REINVESTMENT TAX CREDIT (INCOME TAX) [ S.L.123.71 SUBSIDIARY LEGISLATION 123.71 REINVESTMENT TAX CREDIT (INCOME TAX) REGULATIONS 22nd July, 2003 LEGAL NOTICE 187 of 2003, as amended by Legal Notice 409 of
- The title of these regulations is the Reinvestment Tax Credit (Income Tax) Regulations.
- In these regulations, unless the context otherwise requires - Title. Interpretation. ''base year'' means the year during which the profit eligible to be reinvested has been earned and subsequently declared in the tax return for the relative year of assessment; ''Commissioner'' means the Commissioner of Inland Revenue; ''Corporation'' means the Institute for the Promotion of Small Enterprise Limited; ''eligible person'' means a person resident in Malta deriving eligible profits that are reinvested in an eligible reinvestment project approved by the Corporation and conforming with the requirements of regulation 3; ''eligible profits'' means income deriving from any activity carried out in Malta chargeable under the provisions of article 4
(1)(
- a)of the Income Tax Act, hereinafter referred to as ''the Act'' and computed in accordance with the provisions of the Act, and setaside for the exclusive purpose of financing an approved reinvestment project; ''eligible reinvestment project'' means a project approved by the Corporation under these regulations, in respect of which qualifying expenditure has been incurred and is retained within the business for at least two years or such other shorter period as the Corporation may deem appropriate in view of the nature of the project; ''qualifying expenditure'' shall mean expenditure of a capital nature exclusively financed by eligible profits, incurred as part of an eligible reinvestment project as approved by the Corporation in acquiring brand new plant and machinery, but excluding motor vehicles unless these are specialised commercial vehicles that are essential to the implementation of the project: Provided that the Corporation may, in its absolute discretion, approve expenditure within an eligible reinvestment project, incurred in acquiring: (
- a)second-hand, refurbished or reconditioned plant and machinery; (
- b)any extension to an existing industrial building or structure, including the cost of land forming an integral part of such extension: Cap. 123. 1 2 [ S.L.123.71 REINVESTMENT TAX CREDIT (INCOME TAX) Provided further that such expenditure is incurred on assets (
- a)which are first used in Malta; and (
- b)in respect of which no income tax benefit or incentive has previously been obtained under any other legislation; ''qualifying profits'' means income deriving from the same activity in which eligible profits have been earned, computed in accordance with the provisions of the Act, that is relieved by a reinvestment tax credit. Application and eligibility. Amended by: L.N. 409 of 2007. 3.
(1)These regulations shall apply to eligible persons deriving eligible profits in any of the years of assessment 2003 to 2005 and reinvested in an eligible reinvestment project within three years from the end of the base year.
(2)In order to qualify for the benefits under these regulations, a person shall have in the base year: (
- i)had a turnover of not more than €585,000, and (
- ii)had a minimum of two but not more than five employees of whom at least two were full time employees, and S.L. 372.14 (iii) was registered as an FSS payor under the Final Settlement System (FSS) Rules: Provided that in the case of a company which prepares its financial statements in a currency other than in Euros, the turnover shall be changed into Euros by reference to the middle rate of exchange as determined by the Central Bank of Malta.
(3)A person intending to benefit from the incentive provided by these regulations, shall, by not later than one month after the relative tax return date, notify the Corporation of such intention for each base year by means of a letter of application specifying such intention and providing the following details: (
- i)the person’s name, address, income tax registration number and employer number; (
- ii)the profit declared for the base year; (iii) the amount of eligible profits to be set-aside for reinvestment; (
- iv)the turnover for the base year; (
- v)the number of employees engaged during the year, distinguishing between part-time and fulltime; (
- vi)the period during which the reinvestment is to be made, (vii) the details of the reinvestment project, with a breakdown of the major expense headings; (viii) a certificate issued by a certified public accountant and auditor confirming that the reinvestment project is viable, that the expenses involved are reasonable and fair according to REINVESTMENT TAX CREDIT (INCOME TAX) [ S.L.123.71 3 market values, and that the reinvestment has the capacity to expand the business: Provided that any person who fails to notify the Corporation in writing about the intention to apply for the incentive provided by this regulation, shall forfeit the right to be eligible for the benefit: Provided further that for the year of assessment 2003, such notification shall reach the Corporation by not later than the 31st of October 2003.
(4)The Corporation, on being satisfied with the application referred to in this regulation, shall issue a certificate indicating the amount of the eligible profits approved for reinvestment. 4.
(1)Where it appears to the Corporation that eligible profits derived by an eligible person have been set aside for the exclusive purpose of financing an eligible reinvestment project as shall have been approved by the Corporation, and that the eligible profits or part thereof have in fact been used for such purpose, the Corporation shall issue a certificate showing compliance and th ereu po n the pe rso n sh all b e e nti tl ed to t he ben efi t un der subregulation
(2).
(2)The benefit available under these regulations shall be in the form of a reinvestment tax credit equivalent to the tax chargeable on that part of the eligible profits that is reinvested in an approved project on the basis of the following formula: tax on total income for the base year less tax on total income after excluding that part of the eligible profits for the same base year that is being reinvested, calculated at the rates applicable for the base year.
(3)A person entitled to a reinvestment tax credit in respect of a year of assessment shall be entitled to deduct from the amount of tax which is due on qualifying profits for that year of assessment the amount of the reinvestment tax credit, calculated as a proportion of the qualifying expenditure to the eligible profits that are deemed reinvested and multiplied by the maximum tax credit entitlement derived by applying the formula in subregulation
(2).
(4)(
- a)Where the reinvestment tax credit for any year of assessment exceeds the tax payable by such person for that year, the excess shall be added to the reinvestment tax credit, if any, for the following year: Provided that so much of the reinvestment tax credit which is not so utilised at the end of any year is carried forward up to the year of assessment 2010 and may not be set off against the tax due on any other source of income or to generate a refund of tax. (
- b)The reinvestment tax credit shall only be deducted from the tax due on qualifying profits from the same source of the eligible profits and for the purpose of this Reinvestment tax credit. 4 [ S.L.123.71 REINVESTMENT TAX CREDIT (INCOME TAX) subregulation qualifying profits are deemed to be the last part of the total income. (
- c)The reinvestment tax credit granted under these regulations shall not be allowed if the eligible profits have not been reinvested, even if such profits had been set aside for reinvestment under an eligible reinvestment project.
(5)Where a person has benefited from the provisions of this regulation, the reinvestment tax credit for any year of assessment shall be deemed to have relieved from tax so much of the qualifying profits for the year which when multiplied by the rate or rates of tax at which it was chargeable in that year, is equal to the reinvestment tax credit.
(6)The chargeable income which is deemed to have been relieved from tax in accordance with subregulation
(4), shall, for the purposes of the Act, be retained in the business for at least until the end of the year of assessment 2009, and: (
- a)in the case of an individual it shall be included in the capital account and the movements in such account shall be disclosed by way of a note to the audited financial statements; (
- b)in the case of a limited liability company it shall be disclosed separately in the audited financial statements in a reserve entitled ''Reinvestment Reserve''.
(7)(
- a)In the case of a limited liability company the qualifying income which is deemed to have been relieved from tax is allocated to the Maltese Taxed Account and, upon distribution, shall be exempt from tax in the hands of the shareholders up to the ultimate shareholder. (
- b)The company shall state in the dividend warrant pertaining to any such distribution that such income has been relieved by a reinvestment tax credit in accordance with these regulations, and the tax which has so been relieved shall not be available for refund for any purpose of the Act.
(8)Where the benefit provided by these regulations is due to a partnership, any such benefit shall be due to the partners of any such partnership: Provided that the reinvestment tax credit is calculated separately for each partner on the share of qualifying profit attributable to such partner in the manner set out in subregulation
(4). Certificate of compliance. 5.
(1)A person wishing to claim a reinvestment tax credit for any year of assessment, shall submit to the Corporation, by not later than three months before the relative tax return date, a written application supported by audited financial statements and any other documentary evidence requested by the Corporation.
(2)Any application required to be submitted to the Corporation REINVESTMENT TAX CREDIT (INCOME TAX) [ S.L.123.71 5 in order to benefit from these regulations shall be in such form and contain such particulars as the Corporation may require.
(3)The Corporation, on being satisfied with the submissions referred to in this regulation and within sixty days from the receipt of all relevant information it may request, shall issue a certificate of compliance confirming that all the provisions of these regulations have been complied with.
(4)On granting its approval for any purpose under these regulations, the Corporation shall confirm its approval in writing setting out the conditions to be satisfied by the person, and the person’s entitlement to the benefit provided by these regulations shall be conditional on the production of such written approval.
(5)The Corporation shall forward to the Department of Inland Revenue copies of certificates and approvals issued under the provisions of these regulations. 6. (
- a)Where a benefit has been provided in terms of these regulations, the Corporation may - Examination of records. (
- i)from time to time make such examination of books and documents, hold on-site inspections on premises and all other things and matters of that person as may be necessary to ensure that the benefit is being applied for the purpose for which it has been made; and (
- ii)request such financial statements from the person as it may require, to be submitted quarterly or at shorter intervals at the discretion of the Corporation. (
- b)Where the Corporation is not satisfied that an eligible person is employing the benefit for the purpose it is intended for or has failed to fulfill any condition under these regulations, such person shall immediately forfeit the right for the benefit. 7. The following further conditions must also be fulfilled for eligibility to the benefit under these regulations: (
- a)the tax return together with audited financial statements incorporating the TIFD codes as stipulated in the Tax Index of Financial Data Rules, are to be submitted to the Commissioner by the relative tax return date for each year of assessment starting from the base year and all subsequent consecutive years during which a reinvestment tax credit is available irrespective of whether it is utilised or not; (
- b)no other benefits are being claimed or may subsequently be claimed by a person on the same activity or project under any other legislation granting fiscal incentive schemes; (
- c)all tax liabilities including amounts due in respect of FSS tax as well as social security contributions due up to the time of the application, except for any tax still in Further conditions. S.L. 372.22 6 [ S.L.123.71 REINVESTMENT TAX CREDIT (INCOME TAX) dispute, must have been settled or is being settled in accordance with a formal agreement drawn up with the Commissioner. Power of the Commissioner. Cap. 318. 8. Notwithstanding the other provisions of these regulations, the Commissioner shall have the right not to allow any reinvestment tax credits if any default is committed by the applicant in respect of any provision of the Act or the Social Security Act.