Chapter 123 | Europaius

In short

This law, called the Income Tax Act, establishes and regulates a tax on incomes. It outlines how income tax is imposed, calculated, and administered.

What it regulates

The imposition of income tax.
Exemptions from income tax.
Deductions that can be made from income.
The rate at which income tax is applied.

Who it concerns

Any person or body of persons earning income.
Companies, including those registered in Malta and certain foreign entities operating in Malta.

Key points

The Act defines various terms related to income tax, such as "company," "chargeable income," and "distributable profits."
"Company" includes limited liability companies, certain partnerships, European Economic Interest Groupings (EEIGs), and co-operative societies.
For cell companies, each cell and the non-cellular assets part are considered separate companies for tax purposes.
"Distributable profits" are allocated to specific accounts: final tax, immovable property, foreign income, Maltese taxed, and untaxed accounts.

Legal text

INCOM E TA X CHAPTER 123 INCOME TAX ACT To impose a Tax upon Incomes. Amended by: XVII. 1994.

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, XII, XXII, XXIII and XXXVII of 2014, XIII, XXI and XXXIII of 2015, XV of 2016, XVI of 2017, VII of 2018, VII of 2019, VIII of 2020 and VIII, XVIII of 2021, VII of 2022 , XII, XXVII and XXXV of 2023, XIII of 2024, IX of 2025 and III of
ARRANGEMENT OF ACT Part I. Part II. Part III. Part IV. Part V. Part VI. Part VII. Part VIII. Part IX. Part X. Part XI. Preliminary Imposition of Income Tax Exemptions Deductions Special Provisions Personal Deductions Rate of Tax Tax Rebate Persons Assessable Relief of Double Taxation Power to make Rules Articles 1-3 4-11 12-13 14-26 27-52 53-55 57-58 59-73 74-95 I N C O M E TA X PART I PRELIMINARY Short title. Interpretation. Amended by: V. 1958.2; XV.1958.2; XXV. 1960.2; XXV.1962.2,4,5; L.N. 46 of 1965; VIII.1969.2; XLIX.1974.2; LVIII.1974.68; XXII.1976.4; XXIV.1976.2; XXVI.1977.2; XXVIII. 1978.2; XXI.1980.2; IX.1983.2; XVIII.1993.2; XVII. 1994.4; XX.
2; XVII.1998.70; IX.1999.14; IX. 2001.21; II. 2002.42; II. 2003.7; II. 2007.3; IV. 2007.7; IX. 2007.2; L.N. 409 of 2007; I. 2010.10; IV. 2011.7; XXII. 2011.5; V. 2012.9; III. 2013.18; XIII. 2015.42; XV. 2016.
XVI. 2017.14; VII.2018.14; VIII.2020.13; XVIII.2021.14; VII.2022.17; XXXV.2023.13; III.2026.
The short title of this Act is the Income Tax Act. 2.

(1)In this Act, and in any rules made under this Act, unless the subject or context otherwise requires "a company registered in Malta" shall mean a company which is resident in Malta or a company which, although not resident in Malta, carries on any activity in Malta and in the case of a company which is neither incorporated nor resident in Malta shall mean a company that is registered for this purpose with the Commissioner in such manner as may be prescribed; "body of persons" means any body corporate, including a company, and any fellowship, society or other association of persons, whether corporate or unincorporate, and whether vested with legal personality or not; "bonus shares" means and includes the paid-up value of shares distributed by a company to its shareholders to the extent to which the paid-up value represents a capitalization of profits; "certified public auditor" means an individual who holds a warrant to act as auditor issued under the Accountancy Profession Act, or a partnership of auditors duly registered under the said Act, provided such individual is not disqualified and in the case of a partnership none of the partners is an individual who is disqualified for appointment as auditor or from holding such appointment on any of the grounds mentioned in article 153 of the Companies Act; "chargeable income" means the total income of any person for any year; "collective investment scheme" means any scheme or arrangement which is licensed under the Investment Services Act or notified in terms of the Investment Services Act (List of Notified AIFs) Regulations; "Commissioner" means the Commissioner for Tax and Customs; "Commonwealth" has the same meaning as is assigned to it in article 124 of the Constitution of Malta; "company" means (a) (i) a limited liability company constituted under the Companies Act or under the Commercial Partnerships Ordinance; or (ii) any other company constituted as such under any other law in force in Malta; (iii)

(1)any partnership en nom collectif and any INCOM E TA X partnership en commandite constituted under the Companies Act or under the Commercial Partnerships Ordinance;

(2)any partnership regulated by the applicable provisions of the Civil Code and registered in such manner as may from time to time be provided in terms of the Second Schedule to the Civil Code;

(3)any European Economic Interest Grouping (EEIG) formed pursuant to the provisions of the Companies Act (European Economic Interest Grouping) Regulations;

(4)* any Special Limited Partnership Fund established in accordance with the Investment Services Act (Special Limited Partnerships Funds) Regulations; and which partnership or EEIG as the case may be, has elected to be treated as a company in terms of article 27

(6)of the Income Tax Management Act and for as long as such election remains in force: Provided that in the case of a cell company as defined in any regulations made in terms of the Companies Act (hereinafter in this proviso referred to as "the Regulations") as these 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 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 Companies Act and of the Regulations: Provided further that a partnership en commandite with its capital divided into shares constituted prior to the 1st of January, 2015 shall be deemed to have elected to be treated as a company in terms of article 27

(6)of the Income Tax Management Act and for as long as such election remains in force; (

b)(
i)any body of persons constituted, incorporated or registered outside Malta, and of a nature similar to a company referred to in sub-paragraphs (
i)or (
ii)of paragraph (
a)above; *Applicable from year of assessment 2026. Vide Article 13

(2)of Act III of 2026. S.L. 386.08 S.L. 370.53. I N C O M E TA X (

ii)any body of persons constituted, incorporated or registered outside Malta and of a nature similar to any partnership referred to in sub-paragraph (iii) of paragraph (
a)above, where such body of persons has elected to be treated as a company in terms of article 27

(6)of the Income Tax Management Act and for as long as such election remains in force; (

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; "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 company, to its partners or shareholders, as the case may be, and any amount credited to them as partners or shareholders as the case may be; 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 entitles the shareholder to at least any two of the following rights (hereinafter referred to as "equity holding rights"): (
i)a right to votes; INCOM E TA X (
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; "exclusive economic zone area" shall have the same meaning as assigned to it in the Exclusive Economic Zone Act; "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 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 the Malta Financial Services Authority Act, and (
b)profits resulting from investments, assets or liabilities situated outside Malta to a company not registered under the Malta Financial Services Authority Act, and either licensed as a bank in Malta or in possession of a licence granted under the provisions of the Financial Institutions Act: Provided that, notwithstanding the provisions of article 92

(1)(b), with effect from the year of assessment 2016, this paragraph shall not be applicable to any company which is not specifically empowered to receive such profits or gains; and I N C O M E TA X (

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 pursuant to article 10 of the Income Tax Management Act and attributable to a permanent establishment (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 the Malta Financial Services Authority Act, from the 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 INCOM E TA X 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): (
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 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 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 I N C O M E TA X 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; "income" except for the purposes of article 4

(1)and Part IV shall include capital gains as defined in article 5; "the Income Tax Acts" shall collectively mean this Act and the Income Tax Management Act; "industrial building or structure" includes a building used as a hotel or a car park or offices, as may be prescribed. 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), or whose operation by any such person involves substantial activity, having regard to the capital employed, the organisation of the operation and the income that it generates, 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; (
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- INCOM E TA X 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 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 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 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, the continental shelf and any exclusive economic zone area; "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" refers to any of the spouses or partners in a married couple; I N C O M E TA X "married couple" refers to two spouses who contracted marriage or two partners who have registered their partnership as a civil union, in accordance with the legal provisions of the country where the marriage or civil union was executed; "participating holding" shall mean a holding which arises where: (
a)a company holds directly at least five percent of the equity shares of a company whose capital is wholly or partly divided into shares, which holding confers an entitlement to at least five 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 – INCOM E TA X (
a)a partnership or EEIG referred to in subparagraph (iii) of paragraph (
a)of the definition of "company" in sub-article

(1)of article 2 of the Act, not being a property partnership, and which has not elected to be treated as a company in terms of article 27

(6)of the Income Tax Management Act; or (

b)a body of persons referred to in subparagraph (
ii)of paragraph (
b)of the definition of "company" in sub-article

(1)of article 2 of the Act, not being a property partnership, and which has not elected to be treated as a company in terms of article 27

(6)of the Income Tax Management Act; or (

c)a collective investment vehicle constituted, incorporated or registered outside Malta and which is not resident in Malta, where the liability of investors 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 partnership, EEIG, body of persons or collective investment scheme as the case may be which entitles the holder to at least two of the following rights: (
i)a right to vote; (
ii)a distribution; and right to profits available for (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 and the reference to "company" in this definition and in the provisos thereto shall be deemed to include also such partnership, EEIG, body of persons or collective investment scheme as the case may be. 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 I N C O M E TA X 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; "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: INCOM E TA X 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

(2)and

(3)of article 10 of the Income Tax Management Act; "the Special Commissioners" means the Commissioners appointed by the President of Malta under article 34 of the Income Tax Management Act; "spouse" shall include a partner registered as being in a civil union; "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 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 42(1A) of 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) of the Income Tax Management Act, any income which is not I N C O M E TA X 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" m eans the p er iod 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 Act. Substituted by: XXXV. 1972.

Added by: XVII. 1994.
The administration of this Act shall be vested in the Commissioner, and the provisions of articles 3 and 4 of the Income Tax Management Act shall apply to the Commissioner in the exercise of his powers and functions under this Act. PART II IMPOSITION OF INCOME TAX Charge of Income Tax. Amended by: XXV. 1960.4; VIII. 1969.3; XXXV. 1972.3; XLII. 1975.2; XXVIII. 1978.4; IX. 1983.4; XIII. 1983.5; VIII. 1987.2; XXXI. 1988.2; XIX. 1989.3; XXXVI. 1990.2; XVIII. 1993.
Renumbered by: XVII. 1994.
Amended by: XVII. 1994.4; XX. 1996.3; XI. 2000.3; L.N. 238 of 2000 IX. 2001.22; II. 2003.8; II. 2004.7; L.N. 409 of 2007; XIII. 2015.
VII.2018.15;* XXXV.2023.
4.

(1)Subject to the provisions of this Act, income tax shall be payable at the rate or rates specified hereafter for the year of assessment commencing on 1st January, 1993 but only with respect to any capital gains made on or after the 25th November, 1992 and for each subsequent year of assessment upon the capital gains as defined in article 5 accruing or derived from Malta or elsewhere, and whether received in Malta or not, and for the year of assessmen t commencin g on 1st January, 1949 and for each subsequent year of assessment upon the income of any person accruing in or derived from Malta or elsewhere, and whether received in Malta or not in respect of (

a)gains or profits from any trade, business, profession or vocation, for whatever period of time such trade, business, profession or vocation may have been carried on or exercised including the profit arising from the sale by any person of any property acquired by him for the purpose of profit-making by sale, or from the carrying on or carrying out of any profitmaking 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 - *Applicable from year of assessment 2019. INCOM E TA X (
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 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; (
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; I N C O M E TA X (

iv)Added by: VII.2018.15* S.L.217.05 S.L. 460. 17 in the case of income or capital gains arising from activities carried out in an exclusive economic zone area, only activities which are licensed or otherwise authorised to be undertaken in accordance with the Exclusive Economic Zone Act shall be deemed to be carried out in Malta and the provisions of the Income Tax Acts shall apply accordingly. For the avoidance of doubt, transfers of assets situated within the exclusive economic zone area shall be deemed to have taken place in Malta and the provisions of articles 5 and 5A of this Act shall apply accordingly. Sohowever that items (
i)and (
ii)of this proviso shall not apply to an individual who is a long-term resident, or who holds a permanent residence certificate or a permanent residence card, in respect of any income derived by such individual in the year of being granted long-term resident status or the right of permanent residence and in subsequent years. The terms "long-term resident", "permanent residence certificate" and "permanent residence card" shall have the meaning assigned to them respectively in the Status of Long-Term Residents (Third Country Nationals) Regulations and the Free Movement of European Union Nationals and their Family Members Order. Sohowever also that paragraphs (
i)and (
ii)of this proviso shall not apply to an individual whose spouse is ordinarily resident and domiciled 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 *Applicable from the year of assessment 2019. INCOM E TA X 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 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 eit her i n r espect of the profi ts 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 I N C O M E TA X 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; (ii) to any capital sum exempt from tax under article 12

(1)(g). Profits or income prior to a change in residence or domicile. Added by: I. 2010.11. S.L. 386.12 4A. When a person (

i)changes his residence and becomes resident in Malta and he was at no time domiciled or 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 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. INCOM E TA X 5.

(1)(a) Capital gains derived by a person from the transfer of a capital asset shall be charged under article 4

(1). Notwithstanding anything contained in any other part of this Act, such gains shall be ascertained as laid down in this article and in such manner as may be prescribed. The capital gains to which the provisions of this article shall apply are: (

i)gains or profits arising from any transfer of the ownership or usufruct of any immovable property or the assignment or cession of any rights over such property; (
ii)gains or profits arising from the transfer of the ownership or usufruct of or from the assignment or cession of any rights over any securities, business, goodwill, business permits, copyright, patents, trademarks and trade-names and any 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 sub-article

(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 sub-article (9A) and from a transfer of value in securities as provided for in sub-article

(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; Capital gains. Added by: XVIII. 1993.4. Renumbered by: XVII. 1994.2. Amended by: XVII. 1994.7; XXII. 1995.2; XX. 1996.4; V. 1998.8; XVII. 1998.70; XI. 2000.4; IX. 2001.23; II. 2004.8; XIII. 2004.51; II. 2006.7; II. 2009.10; I. 2010.12; IV. 2011.8; V. 2012.10; L.N. 218 of 2012; III. 2013.19; XII. 2014.13; XIII. 2015.44; XXI. 2015.28; XV. 2016.13; XVI. 2017.15; XVIII.2021.15; VII.2022.18. (
b)In this article "partnership" means (
a)any partnership constituted under the Companies Act or under the Commercial Partnerships Ordinance, being either a commercial partnership en nom collectif or a commercial I N C O M E TA X 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; S.L. 386.08 (
d)a European Economic Interest Grouping (EEIG) formed pursuant to the provisions of the 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 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 sub-articles (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, or a transfer of property by the trustee of a disability trust or disability foundation to any one or more of the remaining beneficiaries of such trust or foundation or the heirs of the disabled beneficiary upon the death of the disabled beneficiary of such trust or foundation and where such remaining beneficiaries or heirs comprise only persons referred to in sub-article

(2)(e)(i); for the purposes of this article, the expressions ''disability trust'' and ''disability foundation'' shall have the meaning assigned to them in article 12

(1)(z); 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 as defined in article 2 of the Investment Services Act, INCOM E TA X 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 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 subparagraph (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 copartitioners, 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 I N C O M E TA X 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 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 copartitioner and the partition, and where such copartitioner 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 INCOM E TA X 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 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 I N C O M E TA X 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; (
g)in the case of a transfer of shares listed on a stock exchange recognised by the Commissioner for the purpose of this provision 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 INCOM E TA X considered as if two separate transfers were taking place; and (
c)the provisions of sub-article

(2)(d), (e), and (f) and shall apply mutatis mutandis to this sub-article.

(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).

(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, including land, transferred through the same deed with the principal residence, which the owner has for his own occupation and enjoyment with that residence as its garden or grounds consisting of an area which, regard being had to the size and character of the dwelling house, is required for the reasonable enjoyment of it as a residence. A garage attached to or underlying a house or a block of flats, or a garage of not more than seventy 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, holiday or study as well as any absences due to illness, or care in a hospital or home for the elderly, provided that the premises in question are not being used or employed for any other purpose during such absence. Any part of the house, garden or grounds which is used exclusively for commercial purposes for any time within two years of the transfer, or which is not required I N C O M E TA X for the reasonable enjoyment of it as a residence 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, garden or grounds: (
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 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 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, or in consequence of a listing, on a stock exchange recognised by the Commissioner for the purpose of this provision not being securities in a collective investment scheme; (
c)transfer of securities listed on a stock exchange recognised by the Commissioner for the purpose of this provision 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 sub-article

(1)(a)(v) shall not apply to gains or profits relating to property transferred in the circumstances referred to in sub-article

(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. INCOM E TA X

(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 sub-article 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 subparagraphs (
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 I N C O M E TA X 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 sub-article 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 stock exchange recognised by the Commissioner for the purpose of this provision. (
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 INCOM E TA X 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 subarticle (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 sub-article

(9), this sub-article 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 sub-article taken into account in determining whether the two companies referred to in this paragraph satisfied the provisions of sub-article

(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, sub-article

(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- I N C O M E TA X 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 sub-article 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 sub-article

(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 by the Commissioner for the purpose of this provision 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 sub-article

(2)(e), or a transfer causa mortis, such individual shall be deemed for all the purposes of this sub-article 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 sub-article

(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 sub-article, 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 higher. INCOM E TA X (
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 I N C O M E TA X (
iv)provisional tax payable in accordance with 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 sub-article

(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. INCOM E TA X

(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 I N C O M E TA X under the provisions of sub-article

(14): Provided also that this paragraph shall not apply where the said company is a company whose securities are listed on a stock exchange recognised by the Commissioner for the purpose of this provision: Provided also that this paragraph shall not apply where the transfer of value is made by the transferor to a person referred to in sub-article

(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 sub-article "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 sub-article 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 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. INCOM E TA X

(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 seventyfive 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 sub-article 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.

(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 sub-article

(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 established or evidenced by means of a written instrument it shall 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 Settlement of property. I N C O M E TA X provides that the beneficiaries are, in relation to each settlor, persons referred to in sub-article

(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 sub-article

(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 beneficial interest.

(19)(a) For the purposes of the provisions of sub-article

(1)(a)(iii), gains or profits shall be deemed to arise on the date of the execution of a written instrument (hereinafter in this sub-article 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 sub-article "taxable trust property" means property referred to in sub-article

(1)(a): 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 INCOM E TA X 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 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, any transfer of a beneficial interest in a trust which includes taxable trust property shall not take place and I N C O M E TA X 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). (
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 sub-article

(24). Transfers of property in the administration of trusts.

(20)(

a)Where, in the administration of a trust, the trustee transfers property of such trust, gains shall be 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 sub-article

(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 property settled on trust.

(21)(a) For the purposes of this article, property is distributed to beneficiaries of a trust when the trustee transfers 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). INCOM E TA X (

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 sub-article

(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 sub-article

(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 sub-article

(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 sub-article

(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 sub-article

(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 reverts where there is a transfer to a person who is the 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. Reversion of property to settlor. (
b)Where property which had been settled in trust in the circumstances described in sub-article

(18)reverts back to the settlor, notwithstanding the relevant deeming provisions of sub-article

(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 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 sub-article

(20)shall apply mutatis I N C O M E TA X m ut a nd i s i n t he c ir c u m s t a n c e s o f a r e v e r s io n o f property settled on trust as they apply to the transfer of property in the administration of a property of a trust. Subsequent transfers by settlors or beneficiaries.

(23)In the case of a subsequent transfer of property by a settlor or beneficiary, as the case may be (

a)where such property had reverted to such settlor; or (
b)where such property was beneficiaries, and where - distributed to the (
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 sub-article

(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 involving changes in trustees and particular commercial reasons.

(24)(

a)No transfer of the property shall be deemed to have taken place (
i)on the settlement of property consisting of 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; INCOM E TA X 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 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 sub-article

(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 so authorised to act as a trustee in terms of articles 43 and 43A of the Trusts and Trustees Act holds in its own 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. Transfers of shares involving fiduciary relationships. I N C O M E TA X (
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 43 and 43A of the Trusts and Trustees Act. (
c)For the purposes of this sub-article "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 Trusts and Trustees Act and "beneficial ownership" shall be construed accordingly. (
d)When the shares referred to in this sub-article 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 rules.

(26)The Minister may make regulations determining the method 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. Added by: II. 2006.

Amended by: II. 2007.4; IV. 2007.8; II. 2009.11; I. 2010.13; IV. 2011.9; V. 2012.11; L.N. 218 of 2012; III. 2013.20; XII. 2014.14; XIII. 2015.45; XV. 2016.14; XVI. 2017.
VII.2018.16; VII.2019.17; VIII.2020.14; VII.2022.19; XIII.2024.9; IX.2025.
5A.

(1)Notwithstanding any other provision of the Income Tax Acts, tax shall be chargeable and payable on any transfer to which this article applies in such amount, at such rate and in such manner as provided herein.

(2)(a) In this article, unless the context otherwise requires "own residence" has the meaning assigned to it in article 5

(5)(c); "project" means property that has been developed by the owner into more than one transferable unit or divided for transfer into more than one transferable portion: Provided that it shall not include land acquired by the owner and divided for transfer into more than one transferable portion, where the land is transferred by the owner in the same state as when acquired (i.e. no excavation or any other works whatsoever have been carried out on the property) and no permit has been issued by the Planning Authority during the period of ownership by the owner sanctioning the development of the land into more than one transferable unit. "property" means any immovable property situated in Malta and any right over such property; INCOM E TA X "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 sub-article (12A) of this article and any provision of article 5. Except as provided in sub-article (7A), 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. (
b)Saving the provisions of sub-article

(7), property assigned to a co-partitioner under a deed of partition shall be deemed to have been acquired by that copartitioner 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)The assignment of any right obtained in terms of a promise of sale of immovable property (konvenju), including a promise to alienate immovable property in any manner and a promise of an emphyteutical grant, shall not be treated as a transfer of property to which this article applies: Provided that the Minister may, by rules, prescribe: (
i)the conditions for the validity of any such assignment; (
ii)the deductions that may be allowed for the purpose of determining the income resulting from any such assignment; (iii) the tax chargeable on the income determined as aforesaid; (
iv)the time within which and the manner in which the tax so chargeable shall be paid.

(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 Transfers Act or of rules made under that Act by I N C O M E TA X 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 that transfer from the scope of this article: Provided that, where a transfer of property made not later than twelve years after the date of the acquisition thereof is made on or after the 1st January, 2015, an election as aforesaid, to exclude that transfer from the scope of this article, may only be made if the following conditions are satisfied: (
i)(
ii)(iii) a notice of a promise of sale or transfer relating to that property has been given to the Commissioner before the 17th November, 2014; the said property is transferred to the same person or persons appearing on the said promise of sale agreement; and the said property is transferred before the 1st January, 2016: Provided also 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 but before the 1st January, 2015, 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; INCOM E TA X (iii) notwithstanding the previous sub-paragraph (
ii)when an election as aforesaid has been made it shall not apply to transfers of property forming part of that project made by the said transferor on or after the 1st January, 2015 in respect of which a notice of a promise of sale or transfer relating to that property has not been given to the Commissioner in accordance with the provisions of article 3

(6)of the Duty on Documents and Transfers Act or of rules made under that Act before the 17th November, 2014: (

iv)notwithstanding the provisions of sub-paragraph (
i)of this proviso, in the case of a transfer of property that forms part of a project made on or after 1st January, 2015, where the first transfer of property forming part of such project is made on or after 1st January, 2015, an election as aforesaid may be made if a notice of a promise of sale or transfer relating to that property has been given to the Commissioner before the 17th November, 2014, so however that the provisions of sub-paragraph (
ii)of this proviso shall not apply where the first transfer of property forming part of a project is made on or after 1st January, 2015: 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 sub-article

(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 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 an election as aforesaid, to exclude that transfer of property situated within a special designated area from the scope of this article, may only be made in the case of a transfer that is made before the 1st January, 2015: Provided also that (
i)in a transfer that is made on or after the 1st I N C O M E TA X 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 but before the 1st January, 2015; 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; (iii) notwithstanding the previous sub-paragraph (
ii)when an election as aforesaid has been made it shall not apply to transfers of property situated within that special designated area made by the said transferor on or after the 1st January, 2015 in respect of which a notice of a promise of sale or transfer relating to that property has not been given to the Commissioner in accordance with the provisions of article 3

(6)of the Duty on Documents and Transfers Act or of rules made under that Act before the 17th November, 2014; (

d)a transfer in respect of which all the following conditions are satisfied: (
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 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 (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 INCOM E TA X 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 except for a transfer to which sub-article

(5)(c)(

ii)applies; (
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; (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 I N C O M E TA X 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: Provided also that, notwithstanding anything said in the Income tax Acts provisional tax paid relating to the transfer of such property made on or after the 1st January, 2015, under the provisions of article 43

(1)(b) of the Income Tax Management Act shall not be available for refund under article 48 of the said Act and the provisions of article 43

(4)(

b)of the said Act shall not apply to such transfer; (
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; (
j)a transfer of property forming part of a project made by a company which has issued debt securities to the public and such debt securities are listed on a stock exchange recognised, 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)an election as aforesaid may only be made if the transfer is the first transfer made by the said transferor, on or after 1st April, 2015, 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 and all such transfers shall accordingly be transfers to which this article shall not apply: Provided also that this paragraph shall only apply where the reason for the offer and use of proceeds, as disclosed in the prospectus published when the debt securities are offered to the public, is solely to develop and construct the said project.

(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

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AI explanation based on the official legal text. Indicative, not a substitute for legal advice.