;
II. 2009.11; (2) (a) In this article, unless the context otherwise requires -
I. 2010.13;
IV. 2011.9; "own residence" has the meaning assigned to it in
V. 2012.11;
L.N. 218 of 2012; article 5(5)(c);
III. 2013.20; "project" means property that has been developed by
XII. 2014.14.
the owner into more than one transferable unit or
divided for transfer into more than one transferable
portion;
"property" means any immovable property situated in
Malta and any right over such property;
"transfer" has the meaning assigned to it in article
5(1)(b) and includes any assignment or cession of any
rights over property, and any occurrence that is deemed
to be a transfer in terms of subarticle (12A) of this article
and any provision of article 5. It shall not include a
partition of property where no owelty is due. When
property is transferred by means of a deed of exchange
the parties shall be deemed to have made two separate
deeds of transfer.
 INCOME TAX [CAP. 123. 41

(b) Saving the provisions of subarticle (7), property

assigned to a co-partitioner under a deed of partition
shall be deemed to have been acquired by that co-
partitioner at the time that he had acquired his
undivided share before that partition and by virtue of
the same transfer causa mortis or inter vivos under
which he had acquired that undivided share.
(c) In determining whether an owelty is due on a contract
of partition, the provisions of article 5(2)(d) shall
apply mutatis mutandis.
(d) Any gains or profits derived from the assignment of
any right obtained in terms of a promise of sale
(konvenju), including a promise to alienate in any
manner immovable property or a promise in respect of
emphyteusis, shall in all cases be deemed to be gains
or profits derived from a trade, business, profession or
vocation falling within the scope of article 4(1)(a):
provided that for the purpose of ascertaining the total
income resulting from any such assignment no
deductions shall be allowable except as and to such
extent as may be prescribed.
(3) Saving the other provisions of this article, this article
applies to any transfer of property made on or after the 1st
November, 2005, excluding:
(a) a transfer in respect of which all the following
conditions are satisfied:
(i) a notice of a promise of sale or transfer relating
to that transfer has been given to the
Commissioner in accordance with the provisions
of article 3(6) of the Duty on Documents and Cap. 364.
Transfers Act or of rules made under that Act by
not later than the 22nd November, 2005;
(ii) the transfer is made on or after the 1st
November, 2005 but not later than the 31st
March, 2006 and is made pursuant to and for the
consideration and at the same terms provided for
in that promise of sale or transfer;
(iii) a notice of that transfer is given to the
Commissioner in accordance with the said Act
by not later than the 15th May, 2006;
(iv) the transferor elects, by means of a declaration
made to the notary at the time of the publication
of the deed of the transfer and recorded in the
said deed, to exclude that transfer from the scope
of this article;
(b) a transfer of property that is made not later than twelve
years after the date of the acquisition thereof if the
transferor elects, by means of a declaration made to
the notary at the time of the publication of the deed of
the transfer and recorded in the said deed, to exclude
 42 CAP. 123.] INCOME TAX

that transfer from the scope of this article:

Provided that in the case of a transfer that is made on
or after the 1st March, 2006, of property that forms
part of a project:
(i) an election as aforesaid may only be made if the
transfer is the first transfer made by the said
transferor, on or after the said date, of property
forming part of that project; and
(ii) when an election as aforesaid has been made it
shall also apply to all subsequent transfers of
property forming part of that project made by the
said transferor not later than twelve years from
the date of the acquisition thereof, and all such
transfers shall accordingly be transfers to which
this article shall not apply:
Provided further that, for the purposes of determining
whether the property has been transferred not later
than twelve years from the date of its acquisition,
where the transferor is a company that had acquired
the property by means of a transfer that qualified for
an exemption in terms of subarticle (4)(f) or article
5(9) ("intra-group exemption"), it shall be deemed to
have acquired the property on the date on which the
property had previously last been acquired by a
company by means of a transfer that did not qualify for
the intra-group exemption;
(c) a transfer of property situated within a special
Cap. 246. designated area, as defined in the Immovable Property
(Acquisition by Non-Residents) Act, if it is made by
the person who was the owner of that property on the
date when that area first became a special designated
area and if the transferor elects, by means of a
declaration made to the notary at the time of the
publication of the deed of the transfer and recorded in
the said deed, to exclude that transfer from the scope
of this article:
Provided that -
(i) in a transfer that is made on or after the 1st
March, 2006, an election as aforesaid may only
be made if the transfer is the first transfer of
property situated within that special designated
area made by the said transferor on or after the
said date; and
(ii) when an election as aforesaid has been made it
shall also apply to all subsequent transfers of
property situated within that special designated
area, made at any date by the said transferor, and
all such transfers shall accordingly be transfers
to which this article shall not apply;
(d) a transfer in respect of which all the following
conditions are satisfied:
 INCOME TAX [CAP. 123. 43

(i) the property was, immediately before the

transfer, co-owned by two individuals and the
transfer is made by one of the co-owners to the
other;
(ii) the co-owners had, for the purposes of article
32(4)(a) of the Duty on Documents and Cap. 364.
Transfers Act, declared in the deed of the
acquisition of that property that they had
acquired it for the purpose of establishing
therein or constructing thereon their sole
ordinary residence;
(iii) the transferor elects, by means of a declaration
made to the notary at the time of the publication
of the deed of the transfer and recorded in the
said deed, to exclude that transfer from the scope
of this article;
(e) a transfer in respect of which all the following
conditions are satisfied:
(i) it is a transfer of property to the Government of
Malta made pursuant to an acquisition of that
property in terms of the Land Acquisition Cap. 88.
(Public Purposes) Ordinance;
(ii) the Government had taken possession of that
property, or an Order of the President has been
issued in respect thereof, before the 1st
November, 2005 and this fact is evidenced by a
letter signed by the Commissioner of Land and
attached to the deed of transfer. The transferor
shall produce that letter to the notary publishing
the deed. The notary shall attach that letter to the
deed of the transfer and shall deliver a certified
copy thereof to the Commissioner in such
manner as may be prescribed;
(iii) the transferor elects, by means of a declaration
made to the notary at the time of the publication
of the deed of the transfer and recorded in the
said deed, to exclude that transfer from the scope
of this article;
(f) a transfer made by means of a judicial sale by auction
or in the course of a winding up by the Court;
(g) a transfer of property that had been used in a business
for a period of at least three years and that is replaced
within one year by property ("the new property") used
solely for a similar purpose of the business:
Provided that:
(i) this paragraph shall only apply, and accordingly
article 5(8) shall apply, if the transferor so elects
by means of a declaration made to the notary at
the time of the publication of the deed of the
transfer and recorded in the said deed;
44 CAP. 123.] INCOME TAX

(ii) when, subsequent to a transfer to which article

5(8) applied, including a transfer made before
1st November, 2005, the new property is
disposed of and that disposal does not qualify
for the tax relief under article 5(8), that disposal
shall also be a transfer to which this article 5A
does not apply, and the income, whether
chargeable under article 4(1)(a) or under article 5,
derived therefrom shall be determined as provided
in article 5(8);
(iii) this paragraph shall not apply, and accordingly
article 5(8) shall not apply, if the replacement
property is disposed of or ceases to be used in such
business, within a period of two years starting from
the date the replacement property was acquired or
such shorter period as the Commissioner may
determine;
(h) a transfer of property by a person who is not resident
in Malta and who is resident for tax purposes in
another country if that person produces to the notary
who publishes the deed of transfer a statement signed
by the tax authorities of the country of that person’s
residence that confirms that person’s residence in that
country and that certifies that that person is subject to
tax in that country on gains or profits derived from the
transfer of immovable property situated in Malta. The
notary shall attach that statement to the deed and shall
deliver an authenticated copy thereof to the
Commissioner in such manner as may be prescribed:
Provided that such person is not owned or controlled
by, directly or indirectly, nor acts on behalf of, an
individual or individuals who is or are resident in
Malta;
(i) a transfer of property pursuant to a lease agreement
that included the option of purchase of the property at
an agreed price, where the said arrangements had been
made prior to, but the transfer occurs after, the 1st
November 2005.
(4) No tax shall be chargeable on a transfer to which this article
applies where that transfer is:
(a) a donation made by a person:
(i) to his spouse, to his descendant or ascendant in
the direct line, or to the spouse of any such
descendant or ascendant, or, in the absence of
any descendants in the direct line, to his brother
or sister or to a descendant of his brother or
sister,
(ii) to a philanthropic institution approved for the
purposes of article 12(1)(e);
(b) a donation deemed to have been made in terms of
article 5(18)(b) or 5(21)(b)(ii) by a person to a person
 INCOME TAX [CAP. 123. 45

or institution mentioned in paragraph (a);

(c) a transfer of property that has been owned and
occupied by the transferor as his own residence for a
period of at least three consecutive years immediately
preceding the date of transfer and provided that the
property is disposed of within twelve months of
vacating the premises and provided further that this
paragraph shall only apply where the transfer would
not have been chargeable under the provisions of
article 4(1)(a) but for the provisions of this article:
Provided that:
(i) any period during which the transferor has
occupied the property as his own residence with
the permission of the Housing Authority
pursuant to a promise of sale (konvenju) by that
Authority shall be deemed to be a period during
which the transferor owned that property;
(ii) where the property was inherited by the
transferor from a direct ascendant, the period
during which the said ascendant had owned and
occupied the property as his own residence shall
be deemed to be a period during which the
property had been owned by the transferor;
(iii) where the transferor had acquired the property
under an assignment to which paragraph (d) or
(e) refers, the period during which the person
making that assignment had owned the property
and used it as his own residence shall be deemed
to be a period during which the property had
been owned by the transferor;
(iv) where any condition for the exemption under
this paragraph is satisfied in respect only of an
undivided part of the property the exemption
shall be restricted proportionately;
(v) where the property was inherited by the
transferor from his or her spouse, the period
during which the said spouse had owned and
occupied the property as his or her own
residence shall be deemed to be a period during
which the property had been owned by the
transferor;
(d) the assignment of property between spouses
consequent to a judicial or consensual separation or a
divorce:
Provided that the provisions of this paragraph shall
also apply where the property to be assigned is owned
by a company which is fully owned by any or both
spouses;
(e) the assignment of property that formed part of the
community of acquests between the spouses or was
otherwise owned in common between them, to one of
46 CAP. 123.] INCOME TAX

the spouses on the dissolution of the community, or the

partition of such property between the spouses or the
surviving spouse and the heirs of the deceased spouse;
(f) a transfer of property from one company to another
which, would qualify for tax relief under article 5(9)
but for the provisions of this article:
Provided that the provisions of article 5(9)(ii) and (iv)
shall also apply to the said transfer:
Provided further that if such transfer does not qualify
for tax relief under article 5(9) solely for the reason
that it is not a transfer of a capital asset, such transfer
shall be exempt from tax under the provisions of this
paragraph if the said transfer is part of a restructuring,
involving the transfer of the whole or part of a
company’s business to another company and the said
property has been owned by the transferring company
for a period exceeding twelve years:
Provided also that on a subsequent transfer of the said
property made within a period of twelve years after the
date of the acquisition thereof as determined in
accordance with the second proviso to subarticle
(3)(b), the cost and date of acquisition of the said
property shall, where the transferor elects to exclude
the transfer from the scope of this article, be the
original cost and the date referred to in article 5(9)(i).
(g) the transfer of property upon the incorporation of a
business or a partnership en nom collectif as a going
concern into a limited liability company that satisfies
the conditions laid down in article 5(15):
Provided that this paragraph shall not apply, and
accordingly article 5(15) is not applicable, if the
business is disposed of or ceases to exist, within a
period of two years starting from the date the business
is transferred to the said company or such shorter
period as the Commissioner may determine:
Provided further that, for the purposes of determining
whether the property has been transferred not later
than twelve years from the date of its acquisition,
under subarticle (3)(b), where the transferor is a
company that had acquired the property by means of a
transfer that qualified for an exemption in terms of this
subarticle or article 5(15), it shall be deemed to have
acquired the property on the date on which the
property had previously been acquired by the person
transferring the property to the said company;
(h) the settlement of property on trust, or the distribution
or reversion of property settled on trust, or the transfer
of all the property of a trust involving only a change in
the trustee of a trust and where there is no change in
the beneficiaries or in the beneficial interest:
 INCOME TAX [CAP. 123. 47

Provided that for the purposes of the provisions of

article 5(18) to (25), it is deemed that in such
instances, no transfer has taken place, or that no loss or
gain has arisen;
(i) except as may be otherwise prescribed, the transfer of
property by a person whose income or capital gains
from the transfer of that property is exempt from tax in
terms of article 12(1), or an exemption order made
under article 12(2), or any other provision of the
Income Tax Acts or any other law;
(j) A transfer of property by a company to its shareholder
or to an individual related to its shareholder in the
course of winding up or in the course of a distribution
of assets pursuant to a scheme of distribution, where
the said shareholder is an individual or his spouse,
who owns or own, directly or indirectly, not less than
95% of the share capital and voting rights of the said
company transferring the property as aforesaid.
For the purpose of this paragraph an individual is
related to the said shareholder if such individual is his
spouse, his descendant or ascendant in the direct line,
or the spouse of any such descendant or ascendant, or,
in the absence of any descendants in the direct line, his
brother or sister or a descendant of his brother or
sister:
Provided that this paragraph shall only apply where all
the following conditions have been satisfied:
(i) the said shareholder held, directly or indirectly,
not less than 95% of the share capital and voting
rights of the company transferring the property
for a period exceeding five years immediately
preceding the date of the transfer of the property
as aforesaid;
(ii) the said property consists of a dwelling house,
garage, shop, office, store or warehouse;
(iii) the said property is held as a capital asset by the
company and has been so held for a period
exceeding five years immediately preceding the
date of the transfer of the property as aforesaid:
Provided further that, on a subsequent transfer of the
said property by the said shareholder or related
individual, the provisions of subarticle (3)(b) shall not
apply:
Provided also that where the said property is
subsequently transferred by the said shareholder or
related individual, as the case may be, to a person
referred to in subarticle (4)(a)(i), and such person
subsequently transfers the said property within a
period of five years from the date of its acquisition the
provisions of subarticle (3)(b) shall not apply:
48 CAP. 123.] INCOME TAX

Provided also that every company resident in Malta shall

allocate the distributable profits derived from a transfer
to which this paragraph applies, and on which no tax is
payable in accordance with this paragraph, to the final tax
account.
(5) (a) Subject to the other provisions of this sub-article, the
tax on a transfer to which this article applies shall be
chargeable at the rate of 12% of the transfer value.
(b) When a transfer to which this article applies is a
transfer of property -
(i) that was acquired by the transferor in terms of a
transfer causa mortis that happened after the
24th November, 1992; or
(ii) that was acquired by the transferor in terms of a
donation made more than five years before the
date of the transfer in question,
the tax thereon shall be chargeable at 12% of the
excess, if any, of the transfer value over its acquisition
value.
(c) When a transfer to which this article applies is a
transfer of property that was acquired by the transferor
in terms of a transfer causa mortis that happened
before the 25th November, 1992, the tax thereon shall
be chargeable at the rate of 7% of the transfer value.
(d) Subject to the provisions of paragraphs (b) and (c),
when a transfer to which this article applies is a
transfer of property in the circumstances referred to in
article 31C(1), the tax thereon shall be chargeable at
the rate of 10% of the transfer value.
(6) (a) The transfer value of property is the higher of the
market value of that property and the consideration
paid or payable for the transfer. In a contract of
emphyteusis and in any transfer of property where the
consideration consists of or includes periodical payments
to which article 4(1)(d) or (e) applies, the ground rent or
any such other periodical payment payable shall be
chargeable as income in accordance with the
provisions of article 4 and shall not be included in the
transfer value of a transfer to which this article applies.
(b) The acquisition value of property shall be determined
in such manner as may be prescribed.
(7) In a partition of property where an owelty is paid -
(a) any person to whom an owelty is due shall be deemed
to have sold part of the property assigned to him. That
sale shall be deemed to be made on the date of the
partition for a consideration equivalent to the owelty;
and
(b) any person by whom an owelty is due shall be deemed
to have bought part of the property assigned to him.
 INCOME TAX [CAP. 123. 49

That purchase shall be deemed to be made on the date

of the partition for a consideration equivalent to the
owelty.
(8) (a) When a transfer is a transfer of property that was
acquired under more than one acquisition, and the tax
chargeable on the transfers of the parts so acquired or
on the gains or profits derived therefrom would fall, if
t h o s e p a r t s w e r e t r a n s f e r r e d s e p a r a t e l y, t o b e
determined in accordance with different provisions of
the Income Tax Acts, those provisions shall apply as if
more than one transfer has taken place and the transfer
v a l u e o f e a c h su c h t r a n s f e r sh a l l be d e t e r m i n e d
separately and in such manner as may be prescribed.
(b) When property is transferred in part the acquisition
value of the part that is transferred shall be a
proportion of the acquisition value of the whole
determined in such manner as may be prescribed.
(9) (a) Except as may be prescribed, the amount on which tax
is chargeable in accordance with this article shall not
be reduced by any deduction whatsoever.
(b) No losses or bad debts arising from, or expenditure
incurred in respect of, a transfer to which this article
applies shall be allowable as a deduction against any
income or capital gains.
(10) (a) Tax payable on a transfer to which this article applies
shall be final and shall be separate and distinct from
that paid or payable under any other provisions of this
Act or of the Income Tax Management Act. It shall not Cap. 372.
be available as a credit against the tax liability of any
person or taken into account for the purpose of
determining the amount of any refund payable under
the said Acts. No provisional tax shall be payable
under article 43 of the Income Tax Management Act in
respect of any transfer to which this article applies.
(b) Saving the other provisions of this article, no tax shall
be chargeable in terms of any provision of the Income
Tax Acts on gains or profits derived from any transfer
to which this article applies to the extent that they are
attributable to a transfer whose transfer value has been
correctly declared in the deed of the transfer or a
transfer which has been correctly declared to be
exempt or out of the scope of this article, or
determined by means of an order in writing that is
made under subarticle (12)(c) and that has become
final and conclusive.
(c) Any person who owns immovable property situated in
Malta shall keep an account in such manner as may be
prescribed of all proceeds and expenditure relating to
transfers to which this article applies in addition to any
other accounts and records that he is required to keep
in accordance with the other provisions of the Income
50 CAP. 123.] INCOME TAX

Tax Acts.
(d) Every company resident in Malta shall allocate the
distributable profits derived from transfers to which
this article applies, and on which tax is payable in
accordance with this article, to the final tax account.
The said distributable profits shall be determined in
such manner as may be prescribed.
(e) Any party to a transfer to which this article applies or
to a promise of sale relating to such a transfer shall
furnish the Commissioner with such particulars
relating to that transfer as the Commissioner may
require or as may be prescribed.
(11) Tax chargeable under this article shall be due by the
transferor and shall be remitted to the Commissioner within fifteen
w o r k i n g d a y s o f t h e r e l a t i v e t r a n s f e r. E x c e p t w h e r e t h e
Commissioner orders otherwise, either in a general manner or in
respect of particular cases, this payment is to be made by the notary
who publishes the transfer deed by means of a bank draft or a
cheque drawn on that notary`s personal bank account, payable to
the Commissioner.
(12) (a) The parties to any transfer of property shall be obliged
to declare to the notary publishing the deed of transfer
all the facts that determine if the transfer is one to
which this article applies and that are relevant for
ascertaining the proper amount of tax chargeable or
any exemption, including the value which, in their
opinion, reasonably reflects the market value of the
s a i d p r o p e r t y, i f t h i s v a l u e i s h i g h e r t h a n t h e
consideration for the transfer.
(b) The notary publishing a deed of transfer shall warn the
parties about the importance of the truthfulness of
declarations made therein and shall record in the deed
the fact that he has given the said warning.
(c) Where it appears to the Commissioner that -
(i) tax is chargeable on a transfer which is declared
in the deed to be a transfer on which no tax is
payable; or
(ii) the tax chargeable on a transfer is, for any
reason, more than that declared to be payable in
the deed,
he may issue an order in writing to the transferor
stating therein the tax which in his opinion is properly
chargeable in the circumstances and the additional tax
as specified in paragraph (e).
(d) An order under this sub-article may be made not later
than six years from the end of the year in which the
transfer is notified to the Commissioner:
Provided that an order that is made solely on account
of the fact that the market value of the property in
question is higher than the transfer value declared in
 INCOME TAX [CAP. 123. 51

the deed -
(i) may only be made if the declared transfer value
is less than eighty-five per cent of the market
value; and
(ii) may not be made later than twelve months after
the date on which the transfer is notified to the
Commissioner.
(e) The additional tax referred to in paragraph (c) shall be
equivalent to the difference between the amount of tax
payable as declared in the deed and the amount of tax
payable in accordance with the order referred to in
paragraph (c).
(f) The additional tax referred to in paragraphs (c) and (e)
shall be payable by the transferor in addition to the tax
which is payable on the transfer value of the property
in accordance with the other provisions of this article.
(g) If any amount of tax due in accordance with this article
is not remitted to the Commissioner within the time set
out in subarticle (11), interest shall be charged thereon
at the rate of one per cent per month or part thereof for
the period ending on the day on which that amount is
remitted:
Provided that, for any period or part thereof commencing
on or after 1st January 2009, interest shall be calculated
at the rate of point seven five percent (0.75%) per month
or part thereof and the total interest shall not exceed the
said amount of tax:
Provided further that for any period or part thereof
commencing on or after 1st January 2014 interest shall be
calculated at the rate established by the provisions of
article 44(2A) of the Income Tax Management Act and Cap. 372.
the total interest shall not exceed the said amount of tax.
(h) Saving the other provisions of this article, the
provisions of the Income Tax Acts relating to the
collection and remission of the tax, interest and
additional tax shall apply to any tax, interest and
additional tax due under this article as if the tax,
interest and additional tax referred to in the said
provisions included also the tax, interest and
additional tax chargeable and payable under this
article.
(i) A transferor who disagrees with an order served upon
him under paragraph (c) shall have the same rights to
object to that order and to appeal from a decision of
the Commissioner refusing that objection as if that
order were an assessment issued under the Income Tax Cap. 372.
Management Act and the relevant provisions of that
Act relating to objections and appeals shall apply
mutatis mutandis.
(12A)(a) If a company ("the chargeable company") owns
52 CAP. 123.] INCOME TAX

property which had been acquired from another

company and such acquisition was exempt from tax
under subarticle (4)(f), this subarticle shall apply if the
chargeable company ceases to be a member of the
original group before the lapse of six years from the
date of the said acquisition. References in this
subarticle to a company ceasing to be a member of a
group of companies do not apply to cases where a
company ceases to be a member of a group by being
wound up or dissolved or in consequence of another
member of the group being wound up or dissolved:
Provided that where a company ceases to be a member
of the original group by being wound up or dissolved,
for the purpose of determining whether the chargeable
company ceases to be a member of the original group
under paragraph (b), such company shall be deemed to
have remained in existence.
(b) The chargeable company shall cease to be a member of
the original group, if such company and the company
from which it had acquired the property referred to in
paragraph (a) no longer satisfy the provisions of
article 5(9)(i) and (iii) and such determination shall be
made by reference to the same individuals referred to
in paragraph (iii) of the said article taken into account
in determining whether the two companies referred to
in this paragraph satisfied the provisions of article
5(9)(i) and (iii) on the date of the acquisition referred
to in paragraph (a):
Provided that where the acquisition referred to in
paragraph (a) took place before the 1st January 2010,
article 5(9)(iii) shall be disregarded for the purpose of
determining whether a company ceases to be a member
of a group:
Provided further that where the chargeable company
ceases to be a member of the original group, solely as
a result of a change in the direct or indirect individual
shareholders of the company from which it had
acquired the property referred to in paragraph (a), the
chargeable company shall, for the purpose of this
paragraph, not be treated as ceasing to be a member of
the original group as a result of such change, so
however that for the purpose of determining whether
the chargeable company ceases to be a member of the
original group it shall be deemed that such change had
not taken place and such determination shall be made
by reference to the same individuals referred to in
article 5(9)(iii) taken into account in determining
whether the chargeable company and the company
from which it had acquired the property satisfied the
provisions of article 5(9)(i) and (iii) on the date of the
acquisition referred to in paragraph (a).
(c) For the purpose of this subarticle the term "original
 INCOME TAX [CAP. 123. 53

group" shall mean the two companies referred to in

paragraph (b), and the individual direct or indirect
beneficial owners of the said companies who were
taken into account in determining whether the
provisions of article 5(9)(i) and (iii) had been satisfied
on the date of the acquisition referred to in paragraph
(a):
Provided that where the two companies referred to in
paragraph (b) are directly or indirectly owned as to
eighty percent or more by a company whose securities
are listed on a stock exchange recognised under the
Financial Markets Act, the term "original group" shall Cap. 345.
mean the two companies referred to above and the
company whose securities are listed on the said stock
exchange as existing on the date of the acquisition
referred to in paragraph (a):
Provided also that where an individual acquires shares
consequent to a judicial or consensual separation, in
terms of a donation, exempt from tax under the
provisions of article 5(2)(e), or a transfer causa mortis
such individual shall be deemed for all the purposes of
this subarticle to have held such shares from the date
such shares were previously acquired in an acquisition
preceding the date of the judicial or consensual
separation, donation or the transfer causa mortis.
(d) When the chargeable company ceases to be a member
of the group it shall be treated for all the purposes of
this article as if, immediately after its acquisition of
the property referred to in paragraph (a), it had
transferred and immediately re-acquired the property
at that time and the transfer value to be taken into
account is the value at which the chargeable company
had acquired the said property from the group
company in an acquisition to which subarticle (4)(f)
applies.
(e) The tax on a transfer to which this subarticle applies
shall be charged at the rate of twelve percent (12%) of
the transfer value as established in paragraph (c).
(f) Tax chargeable under this subarticle shall be due by
the chargeable company and shall be remitted to the
Commissioner within fifteen working days from the
date on which such company ceases to be a member of
the group as provided in paragraph (b).
(g) Where in accordance with paragraph (d) the
chargeable company is treated as having transferred
and immediately reacquired the property, the tax
chargeable on the deemed transfer in accordance with
paragraph (f) shall be treated as being due not by the
chargeable company but by a related company
("company A") if:
(i) company A is incorporated in Malta;
 54 CAP. 123.] INCOME TAX

(ii) a joint election under this paragraph is made by

the chargeable company and company A to treat
the tax chargeable on the deemed transfer as
being due by company A;
(iii) such joint election is made by notice given to the
Commissioner not later than fifteen working
days from the date on which the chargeable
company ceases to be a member of the group as
provided in paragraph (b); and
(iv) the tax chargeable referred to in paragraph (f) is
paid by company A within the period referred to
in the said paragraph.
For the purpose of this paragraph company A is related
to the chargeable company if both companies form a
group for the purposes of article 5(9) at the time the
original group ceases to exist.
(13) The Minister may make rules for the better implementation
of the provisions of this article and, without prejudice to the
generality of the foregoing, such rules may provide for:
(a) the manner in which the value of any property or of
any part of property to which this article applies is to
be determined;
(b) the manner in which the tax due under this article is to
be paid and collected and the obligations of any person
in respect of the payment of such tax;
(c) the manner in which any apportionment of tax due is to
be made for the purposes of this article; and
(d) any matter that may be prescribed under this article.

Investment 6. (1) For the purposes of this article, an "investment services

Services and expatriate" shall mean any individual who is an employee of, or
Insurance
Expatriate. provides services to, an investment services company which holds
Added by: an investment services licence issued under article 6 of the
XVII. 1994.8.
Amended by: Investment Services Act or a company which is recognised by the
XVII. 1998.70; relevant competent authority for the purposes of article 9A of that
L.N. 409 of 2007; said Act, and whose activities solely comprise the provision of
I. 2010.14;
V. 2012.12. management, administration, safekeeping or investment advice to
Cap. 370. collective investment schemes as defined in the aforesaid Act, and
an ''insurance expatriate'' shall mean any individual who is an
employee of, or provides services to, an insurance company as
defined in sub-article (4), and either:
(a) is not ordinarily resident and not domiciled in Malta;
or
(b) was not resident in Malta for a minimum period of
three years immediately preceding the year in which
he commences such employment with or provides
services to any investment services company or
insurance company as aforesaid and provided that
during the said three years such individual has been
engaged on a full time basis in a similar position
 INCOME TAX [CAP. 123. 55

outside Malta.
(2) An investment services expatriate or insurance expatriate,
for the period from the year preceding the first year of assessment
in which he is first liable to tax under the provisions of this Act up
to and including the year preceding the tenth year of assessment,
may opt not to be liable to tax on income relating to the following
expenditure incurred for the benefit of the investment services
expatriate or insurance expatriate or his immediate family by the
investment services company or insurance company of which he is
an employee or to which he provides investment or insurance
services:
(a) removal costs in respect of relocation to or from
Malta;
(b) accommodation expenses incurred in Malta;
(c) travel costs in respect of visits by the investment
services expatriate or insurance expatriate and his
immediate family to or from Malta;
(d) provision of a car for the use of the investment
services expatriate or insurance expatriate in Malta;
(e) a subvention of not more than six hundred euro (600)
per calendar month;
(f) medical expenses and medical insurance; and
(g) school fees in respect of the children of the investment
services expatriate or insurance expatriate.
(3) An investment services expatriate or insurance expatriate
shall be treated as not resident in Malta for the purposes of article
12(1)(c).
(4) For the purposes of this article, an ''insurance company''
shall mean a company authorised under article 7 of the Insurance Cap. 403.
Business Act, an insurance manager authorised under article 13 of
the same Act and a company carrying on the business of insurance
broking under article 12 of the Insurance Intermediaries Act. Cap. 487.

7. (1) No tax shall be payable upon the income of any person Year of assessment
which but for the provisions of this article would have been 1973.
Added by:
chargeable for the year of assessment commencing on 1st January, XXXV.1972.4.
1973. Amended by:
XXXI. 1988.3;
(2) Notwithstanding the provisions of sub-article (1) hereof, XXXVI.1990.3.
Renumbered by:
tax shall still be chargeable for the year of assessment 1973 in XVII. 1994.2.
r e s p e c t o f a n y b o n u s s h a r e a n d a n y u n d u l y l a rg e d i v i d e n d Amended by:
distributed by any company by resolution taken between the 27th XVII. 1994.9.
July, 1972 and the 31st December, 1972, and in respect of any other
unduly inflated income chargeable under any of the paragraphs of
article 4(1) where the Commissioner is of the opinion that such
income accrued to or was derived by any person between the 27th
July, 1972 and the 31st December, 1972 who was in a position to
determine the amount thereof.
(3) The income still chargeable to tax for the year of
assessment 1973 in accordance with the provisions of sub-article
 56 CAP. 123.] INCOME TAX

(2) shall be computed by considering the said bonus share and the
excessive part of the unduly large dividend and income to be the
highest part of the chargeable income which, but for the provisions
of that sub-article, would have been charged to tax for the year of
assessment 1973.
(4) For the purposes of sub-article (2) any dividend declared
during the period 27th July, 1972 to 31st December, 1972 which
exceeds by twenty per cent the highest dividend declared by the
same company between the 1st January, 1969 and the 26th July,
1972, shall, unless the contrary is proved, be deemed to be unduly
large.
(5) Saving the foregoing provisions of this article, the
provisions of this Act shall still apply for the year of assessment
1973.
(6) The provisions of this article shall not apply in the case of
any individual who, in any year of assessment up to the year of
assessment 1972, was entitled to a deduction under article 53(4),
(5) or (6) as in force at the relative time:
Provided that the personal deductions for the year of
assessment 1973 shall in any such case be increased by an amount
equal to what would have been the individual’s chargeable income
for the said year but for the provisions of this sub-article.
(7) In any case referred to in sub-article (6), no surtax shall be
payable for the year of assessment 1973.
(8) Where, in respect of the year of assessment 1973 -
(i) a company is entitled to deduct tax from a
dividend paid to any person in accordance with
the provisions of article 59(1) hereof; or
(ii) tax has been paid by deduction from the income
of any person in accordance with the provisions
of article 59(6) or article 73 hereof,
such tax shall, saving any other provisions of this Act, be set off
against the liability to tax of the said person for such year of
assessment as the Commissioner may elect.
(9) Any excess remaining after tax has been set off as provided
in sub-article (8) shall be refunded in accordance with the
Cap. 372. provisions of article 48 of the Income Tax Management Act.
(10) The provisions contained in sub-article (1) shall not apply
to the income of any body of persons arising from activities
relating or ancillary to oil-prospecting, banking, sound or
television broadcasting, film renting or insurance (excluding
commissions derived from the sale of insurance by bodies of
persons residing in Malta).
 INCOME TAX [CAP. 123. 57

8. (1) Notwithstanding the provisions of this Act and of the Special provisions
Succession and Donation Duties Ordinance, hereinafter in this in respect of
certain formerly
article referred to as "the Ordinance", or of the Death and Donation undeclared
Duty Act, the provisions of this article shall apply to any income income.
Added by:
omitted by any person from a return submitted by him to the XXXV.1972.5.
Commissioner before the 27th July, 1972 in respect of any year of Amended by:
assessment up to the year of assessment 1972 and to any income XX.1973.2;
XXVI.1977.4;
not returned to the Commissioner by the said date by any person IX.1983.5;
who has not submitted a return for any year of assessment up to the XIII.1983.4,5.
year of assessment 1972; provided that there shall be excluded any Renumbered by:
XVII. 1994.2.
such income - Amended by:
XVII. 1994.10;
(a) brought to charge to tax in any assessment - L.N. 409 of 2007.
Cap. 239 -
(i) which became final and conclusive before the Revoked.
27th July, 1972; or
(ii) which was raised by the Commissioner before
the 27th July, 1972 on any person who was not
domiciled in Malta during 1971; or
(b) which accrued to or was derived by any person who
had no chargeable income for any year of assessment
up to the year of assessment 1972.
(2) The income to which this article applies shall be determined
by reference to any capital asset which existed on the 31st
December, 1971, being an accumulation thereof or the source
giving rise to the said income: the value of such asset on the said
date being taken to be the cost of acquisition, or the actual amount
or value thereof, whichever is the less.
(3) The income to which this article applies shall be deemed to
be chargeable income for the year of assessment 1974, separate and
distinct from any other chargeable income for the said year of
assessment.
(4) The rate of tax applicable to the chargeable income herein
contemplated shall be three cents (0.03) in the euro.
(5) Notwithstanding any other provision of the Income Tax
Acts, other than article 31 of the Income Tax Management Act, the Cap. 372.
Commissioner may at any time after the 1st October, 1972, raise an
assessment on the chargeable income referred to in sub-article (3)
and proceed for the collection of the tax due.
(6) The provisions of this article shall not apply to the income
specified in sub-article (1) hereof unless the capital asset referred
to in sub-article (2) is declared on the prescribed form which shall
be filed with the Commissioner within nine months commencing
from the 1st October, 1972.
(7) The declaration referred to in sub-article (6) hereof shall
not be deemed to have been filed with the Commissioner unless the
prescribed form is fully and accurately completed.
(8) Tax charged under the provisions of this article shall not be
deemed to be part of any tax paid or payable under this Act for the
purposes of articles 59, 76 and 89.
 58 CAP. 123.] INCOME TAX

(9) No proceedings under this Act or under the Ordinance or

Cap. 239 - under the Death and Donation Duty Act, shall be taken against any
Revoked.
person in respect of the income referred to in sub-article (1) hereof,
nor shall any fiscal penalty apply thereunder in respect of the said
income, if the person in question was liable to have proceedings
taken against him or to have a fiscal penalty applied by reason of
any act or event happening before the 27th July, 1972.
(10) No tax or duty beyond the tax specified in sub-article (4)
hereof shall be levied under this Act or under the Ordinance or
Cap. 239 - under the Death and Donation Duty Act, on the income in respect
Revoked. of which immunity from proceedings is granted by sub-article (9)
hereof.
(11) The provisions of sub-article (9) and (10) hereof shall apply
to the duties, penalties and proceedings contemplated by the
Cap. 239 - Ordinance or by the Death and Donation Duty Act, only in so far as
Revoked. the assets referred to in sub-article (2) -
(i) were left out from a notice in which they should
have been declared for the purposes of the
Ordinance if the said notice was filed with the
Commissioner before the 27th July, 1972, or
(ii) were transmitted under a succession opening on
the death of a person or on the taking of vows by
a person in a monastic order outside Malta and
no notice thereof was filed with the
Commissioner before the 27th July, 1972:
provided that the time limit set out in article
33(a)(iii) of the Ordinance for the filing of the
said notice had lapsed before the said date, or
(iii) were transmitted under a gratuitous disposition
inter vivos and no notice thereof was filed with
the Commissioner before the 27th July, 1972,
provided that the time limit set out in article
33(c) of the Ordinance for the filing of the said
notice had lapsed before the said date.
(12) Nothing contained in this article shall apply to the duty
charged under the Ordinance in respect of any assessment raised
before the 27th of July, 1972.
(13) Notwithstanding the other provisions of this article, where
the capital asset referred to in sub-article (2) remains undeclared by
any person either in whole or in part within the period specified in
sub-article (6) -
(a) the rate of tax set out in sub-article (4)(c) shall be
substituted by the rate of thirty cents (0.30) in the euro
in respect of such undeclared income or part thereof;
and
(b) if such person is convicted on a charge that he has
knowingly failed to declare the said capital asset, he
shall be liable to a fine (multa) of not less than two
hundred and thirty euro (230) and not exceeding two
thousand and three hundred euro (2,300), and to
 INCOME TAX [CAP. 123. 59

imprisonment for a term not exceeding two years.

(14) The amount of any levy paid under the Bearer Accounts
Levy Act by the 31st of December, 1971, shall be deducted from Cap. 219.
any tax charged under the provisions of this article in respect of any
holding in the relative bearer account and of any interest derived
therefrom, so however that such deduction shall not exceed the tax
chargeable under this article in respect of such holdings:
Provided that nothing in this article contained shall be
deemed to empower the Commissioner to charge to tax any holding
in a bearer account with any bank except by way of an assessment
raised on the person holding the title to such an account.
(15) Any person may elect by notice in writing filed with the
Commissioner within the period specified in sub-article (6) hereof
that the provisions of this article shall not apply to the income
referred to in sub-article (1):
Provided that in such cases nothing in this Act contained
shall prevent the Commissioner from raising an assessment on such
income at any time in accordance with the provisions of the other
articles of this Act.

9. (1) Subject to the provisions of this article, article 8 shall Further special
also apply to the income of any person not returned to the provisions in
respect of certain
Commissioner in respect of the year preceding any year of formerly
assessment up to the year of assessment 1972, if - undeclared
income.
(a) the Commissioner is satisfied that the said person had Added by:
XX. 1973.3.
submitted to him before the 27th July, 1972, a return Renumbered by:
for any other year of assessment but not for the year of XVII. 1994.2.
assessment in question; and Amended by:
XVII. 1994.11.
(b) the income accrued to or was derived by any person
other than a company.
(2) In any case falling under sub-article (1), or under the said
sub-article and of article 8(1), the minimum amount of tax payable
shall be the higher of the following two amounts:
(a) the tax computed in accordance with the provisions of
article 8(2), (3), (4) and (5), or
(b) the total amount of tax charged under article 56(1), (2),
(3) and (10) for the last year of assessment on account
of which an assessment or assessments to tax that were
all final and conclusive on the 27th July, 1972, had
been raised by the said date, multiplied by the number
of years for which no return had been filed as
aforesaid.
(3) Any person may elect not to avail himself of the provisions
of this article.
(4) If a person does not elect as provided in sub-article (3), the
requirements of article 10 of the Income Tax Management Act shall Cap. 372.
not be enforced in his regard in respect of any year of assessment
on account of which the provisions of sub-article (1) apply.
 60 CAP. 123.] INCOME TAX

Spontaneous 9A. (1) Notwithstanding any other provision of the Income

declaration of Tax Acts, a person, apart from the return for the year of assessment
undeclared
income. 1995, may present a spontaneous declaration on the prescribed
Added by: form and the income of that person falling under articles 4 and 5 for
XXII.1995.3.
Amended by: the years of assessment prior to the said year of assessment shall be
XX.1996.5; deemed to be the income as arrived at under the following
L.N. 409 of 2007. provisions of this article.
(2) The spontaneous declaration shall show as income falling
under article 4(1) for the years of assessment 1994, 1993, 1992 and
1991 a sum based on a true declaration of the income declared by
that person falling under article 4(1) (but excluding any investment
income as defined in article 41 and capital gains falling under
article 5) for the year of assessment 1995 as follows:
(a) for the year of assessment 1994, a sum equivalent to
80% of the relative income declared in the return for
the year of assessment 1995, excluding any investment
income as defined in article 41 and capital gains
falling under article 5 as aforesaid;
(b) for the year of assessment 1993, a sum equivalent to
90% of the sum declared under paragraph (a) hereof;
(c) for the year of assessment 1992, a sum equivalent to
90% of the sum declared under paragraph (b) hereof;
and
(d) for the year of assessment 1991 a sum equivalent to
90% of the sum declared under paragraph (c) hereof:
Provided that where a person was in any of the years of
assessment 1991 to 1994 not registered as a taxpayer and had no
income liable to tax under this Act, he shall under paragraphs (a) to
(d) hereof, only declare that he received no income for the years of
assessment therein referred to previous to the year of assessment in
which he first became liable to tax under this Act.
(3) The spontaneous declaration shall also make a statement of
any undeclared capital gains falling under article 5 in respect of
each year of assessment where such gains were so undeclared.
(4) Where a spontaneous declaration has been made in
accordance with the provisions of this article:
(a) the income of the person making the declaration and
subject to tax under the provisions of this Act other
than this article shall be deemed to be the income
declared by that person in the return for the relative
year of assessment:
Provided that:
(i) where in respect of any year of assessment the
income of that person has been arrived at in an
assessment which is final and conclusive the
income so arrived at shall be deemed to be the
income so declared; and
(ii) where any income falling under article 4(1) has
been or is reported by an employer or other
 INCOME TAX [CAP. 123. 61

person paying the income to the Commissioner

in any return required for the purposes of the
Deduction of Tax (PAYE) Rules, 1972, or in
accordance with such rules ought to be so
reported, such income shall be deemed declared
by such person;
(b) the assessment for the relative year of assessment shall
be raised on the basis of the income declared or
deemed declared in accordance with paragraph (a)
hereof:
Provided that in the case where a return was not
submitted to the Commissioner by the 31st March
1995, the assessment for the relative year of
assessment shall be raised on the following basis:
(i) If the return is in respect of any of the years of
assessment 1991 to 1994, the income for the
relative year of assessment shall subject to the
provisions of paragraph (a)(ii) hereof be
considered to be that declared by such person in
the relative return or the income determined in
accordance with sub-article (2), whichever is the
higher;
(ii) If the return is in respect of a year of assessment
prior to year of assessment 1991, the income for
the relative year of assessment shall subject to
the provisions of paragraph (a)(ii) hereof be
considered to be that declared by such person in
the relative return or a sum equal to the income
determined in accordance with sub-article
(2)(d), whichever is the higher; and
(c) any additional tax under article 56(12) in respect of
any year of assessment for which there is not an
assessment which is final and conclusive, shall be
waived.
(5) For the purposes of sub-article (2), (4) and (7), income
under article 4(1) and capital gains falling under article 5, means
the income as adjusted in accordance with the provisions of this
Act.
(6) The income declared in a spontaneous declaration in
accordance with this article shall be deemed to be separate
chargeable income for the year of assessment 1995, and shall,
subject only to the deductions as provided in sub-article (7) be
subject to tax at the rate of twenty-five cents (0.25) in the euro.
(7) There shall only be deducted from the income declared in
respect of each year of assessment under sub-article (2), the income
declared or deemed declared in accordance with sub-article (4), by
the taxpayer for the respective year of assessment being income
falling under article 4(1) not being investment income as defined in
article 41 or capital gains falling under article 5:
Provided that:
 62 CAP. 123.] INCOME TAX

(a) where in respect of a year of assessment the income

falling under article 4(1)(a) as declared in accordance
with sub-article (4) is a loss, such income shall for the
purposes of this article be deemed to be nil; and
(b) where in respect of a year of assessment the income
declared in accordance with sub-article (4) falling
under article 4(1) (excluding investment income as
defined in article 41 or capital gains falling under
article 5) is greater than the income declared under
sub-article (2) in respect of the same year of
assessment, the income declared in accordance with
sub-article (4) shall be deemed to be equal to that
declared under sub-article (2) in respect of the same
year of assessment.
(8) The tax on income chargeable under this article shall be
payable in three instalments as follows:
(a) fifty per cent by not later than the 15th December 1995
together with the submission of the spontaneous
declaration to the Commissioner;
(b) twenty per cent by not later than the 29th March, 1996;
and
(c) thirty per cent by not later than the 30th September,
1996.
(9) The Commissioner shall send by registered post to each
person who makes a valid spontaneous declaration in accordance
with this article, a notice stating the amount of his separate
chargeable income for the year of assessment 1995 and the amount
of tax payable thereon by him, and the provisions of Part VII and of
Cap. 372. article 32 of the Income Tax Management Act shall apply to such
notice.
(10) The spontaneous declaration referred to in the previous sub-
articles to this article shall be deemed not to have been filed with
the Commissioner unless:
(a) the prescribed form is fully and accurately completed
and is submitted in duplicate to the Commissioner not
later than the 15 December, 1995;
(b) all returns for the years of assessment up to and
including the year of assessment 1995 are submitted to
the Commissioner by the time the declaration is made;
and
(c) payment of the first instalment of tax is made as laid
down in sub-article (8).
(11) Where it results to the Commissioner that a person who
filed a valid spontaneous declaration under this article has
underdeclared his income for the year of assessment 1995 or has
underdeclared any income which ought to be declared under sub-
article (3) hereof or has under the proviso to sub-article (2) hereof
declared that he has received no income for any year of assessment
in which he was liable to tax, the Commissioner shall recompute
 INCOME TAX [CAP. 123. 63

the separate chargeable income on the basis of the reassessed

income for the year of assessment 1995, and, or as ought to have
been declared under sub-article (3), and, or disregarding the
provisions of the proviso to sub-article (2) hereof as the case may
be, and raise a tax thereon at the rate of sixty-five cents (0.65) in
the euro. The Commissioner shall thereupon issue a fresh notice of
assessment and any previous notice issued under this article shall
be cancelled and any tax already paid in respect of the previous
notice or together with the filing of the spontaneous declaration
shall be set off from any tax due in accordance with this sub-article.
(12) The relevant provisions of Part VII of the Income Tax Cap. 372.
Management Act shall apply to the tax due under sub-article (11):
Provided that a person shall have a right of objection and Cap. 372.
appeal as laid down in articles 33, 35 and 37 of the Income Tax
Management Act against a notice of assessment issued in
accordance with sub-article (11).
(13)(a) Tax charged under the provisions of this article shall
not be deemed to be part of any tax paid or payable
under this Act for the purposes of articles 59, 76 and
89.
(b) Nothing contained in this article shall affect the
provisions of articles 43, 44 and 45.
(14) Where a person makes a spontaneous declaration in
accordance with the provisions of this article, the Commissioner
shall disregard the provisions of article 14(1)(g) regarding the
carrying forward of losses incurred during any year preceding the
year of assessment 1995 with respect to the year of assessment
1995 and subsequent years of assessment.
(15) The Minister may make rules generally for carrying out the
provisions of this article and may in particular by those rules
provide for the form of returns, claims, statements and notices
under this article.

9B. (1) In this article: Assets registered

under the Invest-
"relevant laws" means the Income Tax Acts, the Succession and ment Registration
Donation Duties Ordinance (Cap. 70 of the revised edition of the Scheme.
Added by:
Laws of Malta, 1942), the Death and Donation Duty Act, the Duty II. 2002.43.
on Documents Act and the Duty on Documents and Transfers Act; Amended by:
IX. 2005.7;
"qualifying asset" means an asset that is registered in accordance IX. 2007.3;
XXIII. 2014.8.
with a scheme made under article 39 of the Exchange Control Act Cap. 123 and 372.
or article 11 of the External Transactions Act; Cap. 239.
Cap. 294.
"tax" means any tax or duty chargeable under any provision of Cap. 364.
the relevant laws. Cap. 233.

(2) Subject to the provisions of subarticle (3), there shall be

exempt from tax otherwise chargeable under any provision of the
relevant laws:
(a) any income, including capital gains, derived from a
qualifying asset at any time before the date on which
that asset is registered as a qualifying asset;
64 CAP. 123.] INCOME TAX

(b) any income, including capital gains, to the extent that

a qualifying asset represents such income or an
undeclared part of such income or an accumulation
thereof, at any time before the date on which that asset
is registered as a qualifying asset, derived by any
person during the year immediately preceding any year
of assessment in respect of which that person has
furnished a return of his income to the Commissioner
before the 31st March, 2005, or during the year
immediately preceding any year of assessment
commencing on or before the 1st January, 2005, in
respect of which that person was not required to
furnish a return of his income;
(c) any transfer inter vivos or transmission causa mortis of
any asset, any document of transfer of such an asset
and any assignment of an asset made or happening
before the 31st March, 2005, or in respect of the
undeclared part of the value or consideration of such
transfer or transmission, to the extent that a qualifying
asset represents such asset or the value in
consideration of such transfer or transmission at any
time before the date on which that asset is registered as
a qualifying asset.
(3) The exemption from tax on income referred to in subarticle
(2)(a) and (b) shall apply to the extent that the said income has not
been declared in any income tax return furnished to the Commissioner,
and no tax has been assessed with respect thereto in any assessment
raised under the Income Tax Acts and notified before the 31st March,
2005, and the exemption from tax referred to in paragraph (c) of the
said subarticle shall apply to the extent that no return, declaration or
notice of the relative transfer, transmission or assignment has been
furnished to the Commissioner and no tax has been paid or assessed
thereon in an assessment raised and notified before the said date under
any provision of the relevant laws or to the extent that the value or
consideration or transfer or transmission has been undeclared and
represented as aforesaid by the qualifying asset.
(4) No person shall be bound to make or furnish, or be considered
to have ever been bound to make or furnish, any return, declaration,
act or notice that would otherwise have been required to be made or
furnished in accordance with any provision of the relevant laws
relating to income, transfer, transmission, assignment or document that
is exempt from tax in terms of subarticle (2), and any responsibility
which the said person would have had under the relevant laws for the
failure to make or to furnish any such return, declaration, act or notice
shall be considered as never having existed, and every person who,
under any scheme made by the Government or any public entity or
under any law, whichever it may be including this Act, before such
registration was considered to be entitled to any benefit, exemption or
other advantage as a result of not having declared such eligible assets
(or income therefrom) in connection with any claim for such benefit,
exemption or advantage, shall not be considered as having committed
an offence as a result of not having declared those assets (or income
 INCOME TAX [CAP. 123. 65

therefrom) and shall not be required to refund that benefit, exemption

or other advantage acquired before that declaration:
Provided that if such person, after the date of registration of
those eligible assets (or income therefrom) continues for a period after
the declaration to take that benefit, exemption or advantage without
being entitled thereto, such person shall be considered as never having
been exempted from liability for the offence, and shall forfeit the right
not to refund any benefit, exemption or advantage acquired before the
registration:
Provided further that nothing in this article shall be construed
as exempting any person from refunding any benefit, exemption or
other advantage demanded to be paid back by the competent authority
before the making of such declaration:
Provided also that in the case of a qualifying asset that is
registered under the Investment Registration Scheme Regulations, Cap. 233.
2014, made under the External Transactions Act, the references to the
dates "31st March, 2005" and "1st January, 2005" in subarticle (2) and
"31st March, 2005" in subarticle (3) shall be construed as references to
"4th November, 2013", "1st January, 2013" and “31st May, 2014”,
respectively.
Provided also that in the case of a qualifying asset that is
registered under the Special Registration Scheme Regulations, S.L. 233.10
made under the External Transactions Act, the references to the Cap. 233.
dates "31st March, 2005" and "1st January, 2005" in subarticles (2)
and (3) of this article shall be construed as references to "15th
March, 2007" and "1st January, 2006", respectively.
(5) Where a person has availed himself of this article with
respect to the Investment Registration Scheme Regulations, 2014,
any losses referred to in article 5(10)(a) and article 14(1)(g)
declared in the return for year of assessment 2013 and for any
preceding year of assessment, whenever submitted, shall not be
carried forward and set off against the total income of the said
person for the year preceding the year of assessment 2014 or in any
subsequent year.
(6) (a) A person who is served with a notice of enquiry
r e f e r r e d t o i n a r t i c l e 1 3 ( 7 ) o f t h e I n c o m e Ta x Cap. 372.
Management Act shall, within thirty days from the
date of service of the said notice, submit to the
Commissioner the Registration Certificate referred to
in regulation 9 of the Investment Registration Scheme
Regulations, 2014.
(b) Notwithstanding the provisions of subarticle (2), the
exemption referred to in the said subarticle shall not
apply if the person referred to in paragraph (a) fails to
submit the said Certificate within thirty days from the
date of service of the said notice:
Provided that the Commissioner, upon being satisfied
that the said person was prevented from submitting the
said Certificate within such period owing to absence
from Malta, sickness or other reasonable cause, may
 66 CAP. 123.] INCOME TAX

extend the period as may be reasonable in the

circumstances.

Basis of 10. Tax shall be charged, levied and collected for each year of
assessment. assessment upon the chargeable income of any person for the year
Renumbered by:
XVII. 1994.2. immediately preceding the year of assessment.
Accounting 11. (1) Every person shall each year make up the accounts of
periods. his trade or business which he is required to keep in accordance
Amended by:
XXII.1976.4. with the provisions of this Act to the day immediately preceding
Substituted by: the next following year of assessment.
XXVI.1977.5.
Amended by: (2) Notwithstanding the provisions of sub-article (1) hereof,
IX. 1981.2.
Renumbered by: the Commissioner may permit any person to whom this sub-article
XVII. 1994.2. applies to make up the said accounts to a date other than the day
immediately preceding a year of assessment and, where permission
has been granted as aforesaid, the gains or profits for that year of
assessment and subsequent years of assessment shall be computed
on the income of the year terminating on the date in the year
immediately preceding the year of assessment on which the
Commissioner has permitted that the accounts be made up.
(3) Sub-article (2) applies to any -
(a) company;
(b) commercial partnership en nom collectif, or
commercial partnership en commandite the capital of
which is not divided into shares;
(c) body corporate established by law;
(d) undertaking required by article 30(7)(d) to be dealt
with as a separate body of persons.
(4) In granting his permission for the purposes of sub-article
(2), the Commissioner may impose such conditions as he deems fit
and reasonable, and where the person who has requested
permission for a change in accounting date accepts the conditions
laid down by the Commissioner and the accounting date of the
trade or business is changed accordingly, such conditions shall be
operative notwithstanding any other provisions of this Act.
(5) The Minister responsible for finance may make rules
prescribing -
(a) the method by which changes in an accounting date
may be authorized by the Commissioner for the
purposes of this article; and
(b) the conditions which may be imposed or required by
the Commissioner in authorizing changes as aforesaid.
 INCOME TAX [CAP. 123. 67

PART III

EXEMPTIONS

12. (1) There shall be exempt from the tax - Exemptions.

Amended by:
(a) the income of the University of Malta; XX. 1955.2;
XV.1958.2;
(b) the allowances and benefits as may be specified by the XXV. 1960.5;
Minister responsible for finance by notice published in XXIV. 1961.2;
XXV. 1962.2,4;
the Gazette which are payable under the Social L.N. 4 of 1963;
Security Act, or in consequence of any measure X. 1963.2;
announced in the annual Budget Speech; XIV. 1963.2;
XXXI. 1966.2;
(c) (i) any interest, discount, premium or royalties XXVII. 1967.20;
VIII. 1969.4;
accruing to or derived by any person not resident XLIX. 1974.3;
in Malta: XLII. 1975.3;
XXII. 1976.4;
Provided that the exemption under this sub- XXXIX. 1976.8;
paragraph shall not apply in respect of any year XXVIII. 1978.5;
in which the said person is engaged in trade or XXI. 1980.3;
IX. 1981.3;
business in Malta through a permanent IX. 1983.6;
establishment situated therein and where the XIII. 1983.5;
XIV. 1984.3;
royalties or the debt claim in respect of which VIII. 1987.3;
the interest, discount or premium, is paid are XXXI. 1988.4;
effectively connected with such permanent XIX. 1989.4;
XXXVI. 1990.4;
establishment; VIII. 1991.2;
(ii) any gains or profits accruing to or derived by XIII. 1992.2.
Renumbered by:
any person not resident in Malta on a transfer of XVII. 1994.2.
any units in a collective investment scheme as Amended by:
XVII. 1994.12;
defined in article 2 of the Investment Services XX. 1996.6;
Act, of any units and such like instruments XVII. 1998.70;
relating to linked long term business of IX. 2001.24;
II. 2002.44;
insurance, including the surrender or maturity of II. 2003.9;
linked long term policies of insurance, of any II. 2004.9;
interest in a partnership which is not a property II. 2007.5;
IV. 2007.9;
partnership and of any shares or securities in a XVII. 2009.45;
company (which for the avoidance of doubt I. 2010.15;
IV. 2011.10;
includes redemption, liquidation or cancellation) V. 2012.13;
which is not a property company and for the L.N. 218 of 2012;
purpose of this paragraph the word "transfer" III. 2013.21;
XII. 2014.15;
shall have the same meaning assigned to it under XXII. 2014.13;
article 5(1)(b): XXXVII. 2014.2.
Cap. 318.
Provided that the beneficial owner of the interest, Cap. 370.
royalty, gain or profit, as the case may be, is a person
not resident in Malta and such person is not owned and
controlled by, directly or indirectly, nor acts on behalf
of an individual or individuals who are ordinarily
resident and domiciled in Malta;
(iii) (A) any dividend paid by a company registered
in Malta to an individual out of profits
allocated to the any of the taxed accounts,
other than the final tax account and the
untaxed account, where such individual’s
chargeable income, excluding such
dividend, is equal to or exceeds the relevant
 68 CAP. 123.] INCOME TAX

threshold:
Provided that, in the case where such
individual is entitled to claim a deduction
against a dividend declared in a tax return,
the amount or portion of such dividend, up
to the amount of the said deduction, shall
not be exempt from tax:
Provided further that in the case where the
said individual’s chargeable income
excluding such dividend is less than the
relevant threshold, the amount or portion of
such dividend to be exempt from tax shall
be an amount determined by deducting
from his chargeable income the relevant
threshold:
Provided also that the preceding proviso
shall not apply where the said individual’s
chargeable income does not exceed the
relevant threshold.
(B) Any dividend or part thereof, exempt from
tax under paragraph (iii)(A), shall, for the
purpose of paragraph (a) of the last proviso
to article 60 and paragraph (a) of the last
Cap. 372. proviso to article 48(1) of the Income Tax
Management Act, be a dividend to which
the said paragraphs refer.
(C) For the purpose of article 12(1)(c)(iii):
(a) Where such individual has more than
one such dividend, the aggregate
amount of such dividends shall be
treated as one dividend;
(b) ''Relevant threshold'' is as follows:

(i) in the case where the rates

prescribed under article 56(1)(a) apply,
the relevant threshold is €28,700;

(ii) in the case where the rates

prescribed under article 56(1)(b) apply,
the relevant threshold is €19,500;

(iii) in the case where the rates

prescribed under the last proviso to
article 56(1)(b) apply, the relevant
threshold is €21,200;

(d) the income of any retirement fund or retirement

scheme licensed, registered or otherwise authorized
Cap. 450. under the Special Funds (Regulation) Act or any Act
replacing the said Act, other than income from
immovable property situated in Malta;
 INCOME TAX [CAP. 123. 69

(e) the income of any institution, trust, bequest or

foundation, of a public character, and of any other
similar organization or body of persons, also of a
public character, which is engaged in philanthropic
work and either qualifies for exemption under this
paragraph in accordance with rules made for this
purpose by the Minister responsible for finance under
article 96 or is named by the said Minister as engaged
in philanthropic work for the purposes of this
paragraph and there is not in respect of it a declaration
by the said Minister that it has ceased to be so named;
(f) the income of any political party including the income
of clubs adhering to political parties;
(g) wound and disability pensions granted in respect of
wounds or disabilities caused by war and any pensions
granted to dependent relatives of members of the
armed forces of the Commonwealth killed on war
service;
(h) any capital sum received by way of commutation of
pension (up to a maximum of thirty percent (30%) of
the total pension), retiring or death gratuity or received
as consolidated compensation for death or injuries;
(for the purposes of this paragraph, ''total pension''
means the total value of the pension available to
provide pension payments):
Provided that in the case of commutation of pensions
in relation to retirement schemes, licensed, registered
or otherwise authorised under the Special Funds Cap. 450.
(Regulation) Act or any Act replacing the same, the
maximum capital sum that may benefit from this
exemption shall be as provided under that Act,
including any regulations or directives issued
thereunder;
(i) the income arising from a scholarship held by a person
receiving full time instruction at a university, college
or similar educational institution:
Provided that this paragraph shall not apply to
income, by whatever name called, paid out of funds
disbursed or otherwise provided by the employer of
the recipient which the recipient would have received
by reason of his employment if he had not held such
scholarship; and any income to which this paragraph
does not apply shall be deemed to be income
chargeable to tax in accordance with the provisions of
article 4(1)(b);
(j) the income of any trade union registered under the
Employment and Industrial Relations Act in so far as Cap. 452.
such income is not derived from a trade or business
carried on by such trade union;
(k) the profits of a non-resident shipowner as defined in
article 28, provided that the country to which such
70 CAP. 123.] INCOME TAX

non-resident shipowner belongs extends a similar

exemption to shipowners who are not resident in such
country but who are resident in Malta;
(l) the income of a club or similar institution which the
Commissioner is satisfied is organised and operated
exclusively for social welfare, civic improvement,
pleasure or recreation, or for any other purpose except
profit, no part of the income of which is payable to, or
is otherwise available for the personal benefit of, any
proprietor, member or shareholder, so long as such
club or similar institution is not deemed to carry on a
business in accordance with article 4(4);
(m) Repealed by Act XX of 1996.
(n) the income of a philharmonic society which the
Commissioner is satisfied constitutes a bona fide band
club, provided that such society has regular premises
registered with the Police as a club and that such
premises are in daily use as a place of resort by its
members;
(o) the income of a club or similar institution which the
Commissioner is satisfied constitutes a bona fide
sports club, provided that no part of the income of
which is payable to, or is otherwise available for the
personal benefit of, any proprietor, member or
shareholder, and provided also on winding up of such
club or institution, no funds are distributed or
available to such proprietor, member or shareholder;
(p) any dividend paid by a company whose main source of
income in the relevant year is charged at the rate
provided for in article 56(13) in respect of a Contractor;
(q) the income of a co-operative society;
(r) such subsidy as may be prescribed related to the
Common Agricultural Policy or to any other similar
scheme introduced in accordance with international or
supra-national agreements;
(s) the income of a collective investment scheme other
than income from immovable property situated in
Malta and investment income to which article 41A(a)
refers;
(t) any financial assistance, as determined by the courts of
a European Union or a European Economic Area
(hereinafter "EU/EEA") Member State or by the courts
of another country as the Commissioner may approve
or as agreed by a public deed of personal separation
under the authority of the courts of a EU/EEA Member
State or by the courts of another country as the
Commissioner may approve, or as ordered by the
courts of a EU/EEA Member State in a divorce
judgment or decree or by the courts or other authorities
of another country as the Commissioner may approve,
 INCOME TAX [CAP. 123. 71

received by an individual from his estranged spouse in

respect of the maintenance of a child;
(u) (1) any income or gains derived by a company
registered in Malta from a participating holding or from
the transfer of such holding, where the taxpayer has not
shown such income or gain as part of his chargeable
income in the return made pursuant to article 10 of the Cap. 372
Income Tax Management Act:
Provided that with respect to a dividend derived from a
participating holding acquired on or after 1 January 2007
the exemption contemplated by this paragraph shall only
apply when the conditions set out in either paragraph (i)
or paragraph (ii) are satisfied:
(i) where the body of persons in which the
participating holding is held satisfies any one of
the following conditions, that is to say:
(1) it is resident or incorporated in a country
or territory which forms part of the
European Union;
(2) it is subject to any foreign tax of at least
fifteen per cent (15%);
(3) it does not have more than fifty per cent
(50%) of its income derived from passive
interest or royalties;
(ii) where none of the conditions set out in
paragraph (i) are satisfied then both of the
following two conditions must be satisfied:
(1) the equity holding by the company
registered in Malta in the body of persons
not resident in Malta is not a portfolio
investment and for this purpose the
holding of shares by a company registered
in Malta in a body of persons not resident
in Malta which derives more than fifty per
cent of its income from portfolio
investments shall be deemed to be a
portfolio investment; and
(2) the body of persons not resident in Malta
or its passive interest or royalties have
been subject to any foreign tax at a rate
which is not less than five per cent (5%):
Provided further that the provisions of the immediately
preceding proviso shall, with effect from 1 January
2011, also be applicable to dividends received from a
participating holding acquired before the 1 January
2007:
Provided also that in respect of participating holdings
in companies and partnerships en commandite the
capital of which is not divided into shares, which are
resident in Malta, the provisions of this paragraph
 72 CAP. 123.] INCOME TAX

shall only apply to gains or profits derived from the

transfer of such holdings:
Provided further that for the purpose of this paragraph
the word "transfer" shall have the same meaning
assigned to it under article 5(1)(b);
(u) (2) any income or gains derived by a company
registered in Malta (hereinafter "the particular company")
which are attributable to a permanent establishment
(including a branch) situated outside Malta or to the
transfer of such permanent establishment, whether such
permanent establishment belongs exclusively or in part to
the particular company, including a permanent
establishment operated through any entity or relationship
other than a company, in which the particular company
has an interest, where the taxpayer has not shown such
income or gains as part of its chargeable income in the
Cap. 372. return made pursuant to article 10 of the Income Tax
Management Act, and for these purposes "profits or
gains" shall be calculated as if the permanent
establishment is an independent enterprise operating in
similar conditions and at arm’s length:
Provided that where, in the opinion of the Commissioner,
a series of transactions is effected with the sole or main
purpose of reducing the amount of tax payable in terms
of this Act by any person by reason of the operation of
this provision, such a person shall be assessable as if this
provision did not apply and, for the purpose of this
provision, a series of transactions shall mean any two or
more corresponding or circular transactions carried out
by the same person, either directly or indirectly, as the
case may be:
Provided further that for the purpose of this paragraph the
word "transfer" shall have the same meaning assigned to
it under article 5(1)(b);
(v) Royalties, advances and similar income derived from -
(i) patents in respect of inventions
(ii) copyright
(iii) trademarks
whether in the course of a trade, business, profession
or vocation or otherwise, subject to the satisfaction of
such terms and conditions (including any limits on the
maximum amount of the exempt income) and
obtaining such determinations as may be prescribed:
Provided that where any income which is exempt from
tax in terms of this paragraph is derived by a company,
the distribution of the particular profits by way of
dividend by such company shall also be exempt from
tax in the hands of the shareholders, so however that
where the person in receipt of such dividend is itself a
company (hereinafter referred to as "the second
 INCOME TAX [CAP. 123. 73

company"), any dividend paid to the members of the

second company shall, to the extent that such dividend
is paid out of profits which are exempt in terms of this
paragraph, not be charged to tax under this Act, and
where a member of the second company is again a
company, the provisions of this proviso shall apply
mutatis mutandis as though references to the second
company were references to that member, and the
principle set out in this proviso shall continue to be
applied for as long as the exempt profits referred to in
this paragraph are distributed by way of dividends:
Provided further that where such royalties, advances
or similar income are derived by a company, this
exemption shall not apply where the company has
shown such income as part of its chargeable income in
Cap. 372.
the return made pursuant to article 10 of the Income
Tax Management Act;
(w) the income from employment (other than income
derived from the holding of an office of director) of a
married woman who is over forty years of age and
starts in employment after having been absent from
any gainful occupation for at least five years and
where such income does not exceed nine thousand one
hundred and fifty euro (€9,150) and the said woman is
chargeable to tax jointly with her spouse at the rates
specified in article 56(1)(a):
Provided that this paragraph shall apply for a period of
five consecutive years of assessment commencing
from the basis year in which the woman started work;
(x) interest payable to an individual in his own name by:
(i) a person carrying on the business of banking in
accordance with the laws of any European Union
Member State in respect of a sum of money
deposited into a special individual saving
account recognised as such by the
Commissioner, and
(ii) interest payable to an individual in his own name
by the Government of a European Union
Member State or by any agency thereof, by a
corporation or authority established by law, or in
respect of a public issue by a company, entity or
other legal person howsoever constituted and
whether resident in Malta or otherwise, where
the relevant interest-bearing securities are
credited for the benefit of the individual to a
special individual saving account recognised as
such by the Commissioner:
Provided that the aggregate amount of the deposits
into such account and the value of the interest-bearing
securities credited for the benefit of the individual into
such account do not together exceed one thousand euro
 74 CAP. 123.] INCOME TAX

(€1,000) in any year or such other amount as may be

prescribed by the Minister from time to time:
Provided that nothing in this subarticle shall be construed
as granting any exemption from the filing of a return in respect of
any such income, or as exempting in the hands of the recipients any
dividends, interests, annuities, emoluments, pensions or other gains
or profits paid wholly or in part out of the income so exempted.
(2) The Minister responsible for finance may exempt any
person or class of persons with or without retrospective effect from
all or any of the provisions of this Act on any ground which to him
may seem sufficient. Any such exemption may be made subject to
such conditions or the payment of such other rate or rates of tax,
whether related to income or otherwise, or to both such conditions
and payment, as the Minister may deem appropriate.
(3) The Minister responsible for finance may by order
published in the Government Gazette provide that the interest
payable on any loan charged on the public revenue of Malta shall
be exempted from the tax, either generally or only in respect of
interest payable to persons not resident in Malta, and such interest
shall, as from the date and to the extent specified in the order, be
exempt accordingly.
(4) The Minister responsible for finance may by order
published in the Government Gazette provide that the interest
payable on any debentures, debenture stock or other securities
Cap. 202. issued by the Malta Development Corporation under the Malta
Development Corporation Act, as security for any authorised
borrowing of the said Corporation, shall be exempted from the tax,
either in whole or in part and to such extent as he may deem
appropriate, and such interest shall, as from the date and to the
extent specified in the order, be exempt accordingly.
Temporary 13. Tax shall not be payable in respect of any income arising
residents. outside Malta to any person who is in Malta for some temporary
Renumbered by:
XVII. 1994.2. purpose only and not with any intent to establish his residence
therein and who has not actually resided in Malta at one or more
times for a period equal in the whole to six months in the year
preceding the year of assessment.
 INCOME TAX [CAP. 123. 75

PART IV

DEDUCTIONS

14. (1) For the purpose of ascertaining the total income of any Deductions
person there shall be deducted all outgoings and expenses incurred allowed.
Amended by:
by such person during the year preceding the year of assessment to XX.1955.3;
the extent to which such outgoings and expenses were wholly and V.1958.3;
XV.1958.2;
exclusively incurred in the production of the income, including - XXV.1960.6;
XXV.1962.2,4;
(a) sums payable by such person by way of interest upon L.N. 4 of 1963;
any money borrowed by him, where the Commissioner X.1973.2;
is satisfied that the interest was payable on capital XLII.1975.4;
XXVI.1977.6;
employed in acquiring the income; XXVIII.1978.6;
XXI. 1980.4;
(b) rent paid by any tenant of land or buildings occupied IX.1981.4;
by him for the purpose of acquiring the income; XIII. 1983.4;
XXXVI. 1990.5;
(c) any sum expended for repairs of premises, plant or XVIII. 1993.5.
machinery employed in acquiring the income, or for Renumbered by:
XVII. 1994.2.
the renewal, repair or alteration of any implement, Amended by:
utensil or article so employed; XX.1996.7;
IV. 2001.35;
(d) bad debts incurred in any trade, business, profession or IX. 2001.25;
vocation, proved to the satisfaction of the II. 2002.45;
II. 2003.10;
Commissioner to have become bad during the year II. 2007.6;
immediately preceding the year of assessment IV. 2007.10;
notwithstanding that such bad debts were due and IX. 2007.4;
L.N. 409 of 2007;
payable prior to the commencement of the said year: I. 2010.16;
IV. 2011.11;
Provided that all sums recovered during the said year XII. 2014.16.
on account of amounts previously written off or
allowed in respect of bad debts shall for the purposes
of this Act be treated as receipts of the trade, business,
profession or vocation for that year;
(e) any sum contributed by an employer to a pension,
saving, provident or any other society or fund which
may be approved by the Commissioner as may be
prescribed;
(f) a deduction in respect of the wear and tear of any plant
and machinery, and any premises being an industrial
building or structure, arising out of the use or
employment of such property in the production of the
income; and where such property is employed on such
terms that the burden of wear and tear thereof falls
upon the person making use of the property in the
production of the income, but such property does not
belong to him, he shall be entitled to any deduction to
which he would have been entitled had the property
belonged to him:
Provided that -
(i) the amount to be deducted in respect of premises
being an industrial building or structure shall not
exceed two per cent of the cost thereof, not
including the cost of the land on which the
76 CAP. 123.] INCOME TAX

building or structure is erected;

(ii) where the total deductions allowable under this
paragraph and under paragraph (j) cannot be
given effect to in full in any year because there
are no profits or gains chargeable for that year
from the source of income in respect of which
they are allowable or because the profits or gains
chargeable from that source are less than the
deductions, the deductions or such part of the
deductions to which effect has not been given,
shall be added to the deduction for wear and tear
in respect of that source for the following year
and deemed to be part of that deduction, or if
there is no such deduction in respect of that
source for that year, be deemed to be the
deduction for that year and so on for subsequent
years;
(iii) the aggregate of the deductions made under this
paragraph and under paragraph (j), added to the
wear and tear, if any, or to such part thereof as
may be appropriate, which occurred prior to the
commencement of this Act, shall not exceed the
original cost, or such part of it as may be
appropriate, of such plant, machinery or
premises, having regard to the extent to which
they were wholly and exclusively used in the
production of the income, and -
(a) the wear and tear which occurred
prior to the commencement of this
Act shall be computed at the
prescribed rates, and
(b) the cost of the land on which the
building or structure is erected shall
in all cases be excluded from the
original cost of the premises;
(g) the amount of a loss incurred by any person, solely or
in partnership, in any trade, business, profession or
vocation during the year preceding the year of
assessment which, if it had been a profit, would have
been assessable under this Act; and in computing such
loss account shall be taken of all deductions which
would have been allowable under the other paragraphs
of this sub-article, except paragraphs (f) and (j), if it
had been a profit; and where the amount of a loss
incurred and computed as aforesaid is such that it
cannot be set off against capital gains or income from
other sources for the year preceding the year of
assessment, it shall, to the extent to which it cannot be
wholly set off against capital gains or income for the
said year, be carried forward and set off against what
would otherwise have been the total income for
subsequent years in succession:
 INCOME TAX [CAP. 123. 77

Provided that nothing in this paragraph shall be

construed as permitting the set off of any loss incurred
outside Malta which, if it had been a profit and had
been retained outside Malta, would not have been
chargeable to tax under this Act:
Provided further that a loss as aforesaid shall not
be deducted against income which stands to be
allocated to the final tax account and any loss resulting
from activities or sources the profit derived from
which would have been allocated to the final tax
account shall not be a loss to which this paragraph
applies;
(h) any expenditure on scientific research incurred by a
person engaged in any trade, business, profession or
vocation and proved to the satisfaction of the
Commissioner to have been incurred for the use and
benefit of the trade, business, profession or vocation:
Provided that any such expenditure of a capital nature,
unless it is an expenditure in respect of which a
deduction is allowable under paragraphs (f) and (j),
shall be spread equally over the year in which it has
been incurred and the five succeeding years:
Provided further that no deduction shall be
allowed under the provisions of this paragraph in the
case of any such expenditure on plant or machinery or
premises, in respect of which any deduction is allowed
under paragraphs (f) and (j):
Provided further that the deduction due under this
paragraph may, at the option of the person, be allowed at
one hundred and fifty per cent of the actual amount of
the expenditure incurred; and when a person exercises
his option as aforesaid, the total increased deduction shall
not, for any year of assessment, exceed five per cent of
the turnover of the person for that year; and if this total
increased deduction is such that the full amount thereof
cannot be allowed as a deduction in the year in which it
would, but for the stated five per cent limitation, have
been deductible, that part which cannot be so allowed
shall be added to any deduction due under the provisions
of this paragraph for the following year and be deemed to
be part of that deduction or, if there is no such deduction
for that year, be deemed to be the deduction for that year,
and so on for subsequent years.
For the purposes of this paragraph "scientific
research" shall include:
(i) basic research comprising activities undertaken for
the advancement of scientific or technological
knowledge;
(ii) applied research where a specific application is
in view;
(iii) development work involving the use of the
 78 CAP. 123.] INCOME TAX

results of basic and applied research as aforesaid

for the purpose of creating new or improving
existing materials, devices, products or
processes.
(i) any expenditure on patents or patent rights incurred by
a person engaged in a trade, business, profession or
vocation and proved to the satisfaction of the
Commissioner to have been incurred for the use and
benefit of the trade, business, profession or vocation:
Provided that any such expenditure of a capital
nature shall be spread over the life of the patent or
patent rights in a reasonable manner to the satisfaction
of the Commissioner:
Provided further that any sums receivable from
any sales of such patents or patent rights or any part
thereof and all royalties or other income receivable in
respect thereof shall be included as total income for
the year when receivable;
(j) in respect of plant and machinery first used and
employed in the year immediately preceding the year
of assessment, an initial deduction of one-fifth of the
capital expenditure thereon, and in respect of premises
being an industrial building or structure first used and
employed in the year immediately preceding the year
of assessment, an initial deduction of one-tenth of the
capital expenditure thereon:
Provided that deductions made under this
paragraph shall be restricted, set off and carried
forward as laid down in the second and third provisos
to paragraph (f):
Provided further that the deduction contemplated
by this paragraph in respect of plant and machinery shall
no longer be applicable with effect from such year of
assessment as may be determined by the Minister by
order in the Gazette;
(k) any sum or expenses proved to the satisfaction of the
Commissioner to have been paid or incurred by or on
behalf of a candidate for election as member of the
House of Representatives on account of or in respect
of the conduct or management of such election:
Provided that such deduction shall only be
allowed in the case of an elected candidate and shall
not exceed the maximum amount of expenditure
Cap. 354. permissible under the General Elections Act, in respect
of one candidate or the amount actually incurred by
such candidate, whichever is the lesser;
(l) any expenditure incurred by a person engaged in a
trade, business, profession or vocation for the purpose
of promoting that trade, business, profession, or
vocation including any expenditure on market research
 INCOME TAX [CAP. 123. 79

and obtaining market information, advertising or other

means of soliciting business, providing samples, and
participating in fairs and exhibitions;
(m) any expenditure of a capital nature on intellectual
property rights incurred by a person engaged in a
trade, business, profession or vocation and proved to
the satisfaction of the Commissioner to have been
incurred for the use and benefit of the trade, business,
profession or vocation:
Provided that any such expenditure of a capital
nature shall be spread equally over the year in which it
has been incurred and the two succeeding years:
Provided further that any sums receivable from
any sales of such intellectual property rights and all
other income receivable in respect thereof shall be
included as total income for the year when receivable;
(n) any sum proven to the satisfaction of the
Commissioner to have been paid by an employer to a
licensed or registered childcare centre as fees in
respect of childcare services for the children of his
employees, up to a maximum of nine hundred and
thirty-five euro (€935) per child.
(2) (a) The Minister responsible for finance may make rules
prescribing the method of calculating or estimating the
deductions allowable under this article, and may by
such rules also determine the amount of the deduction.
(b) The Minister responsible for finance may by such
rules also prescribe tax credits and deductions other
than those listed in subarticle (1), and may also by
such rules determine the class of persons to whom
such tax credits or deductions shall apply and the
method of calculating or estimating such tax credits or
deductions and the amounts thereof.
(3) Where any person incurs expenditure before he begins to
carry on his trade or business, and the expenditure -
(a) is incurred not more than eighteen months before that
time; and
(b) is not deductible in ascertaining the trading or business
income of that person, but would have been so
deductible under subarticle (1) had it been incurred
after that time,
such expenditure as may be prescribed shall be treated as incurred on
the day on which the trade or business is first carried on by that person.
(4) Where a person derives income from work carried out on or
in relation to immovable property situated in Malta, consisting of
brokerage and professional services, construction work, project
management of construction work and work of tradesmen, or from
the granting of loans or from any form of credit to finance the
acquisition, development, construction, refurbishment, renovation
 80 CAP. 123.] INCOME TAX

of immovable property or any right thereon and any other matter

which increases or enhances the value of such immovable property
or any right thereon, and such property is owned by a related
person, the following shall have effect:
(a) the income derived from the work, loans or credit, or
from the transfer of such immovable property or any
right thereon to which such work, loans, or credit is
related, shall be deemed to constitute separate
chargeable income for the purpose of this subarticle;
(b) in determining the chargeable income derived from the
said work, the total deductions allowable under this
article shall not exceed the amount of the
consideration received or receivable for the said work;
and
(c) in determining the chargeable income derived from the
transfer of such immovable property or any right
thereon, the total deductions allowable under this
article shall not exceed the consideration received or
receivable for the said immovable property or right
thereon, in so far that such excess consists of any
amounts paid or payable in respect of the work, loans,
or credit referred to in this subarticle.
For the purpose of this paragraph any amounts paid or
payable in respect of the said work, loans, or credit shall for the
purpose of determining the chargeable income to be taken into
account only after all other allowable deductions have been taken
into account:
Provided that paragraph (c) shall not apply with respect to
income derived from loans or credit, where it can be proved to the
satisfaction of the Commissioner that the amount paid or payable in
respect of the loans or credit referred to in this subarticle reflects
the amount that would have been paid or payable if the persons
referred to in this subarticle were not related.
For the purpose of this subarticle -
(i) an individual is deemed to be related to another
person if that other person is a body of persons
of which the said individual is, directly or
indirectly, a shareholder, partner or member; and
(ii) two bodies of persons are deemed to be related
persons if they are, directly or indirectly,
controlled or beneficially owned as to more than
twenty-five percent by the same persons.
Alimony 14A. Notwithstanding anything to the contrary contained in this
payments. Act, if an individual proves to the satisfaction of the Commissioner
Added by:
XX.1996.8. that in the year preceding a year of assessment he has paid to his
Amended by: estranged spouse an alimony payment as determined by the courts
II. 2002.46;
I. 2010.17; of a European Union or a European Economic Area (hereinafter
L.N. 218 of 2012. "EU/EEA") Member State or by the courts of another country as the
Substituted by: Commissioner may approve or as agreed by a public deed of
XII. 2014.17.
personal separation under the authority of the courts of a EU/EEA
 INCOME TAX [CAP. 123. 81

Member State or by the courts or other authorities of another

country as the Commissioner may approve, or as ordered by the
courts of a EU/EEA Member State in a divorce judgment or decree
or by the courts of another country as the Commissioner may
approve, he shall be allowed as a deduction against his income the
lesser of these amounts -
(a) the amount actually paid in accordance with the Court
order or public deed;
(b) the individual’s chargeable income for the year.

14B. (1) Notwithstanding anything to the contrary contained in School fees.

this Act, if an individual proves to the satisfaction of the Added by:
II. 2002.47.
Commissioner that in the year preceding a year of assessment he Amended by:
has paid school fees in respect of his children attending a registered II. 2005.7;
IV. 2007.11;
private kindergarten or a school named by the Minister he shall be XXXII. 2007.33;
allowed as a deduction against his income the lesser of these L.N. 409 of 2007;
amounts - IV. 2011.12;
V. 2012.14.
(a) the amount actually paid as certified by the head of the
relative school or kindergarten;
(b) two thousand three hundred euro (€2,300) in respect of
each child who attended such secondary school, or one
thousand six hundred euro (€1,600) in respect of each
child who attended such primary school, or one
thousand three hundred euro (€1,300) in respect of
each child who attended such kindergarten:
Provided that the deduction shall only be allowed if the
payment and the details of the individual making the claim are
confirmed by information provided, in such format and content as
determined by the Commissioner, by the head of the relative school or
kindergarten.
(2) Any individual qualifying under the provisions of
subarticle (1) who proves to the satisfaction of the Commissioner
that in the said year he has paid fees to the named school in respect
of his child with special needs for the services of a facilitator, shall
be allowed as a deduction against his income the fees so paid up to
a maximum of nine thousand and three hundred and twenty euro
(9,320), provided that advice shall have been given by a board
established for the purpose by the Minister responsible for
education to the effect that the said facilitator is necessary for that
child.
(3) Where the parents of a child who attends a named school as
provided in subarticles (1) and (2) live separately and they jointly
contribute towards the payment of the school fees, the allowable
deduction in respect of that child shall be apportioned between
them in proportion to the amount of their contribution.
 82 CAP. 123.] INCOME TAX

Child care fees. 14C. Notwithstanding anything to the contrary contained in this
Added by: Act, if an individual proves to the satisfaction of the Commissioner
IV. 2007.12.
Amended by: that in the year preceding a year of assessment he has paid fees in
L.N. 409 of 2007; respect of childcare services for his children who were below the
II. 2009.12;
I. 2010.18; age of twelve years to a bona fide childcare centre he shall, for each
V. 2012.15; child, be allowed as a deduction against his income the lesser of
XII. 2014.18. these amounts -
(a) the amount actually paid as confirmed by official
receipts;
(b) two thousand euro (€2,000):

Provided that the Minister may by rules prescribe the

conditions under which this deduction shall be allowed.

Fees in respect of 14D. Notwithstanding anything to the contrary contained in this

homes for the Act, if an individual proves to the satisfaction of the Commissioner
elderly and the
disabled. that in the year preceding a year of assessment he has paid fees on
Added by: his own behalf or on behalf of a family member, in respect of
XXXII. 2007.34.
Amended by: residence in a private home for the elderly or the disabled, or at a
V. 2012.16; respite centre for the disabled, he shall be allowed as a deduction
III. 2013.22. against his income the lesser of these amounts -
(a) the amount actually paid;
(b) two thousand five hundred euro (€2,500):
Provided that, for any year of assessment, the total
deductions claimed in respect of any resident shall not exceed the
amount as stipulated in this article:
Provided further that the deduction shall only be allowed if
the payment and the details of the individual making the claim are
confirmed by information provided, in such format and content as
determined by the Commissioner, by the person running the home
or centre.

Sports fees. 14E. Notwithstanding anything to the contrary contained in this

Added by: Act, if an individual proves to the satisfaction of the Commissioner
XXXII. 2007.35.
Substituted by: that in the year preceding a year of assessment he has paid fees in
II. 2009.13. respect of his children who have not attained the age of sixteen
Amended by:
XII. 2014.19. years, attending sports activities organised either by a person
S.L. 455.03 registered under the Sport Persons (Registration) Regulations or by
the Kunsill Malti g]all-Isport, he shall, for each child, be allowed
as a deduction against his income the lesser of these amounts -
(a) the amount actually paid;
(b) one hundred euro:
Provided that the deduction shall only be allowed if the
payment and the details of the individual making the claim are
confirmed by information provided by the registered person
through the Kunsill Malti g]all-Isport or by the Kunsill Malti g]all-
Isport as the case may be, in such format and content as determined
by the Commissioner:
Provided further that in the case of attendance at regular
sports activities organised by entities outside Malta, registration as
 INCOME TAX [CAP. 123. 83

aforesaid shall not be necessary and the claim for deduction shall
be made directly by the individual concerned in such format and
content as determined by the Commissioner.

14F. If an individual proves to the satisfaction of the Proof of payment

Commissioner that he has paid fees in respect of his studies at a of fees.
Added by:
recognised tertiary education institution, whether locally or abroad, I. 2010.19.
he shall be allowed a deduction against his income in respect of
such fees in such manner and subject to such conditions as may be
prescribed.

14G. Notwithstanding anything to the contrary contained in this Fees for cultural
Act, if an individual proves to the satisfaction of the Commissioner activities.
Added by:
that in the year preceding a year of assessment he has paid fees in V. 2012.17.
respect of his children who have not attained the age of sixteen Amended by:
XII. 2014.20.
y e a r s , a t t e n d i n g c r e a t i v e o r c u l t u r a l c o u r s e s o rg a n i s e d b y
institutions or persons licensed or accredited by the Malta Council
for Culture and the Arts, he shall, for each child, be allowed as a
deduction against his income the lesser of these amounts -
(a) the amount actually paid;
(b) one hundred euro (€100):
Provided that the deduction shall only be allowed if the
payment and the details of the individual making the claim are
confirmed by information provided by the licensed or accredited
person or institution through the Malta Council for Culture and the
Arts, in such format and content as determined by the
Commissioner:
Provided further that in the case of attendance at creative or
cultural courses organised by entities outside Malta, accreditation
as aforesaid shall not be necessary and the claim for deduction shall
be made directly by the individual concerned in such format and
content as determined by the Commissioner.

15. (1) For the purposes of this article investment services Investment
company shall mean a company which on the 1st October, 2003 services
companies.
held an investment services licence issued under article 6 of the Added by:
Investment Services Act, or a company which, on the 1st October, XVII. 1994.13.
Amended by:
2003 was recognised by the relevant competent authority for the II. 2003.11;
purposes of article 9A of that said Act, and whose activities solely II. 2004.10.
comprise the provision of management, administration, Cap. 370.
safekeeping, or investment advice to collective investment schemes
as defined in the aforesaid Act.
(2) For the purposes of ascertaining the total income of an
investment services company for any year up to the year
immediately preceding the year of assessment commencing on such
date that the Minister may by notice in the Gazette appoint * , the
amounts specified in paragraphs (a) to (e) shall, at the company’s
option, be allowed as deductions in addition to or as a replacement
for, as the case may be, the amounts allowed under article 14(1)

* 1st January, 2011 - see the Notice of Appointed Date (Income Tax Act) Order -
S.L.123.125
84 CAP. 123.] INCOME TAX

and shall be subject to the conditions stipulated in that article. For

this purpose:
(a) rental, energy costs, building maintenance, building
insurance and other building occupancy costs incurred
in the period from the year preceding the first year of
assessment in which the investment services company
first becomes liable to tax under this Act up to and
including the year preceding the tenth year of
assessment shall be allowed as an additional one
hundred per cent of such expenditure;
(b) a one hundred per cent deduction shall replace the
deductions provided for under article 14(1)(f) and (j)
in respect of expenditure which is incurred in the
period commencing from the year preceding the first
year of assessment in which the investment services
company first becomes liable to tax under the
provisions of this Act up to and including the year
preceding the fifth year of assessment and, in addition,
expenditure in respect of office premises shall be
eligible for such deduction as if the said premises were
industrial buildings;
(c) the amounts invested by an investment services
company for its own account in a collective investment
scheme managed by that company shall be allowed as
a deduction if such investment is made during the
period commencing from the year preceding the first
year of assessment in which the investment services
company first becomes liable to tax under the
provisions of this Act up to and including the year
preceding the fifth year of assessment:
Provided that such funds so invested are not
disinvested from such collective investment scheme
within two years of the making of the said investment:
Provided further that this additional deduction shall
not affect the amount which is to be taken as the cost
of acquisition of such investment for the purposes of
any other provision of this Act, and also provided that
such deductions shall not be carried forward as part of
a loss to be set off against the company’s liability in
respect of a capital gain arising on the disposal of its
investments in the collective investment scheme;
(d) remuneration paid by an investment services company
to its employees who are resident in Malta shall be
allowed as an additional one hundred per cent of that
remuneration if such expenditure is incurred during
the period commencing from the year preceding the
year of assessment in which the investment services
company first becomes liable to tax under the
provisions of this Act up to and including the year
preceding the tenth year of assessment;
(e) there shall be allowed as a deduction any other
 INCOME TAX [CAP. 123. 85

expenses and outgoings incurred by the investment

services company wholly and exclusively for the
purposes of carrying on its business and which would
otherwise not have been allowed as a deduction under
the provisions of article 14(1).
(3) Where an investment services company incurs expenditure
before it begins to carry on its business, and the expenditure -
(a) is incurred not more than five years before that time;
and
(b) is not deductible in ascertaining the total income of the
investment services company, but would have been so
deductible under article 14(1) or under sub-article
(2)(e) had it been incurred after that time,
such expenditure shall be treated as incurred on the day on which
the business is first carried on by the investment services company,
and of sub-article (2)(a) to (d) shall apply in respect of such
expenditure.
(4) The additional deductions specified in sub-article (2)
represent the maximum deductions allowed for the purposes of that
sub-article, and an investment services company need not claim the
full amount of such maximum deductions in respect of any year of
assessment.
(5) The additional deductions provided for in this article shall
not be taken into account in determining the amount of loss, if any,
available for surrender under the provisions of articles 16 to 22
(group relief provisions) of this Act.

15A. The provisions of article 15 relating to investment services Companies author-

companies shall, where applicable, apply mutatis mutandis to ised to act as insur-
ance managers.
companies which, on the 1st October, 2003 were authorised to act Added by:
as insurance managers under article 13 of the Insurance Business XVII. 1998.70.
Amended by:
Act. II. 2004.11.
Cap. 403.
16. For the purposes of this article and of articles 17 to 22, Definition of
hereinafter collectively referred to (including this article) as the group.
Added by:
"group relief provisions", two companies resident in Malta but XVII. 1994.13.
neither of which is resident for tax purposes in any other country
shall be deemed to be members of a group of companies if one is
the fifty-one per cent subsidiary of the other or both are fifty-one
per cent subsidiary of a third company resident in Malta.
For the purposes of the group relief provisions, a company
shall be deemed to be a fifty-one per cent subsidiary of another
company, hereinafter referred to as the "parent company":
(a) if and so long as more than fifty per cent of its
ordinary share capital and more than fifty per cent of
its voting rights are owned directly or indirectly by the
parent company; and
(b) the parent company is beneficially entitled either
directly or indirectly to more that fifty per cent of any
 86 CAP. 123.] INCOME TAX

profits available for distribution to the ordinary

shareholders of the subsidiary company; and
(c) the parent company would be beneficially entitled
either directly or indirectly to more than fifty per cent
of any assets of the subsidiary company available for
distribution to its ordinary shareholders on a winding
up.

Surrender of relief 17. (1) Subject to, and in accordance with, the provisions of
between members this article and of articles 18 to 22, allowable losses may, in the
of groups.
Added by: case set out in sub-article (2), be surrendered by a company,
XVII. 1994.13. hereinafter referred to as "the surrendering company", and, on the
making of a claim by another company, hereinafter referred to as
“the claimant company”, be allowed to the claimant company as a
deduction called “group relief”. A claim made by virtue of this sub-
article is hereinafter referred to as a “group claim”.
(2) Group relief shall be available where the surrendering
company and the claimant company are both members of the same
group throughout the year preceding the year of assessment for
which the relief is claimed.
(3) For any year of assessment, two or more claimant
companies may make group claims relating to the same
surrendering company.
(4) A payment for group relief -
(a) shall not be taken into account in computing profits or
losses of either company for the purposes of tax
imposed by this Act; and
(b) shall not, for any of the purposes of this Act, be
regarded as a distribution.
For the purposes of this sub-article "payment for group relief"
means a payment made by the claimant company to the
surrendering company in pursuance of an agreement between them
in respect of an amount surrendered by way of group relief, being a
payment not exceeding that amount.

Losses which may 18. (1) (a) If in the year preceding a year of assessment the
be surrendered by surrendering company has incurred an allowable loss, the amount
way of group
relief. of the loss may be set off for the purposes of tax against the total
Added by: income of the claimant company for the corresponding year of
XVII. 1994.13.
Amended by: assessment and, where applicable, for subsequent years of
II. 2007.7; assessment provided that in the year in which the surrendering
L.N. 409 of 2007. company incurs the loss both companies have accounting periods
which begin and end on the same dates:
Provided that where the surrendering company makes up
accounts and pays tax in a currency other than that of the claimant
company any loss surrendered shall be set off against the total
income of the claimant company as aforesaid, after such amount is
converted to the currency in which the claimant company makes up
accounts and pays tax. Such conversion shall be carried out by
reference to the mean rate or rates of exchange between such
 INCOME TAX [CAP. 123. 87

currency or currencies and the euro ruling on the last day of the
accounting period to which such loss refers as issued by the Central
Bank of Malta.
(b) A surrendering company may surrender allowable losses by
way of group relief in excess of the total income of the claimant
company in the year preceding a year of assessment, in which case
the claimant company may carry forward and set off those losses in
accordance with the provisions of article 14(1)(g) as if they were
losses of its own trade.
(c) Where the allowable loss, had it been a profit, would have
been allocated to the immovable property account or the Maltese
taxed account of the surrendering company, the claimant company
may deduct such loss from its income which stands to be allocated
to either its immovable property account or its Maltese taxed
account, and such loss may only be carried forward against the
claimant company’s total income arising in subsequent years as
would stand to be allocated to any of these taxed accounts.
(d) Where the allowable loss, had it been a profit, would have
been allocated to the foreign income account of the surrendering
company, the claimant company may only deduct such loss from its
total income as would stand to be allocated to its foreign income
account and such loss may only be carried forward against the
claimant company’s total income arising in subsequent years as
would stand to be allocated to its foreign income account.
(2) Notwithstanding the provisions of sub-article (1), a
company which is either -
(a) newly incorporated and at all times after its
incorporation satisfies the conditions to be deemed a
member of the same group of companies as another
company in the year preceding a year of assessment
and has the same accounting period end date as that
other company in that year preceding the year of
assessment, or
(b) wound up part way through its accounting period and
until it is so wound up satisfied the conditions to be
deemed a member of the same group as another
company in the year preceding a year of assessment
and has the same accounting period start date as that
other company in that year preceding the year of
assessment,
will be deemed for the purposes of sub-article (1)(a) to have an
accounting period which begins and ends on the same date as that
of the other company and group relief shall be available in full for
that year.
19. If, apart from this article, a company is a member of a Group relief anti-
group of companies, and arrangements are in existence the sole or avoidance.
Added by:
main purpose of which is to reduce any company’s tax liability, and XVII. 1994.13.
by virtue of the said arrangements that company would cease to be
a member of that group of companies, then that company shall be
treated as not being a member of that group of companies for any
 88 CAP. 123.] INCOME TAX

year preceding a year of assessment in which the said arrangements

are in existence.
Exclusion of 20. (1) Relief shall not be given more than once, whether by
double reliefs. giving group relief and by giving some other relief (in respect of
Added by:
XVII. 1994.13. any year of assessment) to the surrendering company, or by giving
group relief more than once, in respect of the same amount.
(2) In accordance with the provisions of sub-article (1), two or
more claimant companies cannot, in respect of any one loss, obtain
in total more relief than could be obtained by a single claimant
company.

Claims and 21. A claim for group relief:

adjustment.
Added by: (a) need not be for the full amount available,
XVII. 1994.13.
Amended by: (b) shall include the consent of the surrendering company
III. 2013.22. set out in such form as the Commissioner may require,
and
(c) must be made by the later of -
(i) the tax return date for the relative year of
assessment in respect of which the claim is
made, or
(ii) twelve months following the end of the
company’s accounting period, which date falls
within the year immediately preceding the year
of assessment for which the claim is made.
Definitions. 22. For the purpose of the group relief provisions:
Added by:
XVII.1994.13. (a) a reference to "allowable loss" or "allowable losses"
shall be construed as a reference to the loss or losses
referred to in article 14(1)(g), to the extent that they
are incurred in the year preceding the year of
assessment and are not unrelieved losses carried
forward from previous years; and
(b) references to "total income" shall have the meaning
assigned to it by article 2 but shall be computed before
any deduction is made in respect of group relief.

Single taxable 22A. The Minister for finance may make rules providing for
person basis. bodies of persons under common ownership to be entitled to elect
Added by:
III. 2013.24. to compute and bring to charge their chargeable income or losses as
the case may be, on a collective basis, and for the consequent
carrying out of the relevant provisions and obligations under the
Income Tax Acts as if they are a single body of persons, subject to
such terms and conditions as may be laid down in such rules.
 INCOME TAX [CAP. 123. 89

23. (1) Where any person engaged in the business of Profits from
exploration for, and the production of, petroleum (hereinafter production of
petroleum.
referred to as "the Contractor") derives, or aims to derive, gains or Added by:
profits through a Production Sharing Contract (hereinafter referred V.1958.4.
Amended by:
to as "the Contract") granted to such person by the Government of XV.1958.2;
Malta by way of licence in accordance with the provisions of the XXV.1962.2,4;
Petroleum Production Act, the Continental Shelf Act and the L.N. 4 of 1963;
L.N. 46 of 1965;
Petroleum (Production) Regulations, or any provision amending or VIII.1969.5;
substituting the said Acts or Regulations, the chargeable income of X.1977.3;
the said person from such business shall be determined as set out in XXVIII.1978.7;
XXXVI. 1990.6.
this article. Renumbered by:
XVII. 1994.2.
(2) (a) The gains or profits derived by the Contractor from the Amended by:
production of petroleum for any basis year, being the XX.1996.9.
Substituted by:
year immediately preceding a year of assessment, shall IV. 2011.13.
be arrived at by deducting the recoverable costs as Cap. 156.
defined in the Contract and not yet fully recovered by Cap. 194.
S.L. 156.01
the Contractor, from the total of the value of the cost
recovery petroleum and of the share of profit
petroleum, as defined in the Contract, allotted to the
Contractor for that year, to which shall be added any
ancillary or incidental income for the same year.
(b) Where after such deduction as is referred to in
paragraph (a) there remains any balance of unabsorbed
recoverable costs, the amount of such unabsorbed
costs shall be carried forward to the following year and
shall be added to and become part of the recoverable
costs for that year.
(c) The procedure referred to in paragraph (b) shall be
followed in subsequent years until all recoverable
costs shall have been absorbed.
(3) (a) For the purposes of this article, particularly for the
purposes of subarticle (2), each Contract shall be
deemed to constitute a separate and distinct source of
income and any Contractor deriving gains or profits
from more than one Contract shall be subject to tax as
if he were a separate and unconnected person with
respect to each such Contract.
(b) Where more than one petroleum field is in production
in an area covered by the same Contract, the gains or
profits from each such field shall be determined as if
each such field constitutes a separate and distinct
source of income arising to a separate person, so
however that the Contractor shall have the right to
identify the fields in the said area where the cost of
exploration and development operations are to be
taken into account in determining the relative gains or
profits.
(4) The provisions of articles 16 to 22 shall not apply in the
case of any company in any year in which the company is operating
under a licence referred to in subarticle (1).
(5) (a) Notwithstanding anything contained in the Income Tax
 90 CAP. 123.] INCOME TAX

Acts, where a non-resident sub-contractor renders

services to a Contractor in Malta, such Contractor shall
withhold tax at the rate set out in article 56(13)(b) on
payments made to the sub-contractor for services
rendered in Malta and shall pay to the Commissioner
any tax so withheld within thirty days from the making
of the deduction.
(b) Where a Contractor fails to deduct and pay tax in
accordance with paragraph (a), the provisions of
article 73(4) of this Act and of article 40(1) of the
Cap. 372. Income Tax Management Act shall apply mutatis
mutandis.
(c) The tax withheld in accordance with paragraph (a)
shall be considered as a final withholding tax unless
the sub-contractor notifies the Commissioner that this
tax is to be considered as a provisional tax payment to
be credited against the tax liability of the said sub-
contractor’s chargeable income for the relevant year of
assessment computed in accordance with the
provisions of the Act.
(d) The notification referred to in paragraph (c) shall be
made by not later than the tax return date for the
relevant year of assessment and in such form as the
Commissioner may require.
(6) Except for gains or profits derived from the production of
petroleum referred to in subarticles (1) and (2), any income or deemed
income derived by a Contractor and subject to tax under any of the
provisions of this Act shall be so brought to charge in accordance with
the said provisions and at the applicable rates, but no deduction shall
be granted thereagainst in respect of any loss or outgoing expense
incurred in connection with the exploration for or the production of
petroleum.

Balancing 24. (1) Where, under the provisions of article 14(1)(f) and (j),
statement, any deduction has been allowed in any year of assessment in
balancing
allowance and ascertaining the total income of any person and any of the
charge. following events occurs in the year immediately preceding the year
Added by:
XXV. 1960.7. of assessment in the case of any property in respect of which any
Amended by: deduction has been allowed as aforesaid, that is to say, either the
XLII. 1975.5; property or any part thereof -
XXVI.1977.7;
XXVIII. 1978.8. (a) is sold or otherwise transferred under an onerous title,
Renumbered by:
XVII. 1994.2. whether still in use or not; or
Amended by:
XVII. 1994.14. (b) is destroyed; or
(c) is put out of use as being worn out or obsolete or
otherwise useless or no longer required,
and the event in question occurs before the source of income in
respect of which the deduction has been allowed has ceased to exist
or to belong to the said person, he shall, in the year of assessment,
render to the Commissioner, at the same time as he renders his
Cap. 372. return of income under article 10 of the Income Tax Management
Act, a statement (hereinafter referred to as a "balancing
 INCOME TAX [CAP. 123. 91

statement"), in respect of the property in question showing the

following items, that is to say:
(i) the amount of the capital expenditure on the
provision thereof; and
(ii) the total depreciation which has occurred by
reason of wear and tear since the date of the
acquisition of such property, taking into account
the aggregate amount of all deductions
previously allowed under the provisions of
article 14(1)(f) and (j) and of any deductions or
charges previously allowed or made under sub-
article (2)(a) or (b);
(iii) the amount of all sale, insurance, salvage or
compensation monies in respect thereof and,
where the property has been transferred by
exchange, the value thereof, or, if put out of use,
the disposal value thereof.
(2) In ascertaining the total income of a person who is required
under sub-article (1) to render a balancing statement to the
Commissioner, a deduction (hereinafter referred to as a "balancing
allowance") shall be allowed or, as the case may be, an addition
(hereinafter referred to as a "balancing charge") shall be made and
such balancing allowance or balancing charge shall be calculated
by reference to the balancing statement or statements rendered by
the person in respect of the year immediately preceding the year of
assessment, as follows:
(a) the amount of a balancing allowance shall be the
amount by which the amount of item (i) of the
balancing statement exceeds the sum of the amounts of
item (ii) and item (iii) of that statement; or
(b) the amount of the balancing charge shall be the amount
by which the sum of the amounts of item (ii) and item
(iii) of the balancing statement exceeds the amount of
item (i) of that statement:
Provided that -
(i) the balancing charge shall in no case exceed the
aggregate amount of any deductions previously
allowed under the provisions of article 14(1)(f)
and (j) and included in item (ii) of the balancing
statement;
(ii) where the property in respect of which a
balancing allowance falls to be allowed or a
balancing charge falls to be made was used only
partly in the production of the income, only so
much of the balancing allowance that would
otherwise have been allowed, or of the balancing
charge that would otherwise have been made
shall be allowed or made as may be appropriate
having regard to the extent of use for the said
purpose.
92 CAP. 123.] INCOME TAX

(3) Where property, in the case of which any of the events

mentioned in sub-article (1) has occurred, is replaced by the owner
thereof and a balancing charge falls to be made on him by reason of
that event or, but for the provisions of this sub-article, would have
fallen to be made on him by reason thereof, then, if by notice in
writing to the Commissioner he so elects, the following provisions
shall have effect, that is to say:
(a) if the amount of the balancing charge which would
have been made is greater than the capital expenditure
on providing the new property -
(i) the balancing charge shall be an amount equal to
the difference; and
(ii) no balancing allowance under sub-article (2) and
no deduction under article 14(1)(f) and (j) shall
be made or allowed in respect of such new
property or the capital expenditure on the
provision thereof; and
(iii) in considering whether any, and, if so, what
balancing charge falls to be made in respect of
the capital expenditure on providing such new
property, the aggregate amount of all deductions,
previously allowed in respect of such property
under the provisions of this article and of article
14(1)(f) and (j), shall be deemed to be equal to
the full amount of such expenditure;
(b) if the capital expenditure on providing the new
property is equal to, or greater than the amount of the
balancing charge that would have been made -
(i) the balancing charge shall not be made; and
(ii) the amount of any deductions in respect of the
said expenditure under the provisions of article
14(1)(f) and (j) shall be calculated as if the
capital expenditure on providing such new
property had been reduced by the amount of the
balancing charge which would have been made;
and
(iii) in considering whether any, and, if so, what
balancing allowance or balancing charge falls to
be made in respect of the capital expenditure on
providing such new property, the aggregate
amount of all deductions, previously allowed in
respect of such property under the provisions of
this article and under article 14(1)(f) and (j),
shall be deemed to have been increased by an
amount equal to the amount of the balancing
charge that would have been made:
Provided that where the new property is only partly
employed in the production of the income, only so much of the
capital expenditure incurred in providing the property shall be
taken into account for the purposes of this sub-article as may be
appropriate having regard to the extent to which such property is
 INCOME TAX [CAP. 123. 93

wholly and exclusively employed in the production of the income.

(4) Where any person has delivered a balancing statement, the
Commissioner may -
(a) accept the statement and make a balancing allowance
or balancing charge accordingly; or
(b) refuse to accept the statement and, to the best of his
judgment, determine the amount of the balancing
allowance or balancing charge and make a balancing
allowance or balancing charge accordingly.
(5) Where a person has not delivered a balancing statement and
the Commissioner is of the opinion that a balancing charge would
fall to be made upon such person in respect of any such property,
then the Commissioner may, according to the best of his judgment,
determine the amount of such balancing charge and assess him
accordingly.
(6) Nothing in sub-article (4) and (5) contained shall prevent
the decision of the Commissioner in the exercise of the power
conferred upon him by those sub-articles from being questioned in
an appeal in accordance with the provisions of articles 35 and 37 of
the Income Tax Management Act. Cap. 372.

(7) For the purpose of this article -

(a) the expression "property" means plant and machinery,
and premises being an industrial building or structure
owned and employed by any person in the production
of his income;
(b) the capital expenditure on providing any property shall
be the amount which, in the opinion of the
Commissioner, such property would have cost if
bought in the open market at the time it was provided;
(c) the price in respect of any property sold or the value of
any property otherwise transferred under an onerous
title shall be the amount which, in the opinion of the
Commissioner, such property would have fetched if
sold or otherwise transferred under an onerous title on
the open market at the time it was sold or transferred;
(d) the disposal value in respect of any property which is
put out of use shall be the amount which, in the
opinion of the Commissioner, such property would
have fetched if sold or otherwise transferred under an
onerous title in the open market at the time it was put
out of use.
(8) Where in any year of assessment full effect cannot be given
to any balancing allowance owing to there being no profits or gains
chargeable for that year from the source of income in respect of
which such allowance is claimed or owing to the profits or gains
chargeable from that source being less than the allowances, then so
long as the source of income in respect of which the allowance falls
to be made continues to exist and to belong to the person entitled to
the said allowance, the balance of such allowance shall be added to,
 94 CAP. 123.] INCOME TAX

and be deemed to from part of, the allowance, if any, for the next
succeeding year of assessment, and if no such allowance falls to be
made for that year, shall be deemed to constitute the allowance for
that year, and so on for subsequent years of assessment.

Applicability of 25. For the purposes of articles 14 to 24 both inclusive,

articles 14 to 24. expenses incurred in the production of, and allowable deductions
Added by:
XVII. 1994.15. given in respect of, income derived from profits which are
Substituted by: allocated to a taxed account must first be deducted against such
II. 2007.8. income.
Deductions not to 26. For the purpose of ascertaining the total income of any
be allowed. person no deduction shall be allowed in respect of -
Amended by:
V.1958.5; (a) domestic or private expenses other than those specifically
XXII. 1976.4;
XXIV.1976.3; allowed by this Act;
XXVI.1977.8;
XXVIII. 1978.9. (b) any outgoings and expenses to the extent to which they
Renumbered by: are not wholly and exclusively incurred in the
XVII. 1994.2. production of the income and, in the case of gains or
Amended by:
XX.1996.10; profits chargeable under article 4(1)(b), not being
II. 2002.48; furthermore necessarily incurred in the performance of
IV. 2011.14. the duties of the relative employment or office;
(c) any loss, diminution, exhaustion or withdrawal of
capital, any sum employed or intended to be employed
as capital or any expenditure for a capital purpose or
of a capital nature save as provided in article 14 and
23;
(d) the cost of any improvements;
(e) any loss or expense which is recoverable under any
insurance or contract of indemnity;
(f) rent of any premises or part of premises not paid for
the purpose of producing the income;
(g) any payments of a voluntary nature;
(h) any interest, discount or premium paid or payable to a
person not resident in Malta where -
(i) the person not resident in Malta derives or
benefits from the said interest, discount or
premium, directly or indirectly, from the
granting of loans or from any form of credit to
finance the acquisition, development,
construction, refurbishment, renovation of
immovable property situated in Malta or any
right thereon including professional fees related
thereto (including fees related to the acquisition
of finance) and any other matter which increases
or enhances the value of such immovable
property or any right thereon; and
(ii) the said interest, discount or premium is exempt
from tax under the provisions of article
12(1)(c)(i); and
(iii) the payor of the interest, discount or premium is
a person related to the person not resident in
 INCOME TAX [CAP. 123. 95

Malta.
For the purpose of this paragraph a person is deemed
to be related to a person not resident in Malta if:
(i) that person and the person not resident in Malta
are, directly or indirectly, controlled or
beneficially owned to the extent of more than
10% by the same persons; or
(ii) that person owns, directly or indirectly, more
than 10% of the ordinary share capital or voting
rights of the person not resident in Malta.

PART V

SPECIAL PROVISIONS

27. (1) Where any person derives gains or profits wholly or in Business of
part from the business of insurance as insurer, then, so far as insurance.
Amended by:
concerns the gains or profits derived by such person from the XXII. 1976.4.
business of insurance, the total income of such person shall, as Substituted by:
XXI. 1980.5.
from the year of assessment 2000 be ascertained as follows: Re-numbered by:
XVII. 1994.2.
(a) in the case of a person carrying on general business, Substituted by:
other than a person carrying on long term business, the XVII. 1998.70.
total income shall be ascertained by taking for the year Amended by:
II. 2003.12;
immediately preceding the year of assessment - V. 2012.18;
III. 2013.25.
(i) technical provisions at the commencement of the
year;
(ii) the equalisation reserve at the commencement of
the year;
(iii) gross premiums written;
(iv) reinsurance recoveries received;
(v) income from investments received and
receivable and interest income earned;
(vi) profits or gains from the sale or disposal of
investments;
(vii) capital gains subject to tax under the provisions
of this Act;
(viii) realised differences on exchange;
(ix) other technical income including commissions,
allowances and fees received and receivable;
(x) profits or gains not falling under any of the
foregoing sub-paragraphs,
and deducting from the aggregate of the above the
aggregate of the following:
(xi) technical provisions at the end of the year;
(xii) the equalisation reserve at the end of the year;
(xiii) the deductions allowable under Part IV of this
Act, including:
96 CAP. 123.] INCOME TAX

(1) claims paid;

(2) reinsurance premiums paid;
(3) losses from the sale or disposal of
investments;
(b) in the case of a person carrying on long term business,
either exclusively or in addition to general business,
the total income derived from the general business
shall be ascertained as provided in paragraph (a) and
the total income derived from the long term business
shall be ascertained by taking for the year immediately
preceding the year of assessment -
(i) income from investments received and
receivable and interest income earned, other
than those of a long term fund;
(ii) capital gains subject to tax under the provisions
of this Act, not being gains derived from a long
term fund;
(iii) commissions, allowances and fees received and
receivable not credited to a long term fund;
(iv) profits or gains from the sale or disposal of
investments not relating to a long term fund;
(v) realised differences on exchange not relating to a
long term fund;
(vi) the surplus in a long term fund which shall be
ascertained by taking -
(1) technical provisions at the commencement of
the year;
(2) gross premiums written;
(3) reinsurance recoveries received;
(4) income from investments received and
receivable and interest income earned,
relating to the long term fund;
(5) profits or gains from the sale or disposal of
investments, which gains or profits shall, for
the purposes of this paragraph, in all cases
be deemed to be gains or profits falling
within the purport of article 4(1)(a), so
however that where any investments were
capital assets as at the thirty-first (31st) day
of December 2008, the cost of acquisition of
such investments for the purpose of this
paragraph shall be the market value
applicable thereto as at that date;
(6) capital gains subject to tax under the
provisions of this Act and derived from the
transfer of assets other than investments
referred to in sub-paragraph (5) and realized
differences on exchange relating to the long
term fund;
(7) other technical income including
 INCOME TAX [CAP. 123. 97

commissions, allowances and fees received

and receivable;
and deducting from the aggregate of the above
the aggregate of the following:
(8) the deductions allowable under Part IV
relating to the income of the long term fund
including -
(i) claims, maturities and surrenders paid,
including, for the avoidance of doubt,
the tax paid by the insurer in respect
of determinable amounts due in
relation to contracts of long term
business in terms of sub-article (2);
(ii) reinsurance premiums paid;
(iii) other technical charges including
commissions and allowances paid and
payable;
(9) losses from the sale or disposal of
investments and other assets of the long term
fund referred to in sub-paragraphs (5) and
(6), so however that where any investments
were capital assets as at the thirty-first (31st)
day of December 2008, the cost of
acquisition of such investments for the
purpose of this paragraph shall be the market
value applicable thereto as at that date; and
(10) technical provisions at the end of the year;
(vii) gains or profits not falling under any of the
foregoing paragraphs not being gains or profits
derived from a long term fund,
and deducting from the aggregate of the above -
(viii) the deductions allowable under Part IV of this
Act and which have not been taken into account
in the determination of the surplus in a long term
fund; and
(ix) any deficit arising out of the computation in sub-
article (1)(b)(vi):
Provided that where the person is not resident in Malta and
the gains or profits accrue in part in Malta and in part outside
Malta, the total income on which tax shall be payable shall -
(a) in the case of a person doing general business, be
ascertained as provided for in sub-article (1)(a)(i) to
(xiii) on the business carried on in or from Malta;
(b) in the case of a person carrying on long term business,
be ascertained by taking the surplus in the long term
fund computed in accordance with sub-article
(1)(b)(vi) of the business earned in or from Malta;
(c) in determining the total income as aforesaid, any
income from investments held outside Malta to back
98 CAP. 123.] INCOME TAX

Malta business, where such income cannot be readily

ascertained, shall be computed by taking a proportion
of the person’s worldwide investment income in the
year preceding the year of assessment equal to the
proportion which the investments as aforesaid bore to
the person’s worldwide investments.
(2) (a) Where, in relation to a contract of long term business,
a determinable amount becomes due by an insurer on
o r a f t e r t h e f i r s t d a y o f J a n u a r y, 1 9 9 9 , a n d t h e
policyholder is a person resident in Malta, the insurer
shall pay tax at the rate of fifteen per cent (15%) on the
profit attributable to such contract which profit shall be
deemed to have accrued during the period from the
first day of January, 1999, or the date when the
contract was commenced, whichever date is the later,
to the date on which the amount becomes due.
For the purposes of this sub-article "a
determinable amount" means an amount payable by an
insurer in the event of a maturity, surrender or in any
other circumstance, other than a death claim, or a
claim referring to a critical illness or a permanent total
disability, specified in the contract, as the case may be,
where the total amount payable can be determined in
whole or in part on the date it becomes due and
whether payment is effected in one lump sum or
otherwise.
(b) (i) The profit referred to in paragraph (a) shall be
calculated by taking the total determinable
amount due to be paid by the insurer and
subtracting therefrom the total amount of
premiums paid within the period referred to in
paragraph (a), and in those cases where the
contract commenced before the first day of
January, 1999, subtracting also an amount equal
to the actuarial valuation of the contract on this
date. The profit so calculated shall not be
affected by any other provision of this Act and
no person shall be charged to further tax on such
profits.
(ii) An insurer shall, not later than the thirty-first
day of March, 1999, forward in writing to the
Commissioner a list of contracts of insurance
relating to long term business, other than
contracts of term insurance, outstanding on the
first day of January, 1999, and indicating, in
respect of each such contract, the actuarial
valuation on that date. The list shall not specify
the identity of the policyholder or the
beneficiaries there under.
For the purposes of this sub-article, "term
insurance" means a contract of insurance which
provides solely for the payment by the insurer of a sum
 INCOME TAX [CAP. 123. 99

of money or other consideration upon the happening of

death within a term which is specified in the contract,
and which is not extendible by any of the parties
thereto.
(c) The insurer shall render an account to the
Commissioner of all tax paid in accordance with the
provisions of this sub-article, but shall not specify the
identity of the policyholders or beneficiaries. Every
amount of tax due to be so paid shall be a debt due
from the insurer to the Commissioner payable not later
than the fourteenth day following the end of the month
in which the amount becomes due as aforesaid and
shall be recoverable as such. Where the insurer fails to
pay the above mentioned tax, the provisions of article
73(4) and of article 40(1) of the Income Tax Cap. 372.
Management Act shall apply mutatis mutandis.
(3) Notwithstanding the provisions of sub-articles (1) and (2), a
non-resident person carrying on long term business of insurance
who derives gains or profits accruing in part in Malta and in part
outside Malta and who has ceased to issue new contracts of long
term insurance before the first day of January, 1999, may elect to
have the chargeable income from the long term business of
insurance computed by taking, for the year immediately preceding
the year of assessment, the investment income relating to that
business less the management expenses including commission
incurred in relation thereto in a proportion which the premiums
received in Malta bore to the total premiums received by such
person in Malta and elsewhere:
Provided that such election shall be irrevocable and shall be
notified in writing to the Commissioner by not later than the 31st
day of March, 1999:
Provided further that where such a person issues new
contracts of long term insurance on or after the 1st January, 1999,
the election shall cease to have effect in respect of the year of
assessment following the year in which the first new contract is
issued and in respect of subsequent years of assessment.
(4) (a) For the purposes of computing the surplus or deficit
arising out of the computation in sub-article (1)(b)(vi),
no account shall be taken of income and deductions
relating to linked long term business of insurance in so
far as they relate to the linked portion of a contract of
insurance.
(b) Any tax payable under sub-article (2) shall, in the case
of a linked long term contract of insurance, be
computed by reference to the profit attributable to the
unlinked portion of a contract of insurance and any
references to "a determinable amount" and "premiums"
shall be construed as references to the amount due and
premiums paid on the unlinked portion of a contract of
insurance.
(5) (a) Subject to the provisions of paragraph (b), the
 100 CAP. 123.] INCOME TAX

provisions contained in Part IV shall apply to persons

referred to in subarticle (1) provided that in
determining what deductions are allowable under this
article there shall be excluded any deductions allowed
under any other Part of this Act.
(b) Persons referred to in subarticle (1) may not claim
group relief nor surrender losses under the group relief
provisions of this Act.
(6) For the purposes of this article and of article 41, the term
"linked portion of a contract of insurance" means the portion of a
linked long term contract of insurance the benefits of which are
determined by reference to the value of, or the income from,
property of any description (whether or not specified in the
contracts) or by reference to fluctuations in, or in an index of, the
value of property of any description (whether or not so specified)
and "unlinked portion of a contract of insurance" means the portion
of a linked long term contract of insurance the benefits of which are
not so determined.
(7) Words and expressions used in this article and in other parts
of this Act which relate to business of insurance, shall, in so far as
their meanings are not defined by this Act, have the meanings
Cap. 403. assigned to them in the Insurance Business Act, the Insurance
Cap. 487. Intermediaries Act, and any rules and regulations made thereunder.

Tax treatment of 27A. Notwithstanding the provisions contained in the Income

mergers, divisions Tax Acts, the Minister may make rules regulating the tax treatment
of companies, etc.
Added by: of companies and their members and other similar bodies or
II. 2003.13. persons concerning mergers and divisions of companies, transfer of
assets between companies and exchange of shares concerning
companies and for the purposes of this article:
(a) "merger" shall mean an operation whereby:
- one or more companies, on being dissolved
without going into liquidation, transfer all their
assets and liabilities to another existing
company in exchange for the issue to their
shareholders of securities representing the
capital of that other company, and, if applicable,
a cash payment not exceeding such percentage
as may be prescribed of the nominal value, or, in
the absence of a nominal value, of the
accounting par value of those securities,
- two or more companies, on being dissolved
without going into liquidation, transfer all their
assets and liabilities to a company that they
form, in exchange for the issue to their
shareholders of securities representing the
capital of that new company, and, if applicable,
a cash payment not exceeding such percentage
as may be prescribed of the nominal value, or in
the absence of a nominal value, of the
accounting par value of those securities,
 INCOME TAX [CAP. 123. 101

- a company, on being dissolved without going

into liquidation, transfers all its assets and
liabilities to the company holding all the
securities representing its capital;
(b) "division" shall mean an operation whereby a
company, on being dissolved without going into
liquidation, transfers all its assets and liabilities to two
or more existing or new companies, in exchange for
the pro rata issue to its shareholders of securities
representing the capital of the companies receiving the
assets and liabilities and, if applicable, a cash payment
not exceeding such percentage as may be prescribed of
the nominal value or, in the absence of a nominal
value, of the accounting par value of those securities;
(c) "transfer of assets" shall mean an operation whereby a
company transfers without being dissolved all or one
or more branches of its activity to another company in
exchange for the transfer of securities representing the
capital of the company receiving the transfer;
(d) "exchange of shares" shall mean an operation whereby
a company acquires a holding in the capital of another
company such that it obtains a majority of the voting
rights in that company in exchange for the issue to the
shareholders of the latter company, in exchange for
their securities, of securities representing the capital of
the former company, and, if applicable, a cash payment
not exceeding such percentage as may be prescribed of
the nominal value or, in the absence of a nominal
value, of the accounting par value of the securities
issued in exchange;
(e) "transferring company" shall mean the company
transferring its assets and liabilities or transferring all
or one or more branches of its activity;
(f) "receiving company" shall mean the company
receiving the assets and liabilities or all or one or more
branches of the activity of the transferring company;
(g) "acquired company" shall mean the company in which
a holding is acquired by another company by means of
an exchange of securities;
(h) "acquiring company" shall mean the company which
acquires a holding by means of an exchange of
securities;
(i) "branch of activity" shall mean all the assets and
liabilities of a division of a company which from an
organizational point of view constitute an independent
business, that is to say an entity capable of functioning
by its own means.

27B. (1) Where at least one of the trustees of a trust is a person Taxation of trusts.
resident in Malta, tax shall be payable on any income attributable to Added by:
XIII. 2004.52.
a trust accruing or deriving in the year immediately preceding the
 102 CAP. 123.] INCOME TAX

year of assessment commencing on such date as the Minister

responsible for finance may, by notice in the Government Gazette,
appoint and for each subsequent year.
(2) For the purposes of this article, "income attributable to a
trust" means the aggregate of any relevant income referred to in
article 4 which has accrued to or is derived by a trustee or trustees
of a trust from property which was settled in such trust and from
property which was acquired in the administration of such trust
including any income from the employment of such property.

Trustees. 27C. The trustee of a trust shall be answerable for doing all
Added by: matters and things required to be done under the Income Tax Acts
XIII. 2004.52.
for the purposes of the determination, assessment and payment of
tax in connection with the income attributable to a trust. Where two
or more persons act in the capacity of trustees of the same trust,
they shall be jointly and severally so answerable.
Trusts treated as 27D.(1)(a)The trustee of a trust that has been granted
companies. authorisation under subarticle of article 43(3) of the
Added by:
XIII. 2004.52. Trusts and Trustees Act where such trustee is a person
Amended by: resident in Malta (hereinafter a resident trustee) may
II. 2007.9;
IV. 2011.15. e l e c t , i n a c c o r d a n c e w i t h t h e pr o v i s i o n s o f t h i s
Cap. 331. subarticle, to have the income attributable to a trust
treated in the manner provided for in paragraph (c).
Such election, which shall be irrevocable, is to be
effected on the date of the establishment of such trust,
or the date of appointment of the said resident trustee,
whichever is the later, and is to be made on such form
and under such conditions as may be prescribed. The
said trustee shall submit such form to the
Commissioner not later than thirty days from the date
of the establishment of such trust or the appointment of
a resident trustee whichever is the later.
(b) An election as provided for in this subarticle may only
be made where the trust is established by a written
instrument which specifically provides that the income
attributable to a trust shall comprise only of income in
the form of royalties, dividends, capital gains, interest,
rents or any other income from investments. For the
purposes of paragraph (c), such income shall not
constitute income from a trade, business, profession or
vocation.
(c) Where an election has been made in accordance with
the provisions of this subarticle, the trustee of such
trust shall compute the chargeable income in relation
to the income attributable to a trust for the relevant
year of assessment as if such income was derived by a
company ordinarily resident and domiciled in Malta.
Tax thereon shall be charged at the rate specified in
article 56(6) and payable in the same manner
applicable to such companies. Distributable profits
shall be allocated in the same manner applicable to
such companies and distributions of such allocated
 INCOME TAX [CAP. 123. 103

profits to beneficiaries of such trust shall be treated as

if they were dividends distributed to shareholders of
such a company. For the purposes of this subarticle,
distributable profits of a trust shall mean the total
profits which would be available for distribution to the
beneficiaries resulting from the income attributable to
a trust. The trustee shall keep all records and submit
all returns and documents to the Commissioner as is
required in the case of such companies. Where the
Income Tax Acts require documents which are to
comply with the Companies Act, the trustee shall
submit similar documents, certified by a certified
public auditor, and which are either provided for under
the Trusts and Trustees Act or, in the absence of such
provision, which comply as far as is possible, with the
Companies Act.
(2) The trustee of a trust where such trustee is a person in Trusts of a
possession of a valid licence issued in terms of the Banking Act or temporary nature.
Cap. 371.
the Financial Institutions Act may apply to the Commissioner for a Cap. 376.
determination that property has been settled into such trust as a
result or consequence of another transaction or set of transactions,
and that the duration of such trust is of a temporary nature lasting
only until such time as is necessary so that the said transaction or
transactions may be effectively concluded. Such an application may
be made on such form and under such conditions as may be
prescribed. Where the Commissioner makes, at his discretion, such
a determination -
(i) no deduction or exemption contemplated by this
Act shall be allowable or granted in relation to
the income attributable to a trust; and
(ii) the said income shall be taxable at the rate
specified in article 56(6); and
(iii) the tax payable as provided for in this subarticle
shall not be reduced whether by way of relief of
double taxation or otherwise, and no set-off or
credit shall be made or allowed in respect of
such tax. The resulting tax shall be payable by
such time as may be prescribed; and
(iv) the trustee of such trust shall declare such
income and property settled in trust on such
form as may be prescribed and no further
disclosure of such income shall be required by
the beneficiaries of such trust; and
(v) no further tax shall be payable on such income.
(3) (a) Where neither an election in accordance with Other trusts.
subarticle (1) nor a determination in accordance with
subarticle (2) has been made the provisions of
paragraphs (b), (c), (d) and (e) shall apply.
(b) In the case where -
(i) all the income attributable to a trust consists of
income either arising outside Malta or income
 104 CAP. 123.] INCOME TAX

referred to in article 12(1)(c); and

(ii) all the beneficiaries of the trust are persons who
are either not ordinarily resident in Malta or not
domiciled in Malta, or are persons whose
income is totally exempt from tax under the
provisions of article 12,
it shall be deemed that such income is not income
attributable to a trust but is income derived directly by
such beneficiaries, and that where the income arising
outside Malta is received in Malta by the trustee of the
trust, it shall be deemed to be received in Malta by
such beneficiaries. The trustee shall notify the
beneficiary of such income and shall inform him of his
duties under the Income Tax Acts.
(c) In the case where the income attributable to a trust
comprises solely income referred to in paragraph (b)(i)
or dividends distributed out of the profits allocated to
the foreign income account or out of the profits of an
international trading company which were derived by
such company whilst it was an international trading
company, or both such income and dividends, and all
the beneficiaries of such trust are persons not resident
in Malta, and the trustee of such trust provides the
Commissioner with a certificate as referred to in
Cap. 372. article 5(3) of the Income Tax Management Act, it
shall be deemed that such income does not constitute
income attributable to a trust and that such income is
derived directly by such beneficiaries:
Provided that the income referred to in this paragraph
shall also include dividends paid out of profits
allocated to any of the taxed accounts.
(d) Without prejudice to the provisions of paragraphs (b)
and (c), capital gains derived in accordance with the
provisions of article 5 from the transfer of property
settled in trust in the administration of such trust or in
the distribution or reversion of such property shall
form part of the income attributable to a trust.
(e) The chargeable income in relation to the income
attributable to a trust shall be computed as if the trust
was a person that is ordinarily resident and domiciled
in Malta but shall exclude amounts of income
attributable to a trust allocated to beneficiaries as
determined in accordance with the provisions of
subarticle (4).
Income attributable (4) For the purpose of subarticle (3)(e) -
to a trust allocated
to beneficiaries. (a) amounts of income attributable to a trust allocated to
beneficiaries shall consist of -
(i) amounts over which beneficiaries had a vested
right in the year immediately preceding the year
of assessment; and
 INCOME TAX [CAP. 123. 105

(ii) amounts over which an entitlement had been

bestowed to beneficiaries other than in the
manner referred to in subparagraph (i), and
where such entitlement had been so bestowed by
the end of the year immediately preceding the
year of assessment; and
(iii) amounts representing income attributable to a
trust for the year of assessment which were
distributed to beneficiaries by the end of the year
immediately preceding the year of assessment,
and which amounts do not form part of the
amounts referred to in subparagraphs (i) and (ii).
(b) In order that the amounts referred to in paragraph (a)
may be excluded in terms of subarticle (3)(e), the
trustee must ensure that -
(i) the return referred to in article 24A of the
Income Tax Management Act has been submit- Cap. 372.
ted in accordance with the provisions of that
same article; and
(ii) he has furnished the beneficiaries in question
with a certificate indicating, for the relative year
of assessment and where applicable, the relevant
amounts referred to in paragraph (a) on such
form and giving such additional details as may
be prescribed; and
(iii) where the amounts referred to in paragraph (a)(i)
and (ii) were not distributed to the beneficiaries
by the 31st March following the end of the year
immediately preceding the relevant year of
assessment, a payment of tax has been made on
behalf of the beneficiaries equivalent to the tax
which would result were the said amounts
charged to tax at the rate specified in article
56(6). Where such distribution is not made by
the said date, this tax becomes a debt due from
the relevant trustee to the Commissioner payable
by not later than the 30th June following the end
of the said year. The tax so paid shall be
available as a credit against the beneficiary’s tax
liability, or for a refund as the case may be, for
the relevant year of assessment.
(5) Except as provided in article 56(4), tax shall be charged Rate of taxation.
upon the chargeable income in relation to the income attributable to
a trust at the rate specified in article 56(6).
(6) (a) Where foreign tax has been paid on the income Foreign tax
attributable to a trust, such tax shall be deemed to have deemed to be paid
by trust.
been paid by a trustee of such trust, whether it was paid
by a trustee or a beneficiary of such trust.
(b) A claim for relief of double taxation with respect to the
tax referred to in paragraph (a), may only be made
through the provisions of articles 79 to 88. Any
 106 CAP. 123.] INCOME TAX

reference in these articles to a person shall, for the

purposes of this subarticle, be deemed to be a reference
to a trustee of a trust while any reference to income or
income of a person, shall be deemed to be a reference
to the income attributable to a trust.
Tax on income (7) Unless otherwise provided for in this article, no person
attributable to a shall be charged to further tax under this Act in respect of income
trust is final.
attributable to a trust which has been charged to tax in accordance
with the provisions of subarticles (1), (2) and (3).
Taxation of (8) (a) Amounts allocated to beneficiaries referred to in
beneficiaries. subarticle (4)(a) shall be aggregated with other income
of the said beneficiaries for the purposes of article 4
and tax shall be charged accordingly for the year of
assessment commencing on such date as the Minister
r e s p o n s i b l e f o r f i n a n c e m a y, b y n o t i c e i n t h e
Government Gazette, appoint and for each subsequent
year of assessment.
(b) Amounts allocated to beneficiaries referred to in
subarticle (4)(a) shall be treated as income derived by
the beneficiary at the time it vests, or the beneficiary
becomes entitled to it, or it is distributed, as the case
may be.
(c) Income distributed to beneficiaries shall retain its
character as to type and country of source. A claim for
relief of double taxation with respect to such income
may be made in accordance with the provisions
referred to in article 74 notwithstanding that foreign
tax may have been paid by the trustee or the beneficiary
himself:
Provided that the provisions of this subarticle shall apply
mutatis mutandis where none of the trustees of a trust is a person
resident in Malta and the beneficiaries of the such trust include
persons that are -
(i) ordinarily resident and domiciled in Malta; or
(ii) ordinarily resident or domiciled in Malta and the
relevant income is received in Malta.
Interpretation. (9) (a) For the purposes of this article the terms "beneficiary",
"settlor", "trust" and "trustee" shall have the meaning
Cap. 331. assigned to them by article 2 of the Trusts and Trustees
Act.
(b) Words and expressions used in this article and in other
parts of the Income Tax Acts which relate to the
income attributable to a trust, shall, in so far as their
meanings are not defined by the Income Tax Acts,
Cap. 331. have the meaning assigned to them in the Trusts and
Trustees Act and any rules and regulations made
thereunder.
(10) (a) Where in the opinion of the Commissioner,
transactions involving a trust are carried out with the
sole or main purpose of reducing the amount of tax
 INCOME TAX [CAP. 123. 107

payable by a person, the Commissioner shall disregard

such trust and the income of such person shall be
determined as if it had been derived without the
involvement of such trust.
(b) Article 57 of the Income Tax Management Act shall Cap. 372.
apply mutatis mutandis in the circumstances relating to
trustees. References in that article to -
(i) "warrant holder" shall be construed as references
to any person acting as trustee as provided for
under the Trusts and Trustees Act; Cap. 331.
(ii) "Board" shall be construed as references to the
Malta Financial Services Authority;
(iii) "article 14(1)(a)(i) of the Accountancy
Profession Act" shall be construed as references
to article 51 of the Trusts and Trustees Act; Cap. 331.
(iv) "documents" shall be construed as references to
any document required to be produced by a
trustee in relation to a trust under Maltese law;
(v) "1st January, 1998" shall be construed as
references to the date of the coming into force of
the Trusts and Trustees Act. Cap. 331.
27E. The Minister may make regulations in relation to the tax Regulations in
treatment of a foundation, including the application of the relation to tax
treatment of a
provisions of this Act relating to trusts, settlors and beneficiaries of foundation.
trusts to foundations, their founders and beneficiaries thereunder, Added by:
XIII. 2007.15.
as well as to any persons who are donors of property to
foundations, and generally for the better application of this Act to
foundations.
27F. The Minister may make regulations in relation to the tax Regulations in
treatment of any conversion of a legal person into another legal relation to the
conversion of a
form or into a trust as is referred to in article 21 of the Second legal person into
Schedule to the Civil Code. another legal form.
Added by:
XIII. 2007.15.
Cap. 16.
28. (1) Subject to the provisions of article 12(1)(k), where a Non-resident
person not resident in Malta carries on the business of shipowner or shipowners.
Amended by:
charterer and any ship owned or chartered by him calls at a port in XX.1996.11.
Malta, his full profits arising from the carriage of passengers,
mails, livestock or goods shipped in Malta shall be deemed to
accrue in Malta:
Provided that this article shall not apply to goods which are
brought to Malta solely for transhipment.
(2) Where for any accounting period such person produces the
certificate mentioned in sub-article (3), the profits arising in Malta
from his shipping business for such period, before deducting any
allowances for depreciation, shall be a sum bearing the same ratio
to the sums receivable in respect of the carriage of passengers,
mails, livestock and goods shipped in Malta as the ratio for the said
period shown by the certificate of the total profits to the total sum
 108 CAP. 123.] INCOME TAX

receivable by him in respect of the carriage of passengers, mails,

livestock and goods.
(3) The certificate shall be one issued by or on behalf of any
income tax authority with regard to which the Commissioner is
satisfied that it computes and assesses the full profits of the non-
resident person from his shipping business, on a basis not
materially different from that prescribed by this Act, and shall
certify for any accounting period as regards such business -
(a) the ratio of the profits or, where there are no profits, of
the loss, as computed for the purposes of income tax
by that authority, without making any allowance by
way of depreciation, to the total sums receivable in
respect of carriage of passengers, mails, livestock or
goods; and
(b) the ratio of the allowance for depreciation as computed
by that authority to the said total sums receivable in
respect of the carriage of passengers, mails, livestock
and goods.
(4) Where at the time of assessment, the provisions of sub-
article (2) cannot for any reason be satisfactorily applied, the
profits arising in Malta may be computed on a fair percentage of
the full sum receivable on account of the carriage of passengers,
mails, livestock and goods shipped in Malta:
Provided that where any person has been assessed for any
year of assessment by reference to such percentage, he shall be
entitled to claim at any time within six years after the end of such
year of assessment that his liability to tax for that year be
recomputed on the basis provided by sub-article (2).
(5) Where the Commissioner decides that the call of a ship
belonging to a particular non-resident shipowner or charterer at a
port in Malta is casual and that further calls by that ship or others in
the same ownership are improbable, the provisions of this article
shall not apply to the profits of such ship and no tax shall be
chargeable thereon.

Non-resident air 29. (1) The provisions of this Act relating to non-resident
transport, cable shipowners and charterers, including the provisions relating to their
and wireless
undertakings. agents, shall apply mutatis mutandis to any person not resident in
Substituted by: Malta who carries on the business of the transmission of messages
XLIX. 1974.4.
Renumbered by: by cable or wireless telegraphy, and to the agent of such person.
XVII. 1994.2.
Amended by: (2) Where a person owns, leases, or operates any one or more
I. 2010.20. aircraft or aircraft engine (irrespective of the country of
registration of the said aircraft or aircraft engine) which is used for
or employed in the international transport of passengers or goods,
any income of such person which is derived or otherwise arises
from the ownership, leasing, or operation of such aircraft or aircraft
engine shall, for the purposes of the Income Tax Acts, be deemed
to have arisen outside Malta regardless of whether the aircraft may
have called at, or operated from, any airport in Malta.
 INCOME TAX [CAP. 123. 109

30. (1) Notwithstanding anything to the contrary contained in Ecclesiastical and

this Act, the provisions of this article shall apply in the case of any allied income.
Added by:
of the following: XLII. 1975.6.
Amended by:
(a) a diocese, including, in respect of any income accruing XXII. 1976.4;
to him or vested in him by reason of his office, the XXVI. 1977.9;
XXVIII. 1978.10;
bishop thereof; XXI. 1980.6;
(b) a parish; IX. 1981.5;
XL. 1981.2;
(c) a church not falling under the jurisdiction of a parish XIII. 1983.4,5;
XIV. 1984.4;
and not due to be dealt with under paragraph (d); VIII. 1987.4;
XXXVI. 1990.7.
(d) an ecclesiastical community as defined in sub-article Renumbered by:
(9) hereof; XVII. 1994.2.
Amended by:
(e) a province or similar division of any religious order; XX. 1996.12;
IX. 1999.14;
and each of the aforesaid is in this article referred to as "entity": XIII. 2004.53;
L.N. 409 of 2007.
Provided that the Commissioner may, in such circumstances
and subject to such conditions as he may deem appropriate, treat as
one entity any two or more of the entities aforesaid.
(2) There shall be brought to charge to tax in the hands of any
entity to which this article applies the income accruing to or
derived by such entity as well as the income accruing to or derived
by any associated, linked or allied institution, foundation, bequest,
or other similar organisation or body of persons.
(3) The total gross receipts on revenue account of any entity to
which this article applies, ascertained in accordance with the
provisions of sub-article (2), shall be deemed to be receipts of a
trade or business and the entity shall be chargeable accordingly:
Provided that the provisions of article 14(1)(g) shall not
apply in respect of any such entity.
(4) In the case of any ecclesiastical community, there shall be
included in the gross receipts on revenue account any income
received in his own right by any individual member thereof during
the year immediately preceding the year of assessment:
Provided that any part of such income which is in excess of
two thousand and three hundred and thirty euro (2,330) shall be
excluded.
(5) An entity shall be chargeable to tax in respect of its income
for the year immediately preceding any year of assessment on the
greater of the following two amounts:
(a) the income from all sources ascertained in accordance
with the provisions of sub-articles (2), (3) and (4);
(b) that part of the income chargeable to tax under the
provisions of article 4(1)(d), (e) and (f) to which there
shall be added, in the case of an ecclesiastical
community, the income received in his own right by
any individual member thereof; in ascertaining the
total amount of the income as aforesaid -
(i) the provisions of sub-article (2) shall be taken
into account;
110 CAP. 123.] INCOME TAX

(ii) no deductions shall be allowed in respect of

expenses or other charges other than ground-rent
and other burdens on immovable property;
(iii) there shall be excluded such part of the income
received in his own right by any individual
member of an ecclesiastical community which is
in excess of two thousand and three hundred and
thirty euro (2,330).
(5A) An ecclesiastical community shall be entitled to a further
deduction against its income as established under sub-article (5)
equivalent to two thousand and three hundred and thirty euro
(2,330) in respect of every individual who was a member thereof
during the year immediately preceding the year of assessment:
Provided that no such deduction shall be allowed under this
sub-article in respect of any individual member who receives
remuneration or other income from the ecclesiastical community of
which he is an individual member.
(6) The provisions of sub-articles (4), (5) and (5A) shall not
a ff e c t t h e l i a b i l i t y t o t a x o f a n y i n d i v i d u a l m e m b e r o f a n
ecclesiastical community on any income received by him in his
own right.
(7) For the purposes of this article -
(a) a parish which is entrusted to an ecclesiastical
community shall be deemed to be a separate entity
from the said community;
(b) where more than one ecclesiastical community belong
to the same religious order, each such community shall
be dealt with as a separate entity for the purposes of
this article if it is so considered by the statute of the
order;
(c) the province or similar division of a religious order
shall be deemed to be a separate entity from any of the
communities falling under that order;
(d) where an entity to which this article applies operates
on its own account a trading or commercial
undertaking, including a school, printing press,
hospital or cinema, the entity and the undertaking shall
be chargeable to tax separately and only the entity
shall be dealt with in accordance with the provisions of
this article, the undertaking being considered and dealt
with as a separate body of persons for all purposes of
this Act:
Provided that -
(i) no profits or other income arising from the said
undertaking in favour of the entity shall be
included with the gross receipts of the entity for
the purpose of any of the provisions of this Act;
(ii) no deductions shall be allowed in computing the
total income of the undertaking in respect of any
 INCOME TAX [CAP. 123. 111

payments made to the entity on account of any

expenses or charges whatsoever;
(e) total gross receipts on revenue account in all cases
shall include income chargeable to tax in accordance
with the provisions of article 4.
(8) Where any income accrues to or is in any way vested in the
head of a diocese in virtue of his office and does not actually
constitute personal gains or profits of the said head, such income
together with any income accruing to or vested in the diocese,
shall, for the purposes of this article, be deemed to be derived by
one separate entity under the management and control of the head
of the diocese; and the income accruing to the Archbishop of Malta
a n d t o t h e B i s h o p o f G o z o i n v i r t u e o f t h e i r o ff i c e s h a l l ,
notwithstanding any other provision of the law, be deemed to be six
thousand and five hundred and fifty euro (6,550) and three
thousand and five hundred euro (3,500) per annum respectively, or
such higher sum as the Minister responsible for finance, from
information given or otherwise obtained, determines to be the
income received by them in virtue of their office, and the said
income shall be added for assessment purposes to their personal
income:
Provided that the Commissioner shall grant such relief from
the tax to any other person or entity as will, in his opinion, prevent
the said amounts of six thousand and five hundred and fifty euro
(6,550) and three thousand and five hundred euro (3,500) (or any
higher sums determined as aforesaid) being brought to charge both
in the hands of the said bishops and in the hands of any other
person or entity in the same year of assessment.
(9) For the purposes of this article and of article 56(4) -
"ecclesiastical community" means a number of individuals living
together in a community in accordance with the rules of a religious
order recognised as such by the Commissioner;
"individual member", in relation to an ecclesiastical community,
means any individual, lay or religious, who formed part of such
community on the thirty first day of December during the year
immediately preceding the year of assessment.
31. The income of a person arising from a dividend paid by a Income from
company liable to tax under this Act shall, where such tax has been certain dividends
to include tax
deducted therefrom, be the gross amount before making such thereon.
deduction; where no such deduction has been made, the income Amended by:
XXII. 1976.4;
arising shall be the amount of the dividend increased by an amount XXVI. 1977.10.
on account of such taxes corresponding to the extent to which the Renumbered by:
profits, out of which the said dividend has been paid, have been XVII. 1994.2.
charged with such taxes.
31A. (1) Notwithstanding any other provision of the Income Taxation of rental
Tax Acts or any regulations issued thereunder, this article shall income received
from the Housing
apply where any person rents immovable property to the Housing Authority.
Authority for a period of not less than ten years. Added by:
IV. 2007.13.
(2) The tax chargeable in the circumstances mentioned in
subarticle (1) shall be at the rate of 5% of the gross rental income
 112 CAP. 123.] INCOME TAX

received. Such tax shall be final and not be available as a credit

against the tax liability of the said person or refundable to him in
any way.
(3) The Housing Authority shall deduct the tax mentioned in
subarticle (2) when making any payments of rent to which this
article applies and shall render an account to the Commissioner of
all amounts so deducted specifying amounts and details of the
recipient.
(4) The Housing Authority shall remit the tax deducted in
accordance with subarticle (3), together with the account
mentioned in the said subarticle, to the Commissioner by the
fourteenth day following the end of the month during which the
rent was paid.

Rental income on 31B. (1) Notwithstanding any other provision of the Income
Housing Authority Tax Acts or any regulations made thereunder, this article shall
subsidised rent.
Added by: apply where any person who is an owner of immovable property
V. 2012.19. rents such property to a person receiving rent subsidy under any
scheme administered by the Housing Authority and the said owner
is registered with the Housing Authority for this purpose and
complies with any conditions imposed by the Housing Authority.
(2) The tax chargeable in the circumstances mentioned in sub-
article (1) shall be at the rate of 10% of the gross rental income
received. Such tax shall be final and not be available as a credit
against the tax liability of the said person or refundable to him in
any way.
(3) The Housing Authority shall deduct the tax from the rent
subsidy mentioned in sub-article (1) and shall render an account to
the Commissioner of all such amounts deducted specifying
amounts together with the details of the person receiving the rent.
(4) The Housing Authority shall remit the tax collected in
accordance with sub-article (3), together with the account
mentioned in the said sub-article, to the Commissioner by the
fourteenth day following the end of the month during which the
rent subsidy was paid.

Rental income 31C. (1) Notwithstanding any other provision of the Income
from restored Tax Acts, this article shall apply to any person who is the owner of
property.
Added by: immovable property which has been restored in accordance with
V. 2012.19. any scheme issued for this purpose by the Malta Environment and
Planning Authority providing for the restoration of grade 1 or grade
2 scheduled property or property situated in an urban conservation
area, provided that the said person complies with any conditions
imposed by the Malta Environment and Planning Authority in
connection with such scheme and submits such forms and
documentation as the Commissioner may require.
(2) Where the person referred to in sub-article (1) rents
immovable property in the circumstances mentioned in the said
sub-article, the tax chargeable shall be at the rate of 10% of the
gross rental income received where the rent is for a residential
purpose, and at the rate of 15% of the gross rental income received
 INCOME TAX [CAP. 123. 113

where the rent is for a commercial purpose. Such tax shall be final
and not be available as a credit against the tax liability of the said
person or refundable to him in any way. The tax as aforesaid shall
be remitted to the Commissioner, together with the forms and
documentation referred to in sub-article (1) by not later than the
30th June of the year following that to which the income refers.
(3) The Malta Environment and Planning Authority shall
provide the Commissioner with a yearly account of the details of all
persons who availed themselves of any such scheme and such
account shall be provided in such manner as the Commissioner may
require.

31D. (1) Notwithstanding any other provision of the Income Taxation of rental
Tax Acts or any regulations made thereunder, the provisions of this income derived
from the letting of
article shall apply where, during a relevant year, any person rents residential
immovable property, being a tenement leased as a residence or tenement.
Added by:
garage, to an individual or individuals. XII. 2014.21.
Amended by:
(2) The tax chargeable in the circumstances mentioned in sub- XXXVII. 2014.3.
article (1) shall, at the option of the person referred to in the said
sub-article, be at the rate of fifteen cents (0.15) on every euro of the
gross rental income received. Such tax shall be final and
notwithstanding any other provision of the Income Tax Acts, no
set-off or refund shall be granted to any person in respect of the tax
so charged.
(3) Where the option referred to in sub-article (2) has been
exercised, such income shall be deemed to constitute separate
chargeable income for the purpose of the Income Tax Acts and
shall not form part of the chargeable income of the person
exercising the said option and where such person is an individual
he shall not be required to declare such income, in any return made
pursuant to the Income Tax Acts.
(4) Where a person, in a relevant year, derives rental income
from the letting of more than one tenement and the option referred
to in sub-article (2) has been exercised for such year, the said sub-
article shall apply to the total rental income received in the said
year from all the tenements let out by such person.
(5) Irrespective of whether the option referred to in sub-article
(2) is exercised or not, where an enquiry has been conducted and
the Commissioner determines that any rental income which should
have been declared was not so declared, such income shall be
charged to tax at the rate of 35 cents (0.35) on every euro of the
gross rental income received and such tax shall be in addition to
any interest and additional tax payable under the Income Tax Acts.
Such tax shall be final and notwithstanding any other provision of
the Income Tax Acts, no set-off or refund shall be granted to any
person in respect of the tax so charged.
(6) Every company resident in Malta shall allocate the
distributable profits resulting from income to which this article
applies, and on which tax is payable in accordance with this article,
to the final tax account.
 114 CAP. 123.] INCOME TAX

(6A) Where an individual has failed to declare rental income

derived from a tenement leased as a residence or garage during the
relevant period in any return and such individual opts to declare
such rental income in the relevant form referred to in article
Cap. 372. 42(4)(c) of the Income Tax Management Act, which is required to
be submitted by not later than the 30th June 2015, and pays the tax
referred to in sub-article (2) of this article on such rental income, it
shall be deemed for the purpose of the Income Tax Acts that such
rental income was received during basis year 2014. The individual
exercising the said option shall pay to the Commissioner the tax in
such manner as may be prescribed in accordance with the
provisions of article 42 of the Income Tax Management Act:
Provided that where an individual exercises the said option
and declares rental income for more than one year, the total amount
subject to the tax referred to in sub-article (2) of this article shall
not exceed an amount determined as follows:
Y = (a / b) x 2
Where -
(a) "Y" represents the amount to be determined;
(b) "a" is the total rental income declared in the said
relevant form;
(c) "b" is the number of years comprised in the relevant
period in respect of which rental income is declared:
Provided also that where following an enquiry there is
evidence that an individual who exercises the option referred to in
this sub-article has overstated the amount of rental income declared
in the relevant form for the purpose of obtaining a tax advantage,
the preceding proviso shall not apply and the total amount of rental
income declared in the said form shall be subject to tax at the rate
of 15%.
For the purpose of this sub-article "relevant period" means
the period of eight years preceding basis year 2013.
(7) The person exercising the option referred to in sub-article
(2) shall pay to the Commissioner the tax referred to in the said
sub-articles in such manner as may be prescribed in accordance
Cap. 372. with the provisions of article 42 of the Income Tax Management
Act.
(8) For the purposes of this article:
(a) "tenement" means a tenement, not being a commercial
Cap. 16. tenement as defined in article 1525 of the Civil Code,
which consists of either a dwelling house or part
thereof which is to be occupied or is occupied as a
home or residence by the occupier or a garage,
excluding a tenement which, for the purpose of the
said letting, is required to be licensed by virtue of the
Cap. 409. Malta Travel and Tourism Services Act, or any Act
which may be substituted therefor; and
(b) "relevant year" means the calendar year during which
the gross rental income is received.
 INCOME TAX [CAP. 123. 115

32. Notwithstanding anything to the contrary contained in this Taxation of certain

Act, articles 32A to 42, both inclusive, and which together with this investment income
by deduction.
article are referred to as "the investment income provisions", shall Added by:
apply wherever the context so requires. XVII. 1994.16.
Amended by:
II. 2003.14.
32A. A payor shall register as such with the Commissioner in Payor to register.
such manner as may be prescribed. Added by:
II. 2003.15.
33. (1) A payor shall deduct tax from every payment to a Obligation of
recipient of investment income, howsoever made, at a rate of payor to deduct tax
from investment
fifteen cents (0.15) on every euro of such payment: income.
Added by:
Provided that where the recipient derives, or is deemed to have XVII. 1994.16.
derived pursuant to the provisions of article 43(6)(a), (b) or (c), Amended by:
II. 2005.8;
investment income referred to in article 41(a)(viii), tax shall be II. 2007.10;
deducted at the rate specified in article 56(6) or such other rate as may IV. 2007.14;
be prescribed and rules may also be prescribed on how the investment L.N. 409 of 2007;
I. 2010.21;
income provisions are to be applied in particular circumstances. IV. 2011.16.
(2) A payor shall render an account to the Commissioner of all
amounts so deducted, but shall not specify the identity of the
recipient and, subject to the provisions of sub-article (3), every
amount deducted shall be a debt due from such payor to the
Commissioner payable not later than the fourteenth day following
the end of the month in which the payment was made and shall be
recoverable as such.
(3) The payor shall upon making a payment of investment
income furnish each recipient with a certificate in a form
acceptable to the Commissioner setting forth the gross amount paid
by the payor, and the tax deducted.
(4) Where a payor makes a payment of investment income to a
person not resident in Malta (and therefore not a recipient within
the definition contained in article 41(c)), the payor shall be obliged
to obtain a certificate of non-residence from the person receiving
such payment in such form as the Commissioner shall require.
(5) For the purposes of the investment income provisions, tax
shall be deducted on the amount of the investment income before
deducting any foreign tax, whether charged directly or by way of
witholding.
(6) Where the tax deductible in accordance with the provisions
of this article is not remitted to the Commissioner within the time
stipulated in subarticle (2), or an account of amounts deducted is
not rendered to the Commissioner as required under this article, the
payor shall become liable to a penalty of not more than twenty-
three thousand euro (23,000) as may be prescribed by the Minister.

34. (1) A payor shall not deduct tax under article 33 where a Payor not to deduct
recipient elects under the provisions of article 35, to be paid tax where recipient
elects to be paid
investment income without such deduction being made. gross.
Added by.
(2) A payor shall render an account to the Commissioner of all XVII. 1994.16.
payments of investment income made during any year in respect of Amended by:
II. 2003.16;
which an election has been made. The account shall be submitted to I. 2010.22.
 116 CAP. 123.] INCOME TAX

the Commissioner by the 31st January following the year for which
the election has been made, or within thirty days of the request,
whichever date is later. Such account shall include details of the
recipient’s name, address and the income tax registration number as
well as the amount of investment income paid gross by the payor to
the recipient during that year:
Provided that the Commissioner may only request such an
account for a complete year which has passed in respect of which
an election has been made under the provisions of article 35:
Provided further that a payor shall not be required to render
an account to the Commissioner once nine years have elapsed
following the end of the year in which the investment income
becomes payable.
(3) Where an account is not rendered to the Commissioner in
the manner required under this article, the payor shall become
liable to a penalty of not more than twenty-three thousand euro
(€23,000) as may be prescribed by the Minister.

Election by 35. (1) Except in respect of investment income referred to in

recipient to be paid article 41(a)(viii)(2), (3) and (4), a recipient may elect to be paid
without deduction
of tax. investment income without deduction of tax being made and such
Added by: an election shall be made in writing and sent to the payor.
XVII. 1994.16.
Amended by: (2) Subject to the provisions of sub-article (3), an election will
II. 2003.17;
II. 2007.11. be effective as from fourteen days following the receipt of such
notice of election by the payor. Such an election may be revoked at
the option of the recipient by notice in writing and such revocation
shall be effective as from fourteen days following the receipt by the
payor of such notice.
(3) An election made on the opening of a bank account in
respect of which investment income is payable, or on the purchase
of bonds, loan stock, debentures, or any other instrument in respect
of which the investment income is payable, or on any transaction
giving rise to capital gains within the meaning of article 41(a)(v),
shall have immediate effect.

Obligation on 36. Where an election under the provisions of article 35 has

recipient to declare been made, a recipient shall, subject to the provisions of article 12
where an election
is made. of the Income Tax Management Act, declare the investment income
Added by: to which the election relates on his tax return for the relevant year
XVII. 1994.16.
Amended by: of assessment and where a declaration is made as aforesaid any tax
IX.1999.14. due shall be determined as if the investment income provisions had
Cap. 372. not been enacted.
Tax withheld under 37. Where any tax has been withheld under article 33(1), such
article 33(1). tax shall not be available as a credit against the recipient’s tax
Added by:
XVII. 1994.16. liability or for a refund, as the case may be, for the relevant year of
Substituted by: assessment.
II. 2002.49;
V. 2012.20;
XII. 2014.22.
Presumption of 38. Except in respect of a year of assessment for which an
deduction. election under article 35 applies, it shall be presumed, so far as the
Added by:
XVII. 1994.16. tax liability of the recipient is concerned, that a deduction and
 INCOME TAX [CAP. 123. 117

payment which ought to have been made pursuant to the provisions

of article 33 have been made.
39. Where the presumption referred to in article 38 applies: Where
presumption
(a) a recipient who is an individual shall not be obliged to applies, no need to
disclose the existence of the investment income in any declare.
Added by:
return made pursuant to the provisions of this Act, and XVII. 1994.16.
Amended by:
(b) no person shall be charged to further tax in respect of II. 2002.50;
the investment income under this Act. V. 2012.21;
XII. 2014.23.

40. (1) Where a payor fails to deduct and pay tax in Extent of payor’s
accordance with the investment income provisions, the provisions liability.
Added by:
of article 73(4) of this Act and of article 40(1) of the Income Tax XVII. 1994.16.
Management Act shall apply mutatis mutandis. Substituted by:
II. 2003.18;
(2) The provisions of article 39 of this Act and the provisions Amended by:
II. 2005.9;
of article 17 of the Income Tax Management Act shall not be II. 2007.12.
applicable, and a payor shall not be bound by a duty of professional Cap. 372.
secrecy on a request for information by the Commissioner where
investment income referred to in article 41(a)(iv), 41(a)(vii) and
41(a)(viii)(1) are derived from a person, other than a physical
person that is not resident in Malta is paid to a recipient provided
that:
(a) the asset from which the investment income is derived
is not a qualifying asset as defined in the provisions of
article 9B; and
(b) the recipient has not declared, in accordance with the
provisions of the relevant laws as defined in the
provisions of article 9B, income and transfers referred
to in article 9B(2)(a) to (c) in relation to the asset from
which the investment income is derived.
(3) Any person (hereinafter in this subarticle referred to as the
"first person") who is in a position to receive or be deemed to have
received the income referred to in article 41(a)(viii)(2), (3) and (4):
(a) shall inform in writing the person who would be the
payor of such income if the first person were to receive
or be deemed to have received such income, that in
such an eventuality the first person would be the
recipient of that income; and
(b) when the first person has received or has been deemed
to have received such income, he shall, unless the
payor has paid the tax in accordance with the
investment income provisions, pay such tax himself
within seven days from the date that the payor should
have paid the tax; and
(c) without prejudice to any other provisions of the
Income Tax Acts, any such person who does not make
the payment referred to in paragraph (b) when he
ought to have made it shall, in addition to the payment
of the tax due, be liable to pay additional tax of seven
per cent of the amount of such tax for every month or
 118 CAP. 123.] INCOME TAX

part thereof that the tax remains unpaid commencing

from the month in which the tax should have been paid
and any payment made by the said person in respect of
the tax payable by him in terms of this subarticle shall
first be applied against any additional tax due thereon.
(4) The provisions of subarticle (3) shall not be applicable
when the person referred to therein proves to the satisfaction of the
Commissioner that he did not know and could not reasonably have
known that he was a recipient and for this purpose it shall be
presumed that such person was fully cognisant of the provisions
and implications of the Income Tax Acts.
(5) Where the payor has not deducted or paid the tax from the
income referred to in article 41(a)(viii)(2), (3) and (4), the
provisions of articles 38 and 39 shall not be applicable.

Interpretation of 41. For the purposes of the investment income provisions, the
the investment following phrases shall have the meanings given below:
income provisions.
Added by: (a) "investment income" shall mean only the following
XVII. 1994.16.
Amended by: categories of income:
XVII. 1998.70;
XI. 2000.5; (i) interest payable by a person carrying on the
IX. 2001.26; business of banking under the Banking Act, in
II. 2003.19; respect of a sum of money in whatever currency
II. 2004.12;
II. 2005.10; deposited with it in any account whatever
II. 2007.13; (except interest payable in respect of any bearer
I. 2010.23;
IV. 2011.17; account);
XII. 2014.24. (ii) interest, discounts or premiums payable by the
Cap. 371.
Government of Malta or by any agency thereof;
(iii) interest, discounts or premiums payable by a
corporation or authority established by law;
(iv) interest, discounts or premiums payable in
respect of:
(1) a public issue by a company, entity or
other legal person howsoever constituted
and whether resident in Malta or
otherwise; and
(2) a private issue by a company, entity or
other legal person howsoever constituted
and resident in Malta paid to a collective
investment scheme;
(v) (1) capital gains arising on the disposal of
shares or units in a collective investment
scheme where the collective investment
scheme redeems, liquidates or cancels
such shares or units, such capital gains to
be calculated by reference to the price at
which the shares or units were allotted or
issued by the collective investment scheme
or to a value determined in such manner
and on the basis of such criteria as may be
prescribed:
Provided that this item shall not apply to:
 INCOME TAX [CAP. 123. 119

(i) capital gains arising on the disposal

of shares or units held in a
prescribed fund of a collective
investment scheme; and
(ii) capital gains arising on the disposal
of shares or units held in a fund of a
collective investment scheme that is
not resident in Malta if such a fund
is not a prescribed fund and the
disposal is not made through the
services of an authorised financial
intermediary;
(2) capital gains arising on the surrender or
maturity of units and such like instruments
relating to linked long term business of
insurance where the benefits are at least
eighty five per cent determined by
reference to the value of units or shares in,
or income derived from, collective
investment schemes:
Provided that in calculating such capital
gains -
(i) no account shall be taken of any part
of the said benefits that is
determined by reference to the value
of units or shares in collective
investment schemes that were held
in prescribed funds for a continuous
period spanning the whole life of the
relevant linked long term contract of
insurance or three years from the
date of the relevant maturity or
surrender whichever period is the
lesser;
(ii) the cost of acquisition shall be
calculated by reference to the total
amount of premiums paid in relation
to the linked portion of the contract
of insurance or to a value
determined in such manner and on
the basis of such criteria as may be
prescribed;
(3) capital gains arising on the redemption,
liquidation or cancellation of securities not
referred to in items (1) and (2) hereof and
not being shares in a company;
(vi) profits distributed by a collective investment
scheme that is not resident in Malta that are paid
through the services of an authorised financial
intermediary out of profits that had been
allocated in that collective investment scheme to
a fund that is not a prescribed fund;
 120 CAP. 123.] INCOME TAX

(vii) interest payable by a person carrying on the

business of banking in accordance with foreign
legislation in respect of a sum of money in
whatever currency deposited with it in any
account whatever where the payment of the
income from investment is made through an
authorised financial intermediary as is provided
for in items (i), (ii) or (iii) of paragraph (c) of
article 41A;
(viii) (1) profits distributed by a company that is not
resident in Malta (and that is not a
collective investment scheme), and where
such profits are paid through the services
of an authorised financial intermediary to
an individual who is resident in Malta,
provided that such distributed profits
constitute income in the hands of such
individual that is derived from shares in
such company, each share being a
qualifying asset as defined in the
provisions of article 9B;
(2) the amount of the net dividend paid by a
company registered in Malta in respect of
which the recipient shareholder is
registered for the purpose of article 48(4)
Cap. 372. or article 48(4A) of the Income Tax
Management Act;
(3) the amount paid pursuant to article 48(4)
Cap. 372. or article 48(4A) of the Income Tax
Management Act;
(4) the dividend referred to in article 43(6)(a)
and the income or gains referred to in article
43(6)(c);
(5) the income referred to in article 43(6)(b);
(b) "payor" shall mean the person who is liable to make, or if
different, who makes a payment of investment income
and with respect to investment income referred to in
paragraph (a)(viii)(4) shall mean the company which
earned the profits deemed distributed pursuant to article
43(6)(a) and article 43(6)(c) and with respect to
investment income referred to in paragraph (a)(viii)(5)
shall mean the Commissioner;
(c) "recipient" shall mean:
 INCOME TAX [CAP. 123. 121

(i) a person who is resident in Malta during the year

in which investment income is payable to him or
which is payable to a person under sub-
paragraphs (ii) or (iii) (other than a person who
during that year carried on banking business
under the Banking Act, or a person carrying on Cap. 371.
the business of insurance or any other company
(hereinafter "owned and controlled company")
which is owned and controlled, directly or
indirectly, by such persons, excluding an owned
and controlled company not carrying on the
business of banking or insurance which is listed
on a stock exchange recognised under the
Financial Markets Act and in respect of which Cap. 345.
the Commissioner, at his discretion, has issued a
determination that such company falls within the
purport of this definition, or a company which is
registered under article 24 of the Malta Cap. 330.
Financial Services Authority Act), or
(ii) a receiver, guardian, tutor, curator, judicial
sequestrator or committee acting on behalf of a
person referred to in sub-paragraph (i) of this
paragraph, or
(iii) a trustee or foundation pursuant to or by virtue
of which any money or other property
whatsoever shall for the time being be paid or
applied to or for the benefit of a person referred
to in sub-paragraph (i), or
(iv) an EU/EEA individual (and his or her spouse
where applicable) in the circumstances
envisaged by the first and second provisos to
article 56(1)(c):
Provided that with respect to the investment income
referred to in paragraph (a)(viii)(2) and (3) a recipient
shall be an individual who is resident in Malta and with
respect to the investment income referred to in paragraph
(a)(viii)(4) and (5) a recipient shall be the individual
referred to in article 43(6)(a), (b) and (c), as the case may
be, and in the circumstances referred to in article 43(6)(e)
such individual must be ordinarily resident and domiciled
in Malta.

41A. For the purposes of the investment income provisions and Investment income
notwithstanding anything to the contrary contained therein: of collective
investment
(a) when any income referred to in article 41(a) is paid to schemes.
Added by:
a collective investment scheme it shall be treated as IX. 2001.27.
investment income only to the extent that - Amended by:
II. 2003.20;
(i) it falls to be accounted for by that collective L.N. 409 of 2007.
investment scheme as profits of a prescribed
fund; and
(ii) it is not paid by another collective investment
scheme;
 122 CAP. 123.] INCOME TAX

(b) "prescribed fund" means a collective investment

scheme or, in the case of a collective investment
scheme divided into sub-funds, a sub-fund of that
scheme, that satisfies such conditions as may be
prescribed for the purpose of this definition;
(c) "payor" includes an authorised financial intermediary
and all the obligations of a payor shall apply to such an
intermediary with respect to all payments of
investment income effected through his services. A
payment of investment income is effected through the
services of an authorised financial intermediary when
such payment -
(i) is made to the intermediary who holds the
relevant investment for the benefit of the
recipient;
(ii) is made directly to the recipient who requires
that an authorised financial intermediary collects
an amount of tax equal to fifteen per cent of such
income for onward payment to the
Commissioner;
(iii) is made through an arrangement approved by the
Commissioner, which arrangement enables the
collection of tax on such income through an
authorised financial intermediary;
(d) "authorised financial intermediary” means a person
holding an investment services licence issued under
Cap. 370. the Investment Services Act who is registered with the
Commissioner and who satisfies such other conditions
as may be prescribed;
(e) "recipient" includes a collective investment scheme
resident in Malta;
(f) a payor shall deduct tax from every payment of
investment income referred to in paragraph (a) at the
rate of fifteen cents (0.15) on every euro of such
payment or at such other rate or rates, not being more
than the said rate and not less than ten cents (0.10) on
every euro of the said payment, as may be prescribed;
(g) a collective investment scheme shall not have the right
to elect to be paid investment income without
deduction of tax being made;
(h) in no case shall a refund be made to a collective
investment scheme in respect of tax withheld in
accordance with the provisions of this article from
investment income paid to that collective investment
scheme.

Powers of the 41B. The Minister may make regulations determining how the
Minister. investment income provisions shall apply in relation to particular
Added by:
IX. 2001.27. types or categories of securities, making such modifications to the
operation thereof as he may deem necessary in respect of particular
types or categories of securities, and prescribing any matter that
 INCOME TAX [CAP. 123. 123

may be prescribed in accordance with any of the said provisions.

42. Where, in the opinion of the Commissioner, a series of Anti-avoidance
transactions is effected with the sole or main purpose of reducing provisions.
Added by:
the amount of tax payable by a person by reason of the operation of XVII. 1994.16.
the investment income provisions, such a person shall be assessable
as if the aforesaid provisions did not apply, and any tax withheld in
respect of income received under one or more of the aforesaid
transactions shall be available as a credit against the tax liability of
the person receiving such income, or for a refund as the case may
be, for the relevant year of assessment.
For the purposes of this article, a "series of transactions"
shall mean any two or more corresponding or circular transactions,
carried out by the same person, either directly or indirectly, as the
case may be.

43. (1) Where the Commissioner is of the opinion that any Certain
company (other than a company incorporated or registered outside undistributed
profits to be
Malta and not resident therein) has not distributed as dividends its deemed to be
profits or some part of its profits and that the effect of such non- distributed.
Amended by:
distribution is the avoidance or reduction of tax otherwise payable VI.1953.2;
by the shareholders, he may order by notice in writing that such XXVIII.1978.11;
undistributed profits or part thereof shall be deemed, for the VIII.1987.5
Renumbered by:
purposes of this Act, to have been distributed by way of dividend XVII. 1994.2.
by the company in such amount, and on such date or dates, as to Amended by:
him appears to be reasonable, and the shareholders concerned shall XVII. 1994.17;
II. 2007.14;
be assessed thereon accordingly: I. 2010.24;
IV. 2011.18.
Provided that -
(a) no order shall be issued as aforesaid if the company
proves that the main purpose or one of the main
purposes of non-distribution was -
(i) to provide for the development or expansion of
its trade or business from internal sources,
whether alone or in combination with other
sources; or
(ii) to repay any loan, overdraft or other capital
borrowed from external sources (which are
neither directly nor indirectly linked with the
company’s shareholders) and used in the
expansion of the company’s trade or business;
(b) no order issued under this sub-article shall have effect-
(i) where it is made in respect of any profits
chargeable in the company’s hands in respect of
any year of assessment prior to that beginning
on 1st January, 1976, if an assessment has been
raised for that year or, where no such assessment
has been raised, if the order is made after 31st
December, 1979;
(ii) where it is made in respect of any profits
chargeable in the company’s hands in respect of
any year of assessment prior to that beginning on
124 CAP. 123.] INCOME TAX

1st January, 1984, if it is made after 31st

December, 1986; and
(iii) where it is made in respect of any profits so
chargeable for any other year of assessment, if it
is made after the lapse of eight years from the
end of the year of assessment in which the
profits to which the order relates were
chargeable to tax;
(c) where, under the provisions of this sub-article any
dividend would require to be treated as received by
any shareholder of a company (in this proviso referred
to as "the first company") and the shareholder in
question is also a company (in this proviso referred to
as "the second company"), that dividend shall not be
chargeable to tax as income of the second company,
but shall be treated as distributed by the second
company by way of dividend on the date determined
by the Commissioner as aforesaid, and the
shareholders of the second company shall be assessed
thereon accordingly; and where any shareholder of the
second company is again a company, then, in relation
to the sum which is to be treated as distributed to that
shareholder, the preceding provisions of this proviso
shall apply mutatis mutandis as though references
therein to the first company were references to the
second company and as though references therein to
the second company were references to that
shareholder, and so on until, applying the principles of
this proviso, there remains no part of the undistributed
profits to which the directions of the Commissioner
relate which falls to be treated as distributed to a
company.
(2) Where any person who has been assessed to tax, or has had
his assessment revised, in accordance with the provisions of sub-
article (1) fails to pay on due date the tax, or any part of the tax,
attributable to his share of any undistributed profits which are
treated as distributed, such tax or the part thereof shall thereupon
become a debt due to Government from the company by reason of
whose failure to distribute the profits the directions of the
Commissioner under sub-article (1) were given, and shall be
recoverable as such.
(3) Where any undistributed profits taxable by virtue of sub-
article (1) are subsequently distributed, they shall not be treated as
taxable income in the hands of the recipients thereof.
(4) Where any undistributed portion of the profits taxable by
virtue of sub-article (1) has been deemed, by notice given under the
provisions of this article, to have been distributed as dividends to
the shareholders of that company, the company shall within twenty-
one days of the date of service of the said notice furnish each
shareholder with a certificate setting forth the amount of the
dividend deemed to have been distributed to that shareholder and
the amount of tax which the company would have been entitled to
 INCOME TAX [CAP. 123. 125

deduct from such dividend under the provisions of article 59 if such

dividend had been paid.
(5) Nothing contained in this article shall prevent the decision
of the Commissioner in the exercise of the power conferred upon
him by sub-article (1) from being questioned in an appeal in
accordance with the provisions of articles 35 and 37 of the Income
Cap. 372.
Tax Management Act.
(6) (a) Where an individual resident in Malta is registered for
the purpose of article 48(4) or article 48(4A) of the
I n c o m e Ta x M a n a g e m e n t A c t , or is beneficially Cap. 372.
entitled, directly or indirectly, to the profits of a person or
entity which is so registered, such individual shall be
deemed to have received a dividend or dividends
corresponding to the amount of profits (that is, the profits
net of the tax paid or payable by the company in respect
of which he or the said person or entity are so registered)
that he is beneficially entitled to receive directly or
indirectly from such company, on the first day of the
accounting period following that in which such profits
were earned by the said company or on the date such
profits where distributed whichever is the earlier:
Provided that this paragraph shall not apply where the
said profits were distributed to such individual resident in
Malta registered for the purpose of article 48(4) or article
48(4A) of the Income Tax Management Act by way of Cap. 372.
dividends in the accounting period in which such profits
were earned by the said company:
Provided further that when an individual resident in
Malta registered for the purpose of article 48(4) or article
48(4A) of the Income Tax Management Act has been Cap. 372.
deemed to have received a dividend or dividends on the
first day of the accounting period following that in which
such profits were earned by the said company such
dividend or dividends shall for the purpose of article
41(a)(viii)(2) be deemed to have been paid on such day.
(b) An individual resident in Malta beneficially entitled,
directly or indirectly, to the profits of a person or entity
which has received the income referred to in article
41(a)(viii)(3), shall be deemed to have received, at the
time that the said person or entity has received the said
income, so much of that income as corresponds to his,
direct or indirect, entitlement to receive that income by
way of dividend or other means through or from any
person or entity in any manner whatsoever:
Provided that in the case of income referred to article
41(a)(viii)(2) the said person shall not be deemed to
have received such income if and to the extent that the
distributable profits resulting in such income have
been deemed to be income referred to in paragraph (4)
of the said article 41(a)(viii) paid to a recipient as
defined in the investment income provisions.
126 CAP. 123.] INCOME TAX

(c) Where an individual resident in Malta is beneficially

entitled, directly or indirectly, to the profits (whether
or not distributed) of a company which has applied the
provisions of article 12(1)(u) to any of its income or
gains, such individual shall be deemed to have
received, at the time that the said company has
submitted its tax return in which the said income or
gains would have been charged to tax but for the fact
that it applied the said exemption or the last date on
which such a tax return is due to be submitted,
whichever is the earlier, so much of that income or
gains as corresponds to his, direct or indirect,
entitlement to receive that income or gains by way of
dividend or other means through or from any person or
entity in any manner whatsoever and for the purpose
of this paragraph if the company would have already
distributed such income or gains or part thereof it shall
be deemed that no such distribution has been made.
(d) (i) Notwithstanding any other provision in the Income
Tax Acts, where an individual becomes
beneficially entitled, directly or indirectly, to the
profits of a person or entity or any such entitlement
is increased in any way and such person or entity
has received but not yet distributed, or is entitled to
receive (at the time such individual became so
entitled or had his entitlement so increased),
directly or indirectly, the income referred to in
article 41(a)(viii)(2) and (3), such individual shall
be deemed to have received a dividend chargeable
to tax under this Act at the time that he became so
entitled or had his entitlement so increased as
corresponds to his, direct or indirect, entitlement or
increased entitlement to receive that income by
way of dividend or other means through or from
any person or entity in any manner whatsoever and
such individual shall be obliged to declare the said
dividend in his return of income:
Provided that the provisions of this paragraph
shall not be applicable where the Commissioner
is satisfied that the events referred to in this
paragraph were not the result of some
arrangement or scheme the sole or main purpose
of which was the avoidance of or postponement
of the payment of tax.
(ii) Notwithstanding any other provision in the
Income Tax Acts, where an individual not
resident in Malta changes his residence and
becomes resident and domiciled in Malta and at
the time of the change becomes or is beneficially
entitled, directly or indirectly, to the profits of a
person or entity and such person or entity has
received, directly or indirectly, but not yet
distributed the income referred to in article
 INCOME TAX [CAP. 123. 127

41(a)(viii)(2) and (3), such individual shall be

deemed to have received a dividend chargeable
to tax under this Act at the time that he becomes
resident and domiciled in Malta as corresponds
to his, direct or indirect, entitlement to receive
that income by way of dividend or other means
through or from any person or entity in any
manner whatsoever and such individual shall be
obliged to declare the said dividend in his return
of income:
Provided that the provisions of this paragraph shall
not be applicable where the said individual was not
at any time resident in Malta throughout the whole
of the period of five years immediately preceding
the date such individual changes his residence and
becomes ordinarily resident and domiciled in
Malta.
(iii) Notwithstanding any other provision in the
Income Tax Acts, where an individual not
resident in Malta, whether or not registered for
the purpose of article 48(4) or article 48(4A) of
the Income Tax Management Act, receives, Cap. 372.
directly or indirectly, the income referred to in
article 41(a)(viii)(2) and (3), and such individual
was at any time within the five year period
preceding the date on which he received,
directly or indirectly the said income, resident
and domiciled in Malta, such income shall be
chargeable to tax under this Act and the said
individual shall be obliged to declare the said
income in a return of income.
(iv) For the purpose of paragraphs (i) to (iii) above
the reference to "recipient" in article
42(a)(viii)(2) shall mean any person or entity.
(e) Where the immediate shareholder of the company, person
or entity referred to in paragraphs (a), (b) and (c) is not
an individual and is not resident in Malta, the provisions
of the said paragraphs shall only be applicable when the
said individual is ordinarily resident and domiciled in
Malta.
(f) Where the direct or indirect beneficial entitlement
referred to above is an entitlement to the profits of a
public company or other entity, and where one or more
individuals, ordinarily resident and domiciled in
Malta, do not own or control a substantial part of such
company or entity, or are not beneficially entiled to a
substantial part of the profits or income of such
company or entity, and the shares or other similar
security in relation to such company or entity -
(i) are listed on a stock exchange determined by the
Commissioner for the purpose of this provision,
and the Commissioner is satisfied that the shares
 128 CAP. 123.] INCOME TAX

or other similar security are widely held and

frequently traded; or
(ii) although not listed on such a recognised stock
exchange or not frequently traded, are widely
held,
the Commissioner may, in his absolute discretion,
determine that the provisions of this subarticle are not
applicable.
(g) For the purpose of this subarticle the word "entity"
means a person other than an individual and shall
include any trust or body of persons.

Special provisions 44. (1) A company (other than a company incorporated or

in respect of registered outside Malta and not resident therein) may apply to the
certain profits
deemed Commissioner in writing to have any profits which the
distributed. Commissioner has ordered to be deemed distributed in terms of
Added by:
XXXVI.1990.8. article 43 to be deemed distributed as follows:
Renumbered by:
XVII. 1994.2. (a) twenty per centum of the said profits on such date or
Amended by: dates as the Commissioner has ordered;
L.N. 409 of 2007.
(b) eighty per centum of the said profits in the year
immediately preceding the year of assessment 1991:
Provided that where an assessment raised on a
shareholder as a consequence of the said deemed
distribution has become final and conclusive, the
assessment shall not be reopened by way of the
provisions of this sub-article:
Provided further that an application made by a
company for the purposes of this sub-article shall not
be valid if it is made after the 30th June, 1991.
(2) In the case where a company is served with a deemed
distribution order by the Commissioner in terms of article 43 in
respect of any year immediately preceding any of the years of
assessment 1984 to 1989 and after the 23rd November, 1990, the
company may apply to the Commissioner in writing to have the
undistributed profits for the said years to be deemed distributed by
the Commissioner as follows:
(a) twenty per centum of the said profits on such date or
dates as the Commissioner may order;
(b) eighty per centum of the said profits in the year
immediately preceding the year of assessment 1991:
Provided that an application made by a company for the
purposes of this sub-article shall not be valid if it is made after the
lapse of thirty days from the date of service of the deemed
distribution order or the 30th June 1991, whichever is the later.
(3) Notwithstanding any other provisions of this Act, where an
application is made in terms of this article, the profits deemed
distributed by the Commissioner shall be charged to tax on the
company at the following additional rate of tax:
(a) 25c on every euro of profits deemed distributed for
 INCOME TAX [CAP. 123. 129

any year preceding the year of assessment 1990;

(b) 0.025c on every euro of profits deemed distributed for
the year of assessment 1991.
(4) (a) For the purposes of this article, when the profits deemed
distributed are subsequently distributed by the company to the
shareholders, the dividend shall be grossed up as set out in article
31 without taking into account the tax charged additionally on the
company in terms of sub-article (3).
(b) The tax payable by the company under sub-article (3) shall
not be availed of for set-off in terms of article 60 when the profits
deemed distributed are subsequently distributed to the
shareholders.

45. Any distribution made by a company after the 1st January, Further special
1990 in respect of its profits for any year preceding the year of provision in
respect of profits
assessment 1989 shall be considered as having not been distributed deemed
in determining the amount of undistributed profits for the purposes distributed.
Added by:
of article 43. XXXVI.1990.8.
Renumbered by:
XVII. 1994.2.
45A. Notwithstanding anything said in this Act, where in Conversion of a
accordance with the provisions of the Companies Act, a company is commercial
partnership.
converted into a commercial partnership en nom collectif or a Added by:
commercial partnership en commandite the capital of which is not IX. 1999.14.
Substituted by:
divided into shares, the following shall apply: XIX. 2010.58.
Cap. 386.
(a) it shall be deemed for all the purposes of the Income
Tax Acts that any balance of distributable profits
allocated to any of the tax accounts, existing on the
day the company ceases to be a company, to have been
distributed by way of dividend on the said day and the
provisions of articles 61 to 67 shall apply accordingly
to such profits;
(b) subject to paragraph (c), it shall be deemed for all the
purposes of the Income Tax Acts that no transfer or
acquisition of assets has taken place and for the
purpose of determining the chargeable income or gains
on a transfer of the said assets by the partnership, the
cost and date of acquisition taken into account shall be
the cost and date as applicable to the company that has
been converted;
(c) where the assets of the company ("the chargeable
company") include shares in a company or immovable
property situated in Malta which have been acquired
from another company ("the transferor") under a
transfer which qualified for tax relief under the
provisions of articles 5(9) or 5A(4)(f), it shall be
deemed for the purposes of articles 5(9A) and
5A(12A) that the chargeable company ceases to be a
member of the original group and the provisions of the
said articles shall apply accordingly;
(d) where the transferor company referred to in the
 130 CAP. 123.] INCOME TAX

preceding paragraph is converted into a partnership,

for the purpose of determining whether the chargeable
company referred to in articles 5(9A) and 5A(12A)
ceases to be a member of the original group, it shall be
deemed that the conversion had not taken place and
such determination shall be made by reference to the
same individuals referred to in article 5(9)(iii) taken
into account in determining whether the chargeable
company and the transferor company satisfied the
provisions of article 5(9)(i) and (iii) on the date of the
acquisition referred to in paragraph (c) above;
(e) where the company has available for set-off capital
losses referred to under article 5(10), such losses shall
be carried forward and set off only against capital
gains derived by the partnership in the manner
prescribed in the said article as would have applied
had the conversion not taken place;
(f) where the company has available for set-off losses
referred to under article 14(1)(g), such losses shall be
carried forward and set off only against the total
income derived by the partnership in the manner
prescribed in the said article as would have applied
had the conversion not taken place.

Conversion of a 45B. Notwithstanding anything contained in this Act, where, in

partnership into a accordance with the provisions of the Companies Act, a
company.
Added by: commercial partnership en nom collectif or a commercial
IV. 2011.19. partnership en commandite the capital of which is not divided into
Cap. 386. shares is converted into a company, it shall be deemed for all the
purposes of the Income Tax Acts that no transfer or acquisition of
assets has taken place and for the purpose of determining the
chargeable income or gains on a transfer of the said assets by the
company, the cost and date of acquisition taken into account shall
be the cost and date as applicable to the commercial partnership
that has been converted.
Loans to 46. (1) If any amounts are advanced or any assets distributed
shareholders. by a company to any of its shareholders by way of advances or
Renumbered by:
XVII. 1994.2. loans, or any payment is made by the company on behalf of, or for
the individual benefit of, any of its shareholders, so much, if any, of
these advances, loans or payment, as, in the opinion of the
Commissioner represents distribution of income shall, for all
purposes of this Act, be deemed to be dividends paid by the
company to those shareholders out of profits derived by it.
(2) Where the amount of any advance, loan or payment is
deemed, under the last preceding sub-article, to be a dividend paid
by a company to its shareholders, and in any year subsequent to
that in which the dividend is so deemed to be paid, the company
sets off any dividend distributed by it in that subsequent year, in
satisfaction of the whole or part of the amount of that advance, loan
or payment, that dividend shall, to the extent to which it is so set
off, be deemed not to be a dividend for the purposes of this Act.
 INCOME TAX [CAP. 123. 131

47. Distributions to shareholders of a company or to partners Certain

in any partnership by a liquidator in the course of winding up the distributions to
shareholders or to
company or the partnership, to the extent to which they represent partners deemed to
income derived by the company or by the partnership (whether be dividends or
profits..
before or during liquidation) and any distributions from the Renumbered by:
untaxed account shall, for the purposes of this Act, be deemed to be XVII. 1994.2.
dividends paid to the shareholders by the company out of the Amended by:
I. 2010.25.
profits derived by it, or profits distributed to the partners, as the
case may be.
48. (1) Where any trading stock is sold together with other Special provisions
assets of a business, the part of the consideration attributable to the for computation of
income derived
trading stock shall, for the purposes of this Act, be determined by from sale or other
the Commissioner, and the part of the consideration so determined disposal or trading
stock.
shall be deemed to be the price paid for the trading stock by the Renumbered by:
purchaser. XVII. 1994.2.
Amended by:
(2) For the purposes of this article any trading stock which has XVII. 1994.18.
been disposed of otherwise than by sale shall be deemed to have
been sold, and any trading stock so disposed of and any trading
stock which has been sold for a consideration other than cash shall
be deemed to have realised the market price of the day on which it
was so disposed of or sold, but, where there is no market price,
trading stock shall be deemed to have realised such price as the
Commissioner determines.
(3) Nothing contained in this article shall be deemed to impair
the right of an assessee to appeal against an assessment of tax under
the provisions of articles 35 and 37 of the Income Tax Management
Act. Cap. 372.

48A. (1) Where a VAT registered person engages any Special provisions
individual for the carrying out of hand knitting, lace making, regarding certain
income derived by
crochet and embroidery activities at home against a net outworkers on a
remuneration in any one year preceding a year of assessment not part-time basis.
Added by:
exceeding five hundred euro (500) the tax due in respect of the XXII. 1995.4.
income paid to any such outworker and the deductions that may be Amended by:
made in respect thereof by the person engaging them shall be L.N. 409 of 2007.
regulated in accordance with such rules as may be made under this
article:
Provided that the work carried out by such outworkers shall
in all cases be handmade and not machine-made.
(2) The Minister may by order extend the provisions of sub-
article (1) to the remuneration of such workers as may be
prescribed in the Order under such conditions as may be set out in
the said Order.

48B. The Minister responsible for finance may make regulations Special provisions
prescribing the manner in which the chargeable income, falling under regarding certain
income derived
article 4(1)(a), of such persons as may be prescribed is to be calculated under article
or estimated under such conditions as may be set out in the said 4(1)(a) of the Act.
Added by:
regulations. II. 2002.51.
 132 CAP. 123.] INCOME TAX

Married couples. 49. (1) The income of a married couple, where both spouses
Amended by: are living together, shall be charged to tax in the name of the
XLIX.1974.5.
Renumbered by: responsible spouse so elected by the spouses themselves for the
XVII. 1994.2. p u r p o s e s o f t h e I n c o m e Ta x A c t s a n d a n y r e t u r n a n d a n y
Substituted by:
XX. 1996.13. declaration relating to a year of assessment for which the income is
Amended by: so chargeable shall be signed by both spouses:
IX. 1999.14.
Provided that if the return or declaration is signed only by
the responsible spouse or the other spouse on behalf of the
responsible spouse, it shall in all cases be presumed juris et de jure
to have been made with the consent of both spouses:
Provided further that if the spouses fail to appoint the
responsible spouse, the Commissioner shall at his discretion decide
who of the spouses shall be the responsible spouse.
(2) Where a joint return is required to be filed by a married
couple in accordance with the provisions of subarticle (1), both
spouses will be jointly and severally responsible for the
performance of all obligations pursuant to the provisions of the
Income Tax Acts, and in default the Commissioner shall be
entitled, at his discretion, to take such action to enforce
performance of those obligations against either or both of the
spouses:
Provided that in no case may any criminal action be taken
against a spouse for any act or omission for which he or she may
not be directly responsible.
(3) Where a married couple elects that one of the spouses is to
be the responsible spouse, such election shall remain effective for a
minimum period of five successive years unless the Commissioner,
at his sole discretion and for a reasonable cause, authorises a
change following a petition signed by either spouse and filed with
the Commissioner not later than six months before the first day of
the year of assessment in respect of which such change is
requested.
Separate 50. (1) Notwithstanding the provisions of article 49, where in
computation on any year immediately preceding the year of assessment the spouse
certain income
derived by married not being the responsible spouse, derives income subject to tax
couples. under the provisions of article 4(1)(a) or (b) in so far as it does not
Added by:
XXXVI.1990.9. refer to any fees derived from the holding of an office of a director
Renumbered by: or of paragraph (d) of the said sub-article in so far as it refers to a
XVII. 1994.2. pension which is received in view of the past employment the
Amended by:
XVII. 1994.19. responsible spouse may elect in writing that the tax on the
Substituted by: chargeable income in respect of such income derived by the other
XX.1996.13. spouse be computed separately. In such a case the spouse’s income
Amended by:
V. 1998.8; shall not be aggregated with the responsible spouse’s total income
XI. 2000.6; for that year of assessment:
II. 2002.52.
Provided that where such an election is made, then,
notwithstanding anything contained in this Act, any income of the
spouses, other than income referred to in this sub-article and
subject to tax under the provisions of article 4(1)(a), (b) and (d),
shall be aggregated with the total income of the spouse having the
higher income subject to tax under the said provisions or where
such total income of the spouses is equal, it shall be aggregated
 INCOME TAX [CAP. 123. 133

with the total income of the responsible spouse, and the tax charged
shall be computed accordingly.
(2) The tax computed separately for each year of assessment in
respect of the income referred to in subarticle (1) hereof shall be
charged in the name of the responsible spouse.
(3) No election referred to in subarticle (1) may be made in
respect of income which is subject to tax under any of the provisions
of article 4(1)(b) or (d) where such income consists solely of income
which is deemed to constitute a benefit provided by reason of
employment or office in terms of the regulations referred to in article
4(1)(b)(ii).

50A. Notwithstanding anything to the contrary contained in this When arrears of

Act, where during the year immediately preceding the year of pension are to be
brought to charge.
assessment 2004 or during subsequent years of assessment a person Added by:
receives income subject to tax under the provisions of article II. 2003.21.
4(1)(d), insofar as it refers to income accrued during an earlier year
of assessment, such income shall be brought to charge to tax in the
year to which it refers:
Provided that any such income referring to any year of
assessment prior to the year of assessment 1999 shall be brought to
charge in the year of assessment 1999.

51. (1) Where any scheme which reduces the amount of tax Tax avoidance.
payable by any person is artificial or fictitious or is in fact not Substituted by:
XXVIII. 1978.12.
given effect to, the Commissioner shall disregard the scheme and Amended by:
the person concerned shall be assessable accordingly. XXXVI. 1990.10.
Renumbered by:
XVII. 1994.2.
Amended by:
XX. 1996.14;
I. 2010.26.
(2) Where any person, as a direct or indirect result of any
scheme of which the sole or main purpose was the obtaining of any
advantage which has the effect of avoiding, reducing or postponing
liability to tax, or of obtaining any refund or set-off of tax, has
obtained or is in a position to obtain such an advantage, the
Commissioner shall, by order in writing, determine the liability to
tax or the entitlement to a refund or set-off of tax of the said
person, or of any other person, for any year of assessment, in such
m a n n e r a n d i n s u c h a m o u n t a s m a y b e n e c e s s a r y, i n t h e
circumstances of the case, to nullify or modify the said scheme and
the consequent advantage. A person who disagrees with an order
served upon him as aforesaid shall have the same rights to object to
that order and to appeal from a decision of the Commissioner
refusing that objection as if that order were an assessment issued
under the Income Tax Management Act and the relevant provisions Cap. 372.
of that Act relating to objections and appeals shall apply mutatis
mutandis.
(3) Where, as a direct or indirect result of any disposition made
during the life of the disponer, any income is payable to or for the
benefit of a child in the year immediately preceding the year of
assessment, the income shall, if at the commencement of that year
134 CAP. 123.] INCOME TAX

the child was unmarried or has not yet reached the age of eighteen
years, be treated for the purposes of this Act as the income of the
disponer for that year and not as the income of the said child.
(4) Where, as a direct or indirect result of any scheme or of any
change in the shareholding of a company income has been received
by or has accrued to the company in the year immediately
preceding the year of assessment, then, unless it is proved that the
said scheme had not been entered into, or the said change had not
been effected, solely or mainly for the purpose of obtaining the
benefit of any loss, or of the balance of any loss incurred by the
company in any year preceding the year of assessment, or of any
wear and tear or initial allowances, or of the balance of any such
allowances due in respect of any year as aforesaid, so as to avoid
liability on the part of that company or of any other person to the
payment of any tax -
(a) the provisions of articles 5(10)(b) and 14(1)(g) shall
not apply in respect of any loss incurred by the
company during the year in which such scheme was
entered into or such change was effected, or in respect
of any loss or balance of loss which would otherwise
fall to be carried forward into that year or from that
year into subsequent years;
(b) the provisions of the second proviso to article 14(1)(f)
shall not operate so as to allow any deductions to
which the company may otherwise be entitled during
the year in which such scheme was entered into or
such change was effected, in respect of allowances
contemplated under the provisions of sub-article (1)(f)
and (j) of that article, or in respect of such deductions
or of the balance of such deductions which may
otherwise fall to be carried forward from that year into
subsequent years;
(c) the provisions of article 24 shall be applied as though
the provisions of the preceding paragraphs of this sub-
article had not taken effect.
(5) In this article -
"child" includes:
(a) a stepchild, or an adopted child, or an illegitimate
child of the individual or of the individual’s spouse; or
(b) a child orphan of or abandoned by either of the parents
and living with the individual or the individual’s
spouse;
"scheme" includes any disposition, agreement, arrangement,
trust, grant, covenant, transfer of assets, increase in the share
capital of a company and alienation of property, whatsoever,
irrespectively of the date on which such scheme was made, entered
into or set up.
 INCOME TAX [CAP. 123. 135

52. (1) The Commissioner shall, on the application of a Advance Revenue

company which is a party to any transaction, notify his ruling that Rulings.
Added by:
the provisions of article 51 shall not apply to that transaction XVII. 1994.20.
provided that the Commissioner is satisfied that the transaction is Amended by:
II. 2007.15.
to be effected for bona fide commercial reasons.
(2) The Commissioner shall, on the application of any person,
notify his ruling that the provisions of paragraph (f) of the
definition of "participating holding" as defined in article 2 in
respect of a participating holding will apply to a particular
shareholding or to a shareholding which is to be acquired by the
applicant.
(3) The Commissioner shall, on the application of any person
which is a company, notify his ruling on the tax treatment of any
transaction which concerns any financial instrument or other
security.
(4) The Commissioner shall, on the application of any person,
notify his ruling on the tax treatment of any transaction which
involves international business, provided that the determination of
what constitutes international business for the purposes of this sub-
article shall be at the discretion of the Commissioner.
(5) The Commissioner shall, on the application of any person,
notify his ruling as to whether a company qualifies as an
international trading company:
Provided that no such ruling shall be notified in respect of a
company which was a company registered in Malta on or after 1
January 2007 but was not resident in Malta before that date:
Provided further that companies registered in Malta
between the 18 April 2006 and 31 December 2006 shall only be
entitled to apply for a ruling in terms of this subarticle by not later
than 30 June 2007.
(5A) The Commissioner shall, on the application of any person,
notify his ruling that a company is not precluded from being a
c o m p a n y t o w h i c h a r t i c l e 4 8 ( 4 A ) ( b ) o f t h e I n c o m e Ta x Cap. 372.
Management Act refers to as a consequence of paragraph (ii)
thereof:
Provided that where the Commissioner has notified his
ruling as aforesaid, such ruling shall only remain binding and valid
as long as such company together with the filing of its income tax
return also submits the following documents:
(a) a declaration, signed by all the directors of the
company or by the company secretary where such
declaration is approved by the board of directors of the
company, confirming that throughout the relevant
accounting period the company’s activities consisted
solely of the activities referred to in the company’s
application for the said ruling. Where the declaration
is signed by the company secretary it shall also state:
(i) whether all the directors of the company were
present at the meeting approving the declaration
136 CAP. 123.] INCOME TAX

and, if not all the directors were present,

whether the meeting was properly convened as
required by the company’s memorandum and
articles;
(ii) whether the declaration was unanimously
approved by all the directors present at the
meeting and, if approval was not unanimous, the
number of votes against and the number of votes
for the motion; and
(b) a declaration, signed by the auditor of the company for
the accounting period in question, confirming that, to
the best of his knowledge and belief, the declaration
referred to in paragraph (a) is correct.
(6) The notification of a ruling specified in this article may be
given in advance of any transaction in respect of which an
application for a ruling is made.
(7) (a) All applications under this article shall be made in
writing and shall contain all material particulars of the
transactions to be effected.
(b) Where the Commissioner requires further particulars
for the purposes of enabling him to make a decision on
an application under this article, the Commissioner
shall, within thirty days of the receipt of the
application, or of the receipt of any further particulars
previously required under this paragraph, by written
notice, require the applicant to furnish such further
particulars, and if any such notice is not complied with
within thirty days, or such longer period as the
Commissioner may allow, the Commissioner need not
proceed further with the application.
(c) The Commissioner shall notify his ruling to the
applicant within thirty days of receiving the
application or, if he gives a notice under paragraph (b),
within thirty days after the notice has been complied
with.
(d) If any particulars furnished under this article do not
fully and accurately disclose all facts and
considerations material for the ruling of the
Commissioner, any resulting ruling shall be void.
(8) (a) Subject to the provisions of sub-article (7)(d), a ruling
by the Commissioner will be and shall remain binding
on the Commissioner for a period of two years from
the time of any relevant change in statutory provisions
subsequent to such ruling, or for a period of five years
from the time of such ruling, whichever is the lesser.
(b) A ruling by the Commissioner may, at the option of the
applicant, be renewed for a further period of five
years. An application for renewal shall be submitted in
writing to the Commissioner, stating whether or not
there have been any material changes to the facts and
 INCOME TAX [CAP. 123. 137

considerations contained in the original application

and the nature of any such changes. Such renewal shall
not be unreasonably withheld by the Commissioner.
(c) Notwithstanding the provisions of the preceding
paragraphs of this subarticle no ruling pursuant to
subarticle (5) including any renewal of such ruling
shall be effective on or after the 1 January 2011.

52A. The Minister responsible for finance may make rules for Rules in respect of
carrying out the provisions of the Income Tax Acts with respect to finance leasing.
Added by:
finance leasing arrangements generally, and may in particular by XI. 2000.7.
such rules provide for the way in which deductions incurred in the
production of the income shall be allowed with respect to the lessor
and the lessee as well as provide the manner and extent to which, if
any, losses with respect to any finance leasing arrangement may be
set off against gains arising from any other source of income.
52B. (1) The Minister responsible for Finance may by E.U Directives and
regulations under this article make provision implementing and Regulations.
Added by:
giving effect to any Directive of the European Union (hereinafter in II. 2004.13.
this article referred to as "E.U. Directive") relating to any matter
which affects the operation of the Income Tax Acts or to enable the
better operation of any regulation of the European Union
(hereinafter in this article referred to as "E.U. Regulations") and
may by such regulations provide anything that may be required to
be provided for by such E.U. Directive or E.U. Regulation.
(2) Any regulations made under this article shall make
reference to the relevant E.U. Directive or E.U. Regulation and
shall have effect if in conformity therewith notwithstanding
anything to the contrary contained in the Income Tax Acts or any
other enactment relating to this matter.
 138 CAP. 123.] INCOME TAX

PART VI

PERSONAL DEDUCTIONS

Resident 53. Repealed by: XX.1996.15.

individual.
Amended by:
VI.1953.3;
V.1964.2;
VIII.1969.6;
XXXV.1972.6;
X.1973.4;
XLIX.1974.6;
XLII.1975.7;
XXII.1976.4;
XXIV.1976.4;
XXVI.1977.11;
XXVIII.1978.13;
XXI.1980.7;
IX.1981.6;
XL.1981.3;
IX.1983.7;
XIII.1983.5;
XIV.1984.5;
VIII.1987.5;
XXXI.1988.5.
Substituted by:
XXVI.1990.11.
Amended by:
XVIII.1993.6.
Renumbered by:
XVII. 1994.2.
Amended by:
XVII.1994.21.
Non-resident 54. Repealed by: XX.1996.15.
allowance.
Amended by:
XV.1958.2;
XXV.1960.8;
XXV. 1962.2,4;
L.N. 4 of 1963;
L.N. 46 of 1965.
Renumbered by:
XVII. 1994.2.
Claims under this 55. Repealed by: XX.1996.15.
Part.
Amended by:
VIII.1969.7.
Substituted by:
XXVI.1977.12.
Amended by:
XXVI. 1990.12.
Renumbered by:
XVII. 1994.2.
Amended by:
XVII. 1994.22.
 INCOME TAX [CAP. 123. 139

PART VII

RATE OF TAX

56. (1) Saving the other provisions of this article, the tax upon Normal rate of tax
the chargeable income of every person shall be charged at the on individuals and
certain bodies of
following rates: persons.
Amended by:
(a) in the case of a married couple resident in Malta in the V. 1958.6;
year immediately preceding the year of assessment and XVI. 1959.2;
XXIV. 1961.3;
to whom article 49 applies saving where the XXV. 1962.5;
responsible spouse has opted for a separate XIV. 1963.3;
computation for the purposes of article 50 - V. 1964.3;
VIII. 1969.8;
For every euro of the first €11,900 ......................... 0c XXVIII. 1972.2;
X. 1973.5;
For every euro of the next €9,300. ........................ 15c XLII. 1975.8;
For every euro of the next €7,500. ........................ 25c XXII. 1976.4;
For every euro of the next €31,300. ..................... 29c XXIV. 1976.5;
XXVI. 1977.13;
For every euro of the remainder ....................... 35c: XXVIII. 1978.14;
IX. 1981.7;
Provided that in the case of an individual who is a XL. 1981.4;
national of a European Union or European Economic XIII. 1983.4,5;
Area member state, such individual may qualify for the XIV. 1984.6;
VIII. 1987.7;
rates specified in this paragraph even where his or her XXXI. 1988.6.
spouse is not resident in Malta if the other conditions Substituted by:
mentioned in this paragraph are satisfied and the XIX. 1989.13;
XXVI. 1990.13.
Commissioner is satisfied that at least 90% of the Renumbered by:
couple’s world-wide income is derived from Malta; XVII. 1994.2.
Amended by:
(b) in the case of any other individual resident in Malta XVII. 1994.23;
including each spouse where the responsible spouse XXII. 1995.5;
XX. 1996.16;
has opted for a separate computation for the purposes V. 1998.8;
of article 50 - IX. 1999.14;
XI. 2000.8;
For every euro of the first €8,500. ........................... 0c IV. 2001.35;
For every euro of the next €6,000 ......................... 15c II. 2002.53;
II. 2003.22
For every euro of the next €5,000 ........................ 25c III. 2004.160;
For every euro of the next €40,500 ...................... 29c XIII. 2004.54;
II. 2005.11;
For every euro of the remainder ........................... 35c: II. 2006.9;
II. 2007.26;
Provided that: IV. 2007.15;
XXXII. 2007.36;
(a) notwithstanding the other provisions of this paragraph L.N. 409 of 2007;
where an individual was unmarried or a widow or a II. 2009.14;
widower, or was a spouse separated de jure or de facto, I. 2010.27;
IV. 2011.20;
or was divorced, the rates applicable to the chargeable XVI. 2011.57;
income of such individual for the year of assessment V. 2012.22;
2000 and for any year of assessment thereafter shall, L.N. 218 of 2012;
III. 2013.26;
subject to the provisions of paragraph (b) of this XII. 2014.25.
proviso, be those laid down in paragraph (a);
(b) paragraph (a) of this proviso applies where the said
individual, in the year preceding the year of
assessment:
(i) maintained under his or her custody a child who
was not over 16 years of age or, if over that age,
was receiving full-time instruction at any
university, college or other educational
establishment, or was serving an apprenticeship
 140 CAP. 123.] INCOME TAX

with a view to qualifying in a trade or

profession, or was incapacitated by infirmity
from maintaining himself or herself, and who, in
any case, was not in receipt of income, in his or
her own right, in excess of €2,400;
(ii) where a children’s allowance is payable in
Cap. 318. respect of that child under the Social Security
Act, was recognised by the Director (Social
Security) as the beneficiary of the children’s
allowance payable in respect of the said child;
(iii) was not in receipt of any financial assistance in
respect of the maintenance of the said child from
the other parent of the said child;
(iv) was not living or residing at the same house with
the other parent of the said child:
Provided further that where, in the year preceding the
year of assessment, a parent maintained under his or
her custody a child, or paid maintenance in respect of
his or her child as provided in article 12(1)(t), and
such child was not over 18 years of age (or not over 23
years if receiving full-time instruction at any
university, college or other educational establishment)
and not gainfully occupied, or if gainfully occupied
did not earn income in excess of €2,400, then the said
parent shall be entitled to be charged to tax at the
following rates:
For every euro of the first €9,800 ........................... 0c
For every euro of the next €6,000 ......................... 15c
For every euro of the next €5,400 ......................... 25c
For every euro of the next €38,800 ....................... 29c
For every euro of the remainder ......................... 35c;
(c) in the case of any individual who is not resident in
Malta during the year immediately preceding the year
of assessment -
For every euro of the first €700......................................... 0c
For every euro of the next €2,400.................................. 20c
For every euro of the next €4,700................................... 30c
For every euro of the remainder .................................... 35c:
Provided that -
(i) in the case of an individual who is a national of a
European Union or European Economic Area
Member State (hereinafter "EU/EEA
individual"), where the Commissioner is
satisfied that at least 90% of the said
individual’s worldwide income is derived from
Malta, the rates specified in paragraph (b) of this
sub-article shall apply;
(ii) the EU/EEA individual may alternatively qualify
for the rates specified in paragraph (a) of this
 INCOME TAX [CAP. 123. 141

sub-article even where his or her spouse is not

resident in Malta if the other conditions
mentioned in paragraph (a) are satisfied and the
Commissioner is satisfied that at least 90% of
the couple’s worldwide income is derived from
Malta;
(iii) where the rates specified in paragraphs (a) or (b)
are applicable, the provisions of the Income Tax
Acts that are applicable with regards to
exemptions, deductions, credits and refunds
shall be the same as those applicable to persons
resident in Malta;
(iv) in the case of an EU/EEA individual who does
not qualify for the treatment under sub-
paragraphs (i) to (iii) of this proviso, the tax
resulting after applying the rates under this
paragraph shall not be higher than the amount
that results after dividing the income charged to
tax at the rates under this paragraph by the
individual’s worldwide income and multiplying
the result thereof by the amount of tax that
would result by charging the said individual’s
worldwide income at the rates under paragraph
(a) or (b), as applicable;
(d) in the case of any other person -
For every euro of the first €2,400 ................................. 15c
For every euro of the next €2,400................................... 20c
For every euro of the next €3,500................................... 30c
For every euro of the remainder .................................... 35c.
(2) Notwithstanding the provisions of sub-article (1), the tax
upon the chargeable income of individuals referred to in the said
sub-article shall be charged at the following special rates:
(a) In the case of an individual born outside Malta who
was resident in Malta in the year immediately
preceding the year of assessment and who proves to
the satisfaction of the Commissioner that he has
received in Malta at one or more times during the year
immediately preceding the year of assessment an
amount of income of not less than one thousand and
eight hundred and seventy euro (1,870) arising outside
Malta and chargeable to tax under the provisions of
this Act -
(i) being a married individual to whom article 49
applies -
For every euro of the first €5,900 .......................... 0c
For every euro of the remainder.......................... 15c;
(ii) being any other such individual -
For every euro of the first €4,200 .......................... 0c
For every euro of the remainder ......................... 15c:
Provided that subject to the provisions in the next
following paragraph, the rates laid down in sub-
142 CAP. 123.] INCOME TAX

paragraphs (i) and (ii) hereof will not apply if the

individual was domiciled in Malta or ordinarily
resident in Malta before the first day of January, 1958.
(b) The Minister responsible for finance may in his
discretion authorise the application of paragraph (a) in
regard to any individual born outside Malta,
notwithstanding that he was domiciled and/or
ordinarily resident in Malta before the first day of
January, 1958, if the Minister is satisfied that the said
individual was absent from Malta in the period
between the said date and the thirty-first day of
December, 1963, saving occasional visits.
(c) In the case of an individual born in Malta who was
resident in Malta in the year immediately preceding
the year of assessment and who proves to the
satisfaction of the Commissioner that he has actually
resided outside Malta for an aggregate period of not
less than twenty years after the first day of January,
1938 and that he has received in Malta at one or more
times during the year immediately preceding the year
of assessment an amount of income of not less than
one thousand and two hundred euro (1,200) arising
outside Malta and chargeable to tax under the
provisions of this Act, the rates laid down under
paragraph (a)(i) or (ii) hereof, as the case may be, shall
apply:
Provided that -
(i) no such rates shall apply unless the
Commissioner is satisfied that the individual
was ordinarily resident and domiciled in Malta
in the year immediately preceding the year of
assessment;
(ii) in computing the said aggregate period of twenty
years there shall be excluded all calendar years
during which the individual was ordinarily
resident in Malta, and all periods prior to a date
which precedes by thirty years the first day of
the year of assessment in which the individual
first satisfies all the other conditions stipulated
in this sub-article.
(d) In paragraphs (a), (b) and (c) -
"individual born outside Malta" means an individual
not born in Malta whose parents were not domiciled in
Malta or not ordinarily resident in Malta on the date of
his birth or at any time during the ten years previous to
such date;
"received in Malta" means the excess of the amount of
income arising outside Malta and received in Malta
over any sum transferred out of Malta.
(e) The rates mentioned in paragraphs (a), (b) and (c)
shall apply only to any individual who was entitled to
 INCOME TAX [CAP. 123. 143

a further personal deduction of one thousand and one

hundred and sixty euro (1,160) in any year of
assessment up to the year of assessment 1972, and, in
the event of his demise, to the surviving spouse.
(f) Notwithstanding the provisions of article 49 the
responsible spouse shall for the purpose of this article
be the spouse in whose name the residence permit has
been issued.
(3) Nothing in sub-article (2) shall in any way be considered as
overriding the provisions of sub-article (13).
(4) The tax shall be charged at the rate of twenty cents (0.20)
on every euro of the chargeable income of -
(a) every entity to which article 30 applies; and
(b) any foundation, bequest, trust, institution, or other
organization or body of persons the income whereof is
specifically due to be wholly applied in providing
income to members of the clergy:
Provided that where the Commissioner is satisfied that
any part of such income has in fact been so applied in
respect of members of the clergy resident in Malta or
of ecclesiastical communities so resident, such part of
the said income shall be exempt from the tax in the
hands of the foundation, bequest, trust, institution, or
other organization or body of persons aforesaid, even
where such foundation, bequest, trust, institution or
other organization or body of persons is one to which
article 30(2) applies.
(5) Notwithstanding the provisions of sub-article (3), no tax
charged under the provisions of that sub-article shall be deemed to
be part of any tax available for set-off for the purpose of collection
in accordance with article 60.
(6) The tax shall be charged at the rate of thirty-five cents
(0.35) on every euro of the chargeable income of every -
(a) company;
(b) body corporate established by law; and
(c) undertaking required by article 30(7)(d) to be dealt
with as a separate body of persons.
(7) Deleted by Act II. 2002.53.
(8) Notwithstanding the provisions of this article, a person in
receipt of a dividend distributed by an international trading
company out of profits derived by the company while it was an
international trading company, shall be charged to tax in respect of
such dividend at a rate of twenty-seven and a half per cent (27.5%)
of such amount as if such dividend constitutes separate chargeable
income, where such person is either:
(a) not resident in Malta and who is, where applicable, not
owned and controlled, directly or indirectly by, nor
acts on behalf of, an individual or individuals
 144 CAP. 123.] INCOME TAX

ordinarily resident and domiciled in Malta; or

(b) a company resident in Malta which is wholly owned by
a person or persons not resident in Malta, provided
that such person or persons are not owned and
controlled by, directly or indirectly, nor acts on behalf
of, an individual or individuals ordinarily resident and
domiciled in Malta:
Provided that with effect from 1 January 2011 and up to 31
December 2014, as regards dividends paid by a company which
was an international trading company as at 31 December 2010:
(i) the provisions of this subarticle shall continue to
apply after 31 December 2010 with respect to
the distribution of profits earned by such
company while it was an international trading
company, and
(ii) the conditions set out in paragraphs (a) and (b)
above shall not apply in respect of such dividends
paid to any recipient shareholder who is registered
for the purpose of article 48(4) or article 48(4A) of
Cap. 372. the Income Tax Management Act.
Maximum rate of (9) Saving the provisions of sub-article (12), the tax chargeable
tax in certain cases. under the other provisions of this article shall in no case exceed the
rate of -
(a) ten cents (0.10) on every euro of the chargeable
income of every trade union; and
(b) thirty cents (0.30) on every euro of the chargeable
income of every club or other similar non-proprietary
institution if the Commissioner is satisfied that no part
of the income is distributable to, or is otherwise
available for the personal benefit of any proprietor or
member thereof in his capacity as such; and
(c) thirty cents (0.30) on every euro of the chargeable
income in respect of a transfer of property in the
circumstances referred to in article 31C(1), provided
that such income shall be deemed to constitute the last
part of the person’s total income for the year.
Special rates of tax (10) Notwithstanding the provisions of subarticles (1) and (2) -
and minimum tax
liability. (a) in the case of an individual who has been granted a
Cap. 217. residence permit under article 7 of the Immigration
Act before the first day of May, 2004 or who satisfies
the conditions that may be prescribed by the Minister,
the tax upon the chargeable income, other than income
mentioned in paragraph (b) shall be charged -
(i) in the case of an individual who has been
granted such residence permit on or after the
fourteenth day of November, 1972, but before
the first day of January, 1988, at the rates laid
down in sub-paragraph (i) or (ii), as the case
may be, of subarticle (2):
 INCOME TAX [CAP. 123. 145

Provided that the minimum tax payable by

such individual in respect of any year of
assessment shall be two thousand and three
hundred and twenty- five euro (2,325);
(ii) in the case of an individual who has been
granted such residence permit on or after the
first day of January, 1988 but before the first day
of May, 2004 or who satisfies the conditions that
may be prescribed by the Minister, at 15 cents
(0.15) on every euro:
Provided that the minimum amount of
income which shall be chargeable to tax in
respect of any year of assessment shall be
deemed to be twenty-seven thousand and nine
hundred and fifty euro (27,950) and the resulting
tax thereon, after taking into account any double
taxation relief to which such individual may be
entitled, shall not be less than the tax which
would result from applying the said rate on the
deemed minimum chargeable income;
(b) income derived from Malta and chargeable to tax
under articles 4 or 5, shall be deemed to constitute
chargeable income to be taxed separately at the rates
laid down in subarticle (1)(a) or (b) starting at the rate
of 15 cents (0.15) on every euro;
(c) Where income has been deemed to be derived directly
under the provisions of article 27D(3)(b) by an
individual who has been granted a residence permit
under article 7 of the Immigration Act, such income Cap. 217.
shall be charged to tax at the rate of 15 cents (0.15) on
every euro as if such income constitutes separate
chargeable income.
(11) (a) (i) The tax upon the chargeable income other than
income mentioned in sub-paragraph (ii) of this paragraph, of any
individual born in Malta who, after emigrating has returned as a
resident in Malta after the first day of January 1988, shall be
charged at the rates laid down in sub-article (1), or if he so elects,
and until such election is not renounced by him, at the rates laid
down in sub-article (2)(i) or (ii) thereof. The said election may not
be availed of again once it is renounced:
Provided that the provisions of this sub-article shall only
apply where such an individual proves to the satisfaction of the
Commissioner that either:
(a) he had actually resided outside Malta for an aggregate
period of 20 years falling within a period of 25 years
preceding the first day of the year of assessment in
which the individual returns as resident in Malta after
the first day of January 1988, and that he has received
in Malta at one or more times during the year
immediately preceding the year of assessment an
amount of income of not less than fourteen thousand
 146 CAP. 123.] INCOME TAX

euro (14,000) arising outside the island and chargeable

to tax under the provisions of this Act, provided that in
the case of a married person the said amount of income
of fourteen thousand euro (14,000) shall be increased
by two thousand and four hundred euro (2,400) in
respect of every dependant relative including a spouse;
or
(b) he is not a Maltese national and does not satisfy the
period of residence outside Malta referred to in
paragraph (a) of this proviso, and that he satisfies
conditions similar to those established by the Minister
responsible for immigration under article 7 of the
Cap. 217. Immigration Act, for the issue of a residence permit as
existing at the time such an individual returns to
Malta:
Provided further that the minimum liability of any
such individual for any year of assessment in which
the individual elects to pay at the rates laid down in
sub-article (2)(a)(i) or (ii) hereof shall, after taking
into account any double taxation relief to which such
individual may be entitled, be two thousand and three
hundred and twenty-five euro (2,325).
(ii) In the case of income derived from Malta and
chargeable to tax under articles 4 or 5, such income shall be
deemed to constitute chargeable income to be taxed separately at
the rates laid down in sub-article (1)(a) or (b) starting at the rate of
15 cents (0.15) on every euro.
(b) In the event of the demise of any individual to which
paragraph (a) applies and who is charged to tax at the rates laid
down in sub-article (2)(a)(i) hereof, the surviving spouse shall be
entitled to elect to be charged to tax in the same manner and under
the same conditions as the deceased individual and charged at the
rates laid down in sub-article (2)(a)(ii) hereof, and until such
election is not renounced, the surviving spouse shall be considered
to have satisfied in his own right the qualifying period of absence
from Malta stipulated therein.
(12) Any person who -
(a) makes default in furnishing a return in respect of any
year of assessment preceding the year of assessment
1999, shall be chargeable for such year of assessment
with a tax of treble the amount of tax for which he is
liable for that year under the other sub-articles of this
article or with such lesser amount of tax as may be
determined by the Commissioner but which shall in no
case be less than twenty-three euro (23) or one-half per
cent of the said amount of tax for which he is liable
whichever is the greater; or
(b) omits from his return for any year of assessment
preceding the year of assessment 1999 any amount
which should have been included therein, shall be
chargeable with an amount of tax equal to twice the
 INCOME TAX [CAP. 123. 147

difference between the tax as calculated in respect of

the income returned by him and the tax properly
chargeable in respect of his income as determined after
including the amounts omitted,
and shall be required to pay such amount of tax in addition to the
tax properly chargeable in respect of his true income; or
(c) makes default in furnishing a return in respect of the
year of assessment 1999 or any subsequent year of
assessment or omits from his return for the year of
assessment 1999 or any subsequent year of assessment
any amount which should have been included therein,
shall be chargeable for such year of assessment with
additional tax in the amount or amounts specified in
the Schedule to this Act, and shall be required to pay
such amount of tax in addition to the tax properly
chargeable on the total income for that year.
(d) Where a person has taken action under a Mutual
Agreement Procedure in terms of an arrangement
referred to in article 76 including Convention 90/436/
EEC of 23 July 1990 on the elimination of double
taxation in connection with the adjustment of profits
of associated enterprises, any additional tax
chargeable in terms of paragraph (c) shall not apply
for the period between the date when the said action
under the Mutual Agreement Procedure is initiated and
the date when the issue is concluded under the said
procedure:
Provided that if the Commissioner is satisfied that the
default in rendering the return or any such omission as referred to
in paragraphs (a) and (b) was not due to any fraud, art, contrivance
or gross or wilful neglect, he shall remit the whole of the treble or
additional tax and in any other case may remit such part or all of
the said treble or additional tax specified in the said paragraphs as
he may think fit:
Provided further that in the case of a body of persons the
Commissioner shall not reduce any tax chargeable under paragraph
(a) to less than two euro (2) or ten per cent of the total tax
chargeable under the other sub-articles of this article for the
relative year of assessment, whichever is the greater:
Where the Commissioner has sent to any person a notice
referred to in article 12(3) of the Income Tax Management Act, Cap. 372.
such person shall be required to pay, in respect of each such notice,
an additional tax as may be specified in such notice for the year of
assessment in respect of which the default has occurred but which
shall in no case exceed twenty-three euro (23). The Commissioner
may only remit this additional tax where he is satisfied that owing
to absence from Malta, sickness or other reasonable cause such
person was prevented from submitting a return in accordance with
the provisions of article 10 or 11 of the Income Tax Management
Act:
 148 CAP. 123.] INCOME TAX

Provided further that:

(i) the powers conferred upon the Commissioner by
this sub-article shall be in addition to any right
conferred upon him to commence proceedings in
respect of an offence under Part IX of the
Cap. 372. Income Tax Management Act;
(ii) any person who in determining his total income
and the tax liability thereon, as disclosed by his
return, deducts or sets off any amount, the
deduction or set-off whereof is not allowed
under the provisions of the Income Tax Acts, or
shows as an expenditure or loss any amount
which he has not in fact expended or lost, or
provides or withholds information the result of
which is a reduction of the amount of tax
payable by him or an increase in the amount of
tax repayable to him, shall be deemed for the
purposes of this subarticle to have made an
omission from his return;
(iii) any tax charged under the provisions of this sub-
article shall be deemed not to be part of any tax
paid or payable for the purposes of the preceding
sub-articles of this article, or of articles 59, 76
and 89, or of articles 51 and 52 of the Income
Cap. 372. Tax Management Act;
(iv) where the default or omission has been made in
connection with a return required by the
provisions of the Income Tax Acts to be
furnished by another person on behalf of a
company, such company shall be liable for the
additional tax chargeable under the provisions of
this sub-article.
(13) (a) The tax upon the chargeable income of any person
referred to as a Contractor in article 23 shall be levied
at the rate of 35 cents (€0.35) on every euro of the
chargeable income in so far as such income is to be
computed in accordance with the provisions of the said
article 23(1) and (2). Other income arising to a
Contractor shall be charged at the appropriate rate or
rates.
(b) The rate at which tax shall be withheld by a Contractor
from payments made to a sub-contractor in accordance
with the provisions of article 23(5) shall be at 10 cents
(€0.10) of every euro of the payments made as aforesaid.
(14) (Deleted by Act IV. 2011.20).
(15) (Deleted by Act IV. 2011.20)).
(16) (Deleted by Act IV. 2011.20)).
(17) Where, during the year immediately preceding any year of
assessment, any individual derives income subject to tax under
article 4(1)(b), being emoluments payable under a contract of
 INCOME TAX [CAP. 123. 149

employment requiring the performance of work or of duties mainly

outside Malta, excluding however any service on board a ship,
aircraft or road vehicle owned, chartered or leased by a Maltese
company and any service for the Government of Malta, and
received in respect of work or duties carried out outside Malta, or
in respect of any period spent in Malta in connection with such
work or duties, or on leave during the carrying out of such work or
duties, notwithstanding anything to the contrary contained in this
Act, and unless such individual opts to have the said income charged
to tax at the rates laid down in subarticle (1)(a) or (1)(b), such income
shall be deemed to constitute the first part of that individual’s total
income for that year and shall be charged to tax at 15 cents (0.15)
on every euro.
(18) The tax on the income referred to in article 4(6) shall be at
the rate of ten cents (0.10) on every euro thereof, and,
notwithstanding anything to the contrary contained in this Act, no
set-off or refund shall be granted to any person in respect of the tax
so charged.
(18A) Notwithstanding any other provisions of this article, where
a non-resident derives income from entertainment activities
exercised in Malta for a period not exceeding fifteen days in the
year preceding a year of assessment, the tax shall be charged at the
rate of ten cents (0.10) on every euro of the gross payment
receivable in respect of the said activities, and no set-off or refund
shall be granted to any person in respect of the tax so charged:
Provided that where the said activities are exercised in
Malta for a period exceeding fifteen days, the non-resident person
shall declare his income from entertainment activities in a return
made in accordance with the Income Tax Acts and he will be
charged on such income at the rates laid down in subarticle (1)(c),
and in any such case any tax paid on such income in accordance
with this article shall be available as a credit against that person’s
tax liability and where any tax so paid is in excess of such liability
it shall be refunded.
(19) Notwithstanding the other provisions of this article, but
without prejudice to those of sub-article (12), the Minister
r e s p o n s i b l e f o r f i n a n c e m a y, i n t h e i n t e r e s t s o f e c o n o m i c
expediency, direct by notice published in the Gazette, that:
(a) in the case of small assessments charging tax not
exceeding an amount specified in the said notice, the
assessment shall not be raised; and
(b) in determining the chargeable income and the amount
of tax due by any person and in allowing any set-offs,
the Commissioner may round up or down any amount
to the nearest euro.

(20) (a) Where a member of a company resident in Malta is a

resident of a State or territory with which Malta has
made an arrangement under the provisions of this Act
for the grant of relief from double taxation, and under
that arrangement a dividend, or part thereof,
 150 CAP. 123.] INCOME TAX

distributed by such a company is subject to income tax

in Malta at a rate lower than that chargeable on the
income out of which the dividend is distributed, such
company shall be entitled to require that the gains or
profits, or part thereof, derived by it from its trade or
business for the year of assessment 2001 and for
subsequent years of assessment and which are
distributable by way of dividend subject to tax at a
lower rate as aforesaid shall, notwithstanding that the
dividend, or part thereof has not been distributed, be
taxed at the said reduced rate and not at the rate
properly chargeable under this Act on the gains or
profits of the company:
Provided that the provisions of this paragraph shall
only be applicable with respect to companies which do
not sell by retail and a person shall be deemed not to
sell by retail if its sales of goods or services are made
to:
(i) a person who carries on a trade, business,
profession or vocation and the goods or services
so sold to such person are either resold by such
person or are used by such person for the
purpose of his trade, business, profession or
vocation; or
(ii) a person, other than an individual, who uses
those goods for the purposes of an undertaking
carried on by such person:
Provided further that where a company has opted to be
taxed at a reduced rate of income tax as provided by
this paragraph, no person in receipt of a dividend paid
by such company out of profits which have been
subject to tax at such reduced rate of tax shall be
entitled to claim a refund under the provisions of the
Income Tax Acts in respect of that dividend other than
Cap. 372. a refund in terms of article 48(4A) of the Income Tax
Management Act:
Provided also that where a company has opted to be
taxed at a reduced rate of income tax as provided by
this paragraph and such company distributes gains or
profits derived by it from its trade or business which
have been subject to tax at the rate properly chargeable
under this Act to the member resident in the said state
or territory, such member shall not be entitled to claim
a refund under the provisions of the Income Tax Acts
in respect of any dividend paid by such company out
of the said gains or profits:
Provided also that where a company has opted to be
taxed at a reduced rate of income tax as provided by
this paragraph and such company distributes gains or
profits derived by it from its trade or business which
have been subject to tax at such reduced rate of tax to
any person not entitled to a reduced rate of tax under
 INCOME TAX [CAP. 123. 151

any arrangement as aforesaid, such gains or profits

shall be taxed at a rate being the difference between
the rate referred to in article 56(6) and the rate actually
applied and such tax shall be tax payable by the
company in the year of assessment in which such
profits are distributed.
(b) Where the provisions of paragraph (a) have been
applied and subsequently there is a change in the
shareholding of the company in consequence of which
the new shareholders will not be entitled to a reduced
rate of tax under any arrangement as aforesaid or if so
entitled the rate applicable in such arrangement is
more than the rate applicable to the outgoing
shareholder, then any profits which have been subject
to tax at such lower rate as aforesaid and which have
not been distributed at the end of the last financial year
of the company preceding the date of change in
shareholding less any of such profits distributed to the
outgoing shareholder in the current financial year shall
be taxed at a rate being the difference between the rate
of tax which would be applicable had the new
shareholder held the shares when such profits were
earned, and the rate actually applied, and such tax
shall be a tax payable by the company in the year of
assessment in which such profits are distributed:
Provided that where a member of a company is also a
company incorporated under Maltese law, the
provisions of this article shall apply to the same extent
as if the members of the latter company had owned the
shares directly in the company.
(c) The provisions of this subarticle shall apply where a
member of a company resident in Malta is a resident of a
State or territory with which Malta has made an
arrangement under the provisions of this Act for the grant
of relief from double taxation, and under that
arrangement the said company is entitled to require that
the gains or profits, or part thereof, derived by it and
which are distributable by way of dividend, be subject to
tax at a lower rate as aforesaid, notwithstanding that the
dividend, or part thereof has not been distributed.
(21) Where, during the year immediately preceding the year of
assessment 2011 or any subsequent year of assessment, an
individual derives income subject to tax under article 4(1)(b), being
emoluments payable under a qualifying contract of employment,
and received in respect of work or duties carried out in Malta, or in
respect of any period spent outside Malta in connection with such
work or duties, or on leave during the carrying out of such work or
duties, then, notwithstanding anything to the contrary contained in
this Act, that individual may opt to have the said income charged to
tax at the rate of 15 cents on every euro:
Provided that:
 152 CAP. 123.] INCOME TAX

(a) where the said option is exercised, the income that is

charged to tax at the said rate shall be deemed to
constitute the first part of that individual’s total
income for the year of assessment in question and the
tax on the remaining income shall be calculated at the
rate or rates that would have been applicable to that
remaining income had the option not been exercised;
(b) where the said option is exercised, the minimum
amount of income which shall be chargeable to tax at
the said rate in respect of the year of assessment in
question shall be deemed to be such amount as may be
prescribed and the tax thereon shall not be less than
the tax which results from applying the said rate on the
deemed minimum amount;
(c) the applicability of this subarticle shall be subject to
such conditions and restrictions as may be prescribed,
including:
(i) the conditions under which a contract of
employment is to be deemed as a qualifying
contract of employment for the purposes of this
subarticle;
(ii) the maximum period or number of years for
which, the said option may be exercised;
(iii) the procedure to be used for the exercise of the
said option;
(iv) such other conditions and restrictions as the
Minister may deem fit.
(22) In the case of capital gains derived by a person from the
transfer of shares listed on a stock exchange recognised under the
Cap. 345. Financial Markets Act, not being securities in a collective
investment scheme, and not being exempt from tax under the
provisions of article 5(6)(b), such income shall be deemed to
constitute separate chargeable income to be taxed separately at the
rate of 15 cents (€0.15) on every euro.
(23) Notwithstanding the provisions of sub-articles (1) and (2)
in the case of an individual who, after 1 January 2011, has been
granted a special tax status under such terms and conditions as the
Minister may prescribe, the tax upon the chargeable income of that
individual, other than income mentioned in sub-article (10)(b) shall
be charged at the rate of fifteen cents (0.15) on every euro thereof:
Provided that the Minister shall prescribe the minimum tax
payable by such individual in respect of any year of assessment.
(24) In the case of an individual or individuals who, after 1
January 2011, has or have been granted a special temporary tax
status under such terms and conditions as the Minister may
prescribe, the tax upon the chargeable income, other than income
mentioned in sub-article (10)(b) shall be charged at the rate of
fifteen cents (0.15) on every euro thereof:
Provided that the Minister shall prescribe the minimum tax
payable by such individual or individuals in respect of any year of
 INCOME TAX [CAP. 123. 153

assessment.
(25) An individual who is established in a field of excellence
and returns as an ordinary resident in Malta may opt to have his
income from employment exercised in Malta charged to tax at the
rate of 15 cents on every euro, provided that he has been ordinarily
resident in Malta for at least twenty years but has not been
ordinarily resident in Malta for the ten consecutive years prior to
his return, and subject to such terms and conditions as may be
prescribed, including the minimum income chargeable and the
number of years over which the benefit may be availed of.
(26) An individual who derives football income shall, unless he
opts to have the said income charged to tax at the rates laid down in
sub-article (1)(a) or (1)(b), be charged to tax on all such income at
the rate of seven point five cents (0.075) on every euro.
For the purposes of this sub-article the term "football
income" shall mean income from an employment contract in Malta
for playing football, such income being chargeable under article
4(1)(b) and earned by a full-time or part-time professional football
player who is duly registered as a professional football player with
the Malta Football Association, and such a professional football
player has in effect an employment contract with a Maltese football
club duly registered as a Member Club with the Malta Football
Association.

57. (1) An amount which is equal to the lower of: Personal retirement
schemes.
(a) fifteen per centum (15%) of the aggregate of any
contributions made or premiums paid by a person
during the year immediately preceding a year of
assessment in respect of membership in any personal
retirement schemes as defined in the Special Funds Cap. 450.
(Regulation) Act or any Act substituting the said Act,
or a policy of insurance held with a company
authorised to carry on long term business under the
Insurance Business Act; and Cap. 403.
(b) one hundred and fifty euro (€150) or such other
amount as may be prescribed by the Minister from
time to time,
is to be allowed as a credit against the income tax chargeable in
Malta to any person who is a member of, and makes contributions
to, any one or more personal retirement schemes or pays a premium
in relation to a policy of insurance in the year immediately
preceding the year of assessment, and the amount of the income tax
so chargeable shall be reduced by the amount of the credit:
Provided that the credit shall only be allowed in respect of
qualifying schemes or policies of insurance as may be prescribed
by the Commissioner and if the details of such person and amounts
contributed by him to the personal retirement scheme/s or the
premiums paid by him in relation to the policy of insurance in the
relevant year are confirmed by a certificate issued by a licence
holder in such format and content as determined by the
Commissioner.
 154 CAP. 123.] INCOME TAX

(2) In the case of a married couple resident in Malta, and

irrespective of whether or not the responsible spouse has opted for
a separate computation in terms of article 50, each of the spouses
may claim the credit referred to in this article.
(3) The credit referred to in this article shall only be available
in respect of the income tax chargeable for the year during which
the contribution was made by a person to personal retirement
scheme/s or the premiums paid by him in relation to the policy of
insurance, and such credit may not be carried forward to
subsequent years if it is not so utilised.
(4) The income in respect of which a credit is granted under
this article shall be deemed to constitute the first part of that
person’s total income for the relative year of assessment.
(5) No refund of tax may be claimed by a person for an amount
which is equal to the credit allowed under this article where such
refund would have been otherwise due as a result of the person
having availed himself of the credit in terms of this article.
(6) For the purposes of this article, a licence holder shall mean
any person, whether a natural person or otherwise, who holds a
Cap. 450. licence under the Special Funds (Regulation) Act or any Act
substituting the said Act, or to carry on long term business under
Cap. 403. the Insurance Business Act, and is recognised by the Commissioner
for the purpose of issuing certificates in terms of this article.

Added by: PART VIII

XXXVI. 1990.14.
TAX REBATE

Rebate of tax. 57. Repealed by: XX.1996.17.

Renumbered by:
XVII. 1994.2.
Amended by:
XVIII.1993.7.
Further rebate. 58. Repealed by: XX.1996.17.
Added by:
VIII.1991.3.
Amended by:
XVIII. 1993.8.
Substituted by:
I.1994.2.
Renumbered by:
XVII. 1994.2.
Amended by:
XXII.1995.6.
 INCOME TAX [CAP. 123. 155

PART IX

PERSONS ASSESSABLE

59.(1)(a) Every company registered in Malta, not being a Deduction of tax.

company referred to in paragraph (b), shall be entitled Amended by:
XLI. 1961.2;
to deduct from the amount of any dividend, other than VIII. 1969.9;
a dividend paid out of distributable profits allocated to XXVIII. 1972.3;
XXIV. 1976.6;
the untaxed account, paid to any shareholder, a tax at XXVI. 1977.14;
the rate paid or payable by the company, relief of XIII. 1983.5;
double taxation being left out of account, on the XXXVI. 1990.15.
Renumbered by:
income out of which such dividend is paid: XVII. 1994.2.
Amended by:
Provided that where tax is not paid or payable by XVII. 1994.24;
the company on the whole income out of which the V. 1998.8;
dividend is paid, the deduction shall be restricted to IX. 1999.14;
II. 2007.16;
that portion of the dividend which is paid out of L.N. 409 of 2007;
income on which tax is paid or payable by the I. 2010.28;
IV. 2011.21.
company.
(b) (i) Every collective investment scheme shall be
entitled to deduct from the amount of any
dividend, other than a dividend paid out of
distributable profits allocated to the untaxed
account, paid to any shareholder, a tax at the rate
paid, payable or suffered by the collective
investment scheme, whichever rate is the
highest, relief of double taxation being left out
of account, on the income out of which such
dividend is paid:
Provided that where tax is not paid, payable
or suffered by the collective investment scheme
on the whole income out of which the dividend
is paid, the deduction shall be restricted to that
portion of the dividend which is paid out of
income on which tax is paid, payable or suffered
by the collective investment scheme.
(ii) The provisions of article 31 shall apply to the
income of a person arising from a dividend
referred to in sub-paragraph (i).
(2) Where in respect of any year of assessment the rate of tax
chargeable under article 56 upon the chargeable income of a
company is increased and any company constituted under the law
in force in Malta or resident in Malta has, before the date of the
commencement of the enactment imposing the increased rate of
tax, deducted from a dividend paid to a shareholder (hereinafter in
this sub-article referred to as "the original dividend") tax at a rate
lower than that paid or payable by the company for that year in
respect of the income out of which such dividend is paid, the
company shall be entitled -
(a) on the occasion of the next payment of dividend by the
company (hereinafter in this sub-article referred to as
"the next dividend"), to make up from that dividend
the amount of such under-deduction in addition to
156 CAP. 123.] INCOME TAX

making any other deduction which the company is

entitled to make from that dividend, irrespective of
whether or not the person who is entitled to the next
dividend, is the person who was entitled to the original
dividend; or
(b) with the written permission of the Commissioner, to
recover from the person to whom the original dividend
was paid the amount of such under-deduction (which
shall be specified in such written permission) as if
such amount were a debt due to the company; and in
any proceedings for the recovery of such amount, such
written permission shall be evidence of such debt, and
proof of the Commissioner’s signature upon such
written permission shall not be required unless the
court for special cause directs otherwise.
(3) Where in respect of any year of assessment any company
constituted under the law in force in Malta or resident in Malta, not
being a company referred to in sub-article (1)(b), has deducted
from a dividend paid to a shareholder (hereinafter in this sub-article
referred to as "the original dividend") tax at a rate higher than that
paid or payable by the company for that year in respect of the
income out of which such dividend is paid, then, unless the
company has paid the amount of such over-deduction in accordance
with the provisions of sub-article (4), the company shall, on the
occasion of the next payment of dividend by the company
(hereinafter in this sub-article referred to as "the next dividend")
make good such amount by a reduction of the amount of tax
deducted by the company from that dividend, irrespective of
whether or not the person who is entitled to the next dividend is the
person who was entitled to the original dividend.
(4) Where any such company has, in paying a dividend to a
shareholder, made such an over-deduction as is mentioned in sub-
article (3), the company shall, within fourteen days from the tax
return date relevant to the income out of which such dividend was
paid, render an account to the Commissioner of the amount of such
over-deduction and the Commissioner may, at any time after such
account has been rendered as aforesaid but before such over-
deduction has been made good in accordance with the provisions of
sub-article (3), by notice in writing served upon the company,
require the company to pay such amount to the Commissioner and
such amount shall thereupon become a debt due to the Government,
payable within one month from the date of service of such notice,
and shall be recovered as such.
(5) (a) Every company shall upon payment of a dividend,
whether tax is deducted therefrom or not, furnish the
shareholder with a dividend certificate:
Provided that a dividend certificate in respect of a
dividend paid out of profits earned in the accounting
period in which the dividend is paid need not be
furnished at the time of payment of a dividend but
shall be so furnished as soon as practicable after the
end of the accounting period in which the dividend is
 INCOME TAX [CAP. 123. 157

paid and in any such event shall be furnished by not

later than the tax return date of the year of assessment
relative to that accounting period.
(b) The dividend certificate shall be in such form as the
Commissioner shall require and shall show, in respect
of the dividend distributed to the particular
shareholder, the following information:
(i) the gross taxed amount of the distributed profits,
in respect of each taxed account, before
deduction of any tax chargeable on the company
in respect of such distributed profits;
(ii) the total tax chargeable on the company in
respect of the distributed profits, showing
separately:
(1) the Malta tax payable after all reliefs
of double taxation have been given;
and
(2) the foreign tax in respect of which
relief of double taxation has been
given under the double taxation relief,
relief in respect of Commonwealth
income tax, and unilateral relief
provisions; and
(3) the amount which has been set off
against Malta tax pursuant to a claim
for relief of double taxation under the
flat-rate foreign tax credit provisions;
(iii) the amount of the distributed profits from each
taxed account, after deducting the tax referred to
in sub-paragraph (ii) of this paragraph;
(iv) the tax payable on distribution pursuant to
articles 62, 67 and 67A which shall be shown
separately from the tax referred to in sub-
paragraph (ii);
(v) the net amount of the dividend paid to the
shareholder;
(vi) where the tax paid or payable by the company on
the profits so being distributed is affected by
relief of double taxation, the rate, hereinafter in
this Act referred to as "the net Malta rate", of the
tax paid or payable by the company after taking
relief of double taxation into account;
(vii) where the profits being distributed have been
exempt from tax and the distribution of such
profits by the company is exempt from tax in the
hands of the shareholder, a note quoting the
relevant law giving such exemption;
 158 CAP. 123.] INCOME TAX

(viii) where the profits being distributed by a company

(the first company) include a dividend received
from another company (the second company), in
respect of which the first company is entitled to
make a claim for a refund under article 48(4) of
Cap. 372. the Income Tax Management Act, in respect of
the tax paid thereon by the second company, a
statement declaring that the first company is
entitled to make such a claim in respect of those
distributed profits;
(ix) an analysis of the profits out of which the
dividend is paid distinguishing between:
(1) profits which are chargeable to tax in the
year of assessment 2007 and previous
years of assessments; and
(2) profits which are chargeable to tax in the
year of assessment 2008 and subsequent
years of assessment showing separately
the amount of such profits pertaining to
each such year of assessment;
(x) such other information as the Commissioner
shall require.
(6) Every company constituted under the law in force in Malta
or resident in Malta shall, upon payment of debenture interest or of
interest on any other loan advanced to a company for a capital
purpose (excluding interest on customer’s deposits and current
accounts), deduct therefrom tax at the rate of twenty-five cents
(0.25) on every euro of such interest where such payment is made
to a person other than a company, and at the rate chargeable under
article 56(6) on such interest where the payment is made to a
c o m p a n y, a n d s h a l l f o r t h w i t h r e n d e r a n a c c o u n t t o t h e
Commissioner of the amount so deducted and every such amount
shall be a debt due from such company to the Government payable
within one month from the date of payment of such interest and
shall be recoverable as such:
Provided that where the Commissioner gives a certificate in
writing that to the best of his belief the total income of a recipient
will be less than the minimum liable to income tax or, in the case of
a person other than a company, such income will be liable to a rate
of income tax less than twenty-five per cent, the company shall,
until such certificate is cancelled by the Commissioner, pay the
debenture interest or interest on any other loan without deduction
or deduct tax at such less rate as the case may be.
(7) Every such company shall upon payment of such interest
furnish each person to whom such payment is made with a
certificate setting forth the amount of the interest paid to him and
the amount of the tax which the company has deducted from such
interest.
(8) Any account required to be rendered or any certificate
required to be furnished under this article shall be rendered or
furnished, as the case may be, by the manager or other principal
 INCOME TAX [CAP. 123. 159

officer of the company.

(9) For the purposes of this article and of article 60:
"company" includes a collective investment scheme;
"dividend" includes any distribution made by a collective
investment scheme;
"relief of double taxation" means any credit or other relief for
foreign tax allowable by virtue of the reliefs stipulated in article
74;
"shareholder" includes any person holding units in a collective
investment scheme; and
"tax chargeable on the company" includes tax suffered by a
collective investment scheme, whether by deduction or otherwise.

60. Any tax which a company had deducted or is entitled to Set-off of tax in
deduct under article 59 from a dividend paid to a shareholder, from certain cases.
Amended by:
debenture interest payable to a debenture holder or from interest on XLII. 1975.9;
any other loan payable to a creditor, and any tax applicable to the XXIV. 1976.7;
XXVIII. 1978.15;
share to which any person is entitled in the income of a body of XIV. 1984.7.
persons assessed under this Act, shall, when such dividend or Renumbered by:
interest or share is included in the chargeable income of such XVII. 1994.2.
Amended by:
shareholder or person, be set off for the purposes of collection XVII. 1994.25;
against the tax charged on that chargeable income: II. 2003.23.

Provided that, notwithstanding anything in this article or in

the last preceding article but subject to the following proviso,
where a company has deducted tax, the amount of tax actually
deducted by a company from any dividend paid by the company to
a shareholder shall be set off against the tax due from the recipient
of such dividend, irrespective of whether in paying the dividend the
company has made an under-deduction or an over-deduction or any
adjustment of a previous under-deduction or over-deduction of tax,
except where a company has recovered the amount of any under-
deduction under the provisions of article 59(2)(b) in which case a
set-off shall be allowed of the amount of tax actually deducted by
the company and of the amount of tax recovered by the company
under those provisions:
Provided further that no set-off as aforesaid shall be made
unless the certificate referred to in article 59(5) or (7) is produced
to the Commissioner and unless tax has actually been paid:
Provided also that in no case shall any set-off be made in
respect of -
(a) any tax which a company has deducted or is entitled to
deduct from any dividend paid to any person who, in
virtue of any exemption granted by or under any law,
is not chargeable to tax thereon; and
(b) any tax charged on any body of persons under article
56(4), or under article 27(3) and (4) of the Income Tax Cap. 372.
Management Act.
 160 CAP. 123.] INCOME TAX

Definitions. 61. For the purposes of articles 62 to 69:

Added by:
XVII. 1994.26. (a) a "recipient" shall mean:
Amended by:
XIII. 2004.55; (i) a person, other than a company, resident in
II. 2007.27; Malta in the year in which a dividend is received
XII. 2014.26.
by him or by any person on his behalf; or
(ii) a non-resident person (including a non-resident
company) who is owned and controlled by,
directly or indirectly, or who acts on behalf of,
an individual who is ordinarily resident and
domiciled in Malta; or
(iii) a trustee of a trust where the beneficiaries of
such trust are persons referred to in
subparagraphs (i) and (ii); or
(iv) an EU/EEA individual (and his or her spouse
where applicable) in the circumstances
envisaged by the first and second provisos to
article 56(1)(c);
(b) an "untaxed dividend" shall mean a dividend paid by a
company resident in Malta to the extent that it is paid
out of distributable profits allocated to its untaxed
account.

Tax on dividend 62. (1) Every company shall, on payment of untaxed dividend
from untaxed to a recipient, deduct therefrom tax at a rate of fifteen per cent.
account.
Added by: (2) Every amount deducted under sub-article (1) shall be a debt
XVII. 1994.26.
due from such company to the Commissioner payable not later than
the fourteenth day following the end of the month in which such
dividend was paid and shall be recoverable as such:
Provided that the provisions of this article shall not apply in
respect of untaxed dividend payments to persons who are exempt
from tax.

Presumption of 63. It shall be presumed, so far as the tax liability of the

deduction. recipient of a dividend is concerned, that a deduction and payment
Added by:
XVII. 1994.26. which ought to have been made pursuant to the provisions of article
62 have been made.
Where 64. Where the presumption referred to in article 63 applies:
presumption
applies. (a) a recipient of a dividend shall not be obliged to
Added by: disclose the dividend in any return made pursuant to
XVII. 1994.26.
the provisions of this Act; and
(b) subject to the provisions of article 65, no person shall
be charged to further tax under this Act in respect of
the dividend.

Option for 65. A recipient of an untaxed dividend may declare such

recipient to dividend on his tax return and where a declaration is made as
declare.
Added by: aforesaid any tax (or repayment) due shall be determined as if
XVII. 1994.26. article 64 did not apply, and any tax withheld pursuant to article 62
shall be credited against the recipient’s income tax liability and,
where applicable, shall be available for any refund which may be
 INCOME TAX [CAP. 123. 161

due in respect of that tax for the relevant year of assessment.

66. Where an untaxed dividend is paid to a person, who is not a Untaxed dividend
recipient as defined under article 61, such dividend shall not be paid to non-
recipient.
charged to tax under this Act in the hands of such person and where Added by:
such person is not resident in Malta such person shall not be XVII. 1994.26.
obliged to disclose the existence of the dividend in any return made
pursuant to the provisions of the Income Tax Acts.
67. (1) Where a company pays a dividend to a person resident Payment of
in Malta out of profits allocated to immovable property account, dividend out of
taxed account or
the Maltese taxed account or the foreign income account and which foreign income
profits have suffered tax at a rate of tax which is less than the rate account.
Added by:
of tax chargeable applicable at the time of the distribution, under XVII. 1994.26.
article 56(6), only by reason of the fact that a different rate of tax Amended by:
was applicable at the time the profits being distributed were II. 2007.17.
chargeable to tax, the company shall deduct tax at a rate equivalent
to the difference between the current rate and that actually suffered
as aforesaid on the amount of the dividend before deducting any tax
which it has suffered on the profits so being distributed:
Provided that the provisions of this sub-article shall not
apply in respect of such dividend payments to persons who are
exempt from tax.
(2) Every amount deducted under sub-article (1) shall be a debt
due from such company to the Commissioner payable not later than
the fourteenth day following the end of the month in which such
dividend was paid and shall be recoverable as such.
(3) The provisions of article 63 to 65 shall apply mutatis
mutandis as they apply to distributions from the untaxed account
and references in those articles to article 62 shall be construed as
references to sub-article (1).
(4) For the purposes of this article a person resident in Malta
shall include a non-resident person (including a non-resident
company) who is owned and controlled by, directly or indirectly or
who acts on behalf of, an individual who is ordinarily resident and
domiciled in Malta.

67A. (1) Notwithstanding the provisions contained in the Profits distributed

definition of "foreign income account" in article 2, but without by a collective
investment
prejudice to any obligation to allocate profits to the final tax scheme.
account and the immovable property account, in the case of a Added by:
XVII. 1994.26.
collective investment scheme: Substituted by:
II. 2004.14.
(a) no profits shall be allocated to the foreign income Amended by:
account; and II. 2005.12;
II. 2007.18.
(b) profits resulting from dividends distributed out of the
foreign income account of another company shall be
allocated to the Maltese taxed account.
(2) Where a collective investment scheme, which is not
constituted as a company, distributes profits to persons resident in
Malta, there shall be deducted tax as if, for the purposes of this
article, such a collective investment scheme is constituted as a
company. In this respect tax shall be deducted from every
 162 CAP. 123.] INCOME TAX

distribution of profits which, had the collective investment scheme

been constituted as a company, would have been allocated to the
untaxed account:
Provided that the provisions of this subarticle shall not
apply in respect of such payments to persons who are exempt from
tax.
(3) Every amount deducted under subarticle (2) shall be a debt
due from such collective investment scheme to the Commissioner
payable not later than the fourteenth day following the end of the
month in which the distribution was made and shall be so
recoverable.
(4) Articles 63 to 65 shall apply mutatis mutandis in the
circumstances set out in subarticle (2) of this article as they apply
to distributions from the untaxed account. References in those
articles to article 62 shall be construed as references to subarticle
(2) of this article, and references to dividend or untaxed dividend
shall, where the context so requires, be construed as a reference to
profits distributed by a collective investment scheme.
(5) For the purposes of this article a person resident in Malta
shall include a non-resident person (including a non-resident
company) who is owned and controlled by, directly or indirectly or
who acts on behalf of an individual who is ordinarily resident and
domiciled in Malta.
(6) An equalisation reserve shall form part of the distributable
profits of a collective investment scheme.
(7) For the purposes of this Act, in the case of a collective
investment scheme:
"equalisation reserve" means an allocation of income, whether
annual or interim, made in respect of units created or issued or sold
during an accounting period, whether annual or interim,
representing the best estimate of the relevant management company
or of the scheme, of the amount of income included in the price by
reference to which the issue or selling price of such units were
determined;
"dividend" includes amounts distributed out of an equalisation
reserve.

No obligation to 68. (1) (a) Any person who is not resident in Malta or any
disclose. individual who is resident in Malta and who is in receipt of a
Added by:
XVII. 1994.26. dividend paid out of profits allocated to any of the taxed accounts
Amended by: other than the final tax account shall not be obliged to disclose the
II. 2007.19;
IX. 2007.5; existence of such dividend in any return made pursuant to the
IV. 2011.22. provisions of the Income Tax Acts.
(b) No person shall be charged to further tax under this Act in
respect of the income referred to in paragraph (a).
(c) Any dividends paid out of profits allocated to the final tax
account shall not be charged to further tax and shall not form part
of the chargeable income of any person and no person may claim a
credit or refund in respect of any tax directly or indirectly paid on
 INCOME TAX [CAP. 123. 163

such profits and for the purpose of this paragraph any dividends
received from a company not registered in Malta from profits
which would have been allocated to the final tax account had such
company been registered in Malta shall be deemed to be dividends
paid out of profits allocated to the final tax account.
(2) (a) Any person, not being a company resident in Malta,
shall not be obliged to disclose in any return made pursuant to the
provisions of the Income Tax Acts those profits distributed by a
collective investment scheme not constituted as a company, where
such profits would have been allocated to the foreign income
account or to the Maltese taxed account, had the collective
investment scheme been constituted as a company.
(b) No person shall be charged to further tax under this
Act in respect of the profits referred to in paragraph (a).
(3) A dividend paid by a company shall be paid out of profits
allocated to any of the following taxed accounts, that is to say the
final tax account and the immovable property account (including
the amount of profits allocated to these taxed accounts in the
accounting period in which the dividend is paid) before any profits
allocated to the Maltese taxed account are distributed.
(4) A dividend paid by a company which was resident in Malta
before the 1 January 2007 out of profits allocated to the Maltese
taxed account shall be deemed to be paid out of profits earned in
accounting periods commencing prior to the 1 January 2011, and
only when such profits are wholly distributed shall profits earned in
subsequent accounting periods be considered as being distributed
for the purpose of the Income Tax Acts; and for this purpose any
dividend paid on or after the 1 January 2007 which did not involve
the actual payment of a dividend in cash shall be ignored and
deemed to never have been made.
(5) When any person is registered in terms of article 48(4A) of the
Income Tax Management Act for the purposes of claiming a refund Cap. 372.
of tax chargeable on a company and that company has any profits
allocated to its Maltese Taxed Account or its foreign income account
the whole or part of which are actually distributed or deemed to be
distributed under any provision of the Income Tax Acts, such person
who is so registered shall be deemed to have received, whether upon
an actual distribution or deemed distribution as aforesaid, so much of
such profits from each such account as corresponds to his percentage
entitlement to participate in a distribution of profits of the said
company. Any provisions in the memorandum and articles of
association of the company or in any agreement which provide that a
shareholder, who is so registered, shall be entitled to be paid dividends
solely or mainly from the Maltese Taxed Account or the foreign
income account shall be disregarded for the purpose of the Income Tax
Acts:
Provided that where profits have been subject to tax at a rate
pursuant to article 15 of the Business Promotion Act or article 56(20) Cap. 325.
of this Act, the provisions of this subarticle shall not apply as regards
such profits and unless the shares (including any shares substituting
the original shares resulting from any share exchange or
 164 CAP. 123.] INCOME TAX

reorganisation) which gave rise to the entitlement that such profits be

taxed in accordance with the aforementioned articles are no longer in
existence, such profits shall be distributable only to the person in
respect of whom the aforementioned articles were applicable or to any
other person who acquired the shares from such person.

Extent of liability. 69. Where any person fails to deduct and pay tax in accordance
Added by: with the provisions of article 62, 67 and 67A, the provisions of
XVII. 1994.26.
article 73(4) and the provisions of article 40(1) of the Income Tax
Cap. 372. Management Act shall mutatis mutandis apply.
Chargeability of 70. (1) A receiver, administrator, guardian, tutor, curator,
administrators, etc. judicial sequestrator or committee, having the direction, control or
Amended by:
XLIX. 1975.10. management of any property or concern on behalf of any person
Renumbered by: shall be chargeable to tax in respect of income derived from such
XVII. 1994.2.
Amended by: property or concern in like manner and to the like amount as such
IX.1999.14; person would be chargeable if he had received such income, and
XIII. 2004.56. every such receiver, administrator, guardian, tutor, curator, judicial
sequestrator or committee shall be answerable for doing all matters
and things required to be done under this Act for the purposes of
determination, assessment and payment of tax:
Provided that nothing in this article shall affect the liability
of any person represented by any such receiver, administrator,
guardian, tutor, curator, judicial sequestrator or committee to be
himself charged to tax in his own name.
(2) Any person who is entrusted with the management or
administration of any property referred to in article 30, or of any
foundation, bequest, institution, or other organisation or body of
persons referred to in article 56(3)(b), or who is in receipt of
income on their behalf, shall, for the purposes of sub-article (1), be
deemed to be an administrator in respect of that property or
income.

Deceased persons. 71. Where any individual dies during the year preceding the
Amended by: year of assessment and such individual would but for his death
XXV. 1960.10.
Substituted by: have been chargeable to tax for the year of assessment or where any
XLIX. 1974.7. individual dies during the year of assessment or within five years
Renumbered by:
XVII. 1994.2. after the expiration thereof and he has not been assessed or has
been assessed at a lesser amount than that which ought to have been
c h a rg e d f o r t h e y e a r o f a s s e s s m e n t , t h e h e i r s o r t h e l e g a l
representative of such individual shall be liable to and charged with
the payment of the tax with which such individual would have been
chargeable and shall jointly and severally be answerable for doing
all such acts, matters and things as such individual if he were alive
would be liable to do under this Act. In the case of any individual
dying during the year preceding the year of assessment, if his estate
is distributed before the commencement of the year of assessment,
the heirs or such legal representative shall pay the tax at the rate or
rates in force at the time of his death.
Joint trustees. 72. (Deleted by Act XIII. 2004.57.).
Renumbered by:
XVII. 1994.2.
 INCOME TAX [CAP. 123. 165

73. (1) Where any person pays to a person not resident in Income paid to
Malta, or to a person resident in Malta on behalf of such non- non-resident.
Amended by:
resident person, any income chargeable to tax under the provisions XXIV.1961.4;
of this Act, he shall upon paying such income, unless he is himself XXVIII.1972.4;
XXIV.1976.8.
liable to pay tax thereon under the provisions of article 5 of the Substituted by:
Income Tax Management Act, deduct tax therefrom: XXVI.1977.15.
Amended by:
(a) at the rate of twenty-five cents (0.25) in the euro where XIII. 1983.5.
payment is made to or on behalf of any non-resident Renumbered by:
XVII. 1994.2.
person other than a company or a person to whom Amended by:
article 56(18A) applies; IX. 1999.14;
XI. 2000.9;
(b) at the rate chargeable under article 56(6) where L.N. 409 of 2007.
payment is made to or on behalf of a non-resident Cap. 372.
company; and
(c) at the rate chargeable under article 56(18A):
Provided that the Commissioner may, by notice in writing
given to any person required to effect a deduction of tax in
accordance with paragraphs (a) and (b), authorise such person to
deduct tax at a rate lower than that hereinbefore mentioned, or to
pay such income without any deduction of tax:
Provided further that the provisions of this sub-article shall
not apply to income from which tax has been deducted under the
provisions of article 59 or under the provisions of article 23 of the
Income Tax Management Act. Cap. 372.

(2) Any amount of tax deducted from income in accordance

with the provisions of sub-article (1) shall be a debt due to the
Government by the person effecting the deduction as aforesaid,
payable within thirty days from the making of the deduction, and
such amount shall be accounted for and remitted to the
Commissioner within the said period.
(3) Deductions of tax made under sub-article (1)(a) and (b)
shall, when paid to the Commissioner as provided in sub-article (2),
be set off for the purposes of collection against the tax charged on
the non-resident person in respect of the relative income. Any
excess shall be refunded in accordance with the provisions of
article 48 of the Income Tax Management Act. Cap. 372.

(4) Where any person fails to deduct tax in accordance with the
provisions of this article or, after deducting such tax fails to pay it
to the Commissioner within the period mentioned in subarticle (2) -
(a) such person shall be chargeable with the tax which
should have been deducted or paid as aforesaid and, in
addition, with twice the amount of such tax;
(b) the tax and additional tax shall be recoverable from the
said person in the same manner as other tax charged
upon him under this Act;
(c) a notice given by the Commissioner to any person and
stating the tax which was due to be deducted or paid
by him as aforesaid and any additional tax to which he
became liable for having failed to deduct or pay the tax
shall, unless the contrary is proved, be sufficient
 166 CAP. 123.] INCOME TAX

evidence that the amount shown in the said notice is

the amount due to be paid to the Commissioner by the
said person;
(d) the Commissioner may in his discretion remit wholly
or in part any additional tax chargeable under the
provisions of this sub-article;
(e) additional tax charged under this sub-article shall be
borne by the person required to deduct or pay the tax
and shall not be recoverable by such person, whether
wholly or in part, from the person receiving the
income;
(f) additional tax charged under the provisions of this sub-
article shall not be deemed to be part of any tax paid or
payable for the purposes of articles 59, 76 and 89 and
Cap. 372. articles 42, 51 and 52 of the Income Tax Management
Act.

Amended by: PART X

XVII. 1994.28.
RELIEF OF DOUBLE TAXATION

Four reliefs of 74. There shall be four types of reliefs of double taxation,
double taxation. namely:
Added by:
XVII. 1994.28. (a) double taxation relief, as provided in articles 76 to 78,
both inclusive;
(b) unilateral relief, as provided in articles 79 to 88, both
inclusive;
(c) relief in respect of Commonwealth income tax, as
provided in article 89; and
(d) a flat-rate foreign tax credit, as provided in articles 92
to 95, both inclusive,.

Interaction of the 75. In respect of any claim for relief of double taxation:
reliefs.
Added by: (a) the provisions concerning unilateral relief shall be
XVII. 1994.28. applied in calculating a person’s tax liability in those
Amended by:
II. 2002.54. cases where double taxation relief and relief in respect
of Commonwealth income tax are not available to the
person making the claim; and
(b) the provisions concerning the flat-rate foreign tax
credit shall be applied in calculating a person’s tax
liability only in those cases where double taxation
relief, relief in respect of Commonwealth income tax
and unilateral relief, as governed by articles 79 to 88,
are not available to the person making the claim.
 INCOME TAX [CAP. 123. 167

76. (1) If the Minister responsible for finance by order Double taxation
declares that arrangements specified in the order have been made arrangements.
Added by:
with the Government of any territory outside Malta with a view to - XLI.1961.3.
Amended by:
(a) affording relief from double taxation in relation to L.N. 4 of 1963;
income tax and any tax of a similar character imposed VIII.1969.10;
XXVI.1977.33;
by the laws of that territory; XXXVI.1990.18.
(b) preventing fiscal evasion; Renumbered by:
XVII. 1994.2.
(c) giving assistance in the collection of tax; Amended by:
XVII. 1994.29;
and that it is expedient that those arrangements should have effect, the II. 2002.55;
II. 2004.15;
arrangements shall have effect notwithstanding anything in this or any IV. 2011.23.
other enactment.
(2) On the making of an order under this article with respect to
arrangements relating to any territory forming part of the
Commonwealth, article 89 shall cease to have effect as respects
that territory except in so far as the arrangements otherwise
provide.
(3) An order made under this article may be revoked by a
subsequent order.
(4) The Minister responsible for finance may make rules for
carrying out the provisions of any arrangements having effect under
this article. In particular, with regard to arrangements for the
prevention of fiscal evasion, rules may be made in relation to -
(a) the availability of applicable information;
(b) the access to applicable information;
(c) the mechanism of exchange of information;
(d) appropriate rights and safeguards; and enforcement
provisions (including applicable penalties).

77. (1) The provisions of this article shall have effect where, Tax credits.
under arrangements having effect under article 76, tax payable in Added by:
XLI.1961.4.
respect of any income in the territory with the Government of Amended by:
which the arrangements are made is to be allowed as a credit V.1964.5;
XXVIII.1972.6;
against tax payable in respect of that income in Malta; and in this XLII.1975.13;
article the expression "foreign tax" means any tax payable in that XXVIII.1978.28;
territory which under the arrangements is to be so allowed and the XXXVI.1990.19.
Renumbered by:
expression "income tax" means tax charged on the chargeable XVII. 1994.2.
income at the rates laid down in Part VII of this Act. Amended by:
XVII. 1994.30;
(2) The amount of the income tax chargeable in respect of the XX.1996.18;
income shall be reduced by the amount of the credit: IX.1999.14.

Provided that credit shall not be allowed against income tax

for any year of assessment unless the person entitled to the income
is resident in Malta for the year immediately preceding the year of
assessment.
(3) The credit shall not exceed the amount which would be
produced by computing the amount of the income in accordance
with the provisions of this Act and then charging it to income tax at
a rate ascertained by dividing the income tax chargeable (before
allowance or credit under any arrangements having effect under
168 CAP. 123.] INCOME TAX

article 76) on the total income of the person entitled to the income
by the amount of his total income.
(4) Without prejudice to the provisions of the preceding sub-
article, the total credit to be allowed to a person for any year of
assessment for foreign tax under all arrangements having effect
under article 76 shall not exceed the total income tax payable by
him for that year of assessment, less any tax payable by him under
the provisions of articles 40, 69 and 73.
(5) In computing the amount of the income -
(a) no deduction shall be allowed in respect of foreign tax
(whether in respect of the same or any other income);
(b) where the income tax chargeable depends on the
amount received in Malta the said amount shall be
increased by the appropriate amount of the foreign tax
in respect of the income;
(c) where the income includes a dividend and under the
arrangements foreign tax not chargeable directly or by
deduction in respect of the dividend is to be taken into
account in considering whether any, and if so what,
credit is to be given against income tax in respect of
the dividend the amount of the income shall be
increased by the amount of the foreign tax not so
chargeable which falls to be taken into account in
computing the amount of the credit.
(6) Paragraphs (a) and (b) of the preceding sub-article (but not
the remainder thereof) shall apply to the computation of the total
income for the purpose of determining the rate mentioned in sub-
article (3), and shall apply thereto in relation to all income in the
case of which credit falls to be given for foreign tax under
arrangements for the time being in force under article 76.
(7) Where -
(a) the arrangements provide, in relation to dividends of
some classes, but not in relation to dividends of other
classes, that foreign tax not chargeable directly or by
deduction in respect of dividends is to be taken into
account in considering whether any, and if so what,
credit is to be given against income tax in respect of
the dividends, and
(b) a dividend is paid which is not of a class in relation to
which the arrangements so provide,
then, if the dividend is paid to a company which controls, directly
or indirectly, not less than one-half of the voting power in the
company paying the dividend, credit shall be allowed as if the
dividend were a dividend of a class in relation to which the
arrangements so provide.
(8) Credit shall not be allowed under the arrangements against
income tax chargeable in respect of the income of any person for
any year of assessment if he elects that credit shall not be allowed
in the case of his income for that year.
 INCOME TAX [CAP. 123. 169

(9) Any claim for an allowance by way of credit shall be made

not later than two years after the end of the year of assessment to
which the claim refers, and in the event of any dispute as to the
amount allowable the claim shall be subject to objection and appeal
in like manner as an assessment.
(10) Where the amount of any credit given under the
arrangements is rendered excessive or insufficient by reason of any
adjustment of the amount of any tax payable either in Malta or
elsewhere, nothing in this Act limiting the time for the making of
returns, assessment or claims for relief shall apply to any return,
assessment or claim to which the adjustment gives rise, being a
return, assessment or claim made not later than two years from the
time when all such assessments, adjustments and other
determination have been made, whether in Malta or elsewhere, as
are material in determining whether any, and if so what, credit falls
to be given.

78. (1) Where the tax paid or payable by a company is Dividends and tax
affected by double taxation relief the amount to be set off under credits.
Added by:
article 60 or to be repaid under article 48 of the Income Tax XLI.1961.5.
Management Act, in respect of the tax deductible from any Amended by:
XXI.1980.13.
dividend paid by the company, shall be reduced as follows: Renumbered by:
XVII. 1994.2.
(a) if no tax is chargeable on the recipient in respect of the Amended by:
dividend, the reduction shall be an amount equal to tax XVII.1994.31.
on the gross dividend at the rate of double taxation Cap. 372.
relief applicable thereto;
(b) if the rate of tax chargeable on the recipient in respect
of the dividend is less than the rate of double taxation
relief applicable to the dividend, the reduction shall be
an amount equal to tax on the gross dividend at the
difference between those two rates.
(2) For the purpose of this article -
(a) if the income of the person chargeable includes one
dividend such as is mentioned in the preceding sub-
article, that dividend shall be deemed to be the highest
part of his total income;
(b) if his income includes more than one such dividend a
dividend shall be deemed to be a higher part of his
total income than another dividend if the net Malta rate
applicable to the former dividend is lower than that
applicable to the latter dividend;
(c) where tax is chargeable at different rates in respect of
different parts of any such dividend, or where tax is
chargeable in respect of some part of any such
dividend and is not chargeable in respect of some other
part thereof, each part shall be deemed to be a separate
dividend;
(d) the expression "double taxation relief" has the same
meaning as in article 59 and the expression "the rate of
double taxation relief" means the rate which represents
the excess of the rate of tax deductible from the
 170 CAP. 123.] INCOME TAX

dividend over the net Malta rate applicable thereto.

Unilateral relief. 79. In this Act the phrase "unilateral relief" means the relief
Added by: given pursuant to the provisions of articles 80 to 88, and in those
XVII. 1994.32.
articles the phrase "income tax" shall have the meaning attributed
to it in article 77(1).
Availability of 80. Unilateral relief may be available in respect of a claim for
unilateral relief. relief of double taxation where tax under this Act is computed by
Added by:
XVII. 1994.32. reference to income which:
Amended by:
I. 2010.29. (a) arises outside Malta; and
(b) is subject to any tax of a similar character to that
imposed under the Income Tax Acts under the laws of
a territory outside Malta, including, in the case of a
claim for relief to which article 82(a) and (b) applies,
tax imposed under the Income Tax Acts.
For the purposes of paragraph (b), a tax shall not be
prevented from being of a similar character by reason only that it is
payable under the law of a province, state or other part of a country,
or is levied by or on behalf of a municipality or other local body.

Relief by way of 81. The amount of the tax referred to in article 80(b) is to be
credit. allowed as a credit against the income tax chargeable in Malta in
Added by:
XVII. 1994.32. respect of the income under article 80, and the amount of the
Amended by: income tax so chargeable shall be reduced by the amount of the
II. 2007.28;
I. 2010.30. credit:
Provided always that the credit shall not be allowed against
income tax for any year of assessment unless the person entitled to
the income is resident in Malta or is a company registered in Malta
for the year immediately preceding the year of assessment.

Credit for the 82. The provision concerning unilateral relief shall, where the
underlying tax. income under article 80 includes a dividend distributed by a
Added by:
XVII. 1994.32. company not resident in Malta, hereinafter in this article referred to
Substituted by: as "the overseas company", have effect so that tax not chargeable
IX. 2001.28;
II. 2002.56. directly or by deduction in respect of the dividend shall be deemed
Amended by: to fall under the provision of article 80(b) and shall be taken into
II. 2007.20. account in computing the credit to be given against income tax in
respect of the dividend.
For the purposes of this article -
(a) "tax not chargeable directly or by deduction in respect
of the dividend" shall include tax payable in respect of
a dividend distributed by a company which is related
to the overseas company as specified in paragraph (b),
hereinafter referred to in this article as "related
company", where such dividend forms part of a chain
of successive dividends distributed from one related
company to another ending in the dividend received by
the person making the claim, or on the profits out of
which such dividend was distributed;
(b) a company is related to the overseas company if the
overseas company controls, directly or indirectly, not
 INCOME TAX [CAP. 123. 171

less than 10% of the voting power of the related

company.

83. The credit given under article 81 shall not exceed the Limitation on the
amount which would be produced by computing the income of a credit.
Added by:
person in accordance with the provisions of this Act and then XVII. 1994.32.
charging it to income tax at a rate ascertained by dividing the
income tax chargeable (before allowance of credit pursuant to
article 81) on the total income of the person entitled to it, by this
total income.
84. Without prejudice to the provisions of article 87, the total Amount of total
credit to be allowed pursuant to article 81 to a person for any year credit.
Added by:
of assessment shall not exceed the total income tax payable by him XVII. 1994.32.
for that year of assessment, less any tax payable by him for that
year of assessment under the provisions of articles 40, 69 and 73.
85. In computing the amount of the income for purposes of Computation of
unilateral relief: income.
Added by:
(a) no deduction shall be allowed in respect of tax paid XVII. 1994.32.
and referred to in article 80(b) in respect of the
income;
(b) where the income chargeable depends on the amount
received in Malta the said amount shall be increased
by the appropriate amount of the tax paid and referred
to in article 80(b) in respect of the income;
(c) where the income includes a dividend and, in
determining the amount of credit to be given under
article 81, credit is given for tax which is not
chargeable directly or by deduction under article 82,
the amount of the income shall be increased by the
amount of that credit.

86. The provisions of article 85(a) and (b) shall apply to the Applicability of
computation of total income for the purposes of determining the article 85.
Added by:
rate of tax referred to in article 83. XVII.1994.32.
87. The provisions of article 77(8), (9) and (10) and of article Dividends and tax
78 shall apply mutatis mutandis in relation to unilateral relief as credits, etc.
Added by:
they apply to double taxation relief. XVII. 1994.32.
88. Unilateral relief shall not be available to a person unless No relief without
that person has proved to the satisfaction of the Commissioner that proof.
Added by:
the income referred to in the provisions of article 80(a) has borne XVII.1994.32.
tax under the provisions of article 80(b) and has proved the amount
of that tax.
 172 CAP. 123.] INCOME TAX

Relief in respect of 89. (1) If any person resident in Malta who has paid, by
Commonwealth deduction or otherwise, or is liable to pay, tax under this Act for
income tax.
Amended by: any year of assessment on any part of his income, proves to the
XV. 1960.15; satisfaction of the Commissioner that he has paid, by deduction or
V. 1964.6;
VIII. 1969.11; otherwise, or is liable to pay, Commonwealth income tax for that
XXVIII. 1972.7; year in respect of the same part of his income, he shall be entitled
XXII. 1976.4; to relief from tax in Malta paid or payable by him on that part of his
XXVIII. 1978.29;
XXXVI. 1990.20. income at a rate thereon to be determined as follows:
Renumbered by:
XVII. 1994.2. (a) if the Commonwealth rate of tax does not exceed one-
Amended by: half of the rate of tax appropriate to his case under this
IX. 1999.14; Act in Malta, the rate at which relief is to be given
IV. 2011.24.
shall be the Commonwealth rate of tax;
(b) in any other case the rate at which relief is to be given
shall be half the rate of tax appropriate to his case
under this Act.
(2) If any person not resident in Malta who has paid, by
deduction or otherwise, or is liable to pay, tax under this Act for
any year of assessment on any part of his income, proves to the
satisfaction of the Commissioner that he has paid, by deduction or
otherwise, or is liable to pay, Commonwealth income tax for that
year of assessment in respect of the same part of his income, he
shall be entitled to relief from tax paid or payable by him under this
Act on that part of his income at a rate thereon to be determined as
follows:
(a) if the Commonwealth rate of tax appropriate to his
case does not exceed the rate of tax appropriate to his
case under this Act, the rate at which relief is to be
given shall be one-half of the Commonwealth rate of
tax;
(b) if the Commonwealth rate of tax appropriate to his
case exceeds the rate of tax appropriate to his case
under this Act, the rate at which relief is to be given
shall be equal to the amount by which the rate of tax
appropriate to his case under this Act exceeds one-half
of the Commonwealth rate of tax.
(3) For the purpose of this article, "Commonwealth income
tax" means any income tax or tax of a similar nature charged under
any law in force in any country of the Commonwealth, other than
Malta or the United Kingdom of Great Britain and Northern
Ireland, if the legislature of such country has provided for relief in
respect of tax charged on income both in that country and in Malta
in a manner which appears to the Commissioner to correspond to
the relief granted by this article.
(4) For the purposes of this article, the expression "rate of tax"
when applied to tax paid or payable under this Act means the rate
determined by dividing the amount of tax paid or payable for the
year (before the deduction of any relief granted under this article)
by the amount of the income in respect of which the tax paid or
payable under this Act has been charged for that year, except that
where the income which is the subject of a claim to relief under this
article is computed by reference to the provisions of this Act on an
 INCOME TAX [CAP. 123. 173

amount other than the ascertained amount of the actual profits, the
rate of tax shall be determined by the Commissioner.
(5) Where a person is for any year of assessment resident both
in Malta and in a part, place or territory in which Commonwealth
income tax is charged, he shall for the purposes of this article be
deemed to be resident where during that year he resides for the
longer period.
(6) Any claim for relief under this article shall be made not
later than two years after the end of the year of assessment to which
the claim refers.
(7) The provisions of this article shall not apply in the case of
gains or profits referred to in article 23.

90. (1) If it be proved to the satisfaction of the Commissioner Relief in respect of

that any person has paid levy in any year in respect of any bearer Bearer Accounts
Levy.
account under the Bearer Accounts Levy Act, the tax chargeable Repealed by:
under this Act on the interest accruing or derived from such XXV.1960.16.
Added by:
account for that year shall be reduced by the amount of the said XXXV.1972.14.
levy. Amended by:
XXI. 1980.14.
(2) For the purposes of the reduction granted by sub-article (1) Renumbered by:
hereof, the interest on any bearer account shall be deemed to be the XVII. 1994.2.
Amended by:
highest part of the total income for the year of assessment for IX. 1999.14.
which such interest is brought to charge to tax. Cap. 219.

90A. (1) With effect from the 1st day of January 1996, where Tax on part-time
an individual is receiving full-time instruction at a university, work.
Added by:
college or other similar educational institution or was serving an I.1994.3.
apprenticeship with a view to qualifying in a trade or calling, or Substituted by:
XX.1996.19.
where an individual has income in his own right falling under Amended by:
article 4(1)(b) or (d), and has during the year immediately V. 1998.8;
preceding the year of assessment other income from such part-time XI. 2000.10;
II. 2002.57;
work as may be prescribed, he shall subject to the other provisions II. 2005.13;
of this article pay tax at the rate of 15 cents (0.15) on every euro of L.N. 409 of 2007;
such other income, and he shall not be required to declare any such V. 2012.23.
other income, in any return made pursuant to the Income Tax Acts:
Provided that where the other income derived from part-
time work is income as is described in article 4(1)(a) and (b), the
provisions of this article shall apply with respect to that other
income only up to such limit as may be prescribed.
(2) Notwithstanding the provisions of sub-article (1), an
individual may declare all his income from part-time work together
with the rest of his income in his return made in accordance with
the Income Tax Acts, and he will be charged tax on all his income
in accordance with the provisions of paragraph (a) or (b) (as the
case may be) of article 56(1), and in any such case any tax paid on
such other income in accordance with this article shall be available
as a credit against the individual’s tax liability and where any tax
so paid is in excess of such liability, it shall be refunded.
(3) Notwithstanding the provisions of sub-article (1) an
individual, whose projected total income for a calendar year,
including income derived from part-time work, is not expected to
 174 CAP. 123.] INCOME TAX

exceed such sum over which he would become liable to tax, may, if
the income from part-time work falls under the description in
article 4(1)(b), at any time of the year by notice in writing on the
prescribed form, direct the employer with whom he is performing
part-time work not to deduct tax on his income from part-time
work.
(4) For the purposes of sub-article (3) hereof where an
individual’s annual wages or salary from his full time employment
exceed such amount over which he would become liable to tax, or
where in the previous year his total income rendered him liable to
tax, his projected total income for the relevant year will be
expected to exceed such sum over which he would become liable to
tax.
(5) Where the total income of an individual who has given
notice as is provided in sub-article (3), during the year in which the
said notice has been given reaches such sum as would render such
individual liable to tax, such individual shall inform the
Commissioner accordingly on the prescribed form and if he elects
to pay tax on his other income derived from part-time work in
accordance with the provisions of sub-article (1) he shall direct his
employer to deduct tax at the rate of 15 cents (0.15) in the euro, and
furthermore, where he elects to pay tax on his other income derived
from part-time work in accordance with the provisions of sub-
article (1) he shall either -
(a) direct his employer to make such further deductions
from his income so that the tax due in accordance with
sub-article (1) on all income deriving from part-time
work as aforesaid is so deducted by the 31st December
of that year; or
(b) pay such tax due, to the Commissioner by not later
than such date following the relevant year as may be
prescribed.
(6) Where an employer who in accordance with this article is to
deduct tax at 15 cents (0.15) in the euro fails for any reason to
deduct such tax, it shall be the duty of the individual from whose
income such deduction is to be made, to inform the Commissioner
accordingly and to make payment of the tax due directly to the
Commissioner:
Provided that the employer shall still remain liable for any
Cap. 372. liability under article 23(4) of the Income Tax Management Act.
(7) (a) Where the income from part-time work is income falling
under article 4(1)(b), the person paying the income shall, at the
time of payment, unless otherwise directed in accordance with sub-
article (3) and in accordance with the provisions of article 23 of the
Cap. 372. Income Tax Management Act, deduct tax at the rate of 15 cents
(0.15) in the euro, and any tax so deducted shall be remitted to the
Commissioner accordingly.
 INCOME TAX [CAP. 123. 175

(b) Where the income from part-time work is income falling

under article 4(1)(a), the individual shall pay to the Commissioner
an amount equivalent to 15 cents (0.15) for every euro of the
income from part-time work in such manner as may be prescribed
in accordance with the provisions of article 42 of the Income Tax Cap. 372.
Management Act, where applicable.
(8) Where an individual who is to pay tax on part-time work at
the rate of 15 cents (0.15) in the euro as provided in sub-article (1),
fails to pay such tax on all his income from part-time work subject
to such tax by such date following the relevant year as may be
prescribed, all the income from part-time work shall be added with
the rest of the individual’s income and tax shall be assessable
thereon in accordance with the provisions of article 56.
(9) In the case of a married couple the provisions of this article
shall apply to either or each of the spouses where at least one of the
spouses is receiving full-time instruction or is serving an
apprenticeship or has income in his or her own right as described in
subarticle (1) and either or each of the spouses has other income
from part-time work as therein described.
(10) Where an individual declares that income is derived from
part-time work and the Commissioner has reason to believe that
such income was derived from an activity which is not on a part-
time basis, or is the individual’s normal activity or is ancillary
thereto, the Commissioner shall consider such income as not
qualifying to be subject to tax under sub-article (1) and shall assess
it as if the foregoing provisions of this article did not apply thereto,
and any tax remitted in respect of such income shall be available as
a credit against the individual’s tax liability for the relevant year of
assessment and where any tax so remitted is in excess of such
liability it shall be refunded.

91. Where through the operation of the provisions of article 56, Computation of
78 and 90 a part of the income subject to tax falls to be deemed the certain tax
reductions.
last part of the total income and the total income in respect of any Amended by:
year of assessment includes more than one such part to be so XV.1958.2.
Repealed by:
deemed, the provisions of article 78 shall have precedence over the XLI.1961.6.
provisions of article 56 and the provisions of either of these two Added by:
articles shall have precedence over those of article 90, as the case XXI.1980.15. .
Renumbered by:
may be. XVII. 1994.2.
92. For the purposes of the Income Tax Acts, the flat-rate Flat-rate foreign
foreign tax credit shall be credit given in respect of income or credit.
Added by:
gains: XVII. 1994.33.
Amended by:
(a) which are received by a company registered in Malta; XX. 1996.20;
and II. 2007.21;
IX. 2007.6.
(b) which the company is specifically empowered to
receive and fall to be allocated to the foreign income
account as defined in article 2, but excluding profits
resulting from dividends paid out of the foreign
income account of another company resident in Malta:
Provided that in the case of a company resident in Malta
prior to the 1 January 2007, the first condition of this
 176 CAP. 123.] INCOME TAX

paragraph shall apply as from the 1 January 2011, or,

where such company informs the Commissioner as
contemplated in article 48(4A)(b)(1) or (2) of the
Income Tax Management Act, as from the date on
which such information is effective, whichever is the
earlier; and
(c) in respect of which documentary evidence is available
which indicates to the satisfaction of the
Commissioner that such income or gains, as the case
may be, fall to be allocated to the foreign income
account as provided in paragraph (b). For the purposes
of this requirement, a certificate issued by a certified
public accountant and auditor shall be satisfactory
documentary evidence.

Amount of flat-rate 93. (1) The flat-rate foreign tax credit shall be twenty-five per
foreign tax credit. cent of the income or gains receivable by the company within the
Added by:
XVII.1994.33. provisions of article 92, before any deductions or payments
whatsoever are made from the said income or gains.
(2) In the case of income comprising dividends, capital gains,
interest, royalties, rents and other income which are receivable by a
company resident in Malta and derived, where applicable, from
investments situated outside Malta, the flat-rate foreign tax credit
shall be computed on the amount receivable, after deducting any
foreign tax (charged directly or by way of withholding) but before
any other deductions or payments whatsoever are made.

Operation of the 94. (1) Where the flat-rate foreign tax credit is due in respect
flat-rate foreign tax of the income or gains referred to in article 92, it shall be added to
credit.
Added by: the said income or gains. The aggregate sum so obtained shall be
XVII. 1994.33. the amount that is chargeable to tax.
(2) For a year of assessment in respect of the income computed
in accordance with the provisions of sub-article (1), the amount of
tax payable under this Act shall be reduced by the amount of the
flat-rate foreign tax credit due in respect of that income:
Provided that where the amount of the flat-rate foreign tax
credit exceeds eighty-five per cent of the tax payable computed by
taking the tax payable on those profits which are to be allocated to
the foreign income account and deducting therefrom any foreign
tax set-off under the double taxation relief, Commonwealth income
tax relief and unilateral relief provisions, the amount of such
exceeds shall not be available for set-off or refund for any purposes
of the Income Tax Acts.
(3) The provisions of article 77(8), (9) and (10) and of article
78 shall apply mutatis mutandis in relation to the flat-rate foreign
tax credit as they apply to double taxation relief.

Anti-avoidance 95. Where, in the opinion of the Commissioner, a series of

provisions. transactions is effected with the sole or main purpose of reducing
Added by:
XVII. 1994.33. the amount of tax payable by any person by reason of the operation
of the flat-rate foreign tax credit provisions as contained in articles
92 to 94, such a person shall be assessable as if the provisions did
 INCOME TAX [CAP. 123. 177

not apply.
For the purposes of this article, a series of transactions shall
mean any two or more corresponding or circular transactions
carried out by the same person, either directly or indirectly, as the
case may be.

PART XI

POWER TO MAKE RULES

96. (1) The Minister responsible for finance may from time to Power to make
time make rules generally for carrying out the provisions of this rules.
Amended by:
Act and for such matters as are authorised by this Act to be XV. 1958.2;
prescribed. XVII.1961.3;
XXV.1962.2,4;
(2) Any guidelines, explanations or instructions relating to the L.N. 4 of 1963;
L.N. 46 of 1965.
Income Tax Acts or of the rules referred to in subarticle (1) Renumbered by:
contained in a publication or circular published by or under the XVII. 1994.2.
authority of the Commissioner and distributed or made available to Substituted by:
XVII. 1994. 34.
taxpayers in general, shall be read and construed as one with such Amended by:
rules and shall have the same effect as the rules to the extent that II. 2003.24;
such guidelines, explanations or instructions are not in conflict II. 2005.14;
II. 2009.15.
with the Income Tax Acts on the said rules or with guidelines,
explanations or instructions published at a later date and to the
extent that -
(a) they give a definition of any term or an interpretation
of any provision contained in the Income Tax Acts or
the rules;
(b) they determine the manner in which any provision of
the Income Tax Acts or the rules is to be applied;
(c) they determine any matter which in accordance with
the Income Tax Acts or the rules may be determined
by or is subject to the approval or the discretion of the
Commissioner.
(3) The Minister responsible for finance may make rules
prescribing tax credits and may also by such rules determine the
class of persons to whom such tax credits shall apply and the
method of calculating or estimating such tax credits and the
amounts thereof.
(4) The Minister responsible for finance may by rules amend,
repeal or substitute the Schedule to this Act.
 178 CAP. 123.] INCOME TAX

Added by: SCHEDULE*

IX. 1999.14.
Amended by:
XI. 2000.11; Article 56(12)(c)
II. 2002.58;
II. 2003.25; Additional tax chargeable under article 56(12)(c)
L.N. 409 of 2007.
Substituted by:
L.N. 98 of 2009.
Amended by:
L.N. 336 of 2010;
XII. 2014.27.
Definitions. 1. In this Schedule:
" a d d i t i o n a l t a x " m e a n s t h e a d d i t i o n a l t a x c h a rg e a b l e i n
accordance with the provisions of article 56(12)(c) in respect of a
default or omission;
"endangered tax" means, subject to the provisions of item 12, the
difference between the tax declared to be chargeable by the
taxpayer after taking into account any exemption, relief, allowance
or tax credits to which he may be entitled and the tax actually
chargeable after considering the same, but shall not include any
additional tax;
"default" means a default in furnishing a return of income
required to be submitted for the purposes of the Income Tax Acts;
"omission" means the omission from any return of income
submitted for the purpose of the Income Tax Acts of any amount
which should have been included therein and includes any act or
omission which is deemed to constitute an omission in terms article
56(12);
"tax professional" means an individual being the holder of a
Cap. 281. warrant issued under the Accountancy Profession Act, or a member
of the Malta Institute of Taxation, or a member of the legal
profession in Malta who specialises in taxation, or a partnership of
such individuals the majority of whom are so qualified: provided
that the Commissioner shall be entitled to request such proof as he
may deem appropriate to the effect that an individual qualifies as a
tax professional as aforesaid.
Additional tax for a 2. Additional tax chargeable under article 56(12)(c) for a
default by an indi- default by an individual in furnishing a return in respect of the year
vidual.
of assessment 2009 or any subsequent year of assessment shall be
at the amounts shown in Table A hereunder:

* The provisions of this Schedule, as substituted by Legal Notice 98 of 2009, shall

apply with respect to additional tax chargeable in terms of article 56(12)(c) for the
year of assessment 2009 and subsequent years of assessment: provided that the
provisions of this Schedule, as in force immediately before the coming into force of
the substituting rules, shall continue to apply with respect to additional tax chargeable
in accordance with the said article 56(12)(c) for years of assessment preceding the
year of assessment 2009.
 INCOME TAX [CAP. 123. 179

TABLE A
Number of months from the date on which a Additional tax
return is required to be submitted in accordance
with the relevant provisions of the Income Tax
Management Act
Within 6 months €10
Later than 6 but within 12 months €50
Later than 12 but within 18 months €100
Later than 18 but within 24 months €150
Later than 24 but within 36 months €200
Later than 36 but within 48 months €300
Later than 48 but within 60 months €400
Later than 60 months €500
3. Additional tax chargeable under article 56(12)(c) for a Additional tax for a
default by a person, other than an individual, in furnishing a return default by a person
other than an
in respect of the year of assessment 2009 or any subsequent year of individual.
assessment, shall be at the amounts as shown in Table B hereunder:
TABLE B
Number of months from the date on which a Additional tax
return is required to be submitted in accordance
with the relevant provisions of the Income Tax
Management Act
Within 6 months €50
Later than 6 but within 12 months €200
Later than 12 but within 18 months €400
Later than 18 but within 24 months €600
Later than 24 but within 36 months €800
Later than 36 but within 48 months €1,000
Later than 48 but within 60 months €1,200
Later than 60 months €1,500
4. Where a person proves that a default in furnishing a return Remission of
filed or due to be filed by him was due to a reasonable excuse, the additional tax for
default.
Commissioner shall remit the whole of the additional tax otherwise
chargeable in accordance with item 2 or 3 in respect of that default:
Provided that:
(a) an insufficiency of funds to pay any tax due, or
(b) when reliance is placed on any other person to perform
any task, the fact of that reliance or any dilatoriness or
inaccuracies on the part of the person relied upon,
shall not constitute a reasonable excuse for the purpose of this
item.
5. (1) Subject to the provisions of the other items of this Additional tax for
Schedule, additional tax chargeable under article 56(12)(c) for an omission.
omission from a return shall be one point five per cent (1.5%) per
month of the endangered tax.
 180 CAP. 123.] INCOME TAX

(2) Subject to the provisions of item 7, the rate of additional

tax per month as provided in paragraph (1) shall be calculated for
every month or part thereof, such period commencing with the
month during which the tax on the chargeable income for that year
was due and payable and ending with the month during which the
omission is rectified by a further return made under article 13 of
Cap. 372. the Income Tax Management Act or an assessment is made.

Reduced rate of 6. (1) When an omission from a return is rectified by a person

additional tax on by means of the delivery of a further return made in accordance
omission.
Cap. 372. with article 13 of the Income Tax Management Act before that
person is notified in writing by the Commissioner, in terms of
subarticle (7) of the said article, that an enquiry will be conducted
into that person’s tax declarations and liabilities -
(a) if that further return is delivered to the Commissioner
not later than twelve months after the relative tax
return date, the additional tax otherwise chargeable
under item 5 for that omission shall be fully remitted;
(b) in any other case, the rate of additional tax otherwise
chargeable under item 5 for that omission shall be zero
point one per cent (0.1%) per month of the endangered
tax.
(2) Where an omission from a return is rectified by a person by
means of the delivery of a further return made in accordance with
Cap. 372. article 13 of the Income Tax Management Act after that person has
been notified in writing by the Commissioner, in terms of subarticle
(7) of the said article, that an enquiry will be conducted into that
person’s tax declarations and liabilities, but before that person is
notified with an assessment in which additional tax is charged for
that omission, the rate of additional tax otherwise chargeable under
item 5 for that omission shall be zero point seven five 0.75% per
month of the endangered tax.

Maximum 7. The maximum additional tax for an omission payable

additional tax on under item 5 or 6 shall in no case be more than sixty times the
omission.
applicable rate in terms of the respective item.
Remission of 8. (1) Where a return of income delivered by a person
additional tax for contains an omission and -
an omission.
(a) that person has sought and relied upon the written
advice of a tax professional, insofar as the matter to
which the omission refers is concerned, and submits
the original written advice together with the return by
not later than the relative tax return date; or
(b) that person proves that the omission was not due to
any fraud, art, contrivance or gross or wilful neglect,
the Commissioner shall remit the whole of the additional tax
otherwise due in accordance with this Schedule in respect of that
omission.
(2) An advice, referred to in paragraph (1)(a), furnished by a
tax professional, shall not of itself constitute a binding
interpretation of the relative statutory provisions and their proper
 INCOME TAX [CAP. 123. 181

application.
(3) The Commissioner shall not be required to remit the
additional tax in accordance with item (1)(a) if he determines the
advice in question to be spurious or frivolous: provided that the
Commissioner’s decision under this paragraph shall be subject to
review by the Administrative Review Tribunal in any appeal filed
in connection with the relative assessment.
(4) Without prejudice to paragraph (1)(a), the fact that an
omission was due to the complexity of a particular transaction or to
the complexity of any particular provision of the law shall not, of
itself, be considered as a valid ground for the remission of
additional tax under paragraph (1)(b).

9. The additional tax chargeable under article 56(12)(c) shall Additional tax not
be in addition and without prejudice to interest chargeable under subject to interest.
article 44(2A) of the Income Tax Management Act, but no such Cap. 372.
interest shall be charged on the said additional tax.
10. When a person files a declaration prescribed for the Omission by
m a k i n g o f a n e l e c t i o n u n d e r a r t i c l e 1 2 o f t h e I n c o m e Ta x persons not eligible
for election under
Management Act, and he is not a person to whom that article article 12 of the
applies and subsequently submits a full and correct return, he shall Income Tax
Management Act.
be deemed for the purposes of article 56(12)(c) and of this Cap. 372.
Schedule to have omitted from his return all his income except for
that income referred to in article 12(2)(b) of that Act and to have
rectified that omission when he submits the full and correct return.
11. When a person to whom article 12 of the Income Tax Default in
Management Act applies files a declaration prescribed for the connection with an
election under
making of an election under that article after the date prescribed article 12 of the
therefor, he shall for the purposes of article 56(12)(c) and of this Income Tax
Management Act.
Schedule be deemed to have made a default in furnishing a return Cap. 372.
and that default shall continue until a return is furnished.
12. (1) When the Commissioner, having determined the Additional tax for
amount of tax payable by a person for a year or years of assessment an omission in
addition to
on the basis of an estimate made under article 31(3) of the Income additional tax for a
Tax Management Act, gives notice in writing to that person, in default in the case
of return filed after
terms of article 13(7) of that Act, that an enquiry will be conducted notice of enquiry.
into his tax declarations and liabilities, and that person Cap. 372.
subsequently furnishes a return of income in respect of the said
year or years, that person shall be deemed to be subject to
additional tax for an omission in addition to any additional tax to
which he may be liable for a default.
(2) For the purposes of calculating the endangered tax for an
omission to which the person referred to in paragraph (1) shall be
subject, the said endangered tax shall be considered to be equal to
the tax calculated on the total income, deducting therefrom any
credits, as declared in the said return.
(3) Where an assessment or an additional assessment for a year
or years of assessment is made under article 31(5) of the Income Cap. 372.
Tax Management Act on a person referred to in paragraph (1), for
the purposes of calculating the endangered tax, the tax calculated
on the total income, deducting therefrom any credits, as declared in
 182 CAP. 123.] INCOME TAX

the said return, shall be considered to be zero:

Provided that the additional tax for omission as resulting
from paragraph (2) shall be deducted from the amount of the
additional tax as resulting from this paragraph.

Certain powers of 13. (1) The Commissioner may remit such part or all of the
the Commissioner. additional tax otherwise chargeable in accordance with this
Schedule in respect of a default or an omission as he may deem fit.
(2) The Commissioner may impose any condition that he may
consider appropriate for any remission under paragraph (1),
including the requirement that the person concerned shall not make
another default or omission within such period as the
Commissioner may establish or that the said person shall make a
payment of tax in such amount and within such time as the
Commissioner may determine.
(3) Should any condition imposed by the Commissioner in
accordance with the provisions of paragraph (2) be infringed by the
person concerned, any reduction of additional tax granted by the
Commissioner in addition to the reductions contemplated by the
other provisions of this Schedule shall be forfeited.
(4) If forfeiture is due under the provisions of paragraph (3),
any additional reduction made under the provisions of this item, but
not under the provisions of the other items, shall be deemed to have
been a suspension of liability to the said additional tax, and not the
cancellation of the relevant additional tax.
(5) The Commissioner shall communicate in writing to the
person concerned any condition imposed under paragraph (2), the
consequences of an infringement of any such condition in
accordance with paragraph (3) and, when such is the case, the fact
that forfeiture has been incurred.
(6) The use of the Commissioner’s discretion under this item
shall not be questioned in any appeal.