descendant or ascendant, or, in the absence of any descendants in the direct line, to his brother INCOM E TA X or sister or to a descendant of his brother or sister, (ii) to a philanthropic institution approved for the purposes of article 12(1)(e):
\nProvided that on a subsequent transfer of the property by any person mentioned in subparagraph (i), the date of acquisition of the property shall be considered to be the date of the original acquisition of the property by the person who had made the original donation; (b) a donation deemed to have been made in terms of article 5(18)(b) or 5(21)(b)(ii) by a person to a person or institution mentioned in paragraph (a); (c) a transfer of property not forming part of a project, consisting of a dwelling house, that has been owned and occupied by the transferor as his own residence for a period of at least three consecutive years immediately preceding the date of transfer and provided that the property is disposed of within twelve months of vacating the premises or such other period or condition as may be prescribed and provided that such property is declared by the transferor to be his main residence through an election made to the Commissioner in such manner and subject to such rules as may be prescribed:
\nProvided that: (i) any period during which the transferor has occupied the property as his own residence with the permission of the Housing Authority pursuant to a promise of sale (konvenju) by that Authority shall be deemed to be a period during which the transferor owned that property; (ii) where the property was inherited by the transferor from a direct ascendant, the period during which the said ascendant had owned and occupied the property as his own residence shall be deemed to be a period during which the property had been owned by the transferor; (iii) where the transferor had acquired the property under an assignment to which paragraph (d) or (e) refers, the period during which the person making that assignment had owned the property and used it as his own residence shall be deemed to be a period during which the property had been owned by the transferor; (iv) where any condition for the exemption under this paragraph is satisfied in respect only of an undivided part of the property the exemption shall be restricted proportionately; (v) where the property was inherited by the transferor from his or her spouse, the period I N C O M E TA X (vi) (vii) during which the said spouse had owned and occupied the property as his or her own residence shall be deemed to be a period during which the property had been owned by the transferor; where at any time in the period of ownership there is a change in the dwelling house or the part of it which is occupied as the individual’s residence, whether on account of a reconstruction or conversion of a building or for any other reason, or there have been changes as regards the use of part of the dwelling house for the purpose of a trade, business or profession or for any other purpose, the relief given by this sub-article may be adjusted in such manner as the Commissioner may determine in an assessment; where the property has been owned and occupied by the transferor and his spouse as their residence for a period of at least three (3) years and, as a consequence of a divorce or a de jure or de facto separation, one (1) of the spouses ceases to occupy the property, the property shall only be treated as having been vacated if and when the other spouse also ceases to occupy the property as his sole ordinary residence; (d) the assignment of property between spouses consequent to a judicial or consensual separation or a divorce:
\nProvided that the provisions of this paragraph shall also apply where the property to be assigned is owned by a company which is fully owned by any or both spouses; (e) the assignment of property that formed part of the community of acquests between the spouses or was otherwise owned in common between them, to one of the spouses on the dissolution of the community, or the partition of such property between the spouses or the surviving spouse and the heirs of the deceased spouse:
\nProvided that on a subsequent transfer of the said property, the date of acquisition of the share assigned as aforesaid shall be the original date when the property was acquired by the two spouses; (f) a transfer of property from one company to another which, would qualify for tax relief under article 5(9) but for the provisions of this article:
\nProvided that the provisions of article 5(9)(ii) and (iv) shall also apply to the said transfer:
\nProvided further that if such transfer does not qualify for tax relief under article 5(9) solely for the reason that it is not a transfer of a capital asset, such transfer shall be exempt from tax under the provisions of this INCOM E TA X paragraph if the said transfer is part of a restructuring, involving the transfer of the whole or part of a company’s business to another company:
\nProvided also that on a subsequent transfer of the said property made within a period of twelve years after the date of the acquisition thereof as determined in accordance with the second proviso to sub-article
\nProvided that this paragraph shall not apply, and accordingly article 5(15) is not applicable, if the business is disposed of or ceases to exist, within a period of two years starting from the date the business is transferred to the said company or such shorter period as the Commissioner may determine:
\nProvided further that, for the purposes of determining whether the property has been transferred not later than twelve years from the date of its acquisition, under sub-article (3)(b), where the transferor is a company that had acquired the property by means of a transfer that qualified for an exemption in terms of this sub-article or article 5(15), it shall be deemed to have acquired the property on the date on which the property had previously been acquired by the person transferring the property to the said company; (h) the settlement of property on trust, or the distribution or reversion of property settled on trust, or the transfer of all the property of a trust involving only a change in the trustee of a trust and where there is no change in the beneficiaries or in the beneficial interest:
\nProvided that for the purposes of the provisions of article 5(18) to (25), it is deemed that in such instances, no transfer has taken place, or that no loss or gain has arisen; (i) except as may be otherwise prescribed, the transfer of property by a person whose income or capital gains from the transfer of that property is exempt from tax in terms of article 12(1), or an exemption order made under article 12(2), or any other provision of the Income Tax Acts or any other law; (j) A transfer of property by a company to its shareholder or to an individual related to its shareholder in the course of winding up or in the course of a distribution of assets pursuant to a scheme of distribution, where the said shareholder is an individual or his spouse, I N C O M E TA X who owns or own, directly or indirectly, not less than 95% of the share capital and voting rights of the said company transferring the property as aforesaid.
\nFor the purpose of this paragraph an individual is related to the said shareholder if such individual is his spouse, his descendant or ascendant in the direct line, or the spouse of any such descendant or ascendant, or, in the absence of any descendants in the direct line, his brother or sister or a descendant of his brother or sister:
\nProvided that this paragraph shall only apply where all the following conditions have been satisfied: (i) the said shareholder held, directly or indirectly, not less than 95% of the share capital and voting rights of the company transferring the property for a period exceeding five years immediately preceding the date of the transfer of the property as aforesaid; (ii) the said property consists of any immovable property, including land; (iii) the said property is held as a capital asset by the company and has been so held for a period exceeding five years immediately preceding the date of the transfer of the property as aforesaid:
\nProvided further that, on a subsequent transfer of the said property by the said shareholder or related individual, the provisions of sub-article (3)(b) shall not apply:
\nProvided also that on a subsequent transfer of the said property, the date of acquisition of the property shall be considered to be the date of the original acquisition of the property by the company:
\nProvided also that where the said property is subsequently transferred by the said shareholder or related individual, as the case may be, to a person referred to in sub-article (4)(a)(i), and such person subsequently transfers the said property within a period of five years from the date of its acquisition the provisions of sub-article (3)(b) shall not apply:
\nProvided also that every company resident in Malta shall allocate the distributable profits derived from a transfer to which this paragraph applies, and on which no tax is payable in accordance with this paragraph, to the final tax account.
\nINCOM E TA X Provided that in the case of transfers of property made on or after the 1st January, 2015, other than property forming part of a project as referred to in the second proviso to sub-article (3)(b) of this article and property situated within a special designated area as referred to in sub-article (3)(c) of this article in respect of which a notice of a promise of sale or transfer relating to the said property forming part of a project or situated within a special designated area 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 before the 17th November, 2014, the tax on a transfer to which this article applies shall be chargeable at the rate of 8% of the transfer value:
\nProvided that where a notice of a promise of sale or transfer relating to a property 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 is either cancelled after the said date or expired and, either the said property is transferred to the same person or persons appearing on the said promise of sale which has been cancelled or, another property forming part of the same project or situated within the same special designated area is transferred to the same person or persons appearing on the said promise of sale which has been cancelled or has expired, any of such transfers shall for the purpose of this article be deemed to be transfers in respect of which a notice of a promise of sale or 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 before the 17th November, 2014; (b) When a transfer to which this article applies is a transfer of property (i) that was acquired by the transferor in terms of a transfer causa mortis that happened after the 24 th November, 1992; or (ii) that was acquired by the transferor in terms of a donation made more than five years before the date of the transfer in question, the tax thereon shall be chargeable at 12% of the excess, if any, of the transfer value over its acquisition value:
\nProvided that this paragraph (b) shall not apply where the property transferred consists of a transfer of a property forming part of a project. For the purpose of this proviso ''project'' means property that was acquired by the transferor in the circumstances referred to in subparagraph (ii) above and which has been developed by the said transferor into more than one transferable property:
\nI N C O M E TA X Provided also that this paragraph (b) shall not 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:
\nProvided also that when a transfer to which this article applies is a transfer of property that was acquired by the transferor in terms of a donation made five years or less before the date of the transfer in question, the transferor shall be deemed for all the purposes of this sub-article (5) to have acquired such property on the date such property was previously acquired in an acquisition preceding the date of the donation:
\nProvided further that this paragraph (b) shall not apply to a transfer referred to in paragraph (c). (c) When a transfer to which this article applies is a transfer of property that was acquired by the transferor in terms of a transfer causa mortis and (i) the said acquisition causa mortis happened before the 25th November 1992; or (ii) the said acquisition causa mortis happened on or after the 25th November 1992, and the property is transferred by means of a judicial sale by auction, the tax thereon shall be chargeable at the rate of 7% of the transfer value. (d) Subject to the provisions of paragraphs (b) and (c), when a transfer to which this article applies is a transfer of property in the circumstances referred to in article 31C(1), the tax thereon shall be chargeable at the rate of 10% of the transfer value:
\nProvided that in the case of transfers of property referred to in this paragraph made on or after the 1st January 2015 and before the 1st January 2016 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 the tax thereon shall be chargeable at the rate of 7% of the transfer value. The second proviso to paragraph (a) of this sub-article shall apply accordingly. (e) When a transfer to which this article applies, made on or after the 1st January, 2015, is a transfer of property not forming part of a project that is made not later than five years after the date of the acquisition thereof, the tax thereon shall be chargeable at the rate of 5% of the transfer value:
\nProvided that, for the purposes of determining whether the property has been transferred not later than five INCOM E TA X 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) (\"intragroup 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:
\nProvided also that this paragraph (e) shall not apply where the said property was, at any time within the period of five years preceding the transfer, owned by a person related to the transferor and the property formed part of a project at such time:
\nProvided further that, unless the transferor had acquired the property for the purpose of establishing therein or constructing thereon his sole ordinary residence and declared such intention in the deed of acquisition for the purposes of article 32(4)(a) of the Duty on Documents and Transfers Act, this paragraph (e) shall not apply if, at any time during the period of five (5) years preceding the transfer, the transferor, or a person related to the transferor, carried out on that property any works for which a development permission was required in terms of the Development Planning Act but excluding any works for which a permission is granted without the need for an application in terms of an order made under that Act.
\nFor the purpose of these provisos (i) (ii) (f) an individual is deemed to be related to the transferor if the transferor is a body of persons of which the said individual is, directly or indirectly, a shareholder, partner or member; and two bodies of persons are deemed to be related persons if they are, directly or indirectly, controlled or beneficially owned as to more than twenty-five percent by the same persons.
\nNotwithstanding the previous paragraphs (a), (d) and (e) when a transfer to which this article applies, made on or after the 1st January, 2015, is a transfer of property that was acquired by the transferor before the 1st January, 2004 and 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, the tax on a transfer to which this article applies shall be chargeable at the rate of 10% of the transfer value. The second proviso to paragraph (a) of this sub-article shall apply accordingly. In the case where such notice of promise of sale has been given before the 17th November, 2014, the tax chargeable shall be at the rate I N C O M E TA X of 12% of the transfer value:
\nProvided that, for the purposes of determining whether the property has been acquired by the transferor before the 1st January, 2004, 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. (g) When a transfer to which this article applies, made on or after the 1st January, 2015, is a transfer of property that was immediately before the transfer owned by an individual, or co-owned by two individuals, who 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 the said property had been acquired for the purpose of establishing therein or constructing thereon his or their sole ordinary residence, and the transfer is made not later than three years after the date of the acquisition thereof, the tax thereon shall be chargeable at the rate of 2% of the transfer value:
\nProvided that this paragraph shall only apply where the said individual does not own any other residential property at the time of the transfer. The notary who receives any deed of such a transfer shall record in the deed a written declaration by the individual so transferring that he does not own any other residential property at the time of the transfer and the notary shall warn the said individual of the importance of the truthfulness of such declaration. (h) Notwithstanding paragraphs (a), (e) and (f), when a transfer to which this article applies is a transfer of property situated in an urban conservation area or scheduled by the Malta Environment and Planning Authority (MEPA) in terms of article 81 of the Environment and Development Planning Act, and the transferor declares to the notary receiving the deed of the transfer that he has carried out works on that property in compliance with a permit issued by MEPA providing for the restoration and, or rehabilitation of that property upon an application for that purpose that was filed with MEPA on or after 1 January 2015, the tax on the transfer shall be chargeable at the rate of 5% of the transfer value if the following conditions are satisfied: (i) the transfer is made on or after the 1st January 2016; (ii) the provisions of this paragraph or of paragraph INCOM E TA X (d) were not applied in respect of any previous transfer of the same property; (iii) the restoration and, or rehabilitation works have been certified by MEPA as having been completed in compliance with the relative permit; (iv) (v) *† the certificate referred to in sub-paragraph (iii) is produced to the notary who receives the deed of the transfer and the notary produces a certified copy of the certificate to the Commissioner together with the notice required by article 51 of the Duty on Documents and Transfers Act; the person who transfers the property submits any forms and documentation that the Commissioner may require in connection with the said works and with the transfer. (i)(i) When a transfer that is made on or after 1 January 2022 is a transfer of property that had been leased for a period of at least ten (10) years ending on the date of the transfer, and during that whole period of ten (10) years the tenant was entitled to a benefit in respect of that lease under the Private Rent Housing Benefit Scheme, the Nikru Biex Nassistu Scheme or the Rehabilitation of Vacant Dwellings for Rent Scheme administered by the Housing Authority, and that transfer is made to the tenant of that property, no tax
\nshall be chargeable on the first two hundred thousand euro (€200,000) of the transfer value and the tax on the excess, if any, shall be chargeable at the normal rate. (ii)When a transfer satisfies the conditions of subparagraph (i) except only that it is not made to the tenant but to another person, the tax on the first two hundred thousand euro (€200,000) of the transfer value shall be chargeable at the rate of one half of the normal rate and the tax on the excess, if any, shall be chargeable at the normal rate. (iii)When a transfer satisfies the conditions of subparagraph (i) except only that the period of the lease and, or the period during which the tenant was entitled to the said benefit was less than ten (10) years but not less than three (3) years, the tax on the first two hundred thousand euro (€200,000) of the transfer value shall be chargeable at the rate of one half of the normal rate and the tax on the excess, if any, shall be chargeable at the normal rate. *Applicable from year of assessment 2023. †Applicable from year of assessment 2025. Vide Regulation 8 (2) (a) of Act XIII of 2024.
\nI N C O M E TA X (iv) * This paragraph shall apply only if the parties to the transfer or any of them produces to the notary who publishes the deed of the transfer a document issued by the Housing Authority certifying the period during which the tenant of the lease of the property had been entitled to a benefit in respect of that lease under the Private Rent Housing Benefit Scheme, the Nikru Biex Nassistu Scheme, or the Rehabilitation of Vacant Dwellings for Rent Scheme, as the case may be. The notary shall make a reference to that document in that deed and shall produce that document to the Commissioner together with the notice of the transfer referred to in article 51 of the Duty on Documents and Transfers Act. (v) For the purpose of this paragraph, \"normal rate\" means the rate of tax that would be chargeable on the relevant value of the transfer in terms of this article were it not for the provisions of this paragraph.
\nThat purchase shall be deemed to be made on the date of the partition for a consideration equivalent to the owelty. (7A) (a) When the property that is partitioned consists of or includes property that was acquired by the partitioners from a person (\"the original owner\") who was, in respect of that transfer, exempt from tax in terms of sub-article (4)(c) or of article 5(5)(b), each of the partitioners shall be deemed to transfer a portion of that property equivalent to his undivided share in that property. *Applicable from year of assessment 2025. Vide Regulation 8 (2) (a) of Act XIII of 2024.
\nINCOM E TA X (b)For the purposes of this article, the transfer that is deemed to take place upon a partition in accordance with paragraph (a) shall be deemed to be a sale of property for its market value and the transferor shall be deemed to have acquired that property on the date on which it had been acquired by the original owner. Any subsequent transfer shall be deemed to be a transfer of property that had been purchased on the date of the partition.
\nThe said distributable profits shall be determined in such manner as may be prescribed. (e) Any party to a transfer to which this article applies or to a promise of sale relating to such a transfer shall furnish the Commissioner with such particulars relating to that transfer as the Commissioner may require or as may be prescribed.
\nProvided that an order that is made solely on account of the fact that the market value of the property in question is higher than the transfer value declared in the deed (i) may only be made if the declared transfer value is less than eighty-five per cent of the market value; and (ii) may not be made later than twelve months after the date on which the transfer is notified to the Commissioner. (e) The additional tax referred to in paragraph (c) shall be equivalent to the difference between the amount of tax payable as declared in the deed and the amount of tax payable in accordance with the order referred to in paragraph (c). (f) The additional tax referred to in paragraphs (c) and (e) shall be payable by the transferor in addition to the tax which is payable on the transfer value of the property in accordance with the other provisions of this article. (g) If any amount of tax due in accordance with this article is not remitted to the Commissioner within the time set out in sub-article (11), interest shall be charged thereon at the rate of one per cent per month or part thereof for the period ending on the day on which that amount is remitted:
\nProvided that, for any period or part thereof commencing on or after 1st January 2009, interest shall be calculated at the rate of point seven five percent (0.75%) per month or part thereof and the total interest shall not exceed the said amount of tax:
\nProvided further that for any period or part thereof commencing on or after 1st January 2014 interest shall be calculated at the rate established by the provisions of article 44(2A) of the Income Tax Management Act and the total interest shall not exceed the said amount of tax. (h) Saving the other provisions of this article, the provisions of the Income Tax Acts relating to the collection and remission of the tax, interest and additional tax shall apply to any tax, interest and additional tax due under this article as if the tax, interest and additional tax referred to in the said provisions included also the tax, interest and additional tax chargeable and payable under this article. (i) A transferor who disagrees with an order served upon him under paragraph (c) shall have the same rights to object to that order and to appeal from a decision of the Commissioner refusing that objection as if that order were an assessment issued under the Income Tax I N C O M E TA X Management Act and the relevant provisions of that Act relating to objections and appeals shall apply mutatis mutandis. (12A)(a) If a company (\"the chargeable company\") owns p r o p e r t y w h i c h h a d b e e n ac q u i r e d f r o m an o t h e r company and such acquisition was exempt from tax under sub-article (4)(f) or article 5(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 sub-article to a company ceasing to be a member of a group of companies do not apply to cases where a company ceases to be a member of a group by being wound up or dissolved or in consequence of another member of the group being wound up or dissolved:
\nProvided that where a company ceases to be a member of the original group by being wound up or dissolved, for the purpose of determining whether the chargeable company ceases to be a member of the original group under paragraph (b), such company shall be deemed to have remained in existence. (b) The chargeable company shall cease to be a member of the original group, if such company and the company from which it had acquired the property referred to in paragraph (a) no longer satisfy the provisions of article 5(9)(i) and (iii) and such determination shall be made by reference to the same individuals referred to in paragraph (iii) of the said article taken into account in determining whether the two companies referred to in this paragraph satisfied the provisions of article 5(9)(i) and (iii) on the date of the acquisition referred to in paragraph (a):
\nProvided that where the acquisition referred to in paragraph (a) took place before the 1st January 2010, article 5(9)(iii) shall be disregarded for the purpose of determining whether a company ceases to be a member of a group:
\nProvided further that where the chargeable company ceases to be a member of the original group, solely as a result of a change in the direct or indirect individual shareholders of the company from which it had acquired the property referred to in paragraph (a), the chargeable company shall, for the purpose of this paragraph, not be treated as ceasing to be a member of the original group as a result of such change, so however that for the purpose of determining whether the chargeable company ceases to be a member of the original group it shall be deemed that such change had not taken place and such determination shall be made by reference to the same individuals referred to in article 5(9)(iii) taken into account in determining whether the chargeable company and the company INCOM E TA X from which it had acquired the property satisfied the provisions of article 5(9)(i) and (iii) on the date of the acquisition referred to in paragraph (a). (c) For the purpose of this 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 article 5(9)(i) and (iii) had been satisfied on the date of the acquisition referred to in paragraph (a):
\nProvided that where the two companies referred to in paragraph (b) are directly or indirectly owned as to eighty percent or more by a company whose securities are listed on a stock exchange recognised 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 paragraph (a):
\nProvided also that where an individual acquires shares consequent to a judicial or consensual separation, in terms of a donation, exempt from tax under the provisions of article 5(2)(e), or a transfer causa mortis such individual shall be deemed for all the purposes of this sub-article to have held such shares from the date such shares were previously acquired in an acquisition preceding the date of the judicial or consensual separation, donation or the transfer causa mortis. (d) When the chargeable company ceases to be a member of the group it shall be treated for all the purposes of this article as if, immediately after its acquisition of the property referred to in paragraph (a), it had transferred and immediately re-acquired the property at that time and the transfer value to be taken into account is the value at which the chargeable company had acquired the said property from the group company in an acquisition to which sub-article (4)(f) applies. (e) The tax on a transfer to which this sub-article applies shall be charged at the rate of eight percent (8%) of the transfer value as established in paragraph (d): provided that the said rate shall be ten percent (10%) if the acquisition of property referred to in paragraph (c) occurred before the 1st January, 2004. (f) Tax chargeable under this sub-article shall be due by the chargeable company and shall be remitted to the Commissioner within fifteen working days from the date on which such company ceases to be a member of the group as provided in paragraph (b). (g) Where in accordance with paragraph (d) the I N C O M E TA X chargeable company is treated as having transferred and immediately reacquired the property, the tax chargeable on the deemed transfer in accordance with paragraph (f) shall be treated as being due not by the chargeable company but by a related company (\"company A\") if: (i) company A is incorporated in Malta; (ii) a joint election under this paragraph is made by the chargeable company and company A to treat the tax chargeable on the deemed transfer as being due by company A; (iii) such joint election is made by notice given to the Commissioner not later than fifteen working days from the date on which the chargeable company ceases to be a member of the group as provided in paragraph (b); and (iv) the tax chargeable referred to in paragraph (f) is paid by company A within the period referred to in the said paragraph.
\nFor the purpose of this paragraph company A is related to the chargeable company if both companies form a group for the purposes of article 5(9) at the time the original group ceases to exist. (12B) Where, under the provisions of article 14(1)(f) and (j) any deduction has been allowed in any year of assessment in respect of any property in ascertaining the total income of any person, and before the source of income in respect of which the deduction has been allowed has ceased to belong to the said person, any of the events set out in article 24(1) occurs in the year immediately preceding the year of assessment in the case of any such property in respect of which any deduction has been allowed as aforesaid, notwithstanding any other provision of this Act, such person shall render to the Commissioner at the same time as he renders his tax return under article 10 of the Income Tax Management Act, a balancing statement in respect of the property in question in the manner set out in article 24(1) and the other sub-articles of article 24 shall apply accordingly in respect of such balancing statement. For the avoidance of doubt, any balancing charge resulting from the balancing statement shall be charged to tax at the rates applicable to the particular person in terms of article 56.
\nAdded by:
\nXVII. 1994.8.
\nAmended by:
\nXVII. 1998.70;
\nL.N. 409 of 2007;
\nI. 2010.14;
\nV. 2012.12;
\nXIII. 2015.46.
\nI N C O M E TA X services expatriate or insurance expatriate.
\nYear of assessment 1973.
\nAdded by:
\nXXXV.1972.4.
\nAmended by:
\nXXXI. 1988.3;
\nXXXVI.1990.3.
\nRenumbered by:
\nXVII. 1994.2.
\nAmended by:
\nXVII. 1994.9.
\nProvided that the personal deductions for the year of assessment 1973 shall in any such case be increased by an amount equal to what would have been the individual’s chargeable income for the said year but for the provisions of this sub-article.
\nAdded by:
\nXXXV.1972.5.
\nAmended by:
\nXX.1973.2;
\nXXVI.1977.4;
\nIX.1983.5;
\nXIII.1983.4,5.
\nRenumbered by:
\nXVII. 1994.2.
\nAmended by:
\nXVII. 1994.10;
\nL.N. 409 of 2007.
\nCap. 239 Revoked.
\nI N C O M E TA X distinct from any other chargeable income for the said year of assessment.
\nCap. 239 Revoked.
\nCap. 239 Revoked.
\nCap. 239 Revoked.
\nProvided that nothing in this article contained shall be deemed to empower the Commissioner to charge to tax any holding in a bearer account with any bank except by way of an assessment raised on the person holding the title to such an account.
\nProvided that in such cases nothing in this Act contained shall prevent the Commissioner from raising an assessment on such income at any time in accordance with the provisions of the other articles of this Act.
\nAdded by:
\nXX. 1973.3.
\nRenumbered by:
\nXVII. 1994.2.
\nAmended by:
\nXVII. 1994.11.
\nI N C O M E TA X (b) the income accrued to or was derived by any person other than a company.
\nSpontaneous declaration of undeclared income.
\nAdded by:
\nXXII.1995.3.
\nAmended by:
\nXX.1996.5;
\nL.N. 409 of 2007.
\n9A. (1) Notwithstanding any other provision of the Income Tax Acts, a person, apart from the return for the year of assessment 1995, may present a spontaneous declaration on the prescribed form and the income of that person falling under articles 4 and 5 for the years of assessment prior to the said year of assessment shall be deem ed to be the i ncome as arrived at under the follow ing provisions of this article.
\nProvided that where a person was in any of the years of assessment 1991 to 1994 not registered as a taxpayer and had no income liable to tax under this Act, he shall under paragraphs (a) to INCOM E TA X (d) hereof, only declare that he received no income for the years of assessment therein referred to previous to the year of assessment in which he first became liable to tax under this Act.
\nProvided that: (i) where in respect of any year of assessment the income of that person has been arrived at in an assessment which is final and conclusive the income so arrived at shall be deemed to be the income so declared; and (ii) where any income falling under article 4(1) has been or is reported by an employer or other person paying the income to the Commissioner in any return required for the purposes of the Deduction of Tax (PAYE) Rules, 1972, or in accordance with such rules ought to be so reported, such income shall be deemed declared by such person; (b) the assessment for the relative year of assessment shall be raised on the basis of the income declared or deemed declared in accordance with paragraph (a) hereof:
\nProvided that in the case where a return was not submitted to the Commissioner by the 31st March 1995, the assessment for the relative year of assessment shall be raised on the following basis: (i) If the return is in respect of any of the years of assessment 1991 to 1994, the income for the relative year of assessment shall subject to the provisions of paragraph (a)(ii) hereof be considered to be that declared by such person in the relative return or the income determined in accordance with sub-article (2), whichever is the higher; (ii) If the return is in respect of a year of assessment prior to year of assessment 1991, the income for the relative year of assessment shall subject to the provisions of paragraph (a)(ii) hereof be considered to be that declared by such person in the relative return or a sum equal to the income determined in accordance with sub-article I N C O M E TA X
\nProvided that: (a) where in respect of a year of assessment the income falling under article 4(1)(a) as declared in accordance with sub-article (4) is a loss, such income shall for the purposes of this article be deemed to be nil; and (b) where in respect of a year of assessment the income declared in accordance with sub-article (4) falling under article 4(1) (excluding investment income as defined in article 41 or capital gains falling under article 5) is greater than the income declared under sub-article (2) in respect of the same year of assessment, the income declared in accordance with sub-article (4) shall be deemed to be equal to that declared under sub-article (2) in respect of the same year of assessment.
\nINCOM E TA X
\nProvided that a person shall have a right of objection and appeal as laid down in articles 33, 35 and 37 of the Income Tax Management Act against a notice of assessment issued in accordance with sub-article (11).
\nAssets registered under the Investment Registration Scheme.
\nAdded by:
\nII. 2002.43.
\nAmended by:
\nIX. 2005.7;
\nIX. 2007.3;
\nXXIII. 2014.8.
\nCap. 123 and 372.
\n9B. (1) In this article: \"relevant laws\" means the Income Tax Acts, the Succession and Donation Duties Ordinance (Cap. 70 of the revised edition of the Laws of Malta, 1942), the Death and Donation Duty Act, the Duty on Documents Act and the Duty on Documents and Transfers Act; \"qualifying asset\" means an asset that is registered in accordance with a scheme made under article 39 of the Exchange Control Act or article 11 of the External Transactions Act; \"tax\" means any tax or duty chargeable under any provision of the relevant laws.
\nProvided that if such person, after the date of registration of those eligible assets (or income therefrom) continues for a period after the declaration to take that benefit, exemption or advantage without being entitled thereto, such person shall be considered as never having been exempted from liability for the offence, and shall forfeit the right not to refund any benefit, exemption or advantage acquired before the registration:
\nProvided further that nothing in this article shall be construed as exempting any person from refunding any benefit, exemption or other advantage demanded to be paid back by the competent authority before the making of such declaration:
\nProvided also that in the case of a qualifying asset that is registered under the Investment Registration Scheme Regulations, 2014, made under the External Transactions Act, the references to the dates \"31st March, 2005\" and \"1st January, 2005\" in sub-article (2) and \"31st March, 2005\" in sub-article (3) shall be construed as references to \"4th November, 2013\", \"1st January, 2013\" and “31st May, 2014”, respectively.
\nProvided also that in the case of a qualifying asset that is registered under the Special Registration Scheme Regulations, made under the External Transactions Act, the references to the dates \"31st March, 2005\" and \"1st January, 2005\" in sub-articles S.L. 233.10 I N C O M E TA X
\nProvided that the Commissioner, upon being satisfied that the said person was prevented from submitting the said Certificate within such period owing to absence from Malta, sickness or other reasonable cause, may extend the period as may be reasonable in the circumstances.
\nBasis of assessment.
\nRenumbered by:
\nXVII. 1994.2.
\nAccounting periods.
\nAmended by:
\nXXII.1976.4.
\nSubstituted by:
\nXXVI.1977.5.
\nAmended by:
\nIX. 1981.2.
\nRenumbered by:
\nXVII. 1994.2.
\nAmended by:
\nXIII. 2015.47.
\nINCOM E TA X (b) commercial partnership en nom collectif, or commercial partnership en commandite which has not elected to be treated as a company in terms of article 27(6) of the Income Tax Management Act; (c) body corporate established by law; (d) undertaking required by article 30(7)(d) to be dealt with as a separate body of persons.
\nI N C O M E TA X
\nEXEMPTIONS Exemptions.
\nAmended by:
\nXX. 1955.2;
\nXV.1958.2;
\nXXV. 1960.5;
\nXXIV. 1961.2;
\nXXV. 1962.2,4;
\nL.N. 4 of 1963;
\nX. 1963.2;
\nXIV. 1963.2;
\nXXXI. 1966.2;
\nXXVII. 1967.20;
\nVIII. 1969.4;
\nXLIX. 1974.3;
\nXLII. 1975.3;
\nXXII. 1976.4;
\nXXXIX. 1976.8;
\nXXVIII. 1978.5;
\nXXI. 1980.3;
\nIX. 1981.3;
\nIX. 1983.6;
\nXIII. 1983.5;
\nXIV. 1984.3;
\nVIII. 1987.3;
\nXXXI. 1988.4;
\nXIX. 1989.4;
\nXXXVI. 1990.4;
\nVIII. 1991.2;
\nXIII. 1992.2.
\nRenumbered by:
\nXVII. 1994.2.
\nAmended by:
\nXVII. 1994.12;
\nXX. 1996.6;
\nXVII. 1998.70;
\nIX. 2001.24;
\nII. 2002.44;
\nII. 2003.9;
\nII. 2004.9;
\nII. 2007.5;
\nIV. 2007.9;
\nXVII. 2009.45;
\nI. 2010.15;
\nIV. 2011.10;
\nV. 2012.13;
\nL.N. 218 of 2012;
\nIII. 2013.21;
\nXII. 2014.15;
\nXXII. 2014.13;
\nXXXVII. 2014.2;
\nXIII. 2015.48;
\nXV. 2016.15.
\nCap. 370;
\nXVI. 2017.17;
\nVII.2018.17;
\nVII.2019.18;* VIII.2020.15;
\nXVIII.2021.16;
\nVII.2022.20;
\nIII.2026.15.
\nProvided that the exemption under this subparagraph shall not apply in respect of any year in which the said person is engaged in trade or business in Malta through a permanent establishment situated therein and where the royalties or the debt claim in respect of which the interest, discount or premium, is paid are effectively connected with such permanent establishment; (ii) any gains or profits accruing to or derived by any person not resident in Malta on a transfer of, or on a transfer of any rights over, any units in a collective investment scheme as defined in article 2 of the Investment Services Act, any units and other such like instruments relating to linked long term business of insurance, including the surrender or maturity of linked long term policies of insurance, any interest in a partnership which is not a property partnership and any shares or securities in a company (which for the avoidance of doubt includes redemption, liquidation or cancellation) which is not a property company and for the purpose of this paragraph the word \"transfer\" shall have the same meaning assigned to it under article 5(1)(b):
\nProvided that the beneficial owner of the interest, royalty, gain or profit, as the case may be, is a person not resident in Malta and such person is not owned and controlled by, directly or indirectly, nor acts on behalf of an individual or individuals who are ordinarily resident and domiciled in Malta; (iii) (A) any dividend paid by a company registered in Malta to an individual out of profits *Applicable from year of assessment 2020.
\nINCOM E TA X allocated to the any of the taxed accounts, other than the final tax account and the untaxed account, where such individual’s chargeable income, excluding such dividend, is equal to or exceeds the relevant threshold:
\nProvided that, in the case where such individual is entitled to claim a deduction against a dividend declared in a tax return, the amount or portion of such dividend, up to the amount of the said deduction, shall not be exempt from tax:
\nProvided further that in the case where the said individual’s chargeable income excluding such dividend is less than the relevant threshold, the amount or portion of such dividend to be exempt from tax shall be an amount determined by deducting from his chargeable income the relevant threshold:
\nProvided also that the preceding proviso shall not apply where the said individual’s chargeable income does not exceed the relevant threshold. (B) Any dividend or part thereof, exempt from tax under paragraph (iii)(A), shall, for the purpose of paragraph (a) of the last proviso to article 60 and paragraph (a) of the last proviso to article 48(1) of the Income Tax Management Act, be a dividend to which the said paragraphs refer. (C) For the purpose of article 12(1)(c)(iii): (a) Where such individual has more than one such dividend, the aggregate amount of such dividends shall be treated as one dividend; (b) ''Relevant threshold'' is as follows: (i) in the case where the rates prescribed under article 56(1)(a) apply, the relevant threshold is €28,700; (ii)* in the case where the rates prescribed under article 56(1)(b)(i) apply, the relevant threshold is €19,500; (iii)† in the case where the rates *Amendment applicable from the year of assessment 2027. Vide Article 13(2) of Act III of 2026. †Amendment applicable from the year of assessment 2027. Vide Article 13(2) of Act III of 2026.
\nI N C O M E TA X prescribed under article 56(1)(b)(ii), (iv) and (v) apply, the relevant threshold is €21,200:
\nProvided that this sub-paragraph (iii) shall not apply in the case of dividends arising out of shares listed on a stock exchange recognised by the Commissioner for the purpose of this provision and distributed to an individual whose holding of such shares in a company represents less than 0.5% of the paid-up share capital of the said company:
\nProvided also that the preceding proviso shall only apply to distributions of dividends made out of profits derived in the year preceding the year of assessment 2018 or later; (d) the income of any retirement fund or retirement scheme licensed, registered or otherwise authorized under the Special Funds (Regulation) Act or any Act replacing the said Act or derived by a company from long term contracts of insurance that are treated as qualifying personal retirement schemes or qualifying occupational retirement schemes in terms of the provisions of such rules as may be prescribed, other than income from immovable property situated in Malta; (e) the income of any institution, trust, bequest or foundation, of a public character, and of any other similar organization or body of persons, also of a public character, which is engaged in philanthropic work and either qualifies for exemption under this paragraph in accordance with rules made for this purpose by the Minister responsible for finance under article 96 or is named by the said Minister as engaged in philanthropic work for the purposes of this paragraph and there is not in respect of it a declaration by the said Minister that it has ceased to be so named; (f) the income of any political party including the income of clubs adhering to political parties; (g) wound and disability pensions granted in respect of wounds or disabilities caused by war and any pensions granted to dependent relatives of members of the armed forces of the Commonwealth killed on war service; (h) any capital sum received by way of commutation of pension (up to a maximum of thirty percent (30%) of the total pension), retiring or death gratuity or received as consolidated compensation for death or injuries; (for the purposes of this paragraph, ''total pension'' INCOM E TA X means the total value of the pension available to provide pension payments):
\nProvided that in the case of commutation of pensions in relation to retirement schemes, licensed, registered or otherwise authorised under the Special Funds (Regulation) Act or any Act replacing the same, the maximum capital sum that may benefit from this exemption shall, unless provided otherwise by means of rules prescribed by the Minister, be as provided under that Act, including any regulations or directives issued thereunder; (i) the income arising from a scholarship held by a person receiving full time instruction at a university, college or similar educational institution:
\nProvided that this paragraph shall not apply to income, by whatever name called, paid out of funds disbursed or otherwise provided by the employer of the recipient which the recipient would have received by reason of his employment if he had not held such scholarship; and any income to which this paragraph does not apply shall be deemed to be income chargeable to tax in accordance with the provisions of article 4(1)(b); (j) the income of any trade union registered under the Employment and Industrial Relations Act in so far as such income is not derived from a trade or business carried on by such trade union; (k) the profits of a non-resident shipowner as defined in article 28, provided that the country to which such non-resident shipowner belongs extends a similar exemption to shipowners who are not resident in such country but who are resident in Malta; (l) the income of a club or similar institution which the Commissioner is satisfied is organised and operated exclusively for social welfare, civic improvement, pleasure or recreation, or for any other purpose except profit, no part of the income of which is payable to, or is otherwise available for the personal benefit of, any proprietor, member or shareholder, so long as such club or similar institution is not deemed to carry on a business in accordance with article 4(4); (m) Repealed by Act XX of 1996. (n) the income of a philharmonic society which the Commissioner is satisfied constitutes a bona fide band club, provided that such society has regular premises registered with the Police as a club and that such premises are in daily use as a place of resort by its members; (o) the income of a club or similar institution which the Commissioner is satisfied constitutes a bona fide I N C O M E TA X sports club, provided that no part of the income of which is payable to, or is otherwise available for the personal benefit of, any proprietor, member or shareholder, and provided also on winding up of such club or institution, no funds are distributed or available to such proprietor, member or shareholder; (p) any dividend paid by a company whose main source of income in the relevant year is charged at the rate provided for in article 56(13) in respect of a Contractor; (q) the income of a co-operative society; (r) such subsidy as may be prescribed related to the Common Agricultural Policy or to any other similar scheme introduced in accordance with international or supra-national agreements; (s) the income of a collective investment scheme other than income from immovable property situated in
\nMalta and investment income to which article 41A(a) refers; (t) (i)any financial assistance, as determined by the courts of a European Union or a European Economic Area (hereinafter \"EU/EEA\") Member State or by the courts of another country as the Commissioner may approve or as agreed by a public deed of personal separation under the authority of the courts of a EU/EEA Member State or by the courts of another country as the Commissioner may approve, or as ordered by the courts of a EU/EEA Member State in a divorce judgment or decree or by the courts or other authorities of another country as the Commissioner may approve, received by an individual from his estranged spouse in respect of the maintenance of a child; (ii)any financial assistance received by the parent of a child in respect of the maintenance of that child and paid by the other parent in terms of a public deed regulating the obligations of the parents for the maintenance of that child. (u) (1) any income or gains derived by a company registered in Malta from a participating holding or from the transfer of such holding, where the taxpayer has not shown such income or gain as part of his chargeable income in the return made pursuant to article 10 of the Income Tax Management Act:
\nProvided that with respect to a dividend derived from a participating holding acquired on or after 1 January 2007 the exemption contemplated by this paragraph shall only apply when the conditions set out in either paragraph (i) or paragraph (ii) are satisfied: (i) where the body of persons in which the participating holding is held satisfies any one of the following conditions, that is to say:
\nINCOM E TA X
\nProvided further that the provisions of the immediately preceding proviso shall, with effect from 1 January 2011, also be applicable to dividends received from a participating holding acquired before the 1 January 2007:
\nProvided also that in respect of: (a) a participating holding in a company or in a partnership, EEIG, other body of persons or collective investment scheme referred to in the first proviso to the definition of \"participating holding\" in sub-article (1) of article 2, that is resident in Malta; or (b) a participating holding in any other body of persons that holds, directly or indirectly, shares or other interests in a company or in a partnership, EEIG, other body of persons or collective investment scheme referred to in the first proviso to the definition of \"participating holding\" in sub-article (1) of article 2, that is resident in Malta, gains or profits arising on the transfer of any holding referred to in paragraph (a) or paragraph (b) derived by a company registered in Malta (hereinafter in this subarticle referred to as \"the transferor company\"), shall only qualify for the exemption if such gains or profits would have been exempt in terms of sub-paragraph (ii) of paragraph (c) had the transfer of the holding been made by the beneficial owner of the transferor I N C O M E TA X company. Where the beneficial owner is more than one
\nFor the purpose of this proviso any body of persons or collective investment vehicle which is resident in Malta shall be deemed not to fall within the purport of the term \"beneficial owner\":
\nProvided further that where the transferor company has claimed the exemption contemplated in terms of the immediately preceding proviso on the whole or part of the said gains or profits, and any person who would not have qualified for exemption in terms of sub-paragraph (ii) of paragraph (c) had the transfer of the holding been made thereby (hereinafter in this sub-article referred to as \"the non-qualifying shareholder\"), thereafter becomes beneficially entitled to all or any of such gains or profits or to a larger part thereof than was the case at the time they arose, even prior to their distribution, such untaxed gains or profits or such additional part thereof to which the non-qualifying shareholder becomes entitled, shall be taxed at the rate referred to in sub-article (6) of article 56 and such tax shall constitute tax payable by the company in the year of assessment in respect of which such person shall become entitled to such profits even prior to their distribution.
\nProvided further that for the purpose of this paragraph the word \"transfer\" shall have the same meaning assigned to it under article 5(1)(b):
\nProvided further that the exemption contemplated by this paragraph shall not apply to income derived from a participating holding in a body of persons resident for tax purposes in a jurisdiction that is included in the EU list of non-cooperative jurisdictions for a minimum period of three (3) months during the year immediately preceding the year of assessment unless it is proved to the satisfaction of the Commissioner that the said body of persons maintains sufficient significant people functions in that jurisdiction as is commensurate with the type and extent of the activity carried on in that jurisdiction and the income earned therefrom. Where such three (3) months are consecutive and fall in two (2) subsequent consecutive basis years, the exemption shall not apply in respect of any such income derived in any one (1) of the two (2) years;
\nINCOM E TA X (u) (2) any income or gains derived by a company registered in Malta (hereinafter \"the particular company\") which are attributable to a permanent establishment (including a branch) situated outside Malta or to the transfer of such permanent establishment, whether such permanent establishment belongs exclusively or in part to the particular company, including a permanent establishment operated through any entity or relationship other than a company, in which the particular company has an interest, where the taxpayer has not shown such income or gains as part of its chargeable income in the return made pursuant to article 10 of the Income Tax Management Act, and for these purposes \"profits or gains\" shall be calculated as if the permanent establishment is an independent enterprise operating in similar conditions and at arm’s length:
\nProvided that where, in the opinion of the Commissioner, a series of transactions is effected with the sole or main purpose of reducing the amount of tax payable in terms of this Act by any person by reason of the operation of this provision, such a person shall be assessable as if this provision did not apply and, for the purpose of this provision, a series of transactions shall mean any two or more corresponding or circular transactions carried out by the same person, either directly or indirectly, as the case may be:
\nProvided further that for the purpose of this paragraph the word \"transfer\" shall have the same meaning assigned to it under article 5(1)(b):
\nProvided further that as from 1st January, 2016, in the case of distributed profits received from a participating holding by a parent company that is resident in Malta or the permanent establishment of a parent company that is resident in another EU Member State, which permanent establishment is situated in Malta and which benefit from the exemption from withholding tax set out in article 5 of EU Directive 2011/96/EU on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States as amended, the exemption under the provisions of subparagraph (u)(1) shall only apply to the extent that such profits are not deductible by the relevant subsidiary in that other EU Member State.
\nFor the avoidance of doubt, notwithstanding any other provision to the contrary in this Act, distributed profits received by the said parent company or permanent establishment that are deductible by the relevant subsidiary in such other EU Member State shall fall under the charging provisions of sub-article
\nProvided that where any income which is exempt from tax in terms of this paragraph is derived by a company, the distribution of the particular profits by way of dividend by such company shall also be exempt from tax in the hands of the shareholders, so however that where the person in receipt of such dividend is itself a company (hereinafter referred to as \"the second company\"), any dividend paid to the members of the second company shall, to the extent that such dividend is paid out of profits which are exempt in terms of this paragraph, not be charged to tax under this Act, and where a member of the second company is again a company, the provisions of this proviso shall apply mutatis mutandis as though references to the second company were references to that member, and the principle set out in this proviso shall continue to be applied for as long as the exempt profits referred to in this paragraph are distributed by way of dividends:
\nS.L. 123.149 Provided further that where such royalties, advances or similar income are derived by a company, this exemption shall not apply where the company has shown such income as part of its chargeable income in the return made pursuant to article 10 of the Income Tax Management Act; (w) the income from employment (other than employment derived from the holding of an office of director) of a married person who is over forty years of age and starts in employment after having been absent from any gainful occupation for at least five years, and whose name was not during the said time on the unemployment register (Parts 1 and 2) as established by JobsPlus, and where such income does not exceed the amount mentioned in rule 2(a) of the Deduction (Income from Employment) Rules and the said person is chargeable to tax jointly with her or his spouse at the INCOM E TA X rates specified in article 56(1)(a):
\nProvided that this paragraph shall apply for a period of five consecutive years of assessment commencing from the basis year in which the person started work;' (x) interest payable to an individual in his own name by: (i) a person carrying on the business of banking in accordance with the laws of any European Union Member State in respect of a sum of money deposited into a special individual saving account recognised as such by the Commissioner, and (ii) interest payable to an individual in his own name by the Government of a European Union Member State or by any agency thereof, by a corporation or authority established by law, or in respect of a public issue by a company, entity or other legal person howsoever constituted and whether resident in Malta or otherwise, where the relevant interest-bearing securities are credited for the benefit of the individual to a special individual saving account recognised as such by the Commissioner:
\nProvided that the aggregate amount of the deposits into such account and the value of the interest-bearing securities credited for the benefit of the individual into such account do not together exceed one thousand euro (€1,000) in any year or such other amount as may be prescribed by the Minister from time to time; (y) any stipend or maintenance grant paid to a student by the Government or any Government institution; (z) any income or gains derived by the trustee of a disability trust or by a disability foundation upon the transfer of immovable property forming part of the disability trust or the disability foundation where the sale proceeds from the transfer of such property are to be exclusively utilised by the trustee or foundation for the maintenance of the disabled beneficiary, and an undertaking to that effect is made by the trustee or the foundation in the deed of sale:
\nProvided that if the disabled beneficiary dies before all the sale proceeds are utilised for his maintenance, then any balance thereof distributed by the trustee of the disability trust or the disability foundation to the parents of the disabled beneficiary and, or the other beneficiaries of the disability trust or foundation shall be taxed as follows: (i) if less than eighty per centum (80%) of the sale proceeds have been applied for the maintenance of the disabled beneficiary up to his death, the remaining portion which is distributed to the parents and, or the other beneficiaries of the Disability Trusts and Disability Foundations.
\nI N C O M E TA X disability trust or foundation will be taxed at the rate of 8% of the transfer value, and the tax is to be paid by the trustee or foundation before any distributions are made to the parents of the disabled beneficiary and, or the other beneficiaries of the disability trust or foundation; or (ii) if eighty per centum (80%) or more of the sale proceeds have been applied for the maintenance of the disabled beneficiary up to his death, no tax shall be payable on the remaining portion which is distributed by the trustee or the foundation to the parents of the disabled beneficiary and, or the other beneficiaries of the disability trust or foundation.
\nFor the purpose of this paragraph, \"disability trust\" and \"disability foundation\" mean any protected disability trust or foundation, as the case may be, which qualify as such in terms of the Trusts and Trustees Act, any other applicable law regulating foundations, or any regulations made thereunder, and provided that: (i) the trustee or administrator thereof shall not have the power to appoint new beneficiaries after the creation of the trust or foundation; (ii) the trust terminates on the death of the disabled beneficiary; and (iii) the relevant trust instrument or foundation deed specifically provides that the beneficiaries of such trust or foundation comprise only: (a) (b) a person or persons who is/are on the Register of Persons with Disability kept by the National Commission Persons with Disability set up in terms of the Equal Opportunities (Persons with Disability) Act, and persons referred to in article 5(2)(e)(i), whether they are in existence or not at the time of such settlement, in relation to the disabled person:
\nProvided that nothing in this sub-article shall be construed as granting any exemption from the filing of a return in respect of any such income, or as exempting in the hands of the recipients any dividends, interests, annuities, emoluments, pensions or other gains or profits paid wholly or in part out of the income so exempted.
\nTemporary residents.
\nRenumbered by:
\nXVII. 1994.2.
\nI N C O M E TA X
\nDEDUCTIONS Deductions allowed.
\nAmended by:
\nXX.1955.3;
\nV.1958.3;
\nXV.1958.2;
\nXXV.1960.6;
\nXXV.1962.2,4;
\nL.N. 4 of 1963;
\nX.1973.2;
\nXLII.1975.4;
\nXXVI.1977.6;
\nXXVIII.1978.6;
\nXXI. 1980.4;
\nIX.1981.4;
\nXIII. 1983.4;
\nXXXVI. 1990.5;
\nXVIII. 1993.5.
\nRenumbered by:
\nXVII. 1994.2.
\nAmended by:
\nXX.1996.7;
\nIV. 2001.35;
\nIX. 2001.25;
\nII. 2002.45;
\nII. 2003.10;
\nII. 2007.6;
\nIV. 2007.10;
\nIX. 2007.4;
\nL.N. 409 of 2007;
\nI. 2010.16;
\nIV. 2011.11;
\nXII. 2014.16;
\nXV. 2016.16;
\nXVI. 2017.18;
\nVII.2018.18;
\nVIII.2020.16;
\nVII.2022.21;
\nXIII.2024.10;
\nIX.2025.12;
\nIII.2026.16.
\nProvided that the deduction allowable under this paragraph shall be subject to such limitations, and may be carried forward, in such manner as may be prescribed and in accordance with guidelines issued under article 96(2); (b) rent paid by any tenant of land or buildings occupied by him for the purpose of acquiring the income; (c) any sum expended for repairs of premises, plant or machinery employed in acquiring the income, or for the renewal, repair or alteration of any implement, utensil or article so employed; (d) bad debts incurred in any trade, business, profession or vocation, 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:
\nProvided that all sums recovered during the said year on account of amounts previously written off or allowed in respect of bad debts shall for the purposes of this Act be treated as receipts of the trade, business, profession or vocation for that year; (e) any sum contributed by an employer to a pension, saving, provident or any other society or fund which may be approved by the Commissioner as may be prescribed; (f) a deduction in respect of the wear and tear of any plant and machinery, and any premises being an industrial building or structure, arising out of the use or employment of such property in the production of the income; and where such property is employed on such terms that the burden of wear and tear thereof falls upon the person making use of the property in the production of the income, but such property does not belong to him, he shall be entitled to any deduction to which he would have been entitled had the property belonged to him:
\nINCOM E TA X Provided that (i) the amount to be deducted in respect of premises being an industrial building or structure shall not exceed two per cent of the cost thereof, not including the cost of the land on which the building or structure is erected; (ii) where the total deductions allowable under this paragraph and under paragraph (j) cannot be given effect to in full in any year because there are no profits or gains chargeable for that year from the source of income in respect of which they are allowable or because the profits or gains chargeable from that source are less than the deductions, the deductions or such part of the deductions to which effect has not been given, shall be added to the deduction for wear and tear in respect of that source for the following year and deemed to be part of that deduction, or if there is no such deduction in respect of that source for that year, be deemed to be the deduction for that year and so on for subsequent years; (iii) the aggregate of the deductions made under this paragraph and under paragraph (j), added to the wear and tear, if any, or to such part thereof as may be appropriate, which occurred prior to the commencement of this Act, shall not exceed the original cost, or such part of it as may be appropriate, of such plant, machinery or premises, having regard to the extent to which they were wholly and exclusively used in the production of the income, and (a) the wear and tear which occurred prior to the commencement of this Act shall be computed at the prescribed rates, and (b) the cost of the land on which the building or structure is erected shall in all cases be excluded from the original cost of the premises; (g) the amount of a loss incurred by any person, solely or in partnership, in any trade, business, profession or vocation during the year preceding the year of assessment which, if it had been a profit, would have been assessable under this Act; and in computing such loss account shall be taken of all deductions which would have been allowable under the other paragraphs of this sub-article, except paragraphs (f) and (j), if it had been a profit; and where the amount of a loss incurred and computed as aforesaid is such that it cannot be set off against capital gains or income from other sources for the year preceding the year of I N C O M E TA X assessment, it shall, to the extent to which it cannot be wholly set off against capital gains or income for the said year, be carried forward and set off against what would otherwise have been the total income for
\nsubsequent years in succession:
\nProvided that nothing in this paragraph shall be construed as permitting the set off of any loss incurred outside Malta which, if it had been a profit and had been retained outside Malta, would not have been chargeable to tax under this Act:
\nProvided further that a loss as aforesaid shall not be deducted against income which stands to be allocated to the final tax account and any loss resulting from activities or sources the profit derived from which would have been allocated to the final tax account shall not be a loss to which this paragraph applies:
\nProvided also that, subject to the \"group relief provisions\", no person shall, notwithstanding anything contained in any other Act, be entitled to a deduction under this paragraph in respect of any loss incurred by another person:
\nProvided also that: (i) S.L. 123.140 where any merger or division referred to in the Rulings (Income Tax and Duty Treatment of Mergers and Divisions) Rules is being effected for bona fide purposes to the satisfaction of the Commissioner; and (ii) as a result of such merger or division, a trade or business previously carried on by a company or other person involved in the particular merger or division (hereinafter referred to as \"the First Company\") or any part thereof, shall thereafter be carried on by another company or companies or other person involved in such merger or division (hereinafter collectively referred to as \"the Second Company\"); and (iii) the First Company is entitled to any loss or to the balance of any loss incurred by the First Company in any year preceding the year of assessment or to any wear and tear or initial allowances, or to the balance of any such allowances due in respect of any year as aforesaid; the Commissioner shall be entitled to grant his permission for the losses and, or wear and tear and, or initial allowances or such part thereof as he may deem fit, in the light of the trade or business or any part thereof which shall thereafter be carried on by the Second Company, to be claimed by the Second Company and to be set-off against its gains or profits as the case may be in determining its chargeable INCOM E TA X income, in lieu of the First Company. In granting his permission the Commissioner may impose such conditions as he deems fit and reasonable, and where the person who has requested permission accepts the conditions laid down by the Commissioner, such conditions shall be operative notwithstanding any other provisions of this Act. (h) any expenditure on scientific research incurred by a person engaged in any trade, business, profession or vocation and proved to the satisfaction of the Commissioner to have been incurred for the use and benefit of the trade, business, profession or vocation:
\nProvided that any such expenditure of a capital nature, unless it is an expenditure in respect of which a deduction is allowable under paragraphs (f) and (j), shall be spread equally over the year in which it has been incurred and the five succeeding years:
\nProvided further that no deduction shall be allowed under the provisions of this paragraph in the case of any such expenditure on plant or machinery or premises, in respect of which any deduction is allowed under paragraphs (f) and (j).
\nFor the purposes of this paragraph \"scientific research\" shall include: (i) basic research comprising activities undertaken for the advancement of scientific or technological knowledge; (ii) applied research where a specific application is in view; (iii) development work involving the use of the results of basic and applied research as aforesaid for the purpose of creating new or improving existing materials, devices, products or processes. (ha)* (i) any expenditure incurred, at one hundred and seventy-five per cent (175%) of the actual amount of such expenditure, on research, development and innovation activities by a person engaged in any trade, business, profession or vocation and proved to the satisfaction of the Commissioner to have been incurred for the use and benefit of the trade, business, profession or vocation:
\nProvided that any such expenditure of a capital nature, unless it is an expenditure in respect of which a deduction is allowable under paragraphs (f) and (j), shall be spread equally over the year in which it has been incurred and the five (5) subsequent years: *Applicable from the year of assessment 2027. Vide Article 13(2) of Act III of 2026.
\nI N C O M E TA X Provided further that no deduction shall be allowed under the provisions of this paragraph where such expenditure relates to plant or machinery or premises, in respect of which any deduction is allowed in accordance with paragraphs (f) and (j); (ii) this paragraph shall apply from such date as may be provided by the Minister responsible for finance by notice in the Gazette; (iii) the Minister responsible for finance may by rules define the activities that constitute research, development and innovation for the purposes of this paragraph as well as prescribe such other conditions as may be applicable to this paragraph; (i) (Deleted by: XV. 2016.16). (j) in respect of plant and machinery first used and employed in the year immediately preceding the year of assessment, an initial deduction of one-fifth of the capital expenditure thereon, and in respect of premises being an industrial building or structure first used and employed in the year immediately preceding the year of assessment, an initial deduction of one-tenth of the capital expenditure thereon:
\nProvided that deductions made under this paragraph shall be restricted, set off and carried forward as laid down in the second and third provisos to paragraph (f):
\nProvided further that the deduction contemplated by this paragraph in respect of plant and machinery shall no longer be applicable with effect from such year of assessment as may be determined by the Minister by order in the Gazette; (k) any sum or expenses proved to the satisfaction of the Commissioner to have been paid or incurred by or on behalf of a candidate for election as member of the House of Representatives on account of or in respect of the conduct or management of such election:
\nProvided that such deduction shall only be allowed in the case of an elected candidate and shall not exceed the maximum amount of expenditure permissible under the General Elections Act, in respect of one candidate or the amount actually incurred by such candidate, whichever is the lesser; (l) any expenditure incurred by a person engaged in a trade, business, profession or vocation for the purpose of promoting that trade, business, profession, or vocation including any expenditure on market research and obtaining market information, advertising or other means of soliciting business, providing samples, and participating in fairs and exhibitions; (m) any expenditure of a capital nature on intellectual INCOM E TA X property or any intellectual property rights incurred by a person and which intellectual property or intellectual property rights are proved to the satisfaction of the Commissioner to have been used or employed in the production of the income of such person:
\nProvided that any such expenditure shall be spread equally over a number of years which shall not be less than a minimum period of three consecutive years, the first year being that in which the said expenditure has been incurred or the year in which the intellectual property or intellectual property rights is first used or employed in producing the income: * Provided further that, notwithstanding the first proviso, any such expenditure may be deducted in the year in which the said expenditure has been incurred or the year in which the intellectual property or intellectual property rights were first used or employed in producing the income of such person, subject to such conditions as may be prescribed:
\nProvided also that when the intellectual property or intellectual property rights were transferred to the said person (\"the acquirer\") by a company (\"the transferor\") and it was deemed in terms of article 5(9) that no loss or gain arose from that transfer, the total deduction that may be claimed by the acquirer shall be the lower of the cost of acquisition and the market value of the said property or rights as at the time of that transfer, reduced, in either case, by the amount, if any, that the transferor had claimed as a deduction in terms of this paragraph in respect of the property or rights that have been transferred; (ma) any expenditure of a capital nature incurred on or after 1st January 2025 by a person carrying on a trade, business, profession or vocation as consideration for the acquisition of a business permit or a concession, or a commercial lease, where the business permit or the concession or the commercial lease in question is used or employed in the production of income chargeable to tax in accordance with article 4(1)(a):
\nProvided that: (i) in this paragraph, and subject to the other provisions thereof: \"business permit\" means a permit to carry on or operate a business that is issued by a public authority in accordance with any applicable law and it shall be deemed to have been acquired by a person if and when such person is registered as *Applicable from Year of Assessement 2024. Vide Regulation 8 (2) (b) of Act XIII of 2024.
\nI N C O M E TA X the holder thereof with the relevant public authority; \"concession\" means the privilege to carry on a business activity granted by a public authority that has exclusive rights over such activity; \"commercial lease\" means the lease of a commercial going concern (twellija) or the lease of immovable property for the purpose of carrying therein a trade, business, profession or vocation and includes a sub-lease of a commercial lease; \"public authority\" means the government, a government ministry, department or government agency, or any other entity in which the government has, directly or indirectly, a controlling interest; (ii)the deduction shall not include any sum paid for, or attributable to the outright acquisition of a business or a business goodwill, or rights in accordance with an emphyteutical concession, or any intellectual property or rights to which paragraph (m) applies, or any other tangible or intangible asset other than the business permit, the concession or the commercial lease in question; (iii) no deduction shall be allowed in respect of the acquisition of a permit, concession or lease for an indefinite duration or for a duration of more than fifteen (15) years; (iv) the deduction shall only be allowable if the acquisition in question, including the payment of the consideration, results by means of a document in writing; (v) the deduction shall be spread in equal amounts over a period of fifteen (15) years or over the period, if shorter, for which the permit or the concession or the lease has been acquired by the person claiming such deduction;