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Income Tax Act (Cap. 123) Tax Accounts (Income Tax) Rules, 2008 (L.N. 79 Of 2008 )

B 1259
INCOME TAX ACT (CAP. 123)
Tax Accounts (Income Tax) Rules, 2008
IN exercise of the powers conferred by Articles 2 and 96 of the Income Tax Act, hereinafter referred to as the Act, the Prime Minister and Minister of Finance has made the following rules>–
1. The title of these rules is the Tax Accounts (Income Tax) Rules,
2008.
2. The provisions of these rules shall be deemed to have come into force as from year of assessment 2008.
3. With effect from year of assessment 2008 and subsequent years of assessment an amount of distributable profits resulting from the following shall be allocated to the final tax account>
(a) profits after tax resulting from income which has been charged to tax under the investment income provisions irrespective of the fact that the company in receipt of the income is not the recipient for the purposes of the investment income provisions<
(b) profits which have been exempt from tax under the provisions of any Maltese law and where the distribution of such profits by the company is exempt from tax in the hands of the shareholders<
(c) the amount of chargeable income the tax chargeable on which has been relieved from payment by any tax credits where the distribution of such profits is exempt from tax in the hands of the shareholders<
(d) dividends paid out of profits allocated to the final tax account of another company<
(e) The profits after tax derived from the transfer of property chargeable to tax under article 5A of the Act such profits to be determined as prescribed in terms of subarticle 10(d) of the said article 5A<
(f) any profits after tax which under the provisions of
Maltese law are not subject to tax when such profits are distributed

Citation and commencement.

Profits allocated to the final tax account.

B 1260

L.N. 49 of 2005

.

L.N. 135 of 2001

. L.N. 187 of 2003

.

L.N. 330 of 2005

.

L.N. 331 of 2005

.

L.N. 332 of 2005

.

L.N. 333 of 2005

. L.N. 334 of 2005

.

by a company to any person and where upon such a distribution no person is entitled to claim any tax credit in respect of any tax paid on such profits<
(g) the amount of chargeable income after tax of a company which has exercised the option referred to in article 48(4A)(b)(i)(1) of the Income Tax Management Act earned while it was not an international trading company<
(h) the amount which should be allocated to the Maltese Taxed Account computed in accordance with rule 13 of the Sale of Agricultural Produce Rules, 2005<
(i) profits resulting from income or gains in respect of which
Article 12(1)(u) of the Act may and has been applied<
(j) profits resulting from any grant or subsidy where the distribution of such profits is exempt from tax in the hands of the shareholders<
(k) profits after tax resulting from rents to which article 31A
of the Act is applicable<
(l) the amount of the chargeable income the tax chargeable on which has been relieved from payment by any tax credits under any of the following rules or regulations>
(i) the Business Promotion Regulations, 2001<
(ii) the Reinvestment Tax Credit (Income Tax) Regulations, 2003<
(iii) the Deductions and Tax Credits (Research and
Development) Rules, 2005<
(iv) the Tax Credit (Back Office Operations) Rules,
2005<
(v) the Tax Credits (Owners and Operators of
Warehouses Situated in Free Zones) Rules, 2005<
(vi) the Tax Credit (Electronic Business) Rules, 2005< (vii) the Reinvestment Tax Credit (Income Tax) Rules,
2005<
(viii) the Deductions and Tax Credits (General and
Specific Qualifications) Rules 2005<
(ix) the Tax Credit (Audiovisual Infrastructure) Regulations, 2006 made under the Malta Film Commission Act.
(m) Profits referred to in any of the preceding paragraphs which as at the end of the accounting period ending in the year preceding year of assessment 2007 have not been distributed.
4. For the purpose of rule 3, the amount of profits the tax chargeable on which has been relieved by any tax credits referred to in the said rule 3 shall be calculated by dividing the amount of the tax credit by the rate or rates of tax at which the company’s chargeable income is chargeable, and where such chargeable income has been taxed at different rates of tax the tax credit shall first be deemed to have relieved that part of the chargeable income which has been taxed at the lowest rate.
5. (1) With effect from year of assessment 2008 and in subsequent years of assessment an amount of distributable profits arising in any year immediately preceding any of such years of assessment which have suffered tax and which do not stand to be allocated to the final tax account shall be allocated to the immovable property account. Such amount of distributable profits shall consist of the aggregate of the amounts referred to in sub-rules 2 and 3.
(2) Dividends paid out of profits allocated to the immovable property account of another company<
(3) Any profits, gains or income derived, directly or indirectly, from immovable property situated in Malta consisting of>
(a) the amount of chargeable income after tax resulting from any profits or gains of whatever nature derived from the transfer of such immovable property or of any rights whatsoever on such property or in relation thereto<
(b) the amount of chargeable income after tax derived from rents, premiums , provision of accommodation and any income or gains however described and of whatever nature derived, directly or indirectly, from such immovable property including>
(i) any gains or profits derived from any timeshare operation or any other operation of a similar nature<
B 1261

L.N. 335 of 2005

.

L.N. 66 of 2006

.

Immovable Property

Account.

B 1262

Cap. 406.

(ii) any gains or profits derived from the provision of accommodation as defined in the Value Added Tax Act such gains or profits being calculated by reference to the value of sales which are subject to Value Added Tax at the rate of 5% in terms of item ‘1.’ of the Eighth Schedule of the Value Added Tax Act or which would have been so subject but for the fact that the company is not required to charge Value Added Tax by virtue of it being registered under article 11 of the Value Added Tax Act (hereinafter in these rules such sales being referred to as the “5% Vatable Sales”)< and where such gains or profits are derived from the carrying on of a trade, business or other activity which includes the provision of other services or goods in addition to the provision of such accommodation, such gains or profits shall be calculated by dividing the total chargeable income of the said company derived from that trade, business or other activity by the value of its total sales of that trade, business or other activity and multiplying the result by the value of its 5% Vatable Sales of that same trade, business or other activity. For this purpose companies which derive income from the provision of accommodation must maintain accounting records such that the gains or profit derived from the provision of accommodation may be readily ascertained in the manner provided herein. Where a company derives income from the provision of accommodation and does not maintain such accounting records the whole of its profit shall be deemed to be derived from the provision of accommodation<
(c) the amount of chargeable income after tax, derived from work carried out on or in relation to such immovable property consisting of brokerage and professional services, construction work, project management of construction work and work of tradesmen<
(d) the amount of chargeable income after tax resulting from profits derived from the provision of management services in relation to any activity as a result of which income is derived from the provision of accommodation referred to in paragraph b(ii), and where as a result of that activity income is derived from the provision of other services or goods in addition to the provision of such accommodation, such profit shall be calculated by dividing the income derived from the said management services by the value of the total sales of that activity and multiplying the result by the value of sales of that same activity which are 5% Vatable Sales<
(e) the following amounts which shall be determined gross before any deductions whatsoever>
(i) the interest, fees or any other consideration howsoever described derived, directly or indirectly, from the granting of loans or from any form of credit to finance the acquisition, development, construction, refurbishment, renovation of such immovable property 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) insurance premiums related to the insurance of such property>
Provided that where the allocation of profits in terms of this paragraph cannot for any year be made because there are no or insufficient profits which have suffered tax, the amount required to be allocated to the immovable property account in accordance with this paragraph, or part thereof, which for such reason could not be allocated shall be added to the amount to be allocated for the following year and deemed to be part of that amount, or if there is no such amount in respect of that year, be deemed to be the amount to be allocated for that year and so on for subsequent years<
(f) Any other profits however described where the Commissioner is of the opinion that the said profits are directly or indirectly derived from such immovable property and in such case the Commissioner may determine the manner in which such profits are to be determined<
(g) Profits or gains after tax however described derived from the disposal of shares or other interests in any entity which, directly or indirectly, principally owns such immovable property<
(h) The amount of the annual market rent of such immovable property owned and used by the company for the purpose of its activities (excluding property which is rented by the said company to other parties) calculated by multiplying the aggregate surface area in square metres of all floors of such premises so owned and used by sixty Euros (Euro 60) per annum> provided that the allocation of profits to the immovable property account in accordance with this paragraph shall be made after all allocations have been made in accordance with rule 5(2) and the other
B 1263
B 1264

Interpretation.

paragraphs of this sub-rule, and where the allocation of profits in terms of this paragraph cannot for any year be made because there are no or insufficient profits which have suffered tax, the amount required to be allocated to the immovable property account in accordance with this paragraph, or part thereof, which for such reason could not be allocated shall be added to the amount to be allocated for the following year and deemed to be part of that amount, or if there is no such amount in respect of that year, be deemed to be the amount to be allocated for that year and so on for subsequent years.
(4) For the purpose of allocating profits to the immovable property account in accordance with paragraphs (e) and (h) of sub-rule (3) the allocation of profits to the tax accounts shall first be made ignoring the provisions of the said two paragraphs and thereafter the amounts which are to be allocated to the immovable property account in accordance with the said two paragraphs shall (so far as not already transferred to the immovable property account in terms of this sub- rule) be transferred from the amount of distributable profits derived in the accounting period ending in the year preceding year of assessment
2008 and subsequent years of assessment which would have, ignoring the provisions of the said two paragraphs, been allocated to the Maltese Taxed Account and the Foreign Income Account< and for this purpose such amount shall first be transferred from amounts which would have been allocated to the Maltese Taxed Account and then from amounts which would have been allocated to the Foreign Income Account.
(5) The amount which cannot be allocated to the immovable property account in terms of paragraphs (e) and (h) of sub-rule (3) because there are no or insufficient profits which have suffered tax shall be the amount which cannot be allocated to the immovable property account in accordance with the procedure set out in sub-rule (4) above.
(6) The provisions of this rule shall be without prejudice to the fourth proviso to the definition of “Foreign Income Account” in Article 2 of the Act and paragraphs (e) and (h) of sub-rule 3 shall, up to year of assessment 2011, not apply to companies to which the said proviso was applicable for all years of assessment from year of assessment 2008 to year of assessment 2011.
6. (1) Work of tradesmen shall include but shall not be limited to, work consisting of or related to electrical works, plumbing, tile laying, pointing and rendering, plastering, painting, excavation and clearing of site, demolition works, dry wall gypsum works and any other work carried on or in relation to such immovable property.
(2) For the purpose of paragraph (h) of rule 5(3)>
(a) Property held by a company under title of emphyteusis shall be deemed to be owned by the said company< and
(b) where a company uses any immovable property for the purpose of its activities owned by a related person for no consideration or for a consideration which in the opinion of the Commissioner is less than the market rental value of that property and the said consideration is less than sixty Euros (Euro60) per square metre per annum, the said immovable property shall be deemed to be owned by the said company and the amount which shall be allocated to the immovable property account in accordance with rule 4(3)(h) shall be reduced by the amount of consideration paid by the said company to the related person for the use of the said immovable property< and for this purpose a person shall be deemed to be related to a company if>
(i) that person and the company are, directly or indirectly, controlled or beneficially owned to the extent of more than 25% by the same persons< or
(ii) that person owns, directly or indirectly, more than
25% of the ordinary share capital or voting rights of the company< or
(iii) that person, in any capacity whatsoever including that of a trustee, holds the said property or receives the said consideration for and on behalf of or for the benefit of a related person.
7. Where in a tax return the allocation of profits to be made in accordance with these rules and the Act is materially incorrect, the Commissioner may regard that tax return as not being complete in all material respects for the purposes of Article 10(5) of the Income Tax Management Act.
8. Notwithstanding the other provisions of these rules, these rules shall with regard to a collective investment scheme apply with effect from year of assessment 2009 and subsequent years of assessment and for this purpose the words “year of assessment 2007” in rule 3(m) of these rules shall be substituted by the words “year of assessment 2008”.
B 1265

Materially incorrect tax accounting.

Collective investment schemes.

Ippubblikat mid-Dipartiment ta’ l-Informazzjoni (doi.gov.mt) — Valletta — Published by the Department of Information (doi.gov.mt) — Valletta

Mitbug[ fl-Istamperija tal-Gvern — Printed at the Government Printing Press

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