                 INCOME TAX                                   ġ CAP. 123.         1
CHAPTER 123
INCOME TAX ACT 
To impose a Tax upon Incomes.                                                                    Amended by: 
                                                                                                                                      XVII. 1994.35.
                                                              1st January, 1949
ACT LIV of 1948, as amended by Acts: VI of 1953, XX of 1955, V of 1958; Emergency
Ordinance XV of 1958; Ordinances: VIII and XVI of 1959, XXV of 1960, XXIV and XLI of
1961, XXV of 1962; Legal Notice 4 of 1963; Acts: X and XIV of 1963; V of 1964; Legal Notice
46 of 1965; Acts: XXXI of 1966, XXVII of 1967, VIII of 1969, XXVIII and XXXV of 1972, X
and XX of 1973, XLIX and LVIII of 1974; Legal Notice 148 of 1975; Acts: XLII of I975, XXII,
XXIV and XXXIX of 1976, XXVI of 1977, XXVIII of 1978, XXI of 1980, IX and XL of 1981, IX
and XIII of 1983; XIV of 1984, VIII of 1987; XXXI of 1988, XIX of 1989, XXXVI of 1990, VIII
of 1991, XIII of 1992, XVIII of 1993, I and XVII of 1994, XXII of 1995, XX of 1996, V, XVII of
1998, IX of 1999 and XI of 2000; Legal Notice 238 of 2000; and Acts IV and IX of 2001, II of
2002 and II of 2003.
ARRANGEMENT OF ACT
  Articles
Part I. Preliminary  1-3 
Part II.  Imposition of Income Tax  4-11 
Part III.  Exemptions  12-13 
Part IV.  Deductions  14-26 
Part V.  Special Provisions  27-52 
Part VI. Personal Deductions 53-55 
Part VII. Rate of Tax  56 
Part VIII. Tax Rebate  57-58 
Part IX.  Persons Assessable  59-73
Part X.  Relief of Double Taxation  74-95
Part XI. Power to make Rules  96
  2        CAP. 123. ħ                INCOME TAX 
PART I 
PRELIMINARY
Short title. 1. The short title of this Act is the Income Tax Act.
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.1996. 2;
XVII.1998.70;
IX.1999.14;
IX. 2001.21;
II. 2002.42;
II. 2003.7.
Cap. 281.
Cap. 386.
2. (1) In this Act, and in any rules made under this Act,
unless the subject or context otherwise requires - 
"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;
Cap. 370.
"collective investment scheme" means any scheme or
arrangement which is licensed under the Investment Services Act;
"Commissioner" means the Commissioner of Inland Revenue;
"Commonwealth" has the same meaning as is assigned to it in
article 124 of the Constitution of Malta;
 "company" means - 
Cap. 386.
Cap. 168.
( a ) any partnership constituted under the Companies Act
or under the Commercial Partnerships Ordinance,
being either a partnership  en commandite , the capital
of which is divided into shares, or a partnership
anonyme ;
( b ) any body of persons constituted, incorporated or
registered outside Malta, and of a nature similar to the
aforesaid partnerships;
( c ) any co-operative society duly registered as such under
the appropriate law for the time being in force in
Malta;
Cap. 194.
 "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 resident in Malta under the
                 INCOME TAX                                   ġ CAP. 123.         3
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, 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;
"dividend" includes - 
( a ) bonus shares
( b ) any distribution made by a partnership  en   commandite
the capital of which is divided into shares, or by a
partnership  anonyme , to its partners or shareholders,
respectively, and any amount credited to them as
partners or shareholders; and
( c ) any distribution made by a co-operative society to its
members and any amount credited to them as
members, including any patronage refund, bonus
certificate or bonus share, made, paid or allotted in
accordance with the law regulating such societies for
the time being in force in Malta;
"equity holding" shall mean a holding of the nominal share
capital in a company when the shareholding entitles the shareholder
to a right to votes, to profits available for distribution to
shareholders and to assets available for distribution on a winding
up of that company, and "equity shares", "equity shareholder" and
"equity shareholding" shall be construed accordingly;
"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:
Cap. 330.
( a ) profits resulting from royalties and similar income
arising outside Malta and from dividends, capital
gains, interest, rents and any other income derived
from investments situated outside Malta, which are
liable to tax in Malta and are receivable by a company
resident in Malta not being a company registered under
the Malta Financial Services Authority Act, and
Cap. 330.
Cap. 376.
( 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; and
( c ) all profits or gains of a company resident in Malta,
which are liable to tax in Malta 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
  4        CAP. 123. ħ                INCOME TAX 
( d ) profits resulting from dividends paid out of the foreign
income account of another company resident in Malta;
and
Cap. 403.
Cap. 330.
( e ) profits or gains resulting to a company resident 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 in the case of a company referred to in
paragraph ( e ) of this definition, any profits or gains which would,
in accordance with the above provisions, stand to be allocated to
the foreign income account will, for any financial year, not be so
allocated unless such profits or gains arise in the year immediately
preceding the year of assessment 2000 and in subsequent years:
Provided further that in the case of a company which is
licensed as a bank in Malta or which forms part of a banking group
as defined below, any profits which would, in accordance with the
above provisions, stand to be allocated to the foreign income
account will, for any financial year, not be so allocated unless:
( a ) more than ninety-five per cent of its average daily
deposits throughout the financial year are taken from
persons who are not residents in Malta; and
( b ) where the company forms part of a banking group,
such group meets, on a consolidated basis, the
requirement specified in paragraph ( a ) above.
For the purposes of this proviso:
( a ) "banking group" shall comprise only Maltese
registered companies, at least one of which must be a
bank licensed in Malta, and which companies are
members of a banking group of companies. Two
companies shall be deemed to be members of a
banking group of companies if one is the ten per cent
affiliate of the other or both are ten per cent affiliates
of a third company. For this purpose, a company shall
be deemed to be a ten per cent affiliate of another
company (parent company):
(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
                 INCOME TAX                                   ġ CAP. 123.         5
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;
Cap. 371.
( 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 finally, 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;
"incapacitated person" means any minor, lunatic, idiot, insane
person or person under tutorship or curatorship;
"income" except for the purposes of article 4(1) and Part V of
this Act shall include capital gains as defined in article 5;
"industrial building or structure" includes a building used as a
hotel. For the purpose of this definition 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; 
"international trading company" means a company registered in
Malta 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;
Cap. 330.
( b ) trading with companies registered in Malta under the
Malta Financial Services Authority Act; 
  6        CAP. 123. ħ                INCOME TAX 
( c ) trading with other international trading companies;
and
( d ) the management of companies resident in Malta whose
business is restricted to affiliated insurance and where
such business is carried on exclusively with non-
residents;
Cap. 370.
( 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;
"loss" in relation to a trade, business, profession, or vocation
means loss computed in like manner as profits;
"Malta" means the Island of Malta, the Island of Gozo and the
other islands of the Maltese Archipelago, including the territorial
waters thereof and the continental shelf;
"Maltese taxed account" means any of those profits of a company
that are not included in the foreign income account and:
( a ) which have suffered tax; or
( b ) which have been exempt from tax under the provisions
of any Maltese law and where the distribution of such
profits by the company is also exempt from tax in the
hands of the shareholders;
"married couple" refers to two spouses who contracted marriage
in accordance with the legal provisions of the country where the
marriage was executed;
"married individual" refers to a male individual who has a wife
or a female individual who has a husband, living with him or with
her respectively, as the case may be;
"participating holding" shall mean a holding which arises where:
                 INCOME TAX                                   ġ CAP. 123.         7
 ( a ) a company holds directly at least ten per cent of the
equity shares of a company not resident in Malta
whose capital is wholly or partly divided into shares:
        Provided that where the shares held confer different
percentages of entitlement with respect to votes, to
profits available for distribution and to assets available
for distribution on a winding up, the lowest percentage
figure shall be deemed to be the percentage of equity
shares held; or
( b ) a company is an equity shareholder in a company not
resident in Malta 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 not
resident in Malta 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 not
resident in Malta 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 invests a
minimum sum of five hundred thousand liri (or the
equivalent sum in a foreign currency) in a company
not resident in Malta; or
( f ) a company is an equity shareholder in a company not
resident in Malta and where the holding of such shares
is for the furtherance of its own business:
Provided that a holding of shares whether equity shares or not, in
a company not resident in Malta, held as trading stock for the
purpose of a trade shall not constitute a participating holding;
"person" includes -
( a ) a body of persons; and
( b ) a responsible spouse in accordance with article 49; 
"petroleum" means all natural hydrocarbons liquid or gaseous
including crude oil, natural gas, asphalt, ozokerite and cognate
substances and natural gasoline;
"prescribed" means prescribed by rule under this Act;
"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
  8        CAP. 123. ħ                INCOME TAX 
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;
Cap. 372.
"the Special Commissioners" means the Commissioners
appointed by the President of Malta under article 34 of the Income
Tax Management Act;
"tax" means the income tax imposed by the Income Tax Acts; 
Cap. 372.
"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;
Cap. 372.
"tax settlement date" has the meaning assigned to it in article
42(1A) of the Income Tax Management Act;
"the Income Tax Acts" shall collectively mean this Act and the
Income Tax Management Act;
"total income" means the aggregate amount of the income of any
person from the sources specified in Part II of this Act, remaining
after allowing the exemption under Part III and the deductions
under Part IV, and computed in accordance with the provisions of
Part V:
Cap. 372.
Provided that, subject to the provisions of article 12(3)( b )
of the Income Tax Management Act, any income which is not
required to be disclosed and is not disclosed in accordance with the
provisions of the Income Tax Acts shall not form part of total
income;
"untaxed account" shall consist of those profits (or losses as the
case may be), which represent the total distributable profits (a
positive amount) or the total accumulated losses (a negative
amount) as the case may be, and deducting therefrom the total sum
of the amounts allocated to the foreign income account and the
Maltese taxed account;
"year of assessment" means the period of twelve months
commencing on the first day of January, 1949 and each subsequent
period of twelve months.
(2) Words and expressions used in this Act which are not
known to the law of Malta but are known to the English Law, shall,
so far as may be necessary to give effect to this Act and
consistently with the provisions thereof, have the meaning assigned
to them in the English Law and be construed accordingly.
                 INCOME TAX                                   ġ CAP. 123.         9
Administration of 
Act. 
Substituted by: 
XXXV. 1972.2. 
Added by: 
XVII. 1994.5.
Cap. 372.
3. 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. 1993.3.
Renumbered by:
XVII. 1994.2.
Amended by: 
XVII. 1994.4;
XX. 1996.3;
XI.2000.3;
IX. 2001.22;
II. 2003.8.
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
assessment commencing 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 profit-
making undertaking or scheme;
( b ) gains or profits from any employment or office,
including the value of any benefit provided by reason
of any employment or office; and - 
(i) for the purpose of this paragraph the Minister
responsible for finance may by regulations
prescribe the circumstances in which a person
shall be treated as receiving a benefit from
another person provided by reason of an
employment or office and the value of any such
benefit;
(ii) where in terms of the said regulations a person is
treated as receiving a benefit provided by virtue
of an employment or office after the termination
thereof and that benefit has the nature of a
pension the benefit shall be treated as a pension
and the value determined in accordance with the
said regulations shall constitute income
chargeable to tax under paragraph ( d ).
Cap. 371.
( 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;
  10        CAP. 123. ħ                INCOME TAX 
( 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 in the lira 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 in the lira as laid down in
article 56(11), the tax shall be payable only on
any income or capital gains arising in Malta and
on any amount of income arising outside Malta
and received in Malta.
(2) Any sum realized under any insurance against a loss of
profits shall be taken into account in the ascertainment of any
profits or income.
(3) Where a person carries on in Malta an agricultural,
manufacturing or other productive undertaking, the following
provisions shall have effect, that is to say:
( a ) if such person sells any product of the undertaking, in
a wholesale market, outside Malta or for delivery
outside Malta, whether the contract is made within
Malta or outside Malta, the full profits arising from the
sale shall be deemed to be income of such person
accruing in or derived from Malta:
         Provided that if it is shown to the satisfaction of the
Commissioner that the profit has been increased
through treatment of the product outside Malta other
than handling, grading, blending, sorting, packing or
disposal, such increase of profits shall not be deemed
to be income accruing in or derived from Malta;
( b ) if such person otherwise disposes of, uses or deals
with any product of the undertaking, outside Malta, the
profit which might have been obtained if such person
had sold the product to the best advantage in a
wholesale market outside Malta shall be deemed to be
the profit arising from such disposal, dealing or use,
and to be the income of such person accruing in or
derived from Malta.
                 INCOME TAX                                   ġ CAP. 123.         11
(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 either in respect of the profits
therefrom or in respect of the income which would be assessable if
it were not deemed to carry on a business whichever is the greater.
In this sub-article ''members'' in relation to a body of
persons means those persons who are entitled to vote at a general
meeting of the body at which effective control is exercised over its
affairs.
Nothing in this sub-article shall operate to annul or reduce
an exemption granted in article 12, save as provided in sub-article
(1)( l ) thereof.
(5) Where under the provisions of article 24, a balancing
charge falls to be made, the amount thereof shall be deemed to be
income chargeable with tax under this Act.
(6) Subject to the provisions of sub-article (7), on the winding
up, in full or in part, of any pension, saving, provident or other
society or fund approved by the Commissioner for the purposes of
article 53(1)( b )(ii), the following provisions shall have effect:
( a ) any refund, reimbursement, gratuity, bonus, payment,
compensation or other return or benefit paid or
accruing to any person as a consequence of winding up
shall, notwithstanding anything to the contrary
contained in this Act or in any law, document, deed,
contract, agreement or other instrument, be deemed to
constitute income chargeable to tax in the hands of the
said pension, saving, provident or other society or fund
in the year of assessment in which it is granted or so
accrues, and not to constitute income chargeable to tax
in the hands of the person to whom it is paid or
accrues; and
( b ) no refund, reimbursement, gratuity, bonus, payment,
compensation or other return or benefit shall be paid as
aforesaid before payment has been effected of the tax
chargeable in accordance with the provisions of this
sub-article.
(7) Sub-article (6) shall not apply - 
(i) to any benefit, or value thereof, chargeable with
tax under sub-article (6) and which is paid or
payable to members of the said pension, saving,
provident or other society or fund, or other
beneficiaries claiming through or under them, in
accordance with the conditions under which the
said pension, saving, provident or other society
  12        CAP. 123. ħ                INCOME TAX 
or fund was approved by the Commissioner;
(ii) to any capital sum exempt from tax under article
12(1)( g ). 
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.
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; and
(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, copyright, patents,
trademarks and trade-names.
( b ) In this article - 
Cap. 370.
"transfer" includes any assignment, sale, emphyteusis or sub-
emphyteusis, partition, donation, 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, but does not
include a transfer  causa mortis;  and
Cap. 370.
"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, 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,
                 INCOME TAX                                   ġ CAP. 123.         13
or extendable to such periods, the following rules shall
apply:
(i) where the premium exceeds the cost of
acquisition in accordance with paragraph ( a )
hereof, such excess shall be deemed to be gains
or profits;
(ii) where the cost of acquisition in accordance with
paragraph   ( a ) hereof exceeds the premium such
excess shall be deductible from the gains or
profits arrived at in accordance with sub-
paragraph (iii) hereof;
(iii) no account shall be taken of any ground-rent or
increase in ground-rent involved in the transfer
unless and until such ground-rent or increase in
ground-rent is redeemed, or the  directum
dominium  or  sub   directum dominium , as the case
may be, is transferred and in such case the gains
or profits shall be deemed to be the price of
redemption or sale less any deduction in
accordance with sub-paragraph (ii) hereof;
( d )       (i)    a transfer shall not include a contract of partition
where no owelty is due to any of the co-
partitioners, and upon a transfer of any property
by a co-partitioner the cost of acquisition shall be
deemed to be the cost of acquisition of the
property in question at the time of acquisition by
the co-partitioner;
(ii) for the purposes of this paragraph only the
immovable property held in common and
partitioned shall be taken into account, and
where money or other movables held in common
is assigned to a co-partitioner in consideration
for the reduction in the share of immovables
assigned to him the partition shall be deemed to
be one where an owelty has been paid;
(iii) where a person receives an owelty on a contract
of partition he shall be deemed to have made
capital gains as is equivalent to as much of the
increase in the value of the property between the
time of the acquisition by the co-partitioners and
the time of partition, so however that tax on
capital gains shall only be payable at the time of
partition on such part of the capital gains made
as is not included in the increase in the value of
the property assigned to that co-partitioner
between the time of acquisition by the co-
partitioner and the partition, and where such co-
partitioner transfers the property assigned to him
the cost of acquisition shall be deemed to be the
cost of acquisition of the immovables when
acquired by the co-partitioners before the
partition;
  14        CAP. 123. ħ                INCOME TAX 
(iv) where a co-partitioner pays an owelty at the time
of the partition, he shall be deemed to have made
no capital gain at the time of the partition, and
where such co-partitioner transfers any
immovable property assigned to him in the
partition, the cost of acquisition shall be deemed
to be such portion of the sum of the cost of
acquisition of the co-partitioner’s share of all the
immovables partitioned together with the owelty
paid on the contract of partition, as is equivalent
to the portion of the value of the immovable
transferred to the total value of immovables
assigned to the co-partitioner in the deed of
acquisition;
( e ) a donation shall be considered as a deemed sale made
at the market value of the property at the time of
transfer. Provided that no tax shall be payable where
the donation is made by a person to:
(i) his spouse, descendants and ascendants in the
direct line and their relative spouses, or in the
absence of descendants to his brothers or sisters
and their descendants, or
(ii) philanthropic institutions approved for the
purposes of article 12(1)( e );
( f ) without prejudice to the provisions of article 12(1)( e ),
where the property referred to in paragraph ( e ) is
disposed of by the donee within five years of the
donation, the donee shall be charged on the gain
ascertained in accordance with the provisions of this
article by taking into account the cost of acquisition of
the property at the time it was acquired by the donor;
where the property is sold by the donee after the lapse
of five years the cost of acquisition shall be deemed to
be the value of the property as declared in the deed of
donation;
( g ) gains and profits relating to a transfer by donation
shall mean the difference in the market value of the
property at the time of the donation and the cost of
acquisition of the property at the time of acquisition by
the donor.
(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
                 INCOME TAX                                   ġ CAP. 123.         15
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;
( d ) where on a share transfer the rights pertaining to those
shares are changed in any way, the transfer value of
the shares shall be taken as if no such change has been
made;
( e ) any transfer consisting of an exchange shall be
considered as if two separate transfers were taking
place; and 
( f ) the provisions of sub-article (2)( d ), ( e ), ( f ) and ( g )
shall apply mutatis mutandis to this sub-article.
(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. A garage attached
to or underlying a house or a block of flats, or a garage
of not more than thirty square metres situated within
five hundred metres of the dwelling house, and
transferred through the same deed with the principal
residence shall be deemed to be included as part of the
  16        CAP. 123. ħ                INCOME TAX 
residence. The period of residence includes the
physical occupation of the premises and any absences
from Malta such as on account of foreign employment,
illness, holiday or study. Any part of the house which
is used exclusively for commercial purposes for any
time within two years of the transfer shall not be
considered as "own residence" and this part shall be
apportioned on the basis of the area occupied for this
purpose as a proportion of the whole area of the
relative dwelling house;
Cap. 88.
( 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;
( 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; and
( h ) where the immovable property or the undivided part of
the immovable property was obtained by the transferor
causa mortis , or was obtained by the transferor in a
partition of immovable property obtained by the co-
partitioners  causa mortis .
(6) The provisions of sub-article (1)( a )(ii) shall not apply to
gains or profits relating to:
( a ) transfer of Malta Government Bonds and Stocks;
Cap. 345.
( b ) transfer of securities listed on a stock exchange
recognised under the Financial Markets Act, other than
securities in a collective investment scheme;
Cap. 345.
( c ) transfer of securities listed on a stock exchange
recognised under the Financial Markets Act being
securities in a collective investment scheme held in a
prescribed fund as defined in article 41A( b );
( d ) transfer of units and such like instruments relating to
linked long term business of insurance where the
benefits are wholly determined by reference to the
value of, or income from, securities to which either
paragraph ( b ) or ( c ) applies;
( e ) property transferred in the circumstances listed in
subarticle (5)( e ) and ( f ).
(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
                 INCOME TAX                                   ġ CAP. 123.         17
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.
(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 overall gain shall take into account the transfer
price and the cost of acquisition reduced as aforesaid.
(9) 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 the transfer.
In ascertaining the capital gain 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.
(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
  18        CAP. 123. ħ                INCOME TAX 
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.
(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 ) 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.
( c ) On any subsequent transfer of the shares in question,
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, amalgamation
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 shall be deemed to be the cost of acquisition
of the original shares.
(15) Where a business or a partnership  en nom collectif , as a
going concern is incorporated into a limited liability company,
which is beneficially owned to the extent of not less than seventy-
five per cent by the same person who owned the business or the
partnership  en nom collectif  and there is a transfer of assets it shall
be deemed that no loss or gain has arisen from the transfer.
Provided that where such assets are subsequently transferred by the
company, the base cost of the assets that would be considered is the
original cost existing before the first transfer took place.
                 INCOME TAX                                   ġ CAP. 123.         19
Cap. 364.
(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.
Investment 
Services and 
Insurance 
Expatriate. 
Added by: 
XVII. 1994.8.
Amended by:
XVII.1998.70.
6. (1) For the purposes of this article, an "investment services
expatriate" shall mean any individual who is an employee of, or
provides services to, an investment services company, as defined in
article 15 and an ''insurance expatriate'' shall mean any individual
who is an employee of, or provides services to, an insurance
company as defined in sub-article (4), and either:
( a ) is not ordinarily resident and not domiciled in Malta;
or 
( b ) was not resident in Malta for a minimum period of
three years immediately preceding the year in which
he commences such employment with or provides
services to any investment services company or
insurance company as aforesaid and provided that
during the said three years such individual has been
engaged on a full time basis in a similar position
outside Malta.
(2) An investment services expatriate or insurance expatriate,
for the period from the year preceding the first year of assessment
in which he is first liable to tax under the provisions of this Act up
to and including the year preceding the tenth year of assessment,
shall not be liable to tax on income relating to the following
expenditure incurred for the benefit of the investment services
expatriate or insurance expatriate or his immediate family by the
investment services company or insurance company of which he is
an employee or to which he provides investment or insurance
services:
( a ) removal costs in respect of relocation to or from
Malta; 
( b ) accommodation expenses incurred in Malta;
( c ) travel costs in respect of visits by the investment
services expatriate or insurance expatriate and his
immediate family to or from Malta; 
( d ) provision of a car for the use of the investment
services expatriate or insurance expatriate in Malta;
( e ) a subvention of not more than two hundred and fifty
liri per calendar month;
( f ) medical expenses and medical insurance; and
( g ) school fees in respect of the children of the investment
services expatriate or insurance expatriate.
(3) An investment services expatriate or insurance expatriate
shall be treated as not resident in Malta for the purposes of article
12(1)( c ).
  20        CAP. 123. ħ                INCOME TAX 
Cap. 403.
Cap. 404.
(4) For the purposes of this article, an ''insurance company''
shall mean a company authorised under article 7 of the Insurance
Business Act, an insurance manager authorised under article 13 of
the same Act and a company carrying on the business of insurance
broking under article 13 of the Insurance Brokers and Other
Intermediaries Act. 
Year of assessment 
1973. 
Added by: 
XXXV.1972.4. 
Amended by: 
XXXI. 1988.3; 
XXXVI.1990.3.
Renumbered by:
XVII. 1994.2.
Amended by:
XVII. 1994.9.
7. (1) No tax shall be payable upon the income of any person
which but for the provisions of this article would have been
chargeable for the year of assessment commencing on 1st January,
1973.
(2) Notwithstanding the provisions of sub-article (1) hereof,
tax shall still be chargeable for the year of assessment 1973 in
respect of any bonus share and any unduly large dividend
distributed by any company by resolution taken between the 27th
July, 1972 and the 31st December, 1972, and in respect of any other
unduly inflated income chargeable under any of the paragraphs of
article 4(1) where the Commissioner is of the opinion that such
income accrued to or was derived by any person between the 27th
July, 1972 and the 31st December, 1972 who was in a position to
determine the amount thereof.
(3) The income still chargeable to tax for the year of
assessment 1973 in accordance with the provisions of sub-article
(2) shall be computed by considering the said bonus share and the
excessive part of the unduly large dividend and income to be the
highest part of the chargeable income which, but for the provisions
of that sub-article, would have been charged to tax for the year of
assessment 1973.
(4) For the purposes of sub-article (2) any dividend declared
during the period 27th July, 1972 to 31st December, 1972 which
exceeds by twenty per cent the highest dividend declared by the
same company between the 1st January, 1969 and the 26th July,
1972, shall, unless the contrary is proved, be deemed to be unduly
large. 
(5) Saving the foregoing provisions of this article, the
provisions of this Act shall still apply for the year of assessment
1973.
(6) The provisions of this article shall not apply in the case of
any individual who, in any year of assessment up to the year of
assessment 1972, was entitled to a deduction under article 53(4),
(5) or (6) as in force at the relative time: 
Provided that the personal deductions for the year of
assessment 1973 shall in any such case be increased by an amount
equal to what would have been the individual’s chargeable income
for the said year but for the provisions of this sub-article.
(7) In any case referred to in sub-article (6), no surtax shall be
payable for the year of assessment 1973.
(8) Where, in respect of the year of assessment 1973 -
 (i) a company is entitled to deduct tax from a
dividend paid to any person in accordance with
                 INCOME TAX                                   ġ CAP. 123.         21
the provisions of article 59(1) hereof; or
(ii) tax has been paid by deduction from the income
of any person in accordance with the provisions
of article 59(6) or article 73 hereof,
such tax shall, saving any other provisions of this Act, be set off
against the liability to tax of the said person for such year of
assessment as the Commissioner may elect.
Cap. 372.
(9) Any excess remaining after tax has been set off as provided
in sub-article (8) shall be refunded in accordance with the
provisions of article 48 of the Income Tax Management Act.
(10) The provisions contained in sub-article (1) shall not apply
to the income of any body of persons arising from activities
relating or ancillary to oil-prospecting, banking, sound or
television broadcasting, film renting or insurance (excluding
commissions derived from the sale of insurance by bodies of
persons residing in Malta).
Special provisions 
in respect of 
certain formerly 
undeclared 
income. 
Added by: 
XXXV.1972.5. 
Amended by: 
XX.1973.2; 
XXVI.1977.4; 
IX.1983.5; 
XIII.1983.4,5.
Renumbered by:
XVII. 1994.2.
Amended by: 
XVII.1994.10.
Cap. 239 - 
Revoked.
8. (1) Notwithstanding the provisions of this Act and of the
Succession and Donation Duties Ordinance, hereinafter in this
article referred to as "the Ordinance", or of the Death and Donation
Duty Act, the provisions of this article shall apply to any income
omitted by any person from a return submitted by him to the
Commissioner before the 27th July, 1972 in respect of any year of
assessment up to the year of assessment 1972 and to any income
not returned to the Commissioner by the said date by any person
who has not submitted a return for any year of assessment up to the
year of assessment 1972; provided that there shall be excluded any
such income - 
( a ) brought to charge to tax in any assessment -
 (i) which became final and conclusive before the
27th July, 1972; or
 (ii) which was raised by the Commissioner before
the 27th July, 1972 on any person who was not
domiciled in Malta during 1971; or
( b ) which accrued to or was derived by any person who
had no chargeable income for any year of assessment
up to the year of assessment 1972.
(2) The income to which this article applies shall be determined
by reference to any capital asset which existed on the 31st
December, 1971, being an accumulation thereof or the source
giving rise to the said income: the value of such asset on the said
date being taken to be the cost of acquisition, or the actual amount
or value thereof, whichever is the less.
(3) The income to which this article applies shall be deemed to
be chargeable income for the year of assessment 1974, separate and
distinct from any other chargeable income for the said year of
assessment.
(4) The rate of tax applicable to the chargeable income herein
contemplated shall be three cents in the lira.
  22        CAP. 123. ħ                INCOME TAX 
Cap. 372.
(5) Notwithstanding any other provision of the Income Tax
Acts, other than article 31 of the Income Tax Management Act, the
Commissioner may at any time after the 1st October, 1972, raise an
assessment on the chargeable income referred to in sub-article (3)
and proceed for the collection of the tax due.
(6) The provisions of this article shall not apply to the income
specified in sub-article (1) hereof unless the capital asset referred
to in sub-article (2) is declared on the prescribed form which shall
be filed with the Commissioner within nine months commencing
from the 1st October, 1972.
(7) The declaration referred to in sub-article (6) hereof shall
not be deemed to have been filed with the Commissioner unless the
prescribed form is fully and accurately completed.
(8) Tax charged under the provisions of this article shall not be
deemed to be part of any tax paid or payable under this Act for the
purposes of articles 59, 76 and 89.
Cap. 239 - 
Revoked.
(9) No proceedings under this Act or under the Ordinance or
under the Death and Donation Duty Act, shall be taken against any
person in respect of the income referred to in sub-article (1) hereof,
nor shall any fiscal penalty apply thereunder in respect of the said
income, if the person in question was liable to have proceedings
taken against him or to have a fiscal penalty applied by reason of
any act or event happening before the 27th July, 1972.
Cap. 239 - 
Revoked.
(10) No tax or duty beyond the tax specified in sub-article (4)
hereof shall be levied under this Act or under the Ordinance or
under the Death and Donation Duty Act, on the income in respect
of which immunity from proceedings is granted by sub-article (9)
hereof.
Cap. 239 - 
Revoked.
(11) The provisions of sub-article (9) and (10) hereof shall apply
to the duties, penalties and proceedings contemplated by the
Ordinance or by the Death and Donation Duty Act, only in so far as
the assets referred to in sub-article (2) - 
(i) were left out from a notice in which they should
have been declared for the purposes of the
Ordinance if the said notice was filed with the
Commissioner before the 27th July, 1972, or
(ii) were transmitted under a succession opening on
the death of a person or on the taking of vows by
a person in a monastic order outside Malta and
no notice thereof was filed with the
Commissioner before the 27th July, 1972:
provided that the time limit set out in article
33( a )(iii)   of the Ordinance for the filing of the
said notice had lapsed before the said date, or
(iii) were transmitted under a gratuitous disposition
inter vivos  and no notice thereof was filed with
the Commissioner before the 27th July, 1972,
provided that the time limit set out in article
33( c ) of the Ordinance for the filing of the said
notice had lapsed before the said date.
                 INCOME TAX                                   ġ CAP. 123.         23
(12) Nothing contained in this article shall apply to the duty
charged under the Ordinance in respect of any assessment raised
before the 27th of July, 1972.
(13) Notwithstanding the other provisions of this article, where
the capital asset referred to in sub-article (2) remains undeclared by
any person either in whole or in part within the period specified in
sub-article (6) - 
( a ) the rate of tax set out in sub-article (4)( c ) shall be
substituted by the rate of thirty cents in the lira in
respect of such undeclared income or part thereof; and
( b ) if such person is convicted on a charge that he has
knowingly failed to declare the said capital asset, he
shall be liable to a fine ( multa ) of not less than one
hundred liri and not exceeding one thousand liri, and
to imprisonment for a term not exceeding two years.
Cap. 219.
(14) The amount of any levy paid under the Bearer Accounts
Levy Act by the 31st of December, 1971, shall be deducted from
any tax charged under the provisions of this article in respect of any
holding in the relative bearer account and of any interest derived
therefrom, so however that such deduction shall not exceed the tax
chargeable under this article in respect of such holdings:
Provided that nothing in this article contained shall be
deemed to empower the Commissioner to charge to tax any holding
in a bearer account with any bank except by way of an assessment
raised on the person holding the title to such an account.
(15) Any person may elect by notice in writing filed with the
Commissioner within the period specified in sub-article (6) hereof
that the provisions of this article shall not apply to the income
referred to in sub-article (1):
Provided that in such cases nothing in this Act contained
shall prevent the Commissioner from raising an assessment on such
income at any time in accordance with the provisions of the other
articles of this Act.
Further special 
provisions in 
respect of certain 
formerly 
undeclared 
income. 
Added by: 
XX. 1973.3.
Renumbered by:
XVII. 1994.2.
Amended by: 
XVII. 1994.11.
9. (1) Subject to the provisions of this article, article 8 shall
also apply to the income of any person not returned to the
Commissioner in respect of the year preceding any year of
assessment up to the year of assessment 1972, if -
( a ) the Commissioner is satisfied that the said person had
submitted to him before the 27th July, 1972, a return
for any other year of assessment but not for the year of
assessment in question; and
( b ) the income accrued to or was derived by any person
other than a company.
(2) In any case falling under sub-article (1), or under the said
sub-article and of article 8(1), the minimum amount of tax payable
shall be the higher of the following two amounts:
( a ) the tax computed in accordance with the provisions of
article 8(2), (3), (4) and (5), or
  24        CAP. 123. ħ                INCOME TAX 
( b ) the total amount of tax charged under article 56(1),
(2), (3) and (10) for the last year of assessment on
account of which an assessment or assessments to tax
that were all final and conclusive on the 27th July,
1972, had been raised by the said date, multiplied by
the number of years for which no return had been filed
as aforesaid.
(3) Any person may elect not to avail himself of the provisions
of this article.
Cap. 372.
(4) If a person does not elect as provided in sub-article (3), the
requirements of article 10 of the Income Tax Management Act shall
not be enforced in his regard in respect of any year of assessment
on account of which the provisions of sub-article (1) apply.
Spontaneous 
declaration of 
undeclared 
income. 
Added by: 
XXII.1995.3. 
Amended by:
XX.1996.5.
9A. (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
deemed to be the income as arrived at under the following
provisions of this article.
(2) The spontaneous declaration shall show as income falling
under article 4(1) for the years of assessment 1994, 1993, 1992 and
1991 a sum based on a true declaration of the income declared by
that person falling under article 4(1) (but excluding any investment
income as defined in article 41 and capital gains falling under
article 5) for the year of assessment 1995 as follows:
( a ) for the year of assessment 1994, a sum equivalent to
80% of the relative income declared in the return for
the year of assessment 1995, excluding any investment
income as defined in article 41 and capital gains
falling under article 5 as aforesaid;
( b ) for the year of assessment 1993, a sum equivalent to
90% of the sum declared under paragraph ( a ) hereof;
( c ) for the year of assessment 1992, a sum equivalent to
90% of the sum declared under paragraph ( b ) hereof;
and
( d ) for the year of assessment 1991 a sum equivalent to
90% of the sum declared under paragraph ( c ) hereof:
Provided that where a person was in any of the years of
assessment 1991 to 1994 not registered as a taxpayer and had no
income liable to tax under this Act, he shall under paragraphs ( a ) to
( d )   hereof, only declare that he received no income for the years of
assessment therein referred to previous to the year of assessment in
which he first became liable to tax under this Act.
(3) The spontaneous declaration shall also make a statement of
any undeclared capital gains falling under article 5 in respect of
each year of assessment where such gains were so undeclared.
(4) Where a spontaneous declaration has been made in
accordance with the provisions of this article:
                 INCOME TAX                                   ġ CAP. 123.         25
( a ) the income of the person making the declaration and
subject to tax under the provisions of this Act other
than this article shall be deemed to be the income
declared by that person in the return for the relative
year of assessment:
  Provided that:
(i) where in respect of any year of assessment the
income of that person has been arrived at in an
assessment which is final and conclusive the
income so arrived at shall be deemed to be the
income so declared; and
(ii) where any income falling under article 4(1) has
been or is reported by an employer or other
person paying the income to the Commissioner
in any return required for the purposes of the
Deduction of Tax (PAYE) Rules, 1972, or in
accordance with such rules ought to be so
reported, such income shall be deemed declared
by such person;
( b ) the assessment for the relative year of assessment shall
be raised on the basis of the income declared or
deemed declared in accordance with paragraph ( a )
hereof: 
      Provided that in the case where a return was not
submitted to the Commissioner by the 31st March
1995, the assessment for the relative year of
assessment shall be raised on the following basis:
(i) If the return is in respect of any of the years of
assessment 1991 to 1994, the income for the
relative year of assessment shall subject to the
provisions of paragraph ( a )(ii) hereof be
considered to be that declared by such person in
the relative return or the income determined in
accordance with sub-article (2), whichever is the
higher;
(ii) If the return is in respect of a year of assessment
prior to year of assessment 1991, the income for
the relative year of assessment shall subject to
the provisions of paragraph   ( a )(ii)   hereof be
considered to be that declared by such person in
the relative return or a sum equal to the income
determined in accordance with sub-article
(2)( d ), whichever is the higher; and
( c ) any additional tax under article 56(12) in respect of
any year of assessment for which there is not an
assessment which is final and conclusive, shall be
waived.
(5) For the purposes of sub-article (2), (4) and (7), income
under article 4(1) and capital gains falling under article 5, means
the income as adjusted in accordance with the provisions of this
Act.
  26        CAP. 123. ħ                INCOME TAX 
(6) The income declared in a spontaneous declaration in
accordance with this article shall be deemed to be separate
chargeable income for the year of assessment 1995, and shall,
subject only to the deductions as provided in sub-article (7) be
subject to tax at the rate of twenty-five cents in the lira.
(7) There shall only be deducted from the income declared in
respect of each year of assessment under sub-article (2), the income
declared or deemed declared in accordance with sub-article (4), by
the taxpayer for the respective year of assessment being income
falling under article 4(1) not being investment income as defined in
article 41 or capital gains falling under article 5:
  Provided that:
( a ) where in respect of a year of assessment the income
falling under article 4(1)( a ) as declared in accordance
with sub-article (4) is a loss, such income shall for the
purposes of this article be deemed to be nil; and
( b ) where in respect of a year of assessment the income
declared in accordance with sub-article (4) falling
under article 4(1) (excluding investment income as
defined in article 41 or capital gains falling under
article 5) is greater than the income declared under
sub-article (2) in respect of the same year of
assessment, the income declared in accordance with
sub-article (4) shall be deemed to be equal to that
declared under sub-article (2) in respect of the same
year of assessment.
(8) The tax on income chargeable under this article shall be
payable in three instalments as follows:
( a ) fifty per cent by not later than the 15th December 1995
together with the submission of the spontaneous
declaration to the Commissioner;
( b ) twenty per cent by not later than the 29th March, 1996;
and
( c ) thirty per cent by not later than the 30th September,
1996.
Cap. 372.
(9) The Commissioner shall send by registered post to each
person who makes a valid spontaneous declaration in accordance
with this article, a notice stating the amount of his separate
chargeable income for the year of assessment 1995 and the amount
of tax payable thereon by him, and the provisions of Part VII and of
article 32 of the Income Tax Management Act shall apply to such
notice.
(10) The spontaneous declaration referred to in the previous sub-
articles to this article shall be deemed not to have been filed with
the Commissioner unless:
( a ) the prescribed form is fully and accurately completed
and is submitted in duplicate to the Commissioner not
later than the 15 December, 1995;
( b ) all returns for the years of assessment up to and
                 INCOME TAX                                   ġ CAP. 123.         27
including the year of assessment 1995 are submitted to
the Commissioner by the time the declaration is made;
and
( c ) payment of the first   instalment of tax is made as laid
down in sub-article (8).
(11) Where it results to the Commissioner that a person who
filed a valid spontaneous declaration under this article has
underdeclared his income for the year of assessment 1995 or has
underdeclared any income which ought to be declared under sub-
article (3) hereof or has under the proviso to sub-article (2) hereof
declared that he has received no income for any year of assessment
in which he was liable to tax, the Commissioner shall recompute
the separate chargeable income on the basis of the reassessed
income for the year of assessment 1995, and, or as ought to have
been declared under sub-article (3), and, or disregarding the
provisions of the proviso to sub-article (2) hereof as the case may
be, and raise a tax thereon at the rate of sixty-five cents in the lira.
The Commissioner shall thereupon issue a fresh notice of
assessment and any previous notice issued under this article shall
be cancelled and any tax already paid in respect of the previous
notice or together with the filing of the spontaneous declaration
shall be set off from any tax due in accordance with this sub-article.
Cap. 372.
Management Act shall apply to the tax due under sub-article (11):
Cap. 372.
appeal as laid down in articles 33, 35 and 37 of the Income Tax
Management Act against a notice of assessment issued in
accordance with sub-article (11).
(13) ( a ) Tax charged under the provisions of this article shall
not be deemed to be part of any tax paid or payable
under this Act for the purposes of articles 59, 76 and
89.
( b ) Nothing contained in this article shall affect the
provisions of articles 43, 44 and 45.
(14) Where a person makes a spontaneous declaration in
accordance with the provisions of this article, the Commissioner
shall disregard the provisions of article 14(1)( g ) regarding the
carrying forward of losses incurred during any year preceding the
year of assessment 1995 with respect to the year of assessment
1995 and subsequent years of assessment.
(15) The Minister may make rules generally for carrying out the
provisions of this article and may in particular by those rules
provide for the form of returns, claims, statements and notices
under this article.
  28        CAP. 123. ħ                INCOME TAX 
Assets registered 
under the Invest-
ment Registration 
Scheme.
Added by:
II. 2002.43.
Cap. 123 and 372.
Cap. 239.
Cap. 294.
Cap. 364.
Cap. 233.
9B. (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;ż
"qualifying asset" means an asset that is registered in accordance
with a scheme made under article 39 of the Exchange Control Act;
"tax" means any tax or duty chargeable under any provision of
the relevant laws.
(2) Subject to the provisions of subarticle (3), there shall be
exempt from tax otherwise chargeable under any provision of the
relevant laws:
( a ) any income, including capital gains, derived from a
qualifying asset at any time before the date on which
that asset is registered as a qualifying asset;
( b ) any income, including capital gains, to the extent that
a qualifying asset represents such income or an
undeclared part of such income or an accumulation
thereof, derived by any person during the year
immediately preceding any year of assessment in
respect of which that person has furnished a return of
his income to the Commissioner before the 1st
September, 2001, or during the year immediately
preceding any year of assessment commencing on or
before the 1st January, 2001, in respect of which that
person was not required to furnish a return of his
income;
( c ) any transfer  inter   vivos  or transmission  causa   mortis  of
any asset, any document of transfer of such an asset
and any assignment of an asset made or happening
before the 1st September, 2001, or in respect of the
undeclared part of the value or consideration of such
transfer or transmission, to the extent that a qualifying
asset represents such asset or the value in
consideration of such transfer or transmission.
(3) The exemption from tax on income referred to in subarticle
(2)( a ) and ( b ) shall apply to the extent that the said income has not
been declared in any income tax return furnished to the Commissioner,
and no tax has been assessed with respect thereto in any assessment
raised under the Income Tax Acts and notified before the 1st
September, 2001, and the exemption from tax referred to in paragraph
( c ) of the said subarticle shall apply to the extent that no return,
declaration or notice of the relative transfer, transmission or
assignment has been furnished to the Commissioner and no tax has
been paid or assessed thereon in an assessment raised and notified
before the said date under any provision of the relevant laws or to the
extent that the value or consideration or transfer or transmission has
been undeclared and represented as aforesaid by the qualifying asset.
(4) No person shall be bound to make or furnish, or be considered
to have ever been bound to make or furnish, any return, declaration,
                 INCOME TAX                                   ġ CAP. 123.         29
act or notice that would otherwise have been required to be made or
furnished in accordance with any provision of the relevant laws
relating to income, transfer, transmission, assignment or document that
is exempt from tax in terms of subarticle (2), and any responsibility
which the said person would have had under the relevant laws for the
failure to make or to furnish any such return, declaration, act or notice
shall be considered as never having existed, and every person who,
under any scheme made by the Government or any public entity or
under any law, whichever it may be including this Act, before such
registration was considered to be entitled to any benefit, exemption or
other advantage as a result of not having declared such eligible assets
(or income therefrom) in connection with any claim for such benefit,
exemption or advantage, shall not be considered as having committed
an offence as a result of not having declared those assets (or income
therefrom) and shall not be required to refund that benefit, exemption
or other advantage acquired before that declaration:
Provided that if such person, after the date of registration of
those eligible assets (or income therefrom) continues for a period after
the declaration to take that benefit, exemption or advantage without
being entitled thereto, such person shall be considered as never having
been exempted from liability for the offence, and shall forfeit the right
not to refund any benefit, exemption or advantage acquired before the
registration:
Provided further that nothing in this article shall be construed
as exempting any person from refunding any benefit, exemption or
other advantage demanded to be paid back by the competent authority
before the making of such declaration.
Basis of 
assessment.
Renumbered by:
XVII. 1994.2.
10. Tax shall be charged, levied and collected for each year of
assessment upon the chargeable income of any person for the year
immediately preceding the year of assessment.
Accounting 
periods. 
Amended by: 
XXII.1976.4. 
Substituted by: 
XXVI.1977.5. 
Amended by: 
IX. 1981.2.
Renumbered by:
XVII. 1994.2.
11. (1) Every person shall each year make up the accounts of
his trade or business which he is required to keep in accordance
with the provisions of this Act to the day immediately preceding
the next following year of assessment.
(2) Notwithstanding the provisions of sub-article (1) hereof,
the Commissioner may permit any person to whom this sub-article
applies to make up the said accounts to a date other than the day
immediately preceding a year of assessment and, where permission
has been granted as aforesaid, the gains or profits for that year of
assessment and subsequent years of assessment shall be computed
on the income of the year terminating on the date in the year
immediately preceding the year of assessment on which the
Commissioner has permitted that the accounts be made up.
(3) Sub-article (2) applies to any -
( a ) company;
( b ) commercial partnership  en nom collectif , or
commercial partnership  en commandite  the capital of
which is not divided into shares;
( c ) body corporate established by law;
  30        CAP. 123. ħ                INCOME TAX 
( d ) undertaking required by article 30(7)( d ) to be dealt
with as a separate body of persons.
(4) In granting his permission for the purposes of sub-article
(2), the Commissioner may impose such conditions as he deems fit
and reasonable, and where the person who has requested
permission for a change in accounting date accepts the conditions
laid down by the Commissioner and the accounting date of the
trade or business is changed accordingly, such conditions shall be
operative notwithstanding any other provisions of this Act.
(5) The Minister responsible for finance may make rules
prescribing -
( a ) the method by which changes in an accounting date
may be authorized by the Commissioner for the
purposes of this article; and
( b ) the conditions which may be imposed or required by
the Commissioner in authorizing changes as aforesaid.
PART III
EXEMPTIONS 
Exemptions. 
Amended by: 
XX.1955.2; 
XV.1958.2; 
XXV. 1960.5; 
XXIV.1961.2; 
XXV.1962.2,4; 
L.N. 4 of 1963; 
X.1963.2; 
XIV. 1963.2; 
XXXI.1966.2; 
XXVII.1967.20; 
VIII. 1969.4; 
XLIX. 1974.3; 
XLII.1975.3; 
XXII.1976.4; 
XXXIX.1976.8; 
XXVIII. 1978.5; 
XXI.1980.3; 
IX.1981.3; 
IX.1983.6; 
XIII.1983.5; 
XIV.1984.3; 
VIII.1987.3; 
XXXI.1988.4; 
XIX.1989.4; 
XXXVI. 1990.4; 
VIII.1991.2; 
XIII.1992.2.
Renumbered by:
XVII. 1994.2.
Amended by: 
XVII. 1994.12; 
XX.1996.6;
XVII. 1998.70;
IX. 2001.24;
II. 2002.44;
II. 2003.9.
Cap. 318.
Cap. 370.
12. (1) There shall be exempt from the tax -
( a ) the income of the University of Malta;
( b ) the allowances and benefits as may be specified by the
Minister responsible for finance by notice published in
the Gazette which are payable under the Social
Security Act, or in consequence of any measure
announced in the annual Budget Speech;
( c )  (i) any interest or royalties accruing to or derived
by any person not resident in Malta:
  Provided that the exemption under this sub-
paragraph 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 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 disposal of
any units in a collective investment scheme as
defined in article 2 of the Investment Services
Act, of any units and such like instruments
relating to linked long term business of
insurance, including the surrender or maturity of
linked long term policies of insurance and of any
shares or securities in a company (which for the
avoidance of doubt includes redemption,
liquidation or cancellation) which is not a
                 INCOME TAX                                   ġ CAP. 123.         31
company the assets of which consist wholly or
principally of immovable property situated in
Malta:
       Provided that such non-resident person is the
beneficial owner of the interest, royalty, gain or
profit as the case may be, and that such person is
not owned and controlled by, directly or
indirectly, nor acts on behalf of a person who is
ordinarily resident and domiciled in Malta;
( d ) the income of any pension fund, provident fund or
other fund approved by the Minister responsible for
finance; 
( 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, retiring or death gratuity or received as
consolidated compensation for death or injuries;
( i ) the income arising from a scholarship held by a person
receiving full time instruction at a university, college
or similar educational institution:
   Provided that this paragraph shall not apply to
income, by whatever name called, paid out of funds
disbursed or otherwise provided by the employer of
the recipient which the recipient would have received
by reason of his employment if he had not held such
scholarship; and any income to which this paragraph
does not apply shall be deemed to be income
chargeable to tax in accordance with the provisions of
article 4(1)( b );
Cap. 452.
( 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
  32        CAP. 123. ħ                INCOME TAX 
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
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 or payable out of gains or profits
chargeable at the rate provided for in article 56(13);
( q ) the income of a co-operative society;
( r ) Repealed by Act XX of 1996;
( s ) the income of a collective investment scheme other than
investment income to which article 41A( a ) refers;
( t ) any financial assistance, as determined by the Courts
of Malta or as agreed by a public deed of personal
separation under the authority of the Courts of Malta,
received by an individual from his estranged spouse in
respect of the maintenance of a child:
Provided that nothing in this subarticle shall be construed
as granting any exemption from the filing of a return in respect of
any such income, or as exempting in the hands of the recipients any
dividends, interests, annuities, emoluments, pensions or other gains
or profits paid wholly or in part out of the income so exempted.
(2) The Minister responsible for finance may exempt any
person or class of persons with or without retrospective effect from
all or any of the provisions of this Act on any ground which to him
may seem sufficient. Any such exemption may be made subject to
such conditions or the payment of such other rate or rates of tax,
                 INCOME TAX                                   ġ CAP. 123.         33
whether related to income or otherwise, or to both such conditions
and payment, as the Minister may deem appropriate.
(3) The Minister responsible for finance may by order
published in the Government Gazette provide that the interest
payable on any loan charged on the public revenue of Malta shall
be exempted from the tax, either generally or only in respect of
interest payable to persons not resident in Malta, and such interest
shall, as from the date and to the extent specified in the order, be
exempt accordingly.
Cap. 202.
(4) The Minister responsible for finance may by order
published in the Government Gazette provide that the interest
payable on any debentures, debenture stock or other securities
issued by the Malta Development Corporation under the Malta
Development Corporation Act, as security for any authorised
borrowing of the said Corporation, shall be exempted from the tax,
either in whole or in part and to such extent as he may deem
appropriate, and such interest shall, as from the date and to the
extent specified in the order, be exempt accordingly.
Temporary 
residents.
Renumbered by:
XVII. 1994.2.
13 . Tax shall not be payable in respect of any income arising
outside Malta to any person who is in Malta for some temporary
purpose only and not with any intent to establish his residence
therein and who has not actually resided in Malta at one or more
times for a period equal in the whole to six months in the year
preceding the year of assessment.
PART IV
DEDUCTIONS
Deductions 
allowed. 
Amended by: 
XX.1955.3; 
V.1958.3; 
XV.1958.2; 
XXV.1960.6; 
XXV.1962.2,4; 
L.N. 4 of 1963; 
X.1973.2; 
XLII.1975.4; 
XXVI.1977.6; 
XXVIII.1978.6; 
XXI. 1980.4; 
IX.1981.4; 
XIII. 1983.4; 
XXXVI. 1990.5; 
XVIII. 1993.5.
Renumbered by:
XVII. 1994.2.
Amended by: 
XX.1996.7;
IV. 2001.35;
IX. 2001.25;
II. 2002.45;
II. 2003.10.
14. (1) For the purpose of ascertaining the total income of any
person there shall be deducted all outgoings and expenses incurred
by such person during the year preceding the year of assessment to
the extent to which such outgoings and expenses were wholly and
exclusively incurred in the production of the income, including -
( a ) sums payable by such person by way of interest upon
any money borrowed by him, where the Commissioner
is satisfied that the interest was payable on capital
employed in acquiring the income;
( 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:
        Provided that all sums recovered during the said year
  34        CAP. 123. ħ                INCOME TAX 
on account of amounts previously written off or
allowed in respect of bad debts shall for the purposes
of this Act be treated as receipts of the trade, business,
profession or vocation for that year;
( e ) any sum contributed by an employer to a pension,
saving, provident or any other society or fund which
may be approved by the Commissioner as may be
prescribed;
( f ) a deduction in respect of the wear and tear of any plant
and machinery, and any premises being an industrial
building or structure, arising out of the use or
employment of such property in the production of the
income; and where such property is employed on such
terms that the burden of wear and tear thereof falls
upon the person making use of the property in the
production of the income, but such property does not
belong to him, he shall be entitled to any deduction to
which he would have been entitled had the property
belonged to him: 
          Provided that -
(i) the amount to be deducted in respect of premises
being an industrial building or structure shall not
exceed two per cent of the cost thereof, not
including the cost of the land on which the
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
                 INCOME TAX                                   ġ CAP. 123.         35
prior to the commencement of this
Act shall be computed at the
prescribed rates, and
                    ( b )   the cost of the land on which the
building or structure is erected shall
in all cases be excluded from the
original cost of the premises;
( g ) the amount of a loss incurred by any person, solely or
in partnership, in any trade, business, profession or
vocation during the year preceding the year of
assessment which, if it had been a profit, would have
been assessable under this Act; and in computing such
loss account shall be taken of all deductions which
would have been allowable under the other paragraphs
of this sub-article, except paragraphs ( f ) and ( j ), if it
had been a profit; and where the amount of a loss
incurred and computed as aforesaid is such that it
cannot be set off against capital gains or income from
other sources for the year preceding the year of
assessment, it shall, to the extent to which it cannot be
wholly set off against capital gains or income for the
said year, be carried forward and set off against what
would otherwise have been the total income for
subsequent years in succession:
      Provided that nothing in this paragraph shall be
construed as permitting the set off of any loss incurred
outside Malta which, if it had been a profit and had
been retained outside Malta, would not have been
chargeable to tax under this Act;
( h ) any expenditure on scientific research incurred by a
person engaged in any trade, business, profession or
vocation and proved to the satisfaction of the
Commissioner to have been incurred for the use and
benefit of the trade, business, profession or vocation:
        Provided that any such expenditure of a capital nature,
unless it is an expenditure in respect of which a
deduction is allowable under paragraphs ( f )   and   ( j ),
shall be spread equally over the year in which it has
been incurred and the five succeeding years:
         Provided further that no deduction shall be
allowed under the provisions of this paragraph in the
case of any such expenditure on plant or machinery or
premises, in respect of which any deduction is allowed
under paragraphs ( f )   and ( j ):
Provided further that, if the scientific research is
carried out in Malta, the deduction due under this
paragraph may, at the option of the person,  be allowed at
one hundred and fifty per cent of the actual amount of
the expenditure incurred ; and when a person exercises
his option as aforesaid, the total increased deduction shall
not, for any year of assessment, exceed five per cent of
  36        CAP. 123. ħ                INCOME TAX 
the turnover of the person for that year; and if this total
increased deduction is such that the full amount thereof
cannot be allowed as a deduction in the year in which it
would, but for the stated five per cent limitation, have
been deductible, that part which cannot be so allowed
shall be added to any deduction due under the provisions
of this paragraph for the following year and be deemed to
be part of that deduction or, if there is no such deduction
for that year, be deemed to be the deduction for that year,
and so on for subsequent years.
For the purposes of this paragraph "scientific
research" shall include:
(i) basic research comprising activities undertaken for
the advancement of scientific or technological
knowledge;
(ii) applied research where a specific application is
in view;
(iii) development work involving the use of the
results of basic and applied research as aforesaid
for the purpose of creating new or improving
existing materials, devices, products or
processes.
( i ) any expenditure on patents or patent rights incurred by
a person engaged in a trade, business, profession or
vocation and proved to the satisfaction of the
Commissioner to have been incurred for the use and
benefit of the trade, business, profession or vocation:
           Provided that any such expenditure of a capital
nature shall be spread over the life of the patent or
patent rights in a reasonable manner to the satisfaction
of the Commissioner:
       Provided further that any sums receivable from
any sales of such patents or patent rights or any part
thereof and all royalties or other income receivable in
respect thereof shall be included as total income for
the year when receivable;
( j ) in respect of plant and machinery first used and
employed in the year immediately preceding the year
of assessment, an initial deduction of one-fifth of the
capital expenditure thereon, and in respect of premises
being an industrial building or structure first used and
employed in the year immediately preceding the year
of assessment, an initial deduction of one-tenth of the
capital expenditure thereon:
       Provided that deductions made under this
paragraph shall be restricted, set off and carried
forward as laid down in the second and third provisos
to paragraph ( f ):
Provided further that the deduction contemplated
by this paragraph in respect of plant and machinery shall
                 INCOME TAX                                   ġ CAP. 123.         37
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:
Cap. 354.
Provided 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
property rights incurred by a person engaged in a
trade, business, profession or vocation and proved to
the satisfaction of the Commissioner to have been
incurred for the use and benefit of the trade, business,
profession or vocation:
Provided that any such expenditure of a capital
nature shall be spread equally over the year in which it
has been incurred and the two succeeding years:
Provided that where a person engaged in trade or business
derives gains or profits wholly or in part - 
Cap. 156.
Cap. 194.
(i) from the sale or disposal of petroleum produced
in Malta under a licence granted before 1st
January, 1981, under the Petroleum (Production)
Act, or under that Act and under the Continental
Shelf Act, the total income of such person shall
be ascertained in accordance with the provisions
of article 23;
(ii) from operations in Malta relating to the
production of petroleum and the sale or disposal
of such petroleum, whether under a licence
granted as aforesaid after 1st January, 1981, or
under a petroleum production sharing contract or
any other arrangement, the total income of such
person shall be ascertained in such manner as
may be prescribed, 
and the provisions of this sub-article and of article 24 shall not
apply;
(2) ( a ) The Minister responsible for finance may make rules
  38        CAP. 123. ħ                INCOME TAX 
prescribing the method of calculating or estimating the
deductions allowable under this article, and may by
such rules also determine the amount of the deduction.
( b ) The Minister responsible for finance may by such
rules also prescribe tax credits and deductions other
than those listed in subarticle (1), and may also by
such rules determine the class of persons to whom
such tax credits or deductions shall apply and the
method of calculating or estimating such tax credits or
deductions and the amounts thereof.
(3) Where any person incurs expenditure before he begins to
carry on his trade or business, and the expenditure -
( a ) is incurred not more than eighteen months before that
time; and
( b ) is not deductible in ascertaining the trading or business
income of that person, but would have been so
deductible under subarticle (1) had it been incurred
after that time, 
such expenditure as may be prescribed shall be treated as incurred on
the day on which the trade or business is first carried on by that person.
Alimony 
payments.
Added by: 
XX.1996.8.
Amended by:
II. 2002.46.
14A.   Notwithstanding anything to the contrary contained in this
Act, if an individual proves to the satisfaction of the Commissioner
that in the year preceding a year of assessment he has paid to his
estranged spouse an alimony payment as determined by the Courts
of Malta  or as agreed by a public deed of personal separation under
the authority of the Courts of Malta , he shall be allowed as a
deduction against his income the lesser of these amounts -
( a ) the amount actually paid in accordance with the Court
order or public deed;
( b ) the individual’s chargeable income for the year.
School fees.
Added by:
II. 2002.47.
14B. Notwithstanding anything to the contrary contained in this
Act, if an individual proves to the satisfaction of the Commissioner
that in the year preceding a year of assessment he has paid school
fees in respect of his children attending a school named by the
Minister he shall be allowed as a deduction against his income the
lesser of these amounts -
( a ) the amount actually paid as certified by the head of the
relative school;
( b ) three hundred liri in respect of each child who attended
such secondary school or two hundred liri in respect of
each child who attended such primary school:
Provided that where the parents of a child who attends a
named school live separately and they jointly contribute towards
the payment of the school fees, the allowable deduction in respect
of that child shall be apportioned between them in proportion to the
amount of their contribution.
                 INCOME TAX                                   ġ CAP. 123.         39
Investment 
services 
companies. 
Added by: 
XVII. 1994.13.
Amended by:
II. 2003.11.
Cap. 370.
15. (1) For the purposes of this article investment services
company shall mean a company which holds an investment services
licence issued under article 6 of the Investment Services Act, or a
company recognised by the relevant competent authority for the
purposes of article 9A of that said Act, and whose activities solely
comprise the provision of management, administration,
safekeeping, or investment advice to collective investment schemes
as defined in the aforesaid Act.
(2) For the purposes of ascertaining the total income of an
investment services company, the amounts specified in paragraphs
( a )   to   ( e ) shall, at the company’s option, be allowed as deductions
in addition to or as a replacement for, as the case may be, the
amounts allowed under article 14(1) and shall be subject to the
conditions stipulated in that article. For this purpose:
( a ) rental, energy costs, building maintenance, building
insurance and other building occupancy costs incurred
in the period from the year preceding the first year of
assessment in which the investment services company
first becomes liable to tax under this Act up to and
including the year preceding the tenth year of
assessment shall be allowed as an additional one
hundred per cent of such expenditure;
( b ) a one hundred per cent deduction shall replace the
deductions provided for under article 14(1)( f ) and ( j )
in respect of expenditure which is incurred in the
period commencing from the year preceding the first
year of assessment in which the investment services
company first becomes liable to tax under the
provisions of this Act up to and including the year
preceding the fifth year of assessment and, in addition,
expenditure in respect of office premises shall be
eligible for such deduction as if the said premises were
industrial buildings;
( c ) the amounts invested by an investment services
company for its own account in a collective investment
scheme managed by that company shall be allowed as
a deduction if such investment is made during the
period commencing from the year preceding the first
year of assessment in which the investment services
company first becomes liable to tax under the
provisions of this Act up to and including the year
preceding the fifth year of assessment:
        Provided that such funds so invested are not
disinvested from such collective investment scheme
within two years of the making of the said investment:
       Provided further that this additional deduction shall
not affect the amount which is to be taken as the cost
of acquisition of such investment for the purposes of
any other provision of this Act, and also provided that
such deductions shall not be carried forward as part of
a loss to be set off against the company’s liability in
  40        CAP. 123. ħ                INCOME TAX 
respect of a capital gain arising on the disposal of its
investments in the collective investment scheme;
( d ) remuneration paid by an investment services company
to its employees who are resident in Malta shall be
allowed as an additional one hundred per cent of that
remuneration if such expenditure is incurred during
the period commencing from the year preceding the
year of assessment in which the investment services
company first becomes liable to tax under the
provisions of this Act up to and including the year
preceding the tenth year of assessment;
( e ) there shall be allowed as a deduction any other
expenses and outgoings incurred by the investment
services company wholly and exclusively for the
purposes of carrying on its business and which would
otherwise not have been allowed as a deduction under
the provisions of article 14(1).
(3) Where an investment services company incurs expenditure
before it begins to carry on its business, and the expenditure -
( a ) is incurred not more than five years before that time;
and 
( b ) is not deductible in ascertaining the total income of the
investment services company, but would have been so
deductible under article 14(1) or under sub-article
(2)( e ) had it been incurred after that time,
such expenditure shall be treated as incurred on the day on which
the business is first carried on by the investment services company,
and of sub-article (2)( a )   to   ( d ) shall apply in respect of such
expenditure.
(4) The additional deductions specified in sub-article (2)
represent the maximum deductions allowed for the purposes of that
sub-article, and an investment services company need not claim the
full amount of such maximum deductions in respect of any year of
assessment.
(5) The additional deductions provided for in this article shall
not be taken into account in determining the amount of loss, if any,
available for surrender under the provisions of articles 16 to 22
(group relief provisions) of this Act.
Companies author-
ised to act as insur-
ance managers.
Added by:
XVII.1998.70.
Cap. 403.
15A. The provisions of article 15 relating to investment services
companies shall, where applicable, apply  mutatis mutandis  to
companies authorised to act as insurance managers under article 13
of the Insurance Business Act.
Definition of 
group. 
Added by: 
XVII. 1994.13.
16. For the purposes of this article and of articles 17 to 22,
hereinafter collectively referred to (including this article) as the
"group relief provisions", two companies resident in Malta but
neither of which is resident for tax purposes in any other country
shall be deemed to be members of a group of companies if one is
the fifty-one per cent subsidiary of the other or both are fifty-one
                 INCOME TAX                                   ġ CAP. 123.         41
per cent subsidiary of a third company resident in Malta.
For the purposes of the group relief provisions, a company
shall be deemed to be a fifty-one per cent subsidiary of another
company, hereinafter referred to as the "parent company":
( a ) if and so long as more than fifty per cent of its
ordinary share capital and more than fifty per cent of
its voting rights are owned directly or indirectly by the
parent company; and
( b ) the parent company is beneficially entitled either
directly or indirectly to more that fifty per cent of any
profits available for distribution to the ordinary
shareholders of the subsidiary company; and
( c ) the parent company would be beneficially entitled
either directly or indirectly to more than fifty per cent
of any assets of the subsidiary company available for
distribution to its ordinary shareholders on a winding
up.
Surrender of relief 
between members 
of groups. 
Added by: 
XVII. 1994.13.
17. (1) Subject to, and in accordance with, the provisions of
this article and of articles 18 to 22, allowable losses may, in the
case set out in sub-article (2), be surrendered by a company,
hereinafter referred to as "the surrendering company", and, on the
making of a claim by another company, hereinafter referred to as
“the claimant company”, be allowed to the claimant company as a
deduction called “group relief”. A claim made by virtue of this sub-
article is hereinafter referred to as a “group claim”.
(2) Group relief shall be available where the surrendering
company and the claimant company are both members of the same
group throughout the year preceding the year of assessment for
which the relief is claimed.
(3) For any year of assessment, two or more claimant
companies may make group claims relating to the same
surrendering company. 
(4) A payment for group relief -
( a ) shall not be taken into account in computing profits or
losses of either company for the purposes of tax
imposed by this Act; and
( b ) shall not, for any of the purposes of this Act, be
regarded as a distribution.
 For the purposes of this sub-article "payment for group relief"
means a payment made by the claimant company to the
surrendering company in pursuance of an agreement between them
in respect of an amount surrendered by way of group relief, being a
payment not exceeding that amount.
Losses which may 
be surrendered by 
way of group 
relief. 
Added by: 
XVII. 1994.13.
18. (1) ( a ) If in the year preceding a year of assessment the
surrendering company has incurred an allowable loss, the amount
of the loss may be set off for the purposes of tax against the total
income of the claimant company for the corresponding year of
assessment and, where applicable, for subsequent years of
  42        CAP. 123. ħ                INCOME TAX 
assessment provided that in the year in which the surrendering
company incurs the loss both companies have accounting periods
which begin and end on the same dates:
Provided that where the surrendering company makes up
accounts and pays tax in a currency other than that of the claimant
company any loss surrendered shall be set off against the total
income of the claimant company as aforesaid, after such amount is
converted to the currency in which the claimant company makes up
accounts and pays tax. Such conversion shall be carried out by
reference to the mean rate or rates of exchange between such
currency or currencies and the Maltese Lira ruling on the last day
of the accounting period to which such loss refers as issued by the
Central Bank of Malta.
( b ) A surrendering company may surrender allowable losses by
way of group relief in excess of the total income of the claimant
company in the year preceding a year of assessment, in which case
the claimant company may carry forward and set off those losses in
accordance with the provisions of article 14(1)( g ) as if they were
losses of its own trade.
( c ) Where the allowable loss, had it been a profit, would have
been allocated to the Maltese taxed account of the surrendering
company, the claimant company may only deduct such loss from its
total income as would stand to be allocated to its Maltese taxed
account and such loss may only be carried forward against the
claimant company’s total income arising in subsequent years as
would stand to be allocated to its Maltese taxed account.
( d ) Where the allowable loss, had it been a profit, would have
been allocated to the foreign income account of the surrendering
company, the claimant company may only deduct such loss from its
total income as would stand to be allocated to its foreign income
account and such loss may only be carried forward against the
claimant company’s total income arising in subsequent years as
would stand to be allocated to its foreign income account.
(2) Notwithstanding the provisions of sub-article (1), a
company which is either - 
( a ) newly incorporated and at all times after its
incorporation satisfies the conditions to be deemed a
member of the same group of companies as another
company in the year preceding a year of assessment
and has the same accounting period end date as that
other company in that year preceding the year of
assessment, or
( b ) wound up part way through its accounting period and
until it is so wound up satisfied the conditions to be
deemed a member of the same group as another
company in the year preceding a year of assessment
and has the same accounting period start date as that
other company in that year preceding the year of
assessment,
will be deemed for the purposes of sub-article (1)( a ) to have an
                 INCOME TAX                                   ġ CAP. 123.         43
accounting period which begins and ends on the same date as that
of the other company and group relief shall be available in full for
that year.
Group relief anti- 
avoidance.
Added by: 
XVII. 1994.13.
19. If, apart from this article, a company is a member of a
group of companies, and arrangements are in existence the sole or
main purpose of which is to reduce any company’s tax liability, and
by virtue of the said arrangements that company would cease to be
a member of that group of companies, then that company shall be
treated as not being a member of that group of companies for any
year preceding a year of assessment in which the said arrangements
are in existence.
Exclusion of 
double reliefs. 
Added by: 
XVII. 1994.13.
20. (1) Relief shall not be given more than once, whether by
giving group relief and by giving some other relief (in respect of
any year of assessment) to the surrendering company, or by giving
group relief more than once, in respect of the same amount.
(2) In accordance with the provisions of sub-article (1), two or
more claimant companies cannot, in respect of any one loss, obtain
in total more relief than could be obtained by a single claimant
company.
Claims and 
adjustment.  
Added by: 
XVII. 1994.13.
21. A claim for group relief:
( a ) need not be for the full amount available,
( b ) shall include the consent of the surrendering company
set out in such form as the Commissioner may require,
and
( c ) must be made not later than twelve months following
the end of the company’s accounting period which
date falls within the year immediately preceding the
year of assessment for which the claim is made.
Definitions. 
Added by: 
XVII.1994.13.
22. For the purpose of the group relief provisions:
( a ) a reference to "allowable loss" or "allowable losses"
shall be construed as a reference to the loss or losses
referred to in article 14(1)( g ), to the extent that they
are incurred in the year preceding the year of
assessment and are not unrelieved losses carried
forward from previous years; and
( b ) references to "total income" shall have the meaning
assigned to it by article 2 but shall be computed before
any deduction is made in respect of group relief.
  44        CAP. 123. ħ                INCOME TAX 
Profits from 
production of 
petroleum. 
Added by: 
V.1958.4. 
Amended by: 
XV.1958.2; 
XXV.1962.2,4; 
L.N. 4 of 1963; 
L.N. 46 of 1965; 
VIII.1969.5; 
X.1977.3; 
XXVIII.1978.7; 
XXXVI. 1990.6.
Renumbered by:
XVII. 1994.2.
Amended by:
XX.1996.9.
23. (1) Where any person engaged in trade or business derives
gains or profits wholly or in part from the sale or disposal of
petroleum produced in Malta or of rights and interests pertaining to
such petroleum, then, so far as concerns the gains or profits derived
by such person from the sale or disposal of such petroleum or of
rights and interests pertaining thereto, the total income of such
person shall be ascertained by deducting all outgoings and
expenses, wholly and exclusively incurred during the year
immediately preceding the year of assessment by such person in the
production of the income, and properly attributable thereto,
whether incurred in Malta or elsewhere, including, but without in
any way limiting the generality of the foregoing, the following:
( a ) rents and emphyteutical ground-rents paid or payable
for the enjoyment by the person of any right in or over
any land in Malta or in or over any part of the
continental shelf excluding any expenditure of a
capital nature incurred for the acquisition of rights of
ownership and easements:
      Provided that in cases of acquisition of rights of
ownership and easements an appropriate yearly rental
shall be allowed as a deduction;
( b ) royalties in cash or in kind and/or other exactions of a
like nature;
( c ) the intangible exploration, drilling and development
costs, including all expenditure incurred by the person
in geological and geophysical exploration for
petroleum in Malta, and the preparation of the area of
the wells and the drilling of them, and the cost of all
services necessary thereto, but excluding expenditure
for the acquisition of physical assets with an average
useful life exceeding one year. If the person so elects,
the intangible exploration, drilling and development
costs or any part thereof incurred in any year shall be
capitalised and amortised in accordance with the
provisions of paragraph ( f );
( d ) losses arising out of sales of goods purchased by the
person for the purposes of his operations in Malta but
not used in or charged to such operations (any profit
arising out of such sales being deemed to be income)
and the cost to the person of services rendered by the
person in connection with the carrying on of his
operations in Malta;
( e ) administrative, overhead and establishment expenses
and rents or other charges for the use of any property;
( f ) an annual allowance in respect of the exhaustion,
depreciation and amortisation of the tangible and
intangible assets used in the production of the income
during the year immediately preceding the year of
assessment; the allowance shall be calculated at the
following rates on the depreciated value of the assets:
(i) buildings, roads and bridges, jetties and wharves
                 INCOME TAX                                   ġ CAP. 123.         45
and other assets of similar nature    ......... 4%;
(ii) office furniture and fittings   ................... 5%; 
(iii) plant and machinery, tanks, pipelines, motor
vehicles, drilling equipment, harbour craft and
other assets of similar nature  ............. 12.5%;
(iv) intangible exploration, drilling and develop-
ment costs   ........................................... 25%: 
        Provided that no allowance shall be given under this
paragraph ( f ) in respect of expenditure which the
person has elected to write off under the provisions of
paragraph ( c ).
      The depreciated value of an asset for the year of
assessment shall be the total cost to the person of the
asset in question incurred during all years preceding
the year of assessment less annual allowances, if any,
given in all previous years of assessment.
         Where in any year immediately preceding the year of
assessment an asset which qualifies for an allowance
under this paragraph ( f ) is lost, sold or otherwise
disposed of, no annual allowance shall be given in
respect of such asset for that year of assessment, but in
lieu thereof there shall be given an allowance, to be
called a "balancing allowance", in respect of such asset
equal to the excess of the depreciated value of such
asset over the proceeds, if any, arising on the loss, sale
or disposal thereof; provided that where the proceeds
arising on the loss, sale or disposal of such asset
exceed the depreciated value thereof, the excess,
limited to the differences between the cost and the
depreciated value of such asset, shall be added to the
gains or profits of the person for the year immediately
preceding the year of assessment;
( g ) any sum contributed by the person as employer to a
pension, saving, provident or any other society or fund
which may be approved by the Commissioner as may
be prescribed;
( h ) bad debts 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:
         Provided 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 for that
year;
( i ) the cost of training citizens of Malta for the purpose of
the carrying on of the operations of the person in
Malta: 
        Provided that the Minister responsible for finance may,
  46        CAP. 123. ħ                INCOME TAX 
on any ground which to him may seem sufficient,
allow the deduction of payments of a voluntary nature
wholly and exclusively incurred in the year
immediately preceding the year of assessment by the
person in the production of the income and properly
attributable thereto.
(2) Any expenditure incurred on or after the 1st April, 1969,
wholly and exclusively for the purposes of a trade or business to
which this article 23 applies and properly attributable thereto by a
person about to carry on such trade or business, shall be treated for
the purposes of this article 23 as if it had been incurred by that
person on the first day on which he does carry it on.
(3) Nothing hereinbefore contained shall be construed as
authorising the inclusion in the above mentioned outgoings and
expenses of interest on capital.
(4) Where in any year immediately preceding the year of
assessment the outgoings and expenses referred to in sub-article (1)
wholly and exclusively incurred in the production of the income of
the year immediately preceding the year of assessment and properly
attributable thereto exceed such income, the excess shall be carried
forward and deducted in arriving at the total income of the next and
subsequent years of assessment up to a maximum of ten years.
(5) For the purposes of this Act - 
Cap. 156. 
Cap. 194.
( a ) each licence granted under the Petroleum (Production)
Act, or under that Act and under the Continental Shelf
Act, shall be deemed to give rise to a trade or business
separate and distinct from any other trade or business;
( b ) any person to whom more than one licence referred to
in paragraph ( a ) is granted shall be deemed to
constitute as many separate persons subject to tax
under this Act as the number of such licences granted
to him;
( c ) where outgoings and expenses are incurred in common
in respect of separate trades or businesses referred to
in paragraph ( a ) or by separate persons referred to in
paragraph ( b ), such outgoings and expenses shall be
apportioned as necessary notwithstanding any other
provisions of this Act.
Balancing 
statement, 
balancing 
allowance and 
charge. 
Added by: 
XXV. 1960.7. 
Amended by: 
XLII. 1975.5; 
XXVI.1977.7; 
XXVIII. 1978.8.
Renumbered by:
XVII. 1994.2.
Amended by: 
XVII. 1994.14.
24. (1) Where, under the provisions of article 14(1)( f )   and   ( j ),
any deduction has been allowed in any year of assessment in
ascertaining the total income of any person and any of the
following events occurs in the year immediately preceding the year
of assessment in the case of any property in respect of which any
deduction has been allowed as aforesaid, that is to say, either the
property or any part thereof -
( a ) is sold or otherwise transferred under an onerous title,
whether still in use or not; or
( b ) is destroyed; or
( c ) is put out of use as being worn out or obsolete or
                 INCOME TAX                                   ġ CAP. 123.         47
otherwise useless or no longer required,
Cap. 372.
and the event in question occurs before the source of income in
respect of which the deduction has been allowed has ceased to exist
or to belong to the said person, he shall, in the year of assessment,
render to the Commissioner, at the same time as he renders his
return of income under article 10 of the Income Tax Management
Act, a statement (hereinafter referred to as a "balancing
statement"), in respect of the property in question showing the
following items, that is to say:
(i) the amount of the capital expenditure on the
provision thereof; and
(ii) the total depreciation which has occurred by
reason of wear and tear since the date of the
acquisition of such property, taking into account
the aggregate amount of all deductions
previously allowed under the provisions of
article 14(1)( f )   and   ( j ) and of any deductions or
charges previously allowed or made under sub-
article (2)( a )   or   ( b );
(iii) the amount of all sale, insurance, salvage or
compensation monies in respect thereof and,
where the property has been transferred by
exchange, the value thereof, or, if put out of use,
the disposal value thereof.
(2) In ascertaining the total income of a person who is required
under sub-article (1) to render a balancing statement to the
Commissioner, a deduction (hereinafter referred to as a "balancing
allowance") shall be allowed or, as the case may be, an addition
(hereinafter referred to as a "balancing charge") shall be made and
such balancing allowance or balancing charge shall be calculated
by reference to the balancing statement or statements rendered by
the person in respect of the year immediately preceding the year of
assessment, as follows:
( a ) the amount of a balancing allowance shall be the
amount by which the amount of item (i) of the
balancing statement exceeds the sum of the amounts of
item (ii) and item (iii) of that statement; or
( b ) the amount of the balancing charge shall be the amount
by which the sum of the amounts of item (ii) and item
(iii) of the balancing statement exceeds the amount of
item (i) of that statement:
   Provided that - 
(i) the balancing charge shall in no case exceed the
aggregate amount of any deductions previously
allowed under the provisions of article 14(1)( f )
and   ( j ) and included in item (ii) of the balancing
statement;
(ii) where the property in respect of which a
balancing allowance falls to be allowed or a
balancing charge falls to be made was used only
  48        CAP. 123. ħ                INCOME TAX 
partly in the production of the income, only so
much of the balancing allowance that would
otherwise have been allowed, or of the balancing
charge that would otherwise have been made
shall be allowed or made as may be appropriate
having regard to the extent of use for the said
purpose.
(3) Where property, in the case of which any of the events
mentioned in sub-article (1) has occurred, is replaced by the owner
thereof and a balancing charge falls to be made on him by reason of
that event or, but for the provisions of this sub-article, would have
fallen to be made on him by reason thereof, then, if by notice in
writing to the Commissioner he so elects, the following provisions
shall have effect, that is to say:
( a ) if the amount of the balancing charge which would
have been made is greater than the capital expenditure
on providing the new property - 
(i) the balancing charge shall be an amount equal to
the difference; and
(ii) no balancing allowance under sub-article (2) and
no deduction under article 14(1)( f )   and   ( j ) shall
be made or allowed in respect of such new
property or the capital expenditure on the
provision thereof; and
(iii) in considering whether any, and, if so, what
balancing charge falls to be made in respect of
the capital expenditure on providing such new
property, the aggregate amount of all
deductions, previously allowed in respect of
such property under the provisions of this article
and of article 14(1)( f )   and   ( j ), shall be deemed to
be equal to the full amount of such expenditure;
( b ) if the capital expenditure on providing the new
property is equal to, or greater than the amount of the
balancing charge that would have been made -
(i) the balancing charge shall not be made; and
(ii) the amount of any deductions in respect of the
said expenditure under the provisions of article
14(1)( f )   and   ( j ) shall be calculated as if the
capital expenditure on providing such new
property had been reduced by the amount of the
balancing charge which would have been made;
and
(iii) in considering whether any, and, if so, what
balancing allowance or balancing charge falls to
be made in respect of the capital expenditure on
providing such new property, the aggregate
amount of all deductions, previously allowed in
respect of such property under the provisions of
this article and under article 14(1)( f )   and   ( j ),
shall be deemed to have been increased by an
                 INCOME TAX                                   ġ CAP. 123.         49
amount equal to the amount of the balancing
charge that would have been made:
Provided that where the new property is only partly
employed in the production of the income, only so much of the
capital expenditure incurred in providing the property shall be
taken into account for the purposes of this sub-article as may be
appropriate having regard to the extent to which such property is
wholly and exclusively employed in the production of the income.
(4) Where any person has delivered a balancing statement, the
Commissioner may -
( a ) accept the statement and make a balancing allowance
or balancing charge accordingly; or
( b ) refuse to accept the statement and, to the best of his
judgment, determine the amount of the balancing
allowance or balancing charge and make a balancing
allowance or balancing charge accordingly.
(5) Where a person has not delivered a balancing statement and
the Commissioner is of the opinion that a balancing charge would
fall to be made upon such person in respect of any such property,
then the Commissioner may, according to the best of his judgment,
determine the amount of such balancing charge and assess him
accordingly.
Cap. 372.
(6) Nothing in sub-article (4) and (5) contained shall prevent
the decision of the Commissioner in the exercise of the power
conferred upon him by those sub-articles from being questioned in
an appeal in accordance with the provisions of articles 35 and 37 of
the Income Tax Management Act.
(7) For the purpose of this article - 
( a ) the expression "property" means plant and machinery,
and premises being an industrial building or structure
owned and employed by any person in the production
of his income;
( b ) the capital expenditure on providing any property shall
be the amount which, in the opinion of the
Commissioner, such property would have cost if
bought in the open market at the time it was provided;
( c ) the price in respect of any property sold or the value of
any property otherwise transferred under an onerous
title shall be the amount which, in the opinion of the
Commissioner, such property would have fetched if
sold or otherwise transferred under an onerous title on
the open market at the time it was sold or transferred;
( d ) the disposal value in respect of any property which is
put out of use shall be the amount which, in the
opinion of the Commissioner, such property would
have fetched if sold or otherwise transferred under an
onerous title in the open market at the time it was put
out of use.
(8) Where in any year of assessment full effect cannot be given
  50        CAP. 123. ħ                INCOME TAX 
to any balancing allowance owing to there being no profits or gains
chargeable for that year from the source of income in respect of
which such allowance is claimed or owing to the profits or gains
chargeable from that source being less than the allowances, then so
long as the source of income in respect of which the allowance falls
to be made continues to exist and to belong to the person entitled to
the said allowance, the balance of such allowance shall be added to,
and be deemed to from part of, the allowance, if any, for the next
succeeding year of assessment, and if no such allowance falls to be
made for that year, shall be deemed to constitute the allowance for
that year, and so on for subsequent years of assessment.
Applicability of 
articles 14 to 24.  
Added by:
XVII. 1994.15.
25. For the purposes of articles 14 to 24, both inclusive,
expenses incurred in the production of, and allowable deductions
given in respect of, profits which are allocated to the foreign
income account must first be deducted against the income from
which such profits are derived.
Deductions not to 
be allowed. 
Amended by: 
V.1958.5; 
XXII. 1976.4; 
XXIV.1976.3; 
XXVI.1977.8; 
XXVIII. 1978.9.
Renumbered by:
XVII. 1994.2.
Amended by: 
XX.1996.10;
II. 2002.48.
26. For the purpose of ascertaining the total income of any
person no deduction shall be allowed in respect of - 
( a ) domestic or private expenses other than alimony
payments as provided for in article 14A and school fees
as provided for in article 14B;
( b ) any outgoings and expenses to the extent to which they
are not wholly and exclusively incurred in the
production of the income and, in the case of gains or
profits chargeable under article 4(1)( b ), not being
furthermore necessarily incurred in the performance of
the duties of the relative employment or office;
( c ) any loss, diminution, exhaustion or withdrawal of
capital, any sum employed or intended to be employed
as capital or any expenditure for a capital purpose or
of a capital nature save as provided in article 14 and
23;
( d ) the cost of any improvements;
( e ) any loss or expense which is recoverable under any
insurance or contract of indemnity;
( f ) rent of any premises or part of premises not paid for
the purpose of producing the income;
( g ) any payments of a voluntary nature.
                 INCOME TAX                                   ġ CAP. 123.         51
PART V
SPECIAL PROVISIONS
Business of 
insurance. 
Amended by: 
XXII. 1976.4. 
Substituted by: 
XXI. 1980.5.
Re-numbered by:
XVII. 1994.2.
Substituted by:
XVII. 1998.70.
Amended by:
II. 2003.12.
27. (1) Where any person derives gains or profits wholly or in
part from the business of insurance as insurer, then, so far as
concerns the gains or profits derived by such person from the
business of insurance, the total income of such person shall, as
from the year of assessment 2000 be ascertained as follows:
( a ) in the case of a person carrying on general business,
other than a person carrying on long term business, the
total income shall be ascertained by taking for the year
immediately preceding the year of assessment -
(i) technical provisions at the commencement of the
year;
(ii) the equalisation reserve at the commencement of
the year;
(iii) gross premiums written;
(iv) reinsurance recoveries received;
(v) income from investments received and
receivable and interest income earned;
(vi) profits or gains from the sale or disposal of
investments;
(vii) capital gains subject to tax under the provisions
of this Act;
(viii) realised differences on exchange;
(ix) other technical income including commissions,
allowances and fees received and receivable;
(x) profits or gains not falling under any of the
foregoing sub-paragraphs,
and deducting from the aggregate of the above the
aggregate of the following:
(xi) technical provisions at the end of the year;
(xii) the equalisation reserve at the end of the year;
(xiii) the deductions allowable under Part IV of this
Act, including:
(1) claims paid;
(2) reinsurance premiums paid;
(3) losses from the sale or disposal of
investments;
( b ) in the case of a person carrying on long term business,
either exclusively or in addition to general business,
the total income derived from the general business
shall be ascertained as provided in paragraph ( a ) and
the total income derived from the long term business
shall be ascertained by taking for the year immediately
preceding the year of assessment -
(i) income from investments received and
receivable and interest income earned, other
  52        CAP. 123. ħ                INCOME TAX 
than those of a long term fund;
(ii) capital gains subject to tax under the provisions
of this Act, not being gains derived from a long
term fund;
(iii) commissions, allowances and fees received and
receivable not credited to a long term fund;
(iv) profits or gains from the sale or disposal of
investments not relating to a long term fund;
(v) realised differences on exchange not relating to
a long term fund;
(vi) the surplus in a long term fund which shall be
ascertained by taking -
(1) technical provisions at the commencement of
the year;
(2) gross premiums written;
(3) reinsurance recoveries received;
(4) income from investments received and
receivable and interest income earned,
relating to the long term fund;
(5) profits or gains from the sale or disposal of
investments, capital gains subject to tax
under the provisions of this Act and realised
differences on exchange relating to the long
term fund;
(6) other technical income including
commissions, allowances and fees received
and receivable,
and deducting from the aggregate of the above
the aggregate of the following:
(7) the deductions allowable under Part IV of
this Act relating to the income of the long
term fund including -
  (i) claims, maturities and surrenders paid;
 (ii) reinsurance premiums paid;
(iii) other technical charges including
commissions and allowances paid and
payable;
(8) losses from the sale or disposal of
investments of the long term fund accruing
to policyholders; and
(9) technical provisions at the end of the year;
(vii) gains or profits not falling under any of the
foregoing paragraphs not being gains or profits
derived from a long term fund,
and deducting from the aggregate of the above -
(viii) the deductions allowable under Part IV of this
Act and which have not been taken into account
in the determination of the surplus in a long term
                 INCOME TAX                                   ġ CAP. 123.         53
fund; and
(ix) any deficit arising out of the computation in sub-
article (1)( b )(vi):
Provided that where the person is not resident in Malta and
the gains or profits accrue in part in Malta and in part outside
Malta, the total income on which tax shall be payable shall -
( a ) in the case of a person doing general business, be
ascertained as provided for in sub-article (1)( a )(i) to
(xiii) on the business carried on in or from Malta;
( b ) in the case of a person carrying on long term business,
be ascertained by taking the surplus in the long term
fund computed in accordance with sub-article
(1)( b )(vi) of the business earned in or from Malta;
( c ) in determining the total income as aforesaid, any
income from investments held outside Malta to back
Malta business, where such income cannot be readily
ascertained, shall be computed by taking a proportion
of the person’s worldwide investment income in the
year preceding the year of assessment equal to the
proportion which the investments as aforesaid bore to
the person’s worldwide investments.
(2) ( a ) Where, in relation to a contract of long term business,
a determinable amount becomes due by an insurer on
or after the first day of January, 1999, and the
policyholder is a person resident in Malta, the insurer
shall pay tax at the rate of fifteen per cent (15%) on the
profit attributable to such contract which profit shall be
deemed to have accrued during the period from the
first day of January, 1999, or the date when the
contract was commenced, whichever date is the later,
to the date on which the amount becomes due.
For the purposes of this sub-article "a
determinable amount" means an amount payable by an
insurer in the event of a maturity, surrender or in any
other circumstance, other than a death claim, specified
in the contract, as the case may be, where the total
amount payable can be determined in whole or in part
on the date it becomes due and whether payment is
effected in one lump sum or otherwise.
( b ) (i) The profit referred to in paragraph ( a ) shall be
calculated by taking the total determinable
amount due to be paid by the insurer and
subtracting therefrom the total amount of
premiums paid within the period referred to in
paragraph ( a ), and in those cases where the
contract commenced before the first day of
January, 1999, subtracting also an amount equal
to the actuarial valuation of the contract on this
date. The profit so calculated shall not be
affected by any other provision of this Act and
no person shall be charged to further tax on such
  54        CAP. 123. ħ                INCOME TAX 
profits.
(ii) An insurer shall, not later than the thirty-first
day of March, 1999, forward in writing to the
Commissioner a list of contracts of insurance
relating to long term business, other than
contracts of term insurance, outstanding on the
first day of January, 1999, and indicating, in
respect of each such contract, the actuarial
valuation on that date. The list shall not specify
the identity of the policyholder or the
beneficiaries there under.
For the purposes of this sub-article, "term
insurance" means a contract of insurance which
provides solely for the payment by the insurer of a sum
of money or other consideration upon the happening of
death within a term which is specified in the contract,
and which is not extendible by any of the parties
thereto.
Cap. 372.
( c ) The insurer shall render an account to the
Commissioner of all tax paid in accordance with the
provisions of this sub-article, but shall not specify the
identity of the policyholders or beneficiaries. Every
amount of tax due to be so paid shall be a debt due
from the insurer to the Commissioner payable not later
than the fourteenth day following the end of the month
in which the amount becomes due as aforesaid and
shall be recoverable as such. Where the insurer fails to
pay the above mentioned tax, the provisions of article
73(4) and of article 40(1) of the Income Tax
Management Act shall apply  mutatis mutandis.
(3) Notwithstanding the provisions of sub-articles (1) and (2), a
non-resident person carrying on long term business of insurance
who derives gains or profits accruing in part in Malta and in part
outside Malta and who has ceased to issue new contracts of long
term insurance before the first day of January, 1999, may elect to
have the chargeable income from the long term business of
insurance computed by taking, for the year immediately preceding
the year of assessment, the investment income relating to that
business less the management expenses including commission
incurred in relation thereto in a proportion which the premiums
received in Malta bore to the total premiums received by such
person in Malta and elsewhere:
Provided that such election shall be irrevocable and shall be
notified in writing to the Commissioner by not later than the 31st
day of March, 1999:
Provided further that where such a person issues new
contracts of long term insurance on or after the 1st January, 1999,
the election shall cease to have effect in respect of the year of
assessment following the year in which the first new contract is
issued and in respect of subsequent years of assessment.
(4) ( a ) For the purposes of computing the surplus or deficit
                 INCOME TAX                                   ġ CAP. 123.         55
arising out of the computation in sub-article (1)( b )(vi),
no account shall be taken of income and deductions
relating to linked long term business of insurance in so
far as they relate to the linked portion of a contract of
insurance.
( b ) Any tax payable under sub-article (2) shall, in the case
of a linked long term contract of insurance, be
computed by reference to the profit attributable to the
unlinked portion of a contract of insurance and any
references to "a determinable amount" and "premiums"
shall be construed as references to the amount due and
premiums paid on the unlinked portion of a contract of
insurance.
(5) ( a ) Subject to the provisions of paragraph ( b ), the
provisions contained in Part IV shall apply to persons
referred to in subarticle (1) provided that in
determining what deductions are allowable under this
article there shall be excluded any deductions allowed
under any other Part of this Act.
( b ) Persons referred to in subarticle (1) may not claim
group relief nor surrender losses under the group relief
provisions of this Act.
(6) For the purposes of this article and of article 41, the term
"linked portion of a contract of insurance" means the portion of a
linked long term contract of insurance the benefits of which are
determined by reference to the value of, or the income from,
property of any description (whether or not specified in the
contracts) or by reference to fluctuations in, or in an index of, the
value of property of any description (whether or not so specified)
and "unlinked portion of a contract of insurance" means the portion
of a linked long term contract of insurance the benefits of which are
not so determined.
Cap. 403.
Cap. 404.
(7) Words and expressions used in this article and in other parts
of this Act which relate to business of insurance, shall, in so far as
their meanings are not defined by this Act, have the meanings
assigned to them in the Insurance Business Act, the Insurance
Brokers and Other Intermediaries Act, and any rules and
regulations made thereunder.
Tax treatment of 
mergers, divisions 
of companies, etc.
Added by:
II. 2003.13.
27A.    Notwithstanding the provisions contained in the Income
Tax Acts, the Minister may make rules regulating the tax treatment
of companies and their members and other similar bodies or
persons concerning mergers and divisions of companies, transfer of
assets between companies and exchange of shares concerning
companies and for the purposes of this article:
( a ) "merger" shall mean an operation whereby:
- one or more companies, on being dissolved
without going into liquidation, transfer all their
assets and liabilities to another existing
company in exchange for the issue to their
shareholders of securities representing the
  56        CAP. 123. ħ                INCOME TAX 
capital of that other company, and, if applicable,
a cash payment not exceeding such percentage
as may be prescribed of the nominal value, or, in
the absence of a nominal value, of the
accounting par value of those securities,
- two or more companies, on being dissolved
without going into liquidation, transfer all their
assets and liabilities to a company that they
form, in exchange for the issue to their
shareholders of securities representing the
capital of that new company, and, if applicable,
a cash payment not exceeding such percentage
as may be prescribed of the nominal value, or in
the absence of a nominal value, of the
accounting par value of those securities,
- a company, on being dissolved without going
into liquidation, transfers all its assets and
liabilities to the company holding all the
securities representing its capital;
( b ) "division" shall mean an operation whereby a
company, on being dissolved without going into
liquidation, transfers all its assets and liabilities to two
or more existing or new companies, in exchange for
the pro rata issue to its shareholders of securities
representing the capital of the companies receiving the
assets and liabilities and, if applicable, a cash payment
not exceeding such percentage as may be prescribed of
the nominal value or, in the absence of a nominal
value, of the accounting par value of those securities;
( c ) "transfer of assets" shall mean an operation whereby a
company transfers without being dissolved all or one
or more branches of its activity to another company in
exchange for the transfer of securities representing the
capital of the company receiving the transfer;
( d ) "exchange of shares" shall mean an operation whereby
a company acquires a holding in the capital of another
company such that it obtains a majority of the voting
rights in that company in exchange for the issue to the
shareholders of the latter company, in exchange for
their securities, of securities representing the capital of
the former company, and, if applicable, a cash
payment not exceeding such percentage as may be
prescribed of the nominal value or, in the absence of a
nominal value, of the accounting par value of the
securities issued in exchange;
( e ) "transferring company" shall mean the company
transferring its assets and liabilities or transferring all
or one or more branches of its activity;
( f ) "receiving company" shall mean the company
receiving the assets and liabilities or all or one or more
branches of the activity of the transferring company;
                 INCOME TAX                                   ġ CAP. 123.         57
( g ) "acquired company" shall mean the company in which
a holding is acquired by another company by means of
an exchange of securities;
( h ) "acquiring company" shall mean the company which
acquires a holding by means of an exchange of
securities;
( i ) "branch of activity" shall mean all the assets and
liabilities of a division of a company which from an
organizational point of view constitute an independent
business, that is to say an entity capable of functioning
by its own means.
Non-resident 
shipowners. 
Amended by: 
XX.1996.11.
28. (1) Subject to the provisions of article 12(1)( k ), where a
person not resident in Malta carries on the business of shipowner or
charterer and any ship owned or chartered by him calls at a port in
Malta, his full profits arising from the carriage of passengers,
mails, livestock or goods shipped in Malta shall be deemed to
accrue in Malta:
Provided that this article shall not apply to goods which are
brought to Malta solely for transhipment.
(2) Where for any accounting period such person produces the
certificate mentioned in sub-article (3), the profits arising in Malta
from his shipping business for such period, before deducting any
allowances for depreciation, shall be a sum bearing the same ratio
to the sums receivable in respect of the carriage of passengers,
mails, livestock and goods shipped in Malta as the ratio for the said
period shown by the certificate of the total profits to the total sum
receivable by him in respect of the carriage of passengers, mails,
livestock and goods.
(3) The certificate shall be one issued by or on behalf of any
income tax authority with regard to which the Commissioner is
satisfied that it computes and assesses the full profits of the non-
resident person from his shipping business, on a basis not
materially different from that prescribed by this Act, and shall
certify for any accounting period as regards such business -
( a ) the ratio of the profits or, where there are no profits, of
the loss, as computed for the purposes of income tax
by that authority, without making any allowance by
way of depreciation, to the total sums receivable in
respect of carriage of passengers, mails, livestock or
goods; and
( b ) the ratio of the allowance for depreciation as computed
by that authority to the said total sums receivable in
respect of the carriage of passengers, mails, livestock
and goods.
(4) Where at the time of assessment, the provisions of sub-
article (2) cannot for any reason be satisfactorily applied, the
profits arising in Malta may be computed on a fair percentage of
the full sum receivable on account of the carriage of passengers,
mails, livestock and goods shipped in Malta:
  58        CAP. 123. ħ                INCOME TAX 
Provided that where any person has been assessed for any
year of assessment by reference to such percentage, he shall be
entitled to claim at any time within six years after the end of such
year of assessment that his liability to tax for that year be
recomputed on the basis provided by sub-article (2).
(5) Where the Commissioner decides that the call of a ship
belonging to a particular non-resident shipowner or charterer at a
port in Malta is casual and that further calls by that ship or others in
the same ownership are improbable, the provisions of this article
shall not apply to the profits of such ship and no tax shall be
chargeable thereon.
Non-resident air 
transport, cable 
and wireless 
undertakings. 
Substituted by: 
XLIX. 1974.4.
Renumbered by:
XVII. 1994.2.
29. The provisions of this Act relating to non-resident
shipowners and charterers, including the provisions relating to their
agents, shall apply  mutatis mutandis  to any person not resident in
Malta who carries on the business of air transport or the business of
the transmission of messages by cable or wireless telegraphy, and
to the agent of such person.
Ecclesiastical and 
allied income. 
Added by: 
XLII.1975.6. 
Amended by: 
XXII.1976.4; 
XXVI.1977.9; 
XXVIII.1978.10; 
XXI.1980.6; 
IX.1981.5; 
XL.1981.2; 
XIII.1983.4,5; 
XIV.1984.4; 
VIII.1987.4; 
XXXVI.1990.7.
Renumbered by:
XVII. 1994.2.
Amended by: 
XX.1996.12;
IX.1999.14.
30. (1) Notwithstanding anything to the contrary contained in
this Act, the provisions of this article shall apply in the case of any
of the following:
( a ) a diocese, including, in respect of any income accruing
to him or vested in him by reason of his office, the
bishop thereof;
( b ) a parish;
( c ) a church not falling under the jurisdiction of a parish
and not due to be dealt with under paragraph ( d );
( d ) an ecclesiastical community as defined in sub-article
(9) hereof;
( e ) a province or similar division of any religious order; 
and each of the aforesaid is in this article referred to as "entity":
  Provided that the Commissioner may, in such
circumstances and subject to such conditions as he may deem
appropriate, treat as one entity any two or more of the entities
aforesaid.
(2) There shall be brought to charge to tax in the hands of any
entity to which this article applies the income accruing to or
derived by such entity as well as the income accruing to or derived
by any associated, linked or allied institution, trust, foundation,
bequest, or other similar organisation or body of persons.
(3) The total gross receipts on revenue account of any entity to
which this article applies, ascertained in accordance with the
provisions of sub-article (2), shall be deemed to be receipts of a
trade or business and the entity shall be chargeable accordingly:
Provided that the provisions of article 14(1)( g ) shall not
apply in respect of any such entity.
(4) In the case of any ecclesiastical community, there shall be
included in the gross receipts on revenue account any income
                 INCOME TAX                                   ġ CAP. 123.         59
received in his own right by any individual member thereof during
the year immediately preceding the year of assessment:
Provided that any part of such income which is in excess of
one thousand liri shall be excluded.
(5) An entity shall be chargeable to tax in respect of its income
for the year immediately preceding any year of assessment on the
greater of the following two amounts:
( a ) the income from all sources ascertained in accordance
with the provisions of sub-articles (2), (3) and (4);
( b ) that part of the income chargeable to tax under the
provisions of article 4(1)( d ), ( e ) and ( f ) to which there
shall be added, in the case of an ecclesiastical
community, the income received in his own right by
any individual member thereof; in ascertaining the
total amount of the income as aforesaid - 
(i) the provisions of sub-article (2) shall be taken
into account;
(ii) no deductions shall be allowed in respect of
expenses or other charges other than ground-rent
and other burdens on immovable property;
(iii) there shall be excluded such part of the income
received in his own right by any individual
member of an ecclesiastical community which is
in excess of one thousand liri.
(5A)  An ecclesiastical community shall be entitled to a further
deduction against its income as established under sub-article (5)
equivalent to one thousand liri in respect of every individual who
was a member thereof during the year immediately preceding the
year of assessment:
Provided that no such deduction shall be allowed under this
sub-article in respect of any individual member who receives
remuneration or other income from the ecclesiastical community of
which he is an individual member.
(6) The provisions of sub-articles (4), (5) and (5A) shall not
affect the liability to tax of any individual member of an
ecclesiastical community on any income received by him in his
own right.
(7) For the purposes of this article -
( a ) a parish which is entrusted to an ecclesiastical
community shall be deemed to be a separate entity
from the said community;
( b ) where more than one ecclesiastical community belong
to the same religious order, each such community shall
be dealt with as a separate entity for the purposes of
this article if it is so considered by the statute of the
order;
( c ) the province or similar division of a religious order
shall be deemed to be a separate entity from any of the
  60        CAP. 123. ħ                INCOME TAX 
communities falling under that order;
( d ) where an entity to which this article applies operates
on its own account a trading or commercial
undertaking, including a school, printing press,
hospital or cinema, the entity and the undertaking shall
be chargeable to tax separately and only the entity
shall be dealt with in accordance with the provisions of
this article, the undertaking being considered and dealt
with as a separate body of persons for all purposes of
this Act: 
          Provided that -
(i) no profits or other income arising from the said
undertaking in favour of the entity shall be
included with the gross receipts of the entity for
the purpose of any of the provisions of this Act;
(ii) no deductions shall be allowed in computing the
total income of the undertaking in respect of any
payments made to the entity on account of any
expenses or charges whatsoever;
( e ) total gross receipts on revenue account in all cases
shall include income chargeable to tax in accordance
with the provisions of article 4.
(8) Where any income accrues to or is in any way vested in the
head of a diocese in virtue of his office and does not actually
constitute personal gains or profits of the said head, such income
together with any income accruing to or vested in the diocese,
shall, for the purposes of this article, be deemed to be derived by
one separate entity under the management and control of the head
of the diocese; and the income accruing to the Archbishop of Malta
and to the Bishop of Gozo in virtue of their office shall,
notwithstanding any other provision of the law, be deemed to be
two thousand eight hundred liri and one thousand five hundred liri
per annum respectively, or such higher sum as the Minister
responsible for finance, from information given or otherwise
obtained, determines to be the income received by them in virtue of
their office, and the said income shall be added for assessment
purposes to their personal income:
Provided that the Commissioner shall grant such relief from
the tax to any other person or entity as will, in his opinion, prevent
the said amounts of two thousand eight hundred liri and one
thousand five hundred liri (or any higher sums determined as
aforesaid) being brought to charge both in the hands of the said
bishops and in the hands of any other person or entity in the same
year of assessment.
(9) For the purposes of this article and of article 56(4) -
"ecclesiastical community" means a number of individuals living
together in a community in accordance with the rules of a religious
order recognised as such by the Commissioner;
"individual member", in relation to an ecclesiastical community,
means any individual, lay or religious, who formed part of such
                 INCOME TAX                                   ġ CAP. 123.         61
community on the thirty first day of December during the year
immediately preceding the year of assessment.
Income from 
certain dividends 
to include tax 
thereon. 
Amended by: 
XXII. 1976.4; 
XXVI. 1977.10.
Renumbered by:
XVII. 1994.2.
31. The income of a person arising from a dividend paid by a
company liable to tax under this Act shall, where such tax has been
deducted therefrom, be the gross amount before making such
deduction; where no such deduction has been made, the income
arising shall be the amount of the dividend increased by an amount
on account of such taxes corresponding to the extent to which the
profits, out of which the said dividend has been paid, have been
charged with such taxes.
Taxation of certain 
investment income 
by deduction. 
Added by: 
XVII. 1994.16.
Amended by:
II. 2003.14.
32. Notwithstanding anything to the contrary contained in this
Act, articles 32A to 42, both inclusive, and which together with this
article are referred to as "the investment income provisions", shall
apply wherever the context so requires.
Payor to register.
Added by:
II. 2003.15.
32A.    A payor shall register as such with the Commissioner in
such manner as may be prescribed.
Obligation of 
payor to deduct tax 
from investment 
income. 
Added by: 
XVII. 1994.16.
33. (1) A payor shall deduct tax from every payment to a
recipient of investment income, howsoever made, at a rate of
fifteen cents on every lira of such payment.
(2) A payor shall render an account to the Commissioner of all
amounts so deducted, but shall not specify the identity of the
recipient and, subject to the provisions of sub-article (3), every
amount deducted shall be a debt due from such payor to the
Commissioner payable not later than the fourteenth day following
the end of the month in which the payment was made and shall be
recoverable as such.
(3) The payor shall upon making a payment of investment
income furnish each recipient with a certificate in a form
acceptable to the Commissioner setting forth the gross amount paid
by the payor, and the tax deducted.
(4) Where a payor makes a payment of investment income to a
person not resident in Malta (and therefore not a recipient within
the definition contained in article 41( c )), the payor shall be obliged
to obtain a certificate of non-residence from the person receiving
such payment in such form as the Commissioner shall require.
Payor not to deduct 
tax where recipient 
elects to be paid 
gross. 
Added by.
XVII. 1994.16.
Amended by:
II. 2003.16.
34. (1) A payor shall not deduct tax under article 33 where a
recipient elects under the provisions of article 35, to be paid
investment income without such deduction being made.
(2) A payor shall render an account to the Commissioner of all
payments of investment income made during any year in respect of
which an election has been made. The account shall be submitted to
the Commissioner by the 31st January following the year for which
the election has been made, or within thirty days of the request,
whichever date is later. Such account shall include details of the
recipient’s name, address and the income tax registration number as
well as the amount of investment income paid gross by the payor to
the recipient during that year:
  62        CAP. 123. ħ                INCOME TAX 
Provided that the Commissioner may only request such an
account for a complete year which has passed in respect of which
an election has been made under the provisions of article 35:
  Provided further that a payor shall not be required to render
an account to the Commissioner once nine years have elapsed
following the end of the year in which the investment income
becomes payable.
Election by 
recipient to be paid 
without deduction 
of tax. 
Added by: 
XVII. 1994.16.
Amended by:
II. 2003.17.
35. (1) A recipient may elect to be paid investment income
without deduction of tax being made and such an election shall be
made in writing and sent to the payor.
(2) Subject to the provisions of sub-article (3), an election will
be effective as from fourteen days following the receipt of such
notice of election by the payor. Such an election may be revoked at
the option of the recipient by notice in writing and such revocation
shall be effective as from fourteen days following the receipt by the
payor of such notice.
(3) An election made on the opening of a bank account in
respect of which investment income is payable, or on the purchase
of bonds, loan stock, debentures, or any other instrument in respect
of which the investment income is payable, or on any transaction
giving rise to capital gains within the meaning of article 41( a )(v),
shall have immediate effect.
Obligation on 
recipient to declare 
where an election 
is made. 
Added by: 
XVII. 1994.16.
Amended by:
IX.1999.14.
Cap. 372.
36. Where an election under the provisions of article 35 has
been made, a recipient shall, subject to the provisions of article 12
of the Income Tax Management Act, declare the investment income
to which the election relates on his tax return for the relevant year
of assessment and where a declaration is made as aforesaid any tax
due shall be determined as if the investment income provisions had
not been enacted.
Tax withheld under 
article 33(1).
Added by:  
XVII. 1994.16.
Substituted by:
II. 2002.49.
37. Where any tax has been withheld under article 33(1), such tax
shall not be available as a credit against the recipient’s tax liability or
for a refund, as the case may be, for the relevant year of assessment .
Presumption of 
deduction. 
Added by: 
XVII. 1994.16.
38. Except in respect of a year of assessment for which an
election under article 35 applies, it shall be presumed, so far as the
tax liability of the recipient is concerned, that a deduction and
payment which ought to have been made pursuant to the provisions
of article 33 have been made.
Where 
presumption 
applies, no need to 
declare. 
Added by: 
XVII. 1994.16.
Amended by:
II. 2002.50.
39. Where the presumption referred to in article 38 applies:
( a ) a recipient who is an individual shall not be obliged to
disclose the existence of the investment income in any
return made pursuant to the provisions of this Act, and
( b ) no person shall be charged to further tax in respect of
the investment income under this Act.
                 INCOME TAX                                   ġ CAP. 123.         63
Extent of payor’s 
liability. 
Added by: 
XVII. 1994.16.
Amended by:
II. 2003.18.
Cap. 372.
40. (1)  Where a payor fails to deduct and pay tax in
accordance with the investment income provisions, the provisions
of article 73(4) of this Act and of article 40(1) of the Income Tax
Management Act shall apply  mutatis mutandis.
(2) The provisions of article 39 of this Act and the provisions
of article 17 of the Income Tax Management Act shall not be
applicable, and a payor shall not be bound by a duty of professional
secrecy on a request for information by the Commissioner where
investment income referred to in article 41( a )(iv) and 41( a )(vii) are
derived from a person, other than a physical person that is not
resident in Malta is paid to a recipient provided that:
( a ) the asset from which the investment income is derived
is not a qualifying asset as defined in the provisions of
article 9B; and
( b ) the recipient has not declared, in accordance with the
provisions of the relevant laws as defined in the
provisions of article 9B, income and transfers referred
to in article 9B(2)( a ) to ( c ) in relation to the asset from
which the investment income is derived.
Interpretation of 
the investment 
income provisions. 
Added by: 
XVII. 1994.16.
Amended by:
XVII. 1998.70;
XI.2000.5;
IX. 2001.26;
II. 2003.19.
Cap. 371.
41. For the purposes of the investment income provisions, the
following phrases shall have the meanings given below:
( a ) "investment income" shall mean only the following
categories of income:
(i) interest payable by a person carrying on the
business of banking under the Banking Act, in
respect of a sum of money in whatever currency
deposited with it in any account whatever
(except interest payable in respect of any bearer
account);
(ii) interest, discounts or premiums payable by the
Government of Malta or by any agency thereof; 
(iii) interest, discounts or premiums payable by a
corporation or authority established by law;
(iv) interest, discounts or premiums payable in
respect of a public issue by a company, entity or
other legal person howsoever constituted and
whether resident in Malta or otherwise; and
(v) (1) capital gains arising on the disposal of
shares or units in a collective investment
scheme where the collective investment
scheme redeems, liquidates or cancels
such shares or units, such capital gains to
be calculated by reference to the price at
which the shares or units were allotted or
issued by the collective investment scheme
or to a value determined in such manner
and on the basis of such criteria as may be
prescribed:
Provided that this item shall not apply to:
  64        CAP. 123. ħ                INCOME TAX 
(i) capital gains arising on the disposal
of shares or units held in a
prescribed fund of a collective
investment scheme; and
(ii) capital gains arising on the disposal
of shares or units held in a fund of a
collective investment scheme that is
not resident in Malta if such a fund
is not a prescribed fund and the
disposal is not made through the
services of an authorised financial
intermediary;
(2) capital gains arising on the surrender or
maturity of units and such like instruments
relating to linked long term business of
insurance where the benefits are at least
eighty five per cent determined by
reference to the value of units or shares in,
or income derived from, collective
investment schemes:
Provided that in calculating such capital
gains -
(i) no account shall be taken of any part
of the said benefits that is
determined by reference to the value
of units or shares in collective
investment schemes that were held
in prescribed funds for a continuous
period spanning the whole life of the
relevant linked long term contract of
insurance or three years from the
date of the relevant maturity or
surrender whichever period is the
lesser;
(ii) the cost of acquisition shall be
calculated by reference to the total
amount of premiums paid in relation
to the linked portion of the contract
of insurance or to a value
determined in such manner and on
the basis of such criteria as may be
prescribed;
(vi) profits distributed by a collective investment
scheme that is not resident in Malta that are paid
through the services of an authorised financial
intermediary out of profits that had been
allocated in that collective investment scheme to
a fund that is not a prescribed fund;
(vii) interest payable by a person carrying on the
business of banking in accordance with foreign
legislation in respect of a sum of money in
whatever currency deposited with it in any
                 INCOME TAX                                   ġ CAP. 123.         65
account whatever where the payment of the
income from investment is made through an
authorised financial intermediary as is provided
for in items (i), (ii) or (iii) of paragraph ( c ) of
article 41A;
( b ) "payor" shall mean the person who is liable to make,
or if different, who makes a payment of investment
income; 
( c ) "recipient" shall mean:
Cap. 371.
Cap. 330.
(i) a person who is resident in Malta during the year
in which investment income is payable to him or
which is payable to a person under sub-
paragraphs (ii) or (iii) of this paragraph (other
than a person who during that year carried on
banking business under the Banking Act, or a
person carrying on the business of insurance or
any other company which is owned and
controlled, directly or indirectly, by such
persons or a company which is registered under
article 24 of the Malta Financial Services
Authority Act), or
(ii) a receiver, guardian, tutor, curator, judicial
sequestrator or committee acting on behalf of a
person referred to in sub-paragraph (i) of this
paragraph, or
(iii) a trustee or foundation pursuant to or by virtue
of which any money or other property
whatsoever shall for the time being be paid or
applied to or for the benefit of a person referred
to in sub-paragraph (i).
Investment income 
of collective 
investment 
schemes.
Added by:
IX. 2001.27.
Amended by:
II. 2003.20.
41A. For the purposes of the investment income provisions and
notwithstanding anything to the contrary contained therein:
( a ) when any income referred to in article 41( a ) is paid to
a collective investment scheme it shall be treated as
investment income only to the extent that -
(i) it falls to be accounted for by that collective
investment scheme as profits of a prescribed
fund; and
(ii) it is not paid by another collective investment
scheme;
( b ) "prescribed fund" means a collective investment
scheme or, in the case of a collective investment
scheme divided into sub-funds, a sub-fund of that
scheme, that satisfies such conditions as may be
prescribed for the purpose of this definition;
( c ) "payor" includes an authorised financial intermediary
and all the obligations of a payor shall apply to such an
intermediary with respect to all payments of
investment income effected through his services. A
payment of investment income is effected through the
  66        CAP. 123. ħ                INCOME TAX 
services of an authorised financial intermediary when
such payment -
(i) is made to the intermediary who holds the
relevant investment for the benefit of the
recipient;
(ii) is made directly to the recipient who requires
that an authorised financial intermediary collects
an amount of tax equal to fifteen per cent of such
income for onward payment to the
Commissioner;
(iii) is made through an arrangement approved by the
Commissioner, which arrangement enables the
collection of tax on such income through an
authorised financial intermediary;
Cap. 370.
( d ) "authorised financial intermediary” means a person
holding an investment services licence issued under
the Investment Services Act who is registered with the
Commissioner and who satisfies such other conditions
as may be prescribed;
( e ) "recipient" includes a collective investment scheme
resident in Malta;
( f ) a payor shall deduct tax from every payment of
investment income referred to in paragraph ( a ) at the
rate of fifteen cents on every lira of such payment or at
such other rate or rates, not being more than the said
rate and not less than ten cents on every lira of the said
payment, as may be prescribed;
( g ) a collective investment scheme shall not have the right
to elect to be paid investment income without
deduction of tax being made;
( h ) in no case shall a refund be made to a collective
investment scheme in respect of tax withheld in
accordance with the provisions of this article from
investment income paid to that collective investment
scheme.
Powers of the 
Minister.
Added by:
IX. 2001.27.
41B. The Minister may make regulations determining how the
investment income provisions shall apply in relation to particular
types or categories of securities, making such modifications to the
operation thereof as he may deem necessary in respect of particular
types or categories of securities, and prescribing any matter that
may be prescribed in accordance with any of the said provisions.
Anti-avoidance 
provisions. 
Added by: 
XVII. 1994.16.
42. 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 by a person by reason of the operation of
the investment income provisions, such a person shall be assessable
as if the aforesaid provisions did not apply, and any tax withheld in
respect of income received under one or more of the aforesaid
transactions shall be available as a credit against the tax liability of
the person receiving such income, or for a refund as the case may
be, for the relevant year of assessment.
                 INCOME TAX                                   ġ CAP. 123.         67
For the purposes of this article, a "series of transactions"
shall mean any two or more corresponding or circular transactions,
carried out by the same person, either directly or indirectly, as the
case may be.
Certain 
undistributed 
profits to be 
deemed to be 
distributed. 
Amended by: 
VI.1953.2; 
XXVIII.1978.11; 
VIII.1987.5
Renumbered by:
XVII. 1994.2.
Amended by: 
XVII.1994.17.
43. (1)  Where the Commissioner is of the opinion that any
company (other than a company incorporated or registered outside
Malta and not resident therein) has not distributed as dividends its
profits or some part of its profits and that the effect of such non-
distribution is the avoidance or reduction of tax otherwise payable
by the shareholders, he may order by notice in writing that such
undistributed profits or part thereof shall be deemed, for the
purposes of this Act, to have been distributed by way of dividend
by the company in such amount, and on such date or dates, as to
him appears to be reasonable, and the shareholders concerned shall
be assessed thereon accordingly:
  Provided that - 
( a ) no order shall be issued as aforesaid if the company
proves that the main purpose or one of the main
purposes of non-distribution was -
(i) to provide for the development or expansion of
its trade or business from internal sources,
whether alone or in combination with other
sources; or
(ii) to repay any loan, overdraft or other capital
borrowed from external sources (which are
neither directly nor indirectly linked with the
company’s shareholders) and used in the
expansion of the company’s trade or business;
( b ) no order issued under this sub-article shall have effect-
(i) where it is made in respect of any profits
chargeable in the company’s hands in respect of
any year of assessment prior to that beginning
on 1st January, 1976, if an assessment has been
raised for that year or, where no such assessment
has been raised, if the order is made after 31st
December, 1979;
(ii) where it is made in respect of any profits
chargeable in the company’s hands in respect of
any year of assessment prior to that beginning on
1st January, 1984, if it is made after 31st
December, 1986; and
(iii) where it is made in respect of any profits so
chargeable for any other year of assessment, if it
is made after the lapse of eight years from the
end of the year of assessment in which the
profits to which the order relates were
chargeable to tax;
( c ) where, under the provisions of this sub-article any
dividend would require to be treated as received by
any shareholder of a company (in this proviso referred
  68        CAP. 123. ħ                INCOME TAX 
to as "the first company") and the shareholder in
question is also a company (in this proviso referred to
as "the second company"), that dividend shall not be
chargeable to tax as income of the second company,
but shall be treated as distributed by the second
company by way of dividend on the date determined
by the Commissioner as aforesaid, and the
shareholders of the second company shall be assessed
thereon accordingly; and where any shareholder of the
second company is again a company, then, in relation
to the sum which is to be treated as distributed to that
shareholder, the preceding provisions of this proviso
shall apply  mutatis mutandis  as though references
therein to the first company were references to the
second company and as though references therein to
the second company were references to that
shareholder, and so on until, applying the principles of
this proviso, there remains no part of the undistributed
profits to which the directions of the Commissioner
relate which falls to be treated as distributed to a
company.
(2) Where any person who has been assessed to tax, or has had
his assessment revised, in accordance with the provisions of sub-
article (1) fails to pay on due date the tax, or any part of the tax,
attributable to his share of any undistributed profits which are
treated as distributed, such tax or the part thereof shall thereupon
become a debt due to Government from the company by reason of
whose failure to distribute the profits the directions of the
Commissioner under sub-article (1) were given, and shall be
recoverable as such.
(3) Where any undistributed profits taxable by virtue of sub-
article (1) are subsequently distributed, they shall not be treated as
taxable income in the hands of the recipients thereof.
(4) Where any undistributed portion of the profits taxable by
virtue of sub-article (1) has been deemed, by notice given under the
provisions of this article, to have been distributed as dividends to
the shareholders of that company, the company shall within twenty-
one days of the date of service of the said notice furnish each
shareholder with a certificate setting forth the amount of the
dividend deemed to have been distributed to that shareholder and
the amount of tax which the company would have been entitled to
deduct from such dividend under the provisions of article 59 if such
dividend had been paid.
Cap. 372.
(5) Nothing contained in this article shall prevent the decision
of the Commissioner in the exercise of the power conferred upon
him by sub-article (1) from being questioned in an appeal in
accordance with the provisions of articles 35 and 37 of the Income
Tax Management Act.
                 INCOME TAX                                   ġ CAP. 123.         69
Special provisions 
in respect of 
certain profits 
deemed 
distributed. 
Added by: 
XXXVI.1990.8.
Renumbered by:
XVII. 1994.2.
44. (1) A company (other than a company incorporated or
registered outside Malta and not resident therein) may apply to the
Commissioner in writing to have any profits which the
Commissioner has ordered to be deemed distributed in terms of
article 43 to be deemed distributed as follows:
( a ) twenty  per centum  of the said profits on such date or
dates as the Commissioner has ordered;
( b ) eighty  per centum  of the said profits in the year
immediately preceding the year of assessment 1991: 
      Provided that where an assessment raised on a
shareholder as a consequence of the said deemed
distribution has become final and conclusive, the
assessment shall not be reopened by way of the
provisions of this sub-article:
     Provided further that an application made by a
company for the purposes of this sub-article shall not
be valid if it is made after the 30th June, 1991.
(2) In the case where a company is served with a deemed
distribution order by the Commissioner in terms of article 43 in
respect of any year immediately preceding any of the years of
assessment 1984 to 1989 and after the 23rd November, 1990, the
company may apply to the Commissioner in writing to have the
undistributed profits for the said years to be deemed distributed by
the Commissioner as follows:
( a ) twenty  per centum  of the said profits on such date or
dates as the Commissioner may order;
( b ) eighty  per centum  of the said profits in the year
immediately preceding the year of assessment 1991: 
  Provided that an application made by a company for the
purposes of this sub-article shall not be valid if it is made after the
lapse of thirty days from the date of service of the deemed
distribution order or the 30th June 1991, whichever is the later.
(3) Notwithstanding any other provisions of this Act, where an
application is made in terms of this article, the profits deemed
distributed by the Commissioner shall be charged to tax on the
company at the following additional rate of tax:
( a ) 25c on every lira of profits deemed distributed for any
year preceding the year of assessment 1990;
( b ) 2c5 on every lira of profits deemed distributed for the
year of assessment 1991.
(4) ( a )  For the purposes of this article, when the profits deemed
distributed are subsequently distributed by the company to the
shareholders, the dividend shall be grossed up as set out in article
31 without taking into account the tax charged additionally on the
company in terms of sub-article (3).
( b ) The tax payable by the company under sub-article (3) shall
not be availed of for set-off in terms of article 60 when the profits
deemed distributed are subsequently distributed to the
  70        CAP. 123. ħ                INCOME TAX 
shareholders.
Further special 
provision in 
respect of profits 
deemed 
distributed. 
Added by: 
XXXVI.1990.8.
Renumbered by:
XVII. 1994.2.
45. Any distribution made by a company after the 1st January,
1990 in respect of its profits for any year preceding the year of
assessment 1989 shall be considered as having not been distributed
in determining the amount of undistributed profits for the purposes
of article 43.
Conversion of a 
company into a 
partnership.
Added by:
IX. 1999.14.
45A. Where, in accordance with the provisions of the Companies
Act, a company is converted into a partnership, other than a
partnership  en commandite  the capital of which is divided into
shares, the Commissioner shall deem any balance in the untaxed
account existing on the day the company ceases to be a company to
have been distributed by way of dividend on the said day and the
provisions of articles 61 to 66 shall apply accordingly to such
profits.
Loans to 
shareholders.
Renumbered by:
XVII. 1994.2.
46. (1) If any amounts are advanced or any assets distributed
by a company to any of its shareholders by way of advances or
loans, or any payment is made by the company on behalf of, or for
the individual benefit of, any of its shareholders, so much, if any,
of these advances, loans or payment, as, in the opinion of the
Commissioner represents distribution of income shall, for all
purposes of this Act, be deemed to be dividends paid by the
company to those shareholders out of profits derived by it.
(2) Where the amount of any advance, loan or payment is
deemed, under the last preceding sub-article, to be a dividend paid
by a company to its shareholders, and in any year subsequent to
that in which the dividend is so deemed to be paid, the company
sets off any dividend distributed by it in that subsequent year, in
satisfaction of the whole or part of the amount of that advance, loan
or payment, that dividend shall, to the extent to which it is so set
off, be deemed not to be a dividend for the purposes of this Act.
Certain 
distributions to 
shareholders or to 
partners deemed to 
be dividends or 
profits. .
Renumbered by:
XVII. 1994.2.
47. Distributions to shareholders of a company or to partners
in any partnership by a liquidator in the course of winding up the
company or the partnership, to the extent to which they represent
income derived by the company or by the partnership (whether
before or during liquidation) shall, for the purposes of this Act, be
deemed to be dividends paid to the shareholders by the company
out of the profits derived by it, or profits distributed to the partners,
as the case may be.
Special provisions 
for computation of 
income derived 
from sale or other 
disposal or trading 
stock. 
Renumbered by:
XVII. 1994.2.
Amended by:
XVII. 1994.18 .
48. (1) Where any trading stock is sold together with other
assets of a business, the part of the consideration attributable to the
trading stock shall, for the purposes of this Act, be determined by
the Commissioner, and the part of the consideration so determined
shall be deemed to be the price paid for the trading stock by the
purchaser.
(2) For the purposes of this article any trading stock which has
been disposed of otherwise than by sale shall be deemed to have
been sold, and any trading stock so disposed of and any trading
stock which has been sold for a consideration other than cash shall
                 INCOME TAX                                   ġ CAP. 123.         71
be deemed to have realised the market price of the day on which it
was so disposed of or sold, but, where there is no market price,
trading stock shall be deemed to have realised such price as the
Commissioner determines.
Cap. 372.
(3) Nothing contained in this article shall be deemed to impair
the right of an assessee to appeal against an assessment of tax under
the provisions of articles 35 and 37 of the Income Tax Management
Act.
Special provisions 
regarding certain 
income derived by 
outworkers on a 
part-time basis. 
Added by: 
XXII.1995.4.
48A. (1) Where a VAT registered person engages any
individual for the carrying out of hand knitting, lace making,
crochet and embroidery activities at home against a net
remuneration in any one year preceding a year of assessment not
exceeding two hundred liri the tax due in respect of the income paid
to any such outworker and the deductions that may be made in
respect thereof by the person engaging them shall be regulated in
accordance with such rules as may be made under this article:
  Provided that the work carried out by such outworkers shall
in all cases be handmade and not machine-made.
(2) The Minister may by order extend the provisions of sub-
article (1) to the remuneration of such workers as may be
prescribed in the Order under such conditions as may be set out in
the said Order.
Special provisions 
regarding certain 
income derived 
under article 
4(1)( a ) of the Act.
Added by:
II. 2002.51.
48B.   The Minister responsible for finance may make regulations
prescribing the manner in which the chargeable income, falling under
article 4(1)( a ), of such persons as may be prescribed is to be calculated
or estimated under such conditions as may be set out in the said
regulations.
Married couples. 
Amended by: 
XLIX.1974.5.
Renumbered by:
XVII. 1994.2.
Substituted by: 
XX. 1996.13.
Amended by:
IX. 1999.14.
49. (1) The income of a married couple, where both spouses
are living together, shall be charged to tax in the name of the
responsible spouse so elected by the spouses themselves for the
purposes of the Income Tax Acts and any return and any
declaration relating to a year of assessment for which the income is
so chargeable shall be signed by both spouses:
Provided that if the return or declaration is signed only by
the responsible spouse or the other spouse on behalf of the
responsible spouse, it shall in all cases be presumed  juris   et de jure
to have been made with the consent of both spouses:
Provided further that if the spouses fail to appoint the
responsible spouse, the Commissioner shall at his discretion decide
who of the spouses shall be the responsible spouse.
(2) Where a joint return is required to be filed by a married
couple in accordance with the provisions of subarticle (1), both
spouses will be jointly and severally responsible for the
performance of all obligations pursuant to the provisions of the
Income Tax Acts, and in default the Commissioner shall be
entitled, at his discretion, to take such action to enforce
performance of those obligations against either or both of the
spouses:
  72        CAP. 123. ħ                INCOME TAX 
Provided that in no case may any criminal action be taken
against a spouse for any act or omission for which he or she may
not be directly responsible.
(3) Where a married couple elects that one of the spouses is to
be the responsible spouse, such election shall remain effective for a
minimum period of five successive years unless the Commissioner,
at his sole discretion and for a reasonable cause, authorises a
change following a petition signed by either spouse and filed with
the Commissioner not later than six months before the first day of
the year of assessment in respect of which such change is
requested.
Separate 
computation on 
certain income 
derived by married 
couples.
Added by: 
XXXVI.1990.9. 
Renumbered by:
XVII. 1994.2.
Amended by: 
XVII. 1994.19. 
Substituted by:
XX.1996.13.
Amended by:
V. 1998.8;
XI. 2000.6;
II. 2002.52.
50. (1) Notwithstanding the provisions of article 49, where in
any year immediately preceding the year of assessment the spouse
not being the responsible spouse, derives income subject to tax
under the provisions of article 4(1)( a ) or ( b ) in so far as it does not
refer to any fees derived from the holding of an office of a director
or of paragraph ( d ) of the said sub-article in so far as it refers to a
pension which is received in view of the past employment the
responsible spouse may elect in writing that the tax on the
chargeable income in respect of such income derived by the other
spouse be computed separately. In such a case the spouse’s income
shall not be aggregated with the responsible spouse’s total income
for that year of assessment:
Provided that where such an election is made, then,
notwithstanding anything contained in this Act, any income of the
spouses, other than income referred to in this sub-article and
subject to tax under the provisions of article 4(1)( a ), ( b ) and ( d ),
shall be aggregated with the total income of the spouse having the
higher income subject to tax under the said provisions or where
such total income of the spouses is equal, it shall be aggregated
with the total income of the responsible spouse, and the tax charged
shall be computed accordingly.
(2) The tax computed separately for each year of assessment in
respect of the income referred to in subarticle (1) hereof shall be
charged in the name of the responsible spouse.
(3) No election referred to in subarticle (1) may be made in
respect of income which is subject to tax under any of the provisions
of article 4(1)( b ) or ( d ) where such income consists solely of income
which is deemed to constitute a benefit provided by reason of
employment or office in terms of the regulations referred to in article
4(1)( b )(ii).
When arrears of 
pension are to be 
brought to charge.
Added by:
II. 2003.21.
50A.  Notwithstanding anything to the contrary contained in this
Act, where during the year immediately preceding the year of
assessment 2004 or during subsequent years of assessment a person
receives income subject to tax under the provisions of article
4(1)( d ), insofar as it refers to income accrued during an earlier year
of assessment, such income shall be brought to charge to tax in the
year to which it refers:
Provided that any such income referring to any year of
assessment prior to the year of assessment 1999 shall be brought to
                 INCOME TAX                                   ġ CAP. 123.         73
charge in the year of assessment 1999.
Tax avoidance. 
Substituted by: 
XXVIII.1978.12. 
Amended by: 
XXXVI.1990.10.
Renumbered by:
XVII. 1994.2.
Amended by:
XX.1996.14.
51. (1) Where any scheme which reduces the amount of tax
payable by any person is artificial or fictitious or is in fact not
given effect to, the Commissioner shall disregard the scheme and
the person concerned shall be assessable accordingly.
(2) Where any person, as a direct or indirect result of any
scheme of which the sole or main purpose was the obtaining of any
advantage which has the effect of avoiding, reducing or postponing
liability to tax, or of obtaining any refund or set-off of tax, has
obtained or is in a position to obtain such an advantage, the
Commissioner shall, by order in writing, determine the liability to
tax or the entitlement to a refund or set-off of tax of the said
person, or of any other person, for any year of assessment, in such
manner and in such amount as may be necessary, in the
circumstances of the case, to nullify or modify the said scheme and
the consequent advantage.
(3) Where, as a direct or indirect result of any disposition made
during the life of the disponer, any income is payable to or for the
benefit of a child in the year immediately preceding the year of
assessment, the income shall, if at the commencement of that year
the child was unmarried or has not yet reached the age of eighteen
years, be treated for the purposes of this Act as the income of the
disponer for that year and not as the income of the said child.
(4) Where, as a direct or indirect result of any scheme or of any
change in the shareholding of a company income has been received
by or has accrued to the company in the year immediately
preceding the year of assessment, then, unless it is proved that the
said scheme had not been entered into, or the said change had not
been effected, solely or mainly for the purpose of obtaining the
benefit of any loss, or of the balance of any loss incurred by the
company in any year preceding the year of assessment, or of any
wear and tear or initial allowances, or of the balance of any such
allowances due in respect of any year as aforesaid, so as to avoid
liability on the part of that company or of any other person to the
payment of any tax -
( a ) the provisions of article 14(1)( g ) shall not apply in
respect of any loss incurred by the company during the
year in which such scheme was entered into or such
change was effected, or in respect of any loss or
balance of loss which would otherwise fall to be
carried forward into that year or from that year into
subsequent years;
( b ) the provisions of the second proviso to article 14(1)( f )
shall not operate so as to allow any deductions to
which the company may otherwise be entitled during
the year in which such scheme was entered into or
such change was effected, in respect of allowances
contemplated under the provisions of sub-article (1)( f )
and ( j ) of that article, or in respect of such deductions
or of the balance of such deductions which may
otherwise fall to be carried forward from that year into
  74        CAP. 123. ħ                INCOME TAX 
subsequent years;
( c ) the provisions of article 24 shall be applied as though
the provisions of the preceding paragraphs of this sub-
article had not taken effect.
(5) In this article -
"child" includes:
( a ) a stepchild, or an adopted child, or an illegitimate
child of the individual or of the individual’s spouse; or
( b ) a child orphan of or abandoned by either of the parents
and living with the individual or the individual’s
spouse;
"scheme" includes any disposition, agreement, arrangement,
trust, grant, covenant, transfer of assets and alienation of property,
whatsoever, irrespectively of the date on which such scheme was
made, entered into or set up.
Advance Revenue 
Rulings. 
Added by: 
XVII. 1994.20.
52. (1) The Commissioner shall, on the application of a
company which is a party to any transaction, notify his ruling that
the provisions of article 51 shall not apply to that transaction
provided that the Commissioner is satisfied that the transaction is
to be effected for  bona fide  commercial reasons.
(2) The Commissioner shall, on the application of any person,
notify his ruling that the provisions of paragraph ( f ) of the
definition of "participating holding" as defined in article 2 in
respect of a participating holding will apply to a particular
shareholding or to a shareholding which is to be acquired by the
applicant.
(3) The Commissioner shall, on the application of any person
which is a company, notify his ruling on the tax treatment of any
transaction which concerns any financial instrument or other
security.
(4) The Commissioner shall, on the application of any person,
notify his ruling on the tax treatment of any transaction which
involves international business, provided that the determination of
what constitutes international business for the purposes of this sub-
article shall be at the discretion of the Commissioner.
(5) The Commissioner shall, on the application of any person,
notify his ruling as to whether a company qualifies as an
international trading company.
(6) The notification of a ruling specified in this article may be
given in advance of any transaction in respect of which an
application for a ruling is made.
(7) ( a ) All applications under this article shall be made in
writing and shall contain all material particulars of the transactions
to be effected.
( b ) Where the Commissioner requires further particulars for the
purposes of enabling him to make a decision on an application
under this article, the Commissioner shall, within thirty days of the
receipt of the application, or of the receipt of any further particulars
                 INCOME TAX                                   ġ CAP. 123.         75
previously required under this paragraph, by written notice, require
the applicant to furnish such further particulars, and if any such
notice is not complied with within thirty days, or such longer
period as the Commissioner may allow, the Commissioner need not
proceed further with the application.
( c ) The Commissioner shall notify his ruling to the applicant
within thirty days of receiving the application or, if he gives a
notice under paragraph ( b ), within thirty days after the notice has
been complied with.
( d ) If any particulars furnished under this article do not fully
and accurately disclose all facts and considerations material for the
ruling of the Commissioner, any resulting ruling shall be void.
(8) ( a )   Subject to the provisions of sub-article (7)( d ), a ruling
by the Commissioner will be and shall remain binding on the
Commissioner for a period of two years from the time of any
relevant change in statutory provisions subsequent to such ruling,
or for a period of five years from the time of such ruling, whichever
is the lesser.
( b ) A ruling by the Commissioner may, at the option of the
applicant, be renewed for a further period of five years. An
application for renewal shall be submitted in writing to the
Commissioner, stating whether or not there have been any material
changes to the facts and considerations contained in the original
application and the nature of any such changes. Such renewal shall
not be unreasonably withheld by the Commissioner.
Rules in respect of 
finance leasing.
Added by:
XI.2000.7.
52A.  The Minister responsible for finance may make rules for
carrying out the provisions of the Income Tax Acts with respect to
finance leasing arrangements generally, and may in particular by
such rules provide for the way in which deductions incurred in the
production of the income shall be allowed with respect to the lessor
and the lessee as well as provide the manner and extent to which, if
any, losses with respect to any finance leasing arrangement may be
set off against gains arising from any other source of income.
  76        CAP. 123. ħ                INCOME TAX 
PART VI 
PERSONAL DEDUCTIONS
Resident 
individual. 
Amended by: 
VI.1953.3; 
V.1964.2; 
VIII.1969.6; 
XXXV.1972.6; 
X.1973.4; 
XLIX.1974.6; 
XLII.1975.7; 
XXII.1976.4; 
XXIV.1976.4; 
XXVI.1977.11; 
XXVIII.1978.13; 
XXI.1980.7; 
IX.1981.6; 
XL.1981.3; 
IX.1983.7; 
XIII.1983.5;    
XIV.1984.5; 
VIII.1987.5; 
XXXI.1988.5. 
Substituted by: 
XXVI.1990.11. 
Amended by: 
XVIII.1993.6.
Renumbered by:
XVII. 1994.2.
Amended by: 
XVII.1994.21.
53. Repealed by: XX.1996.15.
Non-resident 
allowance. 
Amended by: 
XV.1958.2; 
XXV.1960.8; 
XXV. 1962.2,4; 
L.N. 4 of 1963; 
L.N. 46 of 1965.
Renumbered by:
XVII. 1994.2.
54. Repealed by: XX.1996.15.
Claims under this 
Part. 
Amended by: 
VIII.1969.7. 
Substituted by: 
XXVI.1977.12. 
Amended by: 
XXVI. 1990.12.
Renumbered by:
XVII. 1994.2.
Amended by:
XVII. 1994.22.
55.   Repealed by: XX.1996.15.
                 INCOME TAX                                   ġ CAP. 123.         77
PART VII 
RATE OF TAX
Normal rate of tax 
on individuals and 
certain bodies of 
persons. 
Amended by: 
V.1958.6; 
XVI.1959.2; 
XXIV.1961.3; 
XXV.1962.5; 
XIV.1963.3; 
V.1964.3; 
VIII. 1969.8; 
XXVIII. 1972.2; 
X.1973.5; 
XLII.1975.8; 
XXII.1976.4; 
XXIV.1976.5; 
XXVI.1977.13; 
XXVIII.1978.14; 
IX.1981.7; 
XL.1981.4; 
XIII.1983.4,5; 
XIV.1984.6; 
VIII.1987.7; 
XXXI.1988.6. 
Substituted by: 
XIX.1989.13; 
XXVI.1990.13.
Renumbered by:
XVII. 1994.2.
Amended by: 
XVII.1994.23; 
XXII.1995.5;
XX.1996.16;
V. 1998.8;
IX.1999.14;
XI. 2000.8;
IV. 2001.35;
II. 2002.53;
II. 2003.22.
56. (1) Saving the other provisions of this article, the tax upon
the chargeable income of every person shall be charged at the
following rates:
( a ) in the case of a married couple resident in Malta in the
year immediately preceding the year of assessment and
to whom article 49 applies saving where the
responsible spouse has opted for a separate
computation for the purposes of article 50 -
  For every lira of the first Lm4300   ................................... 0c 
For every lira of the next Lm1700 .................................. 15c 
For every lira of the next Lm1250 .................................. 20c 
For every lira of the next Lm1250 .................................. 25c 
For every lira of the next Lm1500 .................................. 30c 
For every lira of the remainder      .................................. 35c;
( b ) in the case of any other individual resident in Malta
including each spouse where the responsible spouse
has opted for a separate computation for the purposes
of article 50 - 
For every lira of the first Lm3100   .................................... 0c 
For every lira of the next Lm1000 .................................. 15c 
For every lira of the next Lm900 .................................... 20c 
For every lira of the next Lm1000 .................................. 25c 
For every lira of the next Lm750 .................................... 30c 
For every lira of the remainder ...................................... 35c:
Provided that:
( a ) notwithstanding the other provisions of this paragraph
where an individual was unmarried or a widow or a
widower, or was a spouse separated  de jure  or  de
facto , the rates applicable to the chargeable income of
such individual for the year of assessment 2000 and
for any year of assessment thereafter shall, subject to
the provisions of paragraph ( b ) of this proviso, be
those laid down in paragraph ( a );
( b ) paragraph ( a ) of this proviso applies where the said
individual, in the year preceding the year of
assessment:
(i) maintained under his or her custody a child who
was not over 16 years of age or, if over that age,
was receiving full-time instruction at any
university, college or other educational
establishment, or was serving an apprenticeship
with a view to qualifying in a trade or
profession, or was incapacitated by infirmity
from maintaining himself or herself, and who, in
any case, was not in receipt of income, in his or
her own right, in excess of Lm1,000;
Cap. 318.
(ii) where a children’s allowance is payable in
respect of that child under the Social Security
  78        CAP. 123. ħ                INCOME TAX 
Act, was recognised by the Director (Social
Security) as the beneficiary of the children’s
allowance payable in respect of the said child;
(iii) was not in receipt of any financial assistance in
respect of the maintenance of the said child from
the other parent of the said child;
(iv) was not living or residing at the same house with
the other parent of the said child.
( c ) in the case of any individual who is not resident in
Malta during the year immediately preceding the year
of assessment - 
For every lira of the first Lm300.................................... 0c 
For every lira of the next Lm1000 ...............................  20c 
For every lira of the next Lm2000 ................................ 30c 
For every lira of the remainder  .................................... 35c;
( d ) in the case of any other person -
For every lira of the first Lm1000   .............................  15c 
For every lira of the next Lm1000 ................................ 20c 
For every lira of the next Lm1500 ................................ 30c 
For every lira of the remainder  .................................... 35c.
(2) Notwithstanding the provisions of sub-article (1), the tax
upon the chargeable income of individuals referred to in the said
sub-article shall be charged at the following special rates:
( a ) In the case of an individual born outside Malta who
was resident in Malta in the year immediately
preceding the year of assessment and who proves to
the satisfaction of the Commissioner that he has
received in Malta at one or more times during the year
immediately preceding the year of assessment an
amount of income of not less than eight hundred liri
arising outside Malta and chargeable to tax under the
provisions of this Act - 
(i) being a married individual to whom article 49
applies - 
     For every lira of the first Lm 2500  ....................... 0c 
For every lira of the remainder ........................... 15c;
(ii) being any other such individual -
For every lira of the first Lm 1800   ....................... 0c 
For every lira of the remainder  ........................... 15c:
   Provided that subject to the provisions in the next
following paragraph, the rates laid down in sub-
paragraphs (i) and (ii) hereof will not apply if the
individual was domiciled in Malta or ordinarily
resident in Malta before the first day of January, 1958.
( b ) The Minister responsible for finance may in his
discretion authorise the application of paragraph ( a ) in
regard to any individual born outside Malta,
notwithstanding that he was domiciled and/or
ordinarily resident in Malta before the first day of
January, 1958, if the Minister is satisfied that the said
                 INCOME TAX                                   ġ CAP. 123.         79
individual was absent from Malta in the period
between the said date and the thirty-first day of
December, 1963, saving occasional visits.
( c ) In the case of an individual born in Malta who was
resident in Malta in the year immediately preceding
the year of assessment and who proves to the
satisfaction of the Commissioner that he has actually
resided outside Malta for an aggregate period of not
less than twenty years after the first day of January,
1938 and that he has received in Malta at one or more
times during the year immediately preceding the year
of assessment an amount of income of not less than
five hundred liri arising outside Malta and chargeable
to tax under the provisions of this Act, the rates laid
down under paragraph ( a )(i) or (ii) hereof, as the case
may be, shall apply:
  Provided that -
(i) no such rates shall apply unless the
Commissioner is satisfied that the individual
was ordinarily resident and domiciled in Malta
in the year immediately preceding the year of
assessment;
(ii) in computing the said aggregate period of twenty
years there shall be excluded all calendar years
during which the individual was ordinarily
resident in Malta, and all periods prior to a date
which precedes by thirty years the first day of
the year of assessment in which the individual
first satisfies all the other conditions stipulated
in this sub-article.
( d ) In paragraphs ( a ), ( b ) and ( c ) -
"individual born outside Malta" means an individual
not born in Malta whose parents were not domiciled in
Malta or not ordinarily resident in Malta on the date of
his birth or at any time during the ten years previous to
such date;
"received in Malta" means the excess of the amount of
income arising outside Malta and received in Malta
over any sum transferred out of Malta.
( e ) The rates mentioned in paragraphs ( a ),   ( b ) and   ( c )
shall apply only to any individual who was entitled to
a further personal deduction of five hundred liri in any
year of assessment up to the year of assessment 1972,
and, in the event of his demise, to the surviving
spouse.
( f ) Notwithstanding the provisions of article 49 the
responsible spouse shall for the purpose of this article
be the spouse in whose name the residence permit has
been issued.
(3) Nothing in sub-article (2) shall in any way be considered as
  80        CAP. 123. ħ                INCOME TAX 
overriding the provisions of sub-article (13).
(4) The tax shall be charged at the rate of twenty cents on every
lira of the chargeable income of -
( a ) every entity to which article 30 applies; and 
( b )any foundation, bequest, trust, institution, or other
organization or body of persons the income whereof is
specifically due to be wholly applied in providing
income to members of the clergy:
        Provided that where the Commissioner is satisfied that
any part of such income has in fact been so applied in
respect of members of the clergy resident in Malta or
of ecclesiastical communities so resident, such part of
the said income shall be exempt from the tax in the
hands of the foundation, bequest, trust, institution, or
other organization or body of persons aforesaid, even
where such foundation, bequest, trust, institution or
other organization or body of persons is one to which
article 30(2) applies.
(5) Notwithstanding the provisions of sub-article (3), no tax
charged under the provisions of that sub-article shall be deemed to
be part of any tax available for set-off for the purpose of collection
in accordance with article 60.
(6) The tax shall be charged at the rate of thirty-five cents on
every lira of the chargeable income of every -
( a ) company;
( b ) body corporate established by law; and
( c ) undertaking required by article 30(7)( d ) to be dealt
with as a separate body of persons.
(7) Deleted by Act II. 2002.53.
(8) Notwithstanding the provisions of this article, a person in
receipt of a dividend distributed by an international trading
company out of profits derived by the company while it was an
international trading company, shall be charged to tax in respect of
such dividend at a rate of twenty-seven and a half per cent (27.5%)
of such amount as if such dividend constitutes separate chargeable
income, where such person is either:
( a ) not resident in Malta and who is, where applicable, not
owned and controlled, directly or indirectly by, nor
acts on behalf of, a person or persons ordinarily
resident and domiciled in Malta; or
( b ) a company resident in Malta which is wholly owned by
a person or persons not resident in Malta, provided
that such person or persons are not owned and
controlled by, directly or indirectly, nor acts on behalf
of, a person or persons ordinarily resident and
domiciled in Malta.
Maximum rate of 
tax in certain cases.
(9) Saving the provisions of sub-article (12), the tax chargeable
under the other provisions of this article shall in no case exceed the
                 INCOME TAX                                   ġ CAP. 123.         81
rate of - 
( a ) ten cents on every lira of the chargeable income of
every trade union; and
( b ) thirty cents on every lira of the chargeable income of
every club or other similar non-proprietary institution
if the Commissioner is satisfied that no part of the
income is distributable to, or is otherwise available for
the personal benefit of any proprietor or member
thereof in his capacity as such.
Special rates of tax 
and minimum tax 
liability.
Cap. 217.
(10) Notwithstanding the provisions of subarticles (1) and (2) -
( a ) in the case of an individual who has been granted a
residence permit under article 7 of the Immigration
Act, the tax upon the chargeable income, other than
income mentioned in paragraph ( b ) shall be charged -
(i) in the case of an individual who has been
granted such residence permit on or after the
fourteenth day of November, 1972, but before
the first day of January, 1988, at the rates laid
down in sub-paragraph (i) or (ii), as the case
may be, of subarticle (2):
Provided that the minimum tax payable by
such individual in respect of any year of
assessment shall be one thousand liri;
(ii) in the case of an individual who has been
granted such residence permit on or after the
first day of January, 1988, at 15 cents on every
lira:
Provided that the minimum amount of
income which shall be chargeable to tax in
respect of any year of assessment shall be
deemed to be twelve thousand liri and the
resulting tax thereon, after taking into account
any double taxation relief to which such
individual may be entitled, shall not be less than
the tax which would result from applying the
said rate on the deemed minimum chargeable
income;
( b ) income derived from Malta and chargeable to tax
under article 4(1)( a ) and ( b ), shall be deemed to
constitute chargeable income to be taxed separately at
the rates laid down in subarticle (1)( a ) or ( b ) starting
at the rate of 15c on every lira.
(11) ( a )  (i)  The tax upon the chargeable income other than
income mentioned in sub-paragraph (ii) of this paragraph, of any
individual born in Malta who, after emigrating has returned as a
resident in Malta after the first day of January 1988, shall be
charged at the rates laid down in sub-article (1), or if he so elects,
and until such election is not renounced by him, at the rates laid
down in sub-article (2)(i) or (ii) thereof. The said election may not
be availed of again once it is renounced:
  82        CAP. 123. ħ                INCOME TAX 
  Provided that the provisions of this sub-article shall only
apply where such an individual proves to the satisfaction of the
Commissioner that either:
( a ) he had actually resided outside Malta for an aggregate
period of 20 years falling within a period of 25 years
preceding the first day of the year of assessment in
which the individual returns as resident in Malta after
the first day of January 1988, and that he has received
in Malta at one or more times during the year
immediately preceding the year of assessment an
amount of income of not less than six thousand liri
arising outside the island and chargeable to tax under
the provisions of this Act, provided that in the case of
a married person the said amount of income of six
thousand liri shall be increased by one thousand liri in
respect of every dependant relative including a spouse;
or
Cap. 217.
( b ) he is not a Maltese national and does not satisfy the
period of residence outside Malta referred to in
paragraph ( a ) of this proviso, and that he satisfies
conditions similar to those established by the Minister
responsible for immigration under article 7 of the
Immigration Act, for the issue of a residence permit as
existing at the time such an individual returns to
Malta:
Provided further that the minimum liability of any
such individual for any year of assessment in which
the individual elects to pay at the rates laid down in
sub-article (2)( a )(i) or (ii) hereof shall, after taking
into account any double taxation relief to which such
individual may be entitled, be one thousand liri.
         (ii)  In the case of income derived from Malta and
chargeable to tax under article 4(1)( a ) and ( b ), such income shall be
deemed to constitute chargeable income to be taxed separately at
the rates laid down in sub-article (1)( a ) starting at the rate of 15c
on every lira.
( b ) In the event of the demise of any individual to which
paragraph ( a ) applies and who is charged to tax at the rates laid
down in sub-article (2)( a )(i) hereof, the surviving spouse shall be
entitled to elect to be charged to tax in the same manner and under
the same conditions as the deceased individual and charged at the
rates laid down in sub-article (2)( a )(ii) hereof, and until such
election is not renounced, the surviving spouse shall be considered
to have satisfied in his own right the qualifying period of absence
from Malta stipulated therein.
(12) Any person who - 
( a ) makes default in furnishing a return in respect of any
year of assessment preceding the year of assessment
1999, shall be chargeable for such year of assessment
with a tax of treble the amount of tax for which he is
liable for that year under the other sub-articles of this
                 INCOME TAX                                   ġ CAP. 123.         83
article or with such lesser amount of tax as may be
determined by the Commissioner but which shall in no
case be less than ten liri or one-half per cent of the said
amount of tax for which he is liable whichever is the
greater; or
( b ) omits from his return for any year of assessment
preceding the year of assessment 1999 any amount
which should have been included therein, shall be
chargeable with an amount of tax equal to twice the
difference between the tax as calculated in respect of
the income returned by him and the tax properly
chargeable in respect of his income as determined after
including the amounts omitted,
and shall be required to pay such amount of tax in addition to the
tax properly chargeable in respect of his true income; or
( c ) makes default in furnishing a return in respect of the
year of assessment 1999 or any subsequent year of
assessment or omits from his return for the year of
assessment 1999 or any subsequent year of assessment
any amount which should have been included therein,
shall be chargeable for such year of assessment with
additional tax in the amount or amounts specified in
the Schedule to this Act, and shall be required to pay
such amount of tax in addition to the tax properly
chargeable on the total income for that year:
  Provided that if the Commissioner is satisfied that the
default in rendering the return or any such omission as referred to
in paragraphs ( a ) and ( b ) was not due to any fraud, art, contrivance
or gross or wilful neglect, he shall remit the whole of the treble or
additional tax and in any other case may remit such part or all of
the said treble or additional tax specified in the said paragraphs as
he may think fit:
  Provided further that in the case of a body of persons the
Commissioner shall not reduce any tax chargeable under paragraph
( a ) to less than one lira or ten per cent of the total tax chargeable
under the other sub-articles of this article for the relative year of
assessment, whichever is the greater:
Cap. 372.
 Where the Commissioner has sent to any person a notice
referred to in article 12(3) of the Income Tax Management Act,
such person shall be required to pay, in respect of each such notice,
an additional tax as may be specified in such notice for the year of
assessment in respect of which the default has occurred but which
shall in no case exceed ten liri. The Commissioner may only remit
this additional tax where he is satisfied that owing to absence from
Malta, sickness or other reasonable cause such person was
prevented from submitting a return in accordance with the
provisions of article 10 or 11 of the Income Tax Management Act:
  Provided further that:
  84        CAP. 123. ħ                INCOME TAX 
Cap. 372.
(i) the powers conferred upon the Commissioner by
this sub-article shall be in addition to any right
conferred upon him to commence proceedings in
respect of an offence under Part IX of the
Income Tax Management Act;
(ii) any person who in determining his total income
and the tax liability thereon, as disclosed by his
return, deducts or sets off any amount, the
deduction or set-off whereof is not allowed
under the provisions of the Income Tax Acts, or
shows as an expenditure or loss any amount
which he has not in fact expended or lost, or
provides or withholds information the result of
which is a reduction of the amount of tax
payable by him or an increase in the amount of
tax repayable to him, shall be deemed for the
purposes of this subarticle to have made an
omission from his return;
Cap. 372.
(iii) any tax charged under the provisions of this sub-
article shall be deemed not to be part of any tax
paid or payable for the purposes of the preceding
sub-articles of this article, or of articles 59, 76
and 89, or of articles 51 and 52 of the Income
Tax Management Act;
(iv) where the default or omission has been made in
connection with a return required by the
provisions of the Income Tax Acts to be
furnished by another person on behalf of a
company, such company shall be liable for the
additional tax chargeable under the provisions of
this sub-article.
(13) The tax upon the chargeable income of any person engaged
in the production of petroleum produced in Malta shall be-
( a ) where the gains or profits are ascertained as provided
in paragraph (i) of the proviso to article 14(1), at the
rate of fifty cents on every lira of such part of his
chargeable income as is derived therefrom and at the
appropriate rates set out in the other sub-articles of
this article on that part which is not so derived; or
( b ) where the gains or profits are ascertained as provided
in paragraph (ii) of the proviso to article 14(1), at the
rate of fifty cents on every lira of such part of his
chargeable income as is derived therefrom, and at the
appropriate rates set out in the other sub-articles of
this article on that part which is not so derived: 
  Provided that in the case of a Production Sharing Contract
signed after 1 January, 1996, the tax shall be charged at the rate
stipulated in sub-article (6) hereof.
(14) Every person referred to in sub-article (13) shall - 
                 INCOME TAX                                   ġ CAP. 123.         85
Cap. 156.
Cap. 194.
( a ) in the case of a person referred to in paragraph ( a )
thereof, have and maintain a permanent office in Malta
where all contracts for the sale or disposal of
petroleum produced in Malta or of rights and interests
pertaining to such petroleum shall be made, and the
sale or disposal prices of such petroleum or rights and
interests to be used in all accounting documents and in
all returns submitted for the purposes of this Act shall
not be less than the values attributed thereto for
royalty purposes in accordance with the terms of the
licence granted to such person under the Petroleum
(Production) Act, or under that Act and under the
Continental Shelf Act;
( b ) in the case of a person referred to in paragraph ( b )
thereof, have and maintain a permanent office in Malta
for the conduct of operations under the licence,
contract or other arrangement, as the case may be, and
the values to be used by such person in all accounting
documents shall, for the purposes of this Act, be
established in the manner provided under paragraph
(ii) of the proviso to article 14(1).
(15) Any person engaged in trade or business who derives gains
or profits in part from the sale or disposal of petroleum produced in
Malta or of rights or interests pertaining to such petroleum and in
part from any other trade, business, profession or vocation shall, in
respect of the first mentioned part of his trade or business, allocate
a separate capital and keep separate books and other records and
accounts and shall not pool the accounts of such part of his trade or
business with those of his other trade, business, profession or
vocation. The accounts of the trade or business, or as the case may
be, that part of the trade or business of a person whereof the gains
or profits are derived from the sale or disposal of petroleum
produced in Malta or of rights and interests pertaining to such
petroleum shall be drawn up in accordance with consistent and
generally accepted accounting practice.
(16) The provisions of sub-article (15) shall apply  mutatis
mutandis  to any person operating in Malta under a licence, contract
or other arrangement as is mentioned in article 14(1)(ii).
(17) Where, during the year immediately preceding any year of
assessment, any individual derives income subject to tax under
article 4(1)( b ), being emoluments payable under a contract of
employment requiring the performance of work or of duties mainly
outside Malta, excluding however any service on board a ship,
aircraft or road vehicle owned, chartered or leased by a Maltese
company and any service for the Government of Malta, and
received in respect of work or duties carried out outside Malta, or
in respect of any period spent in Malta in connection with such
work or duties, or on leave during the carrying out of such work or
duties -
( a ) notwithstanding anything to the contrary contained in
this Act, such income shall be deemed to constitute the
last part of that individual’s total income for that year
  86        CAP. 123. ħ                INCOME TAX 
and, saving the provisions of paragraph ( c ), shall not
be liable to an amount of tax in excess of -
(i) Lm300  per annum  in the case of an unskilled
worker;
(ii) Lm450  per annum  in the case of a skilled
worker; 
(iii) Lm500  per annum  in the case of a technician;
and 
(iv) Lm1,000  per annum  in the case of an individual
rendering managerial or professional services;
( b ) in each particular case the Commissioner shall
determine in his absolute discretion which of the
categories set out in paragraph ( a ) hereof is applicable;
( c ) where the said work or duties are not carried out
during the whole year, the maximum amounts
applicable under paragraph ( a ) hereof shall be reduced
in the proportion which the period during which the
work or duties are so carried out bears to the whole
year;
Cap. 318.
( d ) where the tax is reduced in accordance with the
provisions of this sub-article, it shall be further
reduced by the amount of any contribution paid by the
individual under the Social Security Act during the
period in which the relative work or duties are carried
out.
(18) The tax on the income referred to in article 4(6) shall be at
the rate of ten cents on every lira thereof, and, notwithstanding
anything to the contrary contained in this Act, no set-off or refund
shall be granted to any person in respect of the tax so charged.
(18A)  Notwithstanding any other provisions of this article, where
a non-resident derives income from entertainment activities
exercised in Malta for a period not exceeding fifteen days in the
year preceding a year of assessment, the tax shall be charged at the
rate of ten cents on every lira of the gross payment receivable in
respect of the said activities, and no set-off or refund shall be
granted to any person in respect of the tax so charged:
Provided that where the said activities are exercised in
Malta for a period exceeding fifteen days, the non-resident person
shall declare his income from entertainment activities in a return
made in accordance with the Income Tax Acts and he will be
charged on such income at the rates laid down in subarticle (1)( c ),
and in any such case any tax paid on such income in accordance
with this article shall be available as a credit against that person’s
tax liability and where any tax so paid is in excess of such liability
it shall be refunded.
(19) Notwithstanding the other provisions of this article, but
without prejudice to those of sub-article (12), the Minister
responsible for finance may, in the interests of economic
expediency, direct by notice published in the Gazette, that:
                 INCOME TAX                                   ġ CAP. 123.         87
( a ) in the case of small assessments charging tax not
exceeding an amount specified in the said notice, the
assessment shall not be raised; and
( b ) in determining the chargeable income and the amount
of tax due by any person and in allowing any set-offs,
the Commissioner may round up or down any amount
to the nearest lira.
(20) ( a ) Where a member of a company resident in Malta is a
resident of a State or territory with which Malta has made an
arrangement under the provisions of this Act for the grant of relief
from double taxation, and under that arrangement a dividend, or
part thereof, distributed by such a company is subject to income tax
in Malta at a rate lower than that chargeable on the income out of
which the dividend is distributed, such company shall be entitled to
require that the gains or profits, or part thereof, derived by it for the
year of assessment 2001 and for subsequent years of assessment
and which are distributable by way of dividend subject to tax at a
lower rate as aforesaid shall, notwithstanding that the dividend, or
part thereof has not been distributed, be taxed at the said reduced
rate and not at the rate properly chargeable under this Act on the
gains or profits of the company:
Provided that the provisions of this paragraph shall only be
applicable with respect to companies which do not sell by retail and
a person shall be deemed not to sell by retail if its sales of goods or
services are made to:
(i) a person who carries on a trade, business, profession or
vocation and the goods or services so sold to such
person are either resold by such person or are used by
such person for the purpose of his trade, business,
profession or vocation; or
(ii) a person, other than an individual, who uses those goods
for the purposes of an undertaking carried on by such
person:
Provided further that where a company has opted to be taxed
at a reduced rate of income tax as provided by this paragraph, no
person in receipt of a dividend paid by such company out of profits
which have been subject to tax at such reduced rate of tax shall be
entitled to claim a refund under the provisions of the Income Tax Acts
in respect of that dividend.
( b ) Where the provisions of paragraph ( a ) have been applied
and subsequently there is a change in the shareholding of the
company in consequence of which the new shareholders will not be
entitled to a reduced rate of tax under any arrangement as aforesaid
or if so entitled the rate applicable in such arrangement is more
than the rate applicable to the outgoing shareholder, then any
profits which have not been distributed at the end of the last
financial year of the company preceding the date of change in
shareholding less any profit distributions made to the outgoing
shareholder in the current financial year shall be taxed at a rate
being the difference between the rate of tax which would be
  88        CAP. 123. ħ                INCOME TAX 
applicable had the new shareholder held the shares when such
profits were earned, and the rate actually applied, and such tax shall
be a tax payable by the company in the year of assessment in which
such profits are distributed:
Provided that where a member of a company is also a
company incorporated under Maltese law, the provisions of this
article shall apply to the same extent as if the members of the latter
company had owned the shares directly in the company.
Added by: 
XXXVI. 1990.14.
PART VIII 
TAX REBATE
Rebate of tax.
Renumbered by:
XVII. 1994.2.
Amended by: 
XVIII.1993.7.
57. Repealed by: XX.1996.17. 
Further rebate. 
Added by: 
VIII.1991.3. 
Amended by: 
XVIII. 1993.8.
Substituted by: 
I.1994.2. 
Renumbered by:
XVII. 1994.2.
Amended by:
XXII.1995.6.
58.   Repealed by: XX.1996.17.
PART IX
 PERSONS ASSESSABLE
Deduction of tax.
Amended by: 
XLI.1961.2; 
VIII.1969.9; 
XXVIII.1972.3; 
XXIV.1976.6; 
XXVI.1977.14; 
XIII.1983.5; 
XXXVI.1990.15.
Renumbered by:
XVII. 1994.2.
Amended by: 
XVII. 1994.24;
V. 1998.8;
IX. 1999.14.
59. (1) ( a ) Every company resident in Malta, not being a
company referred to in paragraph ( b ), shall be entitled
to deduct from the amount of any dividend, other than
a dividend paid out of distributable profits allocated to
the untaxed account and other than a dividend referred
to in article 12(1)( p ), paid to any shareholder, a tax at
the rate paid or payable by the company, relief of
double taxation being left out of account, on the
income out of which such dividend is paid:
Provided that where tax is not paid or payable by
the company on the whole income out of which the
dividend is paid, the deduction shall be restricted to
that portion of the dividend which is paid out of
income on which tax is paid or payable by the
company.
( b ) (i) Every collective investment scheme shall be
entitled to deduct from the amount of any
dividend, other than a dividend paid out of
distributable profits allocated to the untaxed
account, paid to any shareholder, a tax at the rate
paid, payable or suffered by the collective
investment scheme, whichever rate is the
                 INCOME TAX                                   ġ CAP. 123.         89
highest, relief of double taxation being left out
of account, on the income out of which such
dividend is paid:
Provided that where tax is not paid, payable
or suffered by the collective investment scheme
on the whole income out of which the dividend
is paid, the deduction shall be restricted to that
portion of the dividend which is paid out of
income on which tax is paid, payable or suffered
by the collective investment scheme.
(ii) The provisions of article 31 shall apply to the
income of a person arising from a dividend
referred to in sub-paragraph (i).
(2) Where in respect of any year of assessment the rate of tax
chargeable under article 56 upon the chargeable income of a
company is increased and any company constituted under the law
in force in Malta or resident in Malta has, before the date of the
commencement of the enactment imposing the increased rate of
tax, deducted from a dividend paid to a shareholder (hereinafter in
this sub-article referred to as "the original dividend") tax at a rate
lower than that paid or payable by the company for that year in
respect of the income out of which such dividend is paid, the
company shall be entitled -
( a ) on the occasion of the next payment of dividend by the
company (hereinafter in this sub-article referred to as
"the next dividend"), to make up from that dividend
the amount of such under-deduction in addition to
making any other deduction which the company is
entitled to make from that dividend, irrespective of
whether or not the person who is entitled to the next
dividend, is the person who was entitled to the original
dividend; or
( b ) with the written permission of the Commissioner, to
recover from the person to whom the original dividend
was paid the amount of such under-deduction (which
shall be specified in such written permission) as if
such amount were a debt due to the company; and in
any proceedings for the recovery of such amount, such
written permission shall be evidence of such debt, and
proof of the Commissioner’s signature upon such
written permission shall not be required unless the
court for special cause directs otherwise.
(3) Where in respect of any year of assessment any company
constituted under the law in force in Malta or resident in Malta, not
being a company referred to in sub-article (1)( b ), has deducted
from a dividend paid to a shareholder (hereinafter in this sub-article
referred to as "the original dividend") tax at a rate higher than that
paid or payable by the company for that year in respect of the
income out of which such dividend is paid, then, unless the
company has paid the amount of such over-deduction in accordance
with the provisions of sub-article (4), the company shall, on the
  90        CAP. 123. ħ                INCOME TAX 
occasion of the next payment of dividend by the company
(hereinafter in this sub-article referred to as "the next dividend")
make good such amount by a reduction of the amount of tax
deducted by the company from that dividend, irrespective of
whether or not the person who is entitled to the next dividend is the
person who was entitled to the original dividend.
(4) Where any such company has, in paying a dividend to a
shareholder, made such an over-deduction as is mentioned in sub-
article (3), the company shall, within fourteen days from the tax
return date relevant to the income out of which such dividend was
paid, render an account to the Commissioner of the amount of such
over-deduction and the Commissioner may, at any time after such
account has been rendered as aforesaid but before such over-
deduction has been made good in accordance with the provisions of
sub-article (3), by notice in writing served upon the company,
require the company to pay such amount to the Commissioner and
such amount shall thereupon become a debt due to the Government,
payable within one month from the date of service of such notice,
and shall be recovered as such.
(5) ( a ) Every company shall upon payment of a dividend,
whether tax is deducted therefrom or not, furnish the
shareholder with a dividend certificate.
( b ) The dividend certificate shall be in such form as the
Commissioner shall require and shall show, in respect
of the dividend distributed to the particular
shareholder, the following information:
(i) the gross amount of the distributed profits, in
respect of each account, before deduction of any
tax chargeable on the company in respect of
such distributed profits;
(ii) the total tax chargeable on the company in
respect of the distributed profits, showing
separately:
(1) the Malta tax payable after all reliefs
of double taxation have been given;
and
(2) the foreign tax in respect of which
relief of double taxation has been
given under the double taxation relief,
relief in respect of Commonwealth
income tax, and unilateral relief
provisions; and
(3) the amount which has been set off
against Malta tax pursuant to a claim
for relief of double taxation under the
flat-rate foreign tax credit provisions;
(iii) the amount of the distributed profits from each
account, after deducting the tax referred to in
sub-paragraph (ii) of this paragraph;
(iv) the tax payable on distribution pursuant to
articles 62, 67 and 67A which shall be shown
                 INCOME TAX                                   ġ CAP. 123.         91
separately from the tax referred to in sub-
paragraph (ii);
(v) the net amount of the dividend paid to the
shareholder;
(vi) where the tax paid or payable by the company on
the profits so being distributed is affected by
relief of double taxation, the rate, hereinafter in
this Act referred to as "the net Malta rate", of the
tax paid or payable by the company after taking
relief of double taxation into account;
(vii) where the profits being distributed have been
exempt from tax and the distribution of such
profits by the company is exempt from tax in the
hands of the shareholder, a note quoting the
relevant law giving such exemption;
Cap. 372.
(viii) where the profits being distributed by a company
(the first company) include a dividend received
from another company (the second company), in
respect of which the first company is entitled to
make a claim for a refund under article 48(4) of
the Income Tax Management Act, in respect of
the tax paid thereon by the second company, a
statement declaring that the first company is
entitled to make such a claim in respect of those
distributed profits;
(ix) such other information as the Commissioner
shall require.
(6) Every company constituted under the law in force in Malta
or resident in Malta shall, upon payment of debenture interest or of
interest on any other loan advanced to a company for a capital
purpose (excluding interest on customer’s deposits and current
accounts), deduct therefrom tax at the rate of twenty-five cents on
every lira of such interest where such payment is made to a person
other than a company, and at the rate chargeable under article 56(6)
on such interest where the payment is made to a company, and shall
forthwith render an account to the Commissioner of the amount so
deducted and every such amount shall be a debt due from such
company to the Government payable within one month from the
date of payment of such interest and shall be recoverable as such:
  Provided that where the Commissioner gives a certificate in
writing that to the best of his belief the total income of a recipient
will be less than the minimum liable to income tax or, in the case of
a person other than a company, such income will be liable to a rate
of income tax less than twenty-five per cent, the company shall,
until such certificate is cancelled by the Commissioner, pay the
debenture interest or interest on any other loan without deduction
or deduct tax at such less rate as the case may be.
(7) Every such company shall upon payment of such interest
furnish each person to whom such payment is made with a
certificate setting forth the amount of the interest paid to him and
the amount of the tax which the company has deducted from such
  92        CAP. 123. ħ                INCOME TAX 
interest.
(8) Any account required to be rendered or any certificate
required to be furnished under this article shall be rendered or
furnished, as the case may be, by the manager or other principal
officer of the company.
(9) For the purposes of this article and of article 60:
"company" includes a collective investment scheme;
"dividend" includes any distribution made by a collective
investment scheme;
"relief of double taxation" means any credit or other relief for
foreign tax allowable by virtue of the reliefs stipulated in article
74;
"shareholder" includes any person holding units in a collective
investment scheme; and
"tax chargeable on the company" includes tax suffered by a
collective investment scheme, whether by deduction or otherwise.
Set-off of tax in 
certain cases. 
Amended by: 
XLII.1975.9; 
XXIV.1976.7;   
XXVIII.1978.15; 
XIV.1984.7.
Renumbered by:
XVII. 1994.2.
Amended by: 
XVII.1994.25;
II. 2003.23.
60. Any tax which a company had deducted or is entitled to
deduct under article 59 from a dividend paid to a shareholder, from
debenture interest payable to a debenture holder or from interest on
any other loan payable to a creditor, and any tax applicable to the
share to which any person is entitled in the income of a body of
persons assessed under this Act, shall, when such dividend or
interest or share is included in the chargeable income of such
shareholder or person, be set off for the purposes of collection
against the tax charged on that chargeable income:
  Provided that, notwithstanding anything in this article or in
the last preceding article but subject to the following proviso,
where a company has deducted tax, the amount of tax actually
deducted by a company from any dividend paid by the company to
a shareholder shall be set off against the tax due from the recipient
of such dividend, irrespective of whether in paying the dividend the
company has made an under-deduction or an over-deduction or any
adjustment of a previous under-deduction or over-deduction of tax,
except where a company has recovered the amount of any under-
deduction under the provisions of article 59(2)( b ) in which case a
set-off shall be allowed of the amount of tax actually deducted by
the company and of the amount of tax recovered by the company
under those provisions:
Provided further that no set-off as aforesaid shall be made
unless the certificate referred to in article 59(5) or (7) is produced
to the Commissioner and unless tax has actually been paid:
Provided also that in no case shall any set-off be made in
respect of -
( a ) any tax which a company has deducted or is entitled to
deduct from any dividend paid to any person who, in
virtue of any exemption granted by or under any law,
is not chargeable to tax thereon; and
                 INCOME TAX                                   ġ CAP. 123.         93
Cap. 372.
( b ) any tax charged on any body of persons under article
56(4), or under article 27(3) and (4) of the Income Tax
Management Act.
Definitions.  
Added by: 
XVII. 1994.26.
61. For the purposes of articles 62 to 69: 
( a ) a "recipient" shall mean:
(i) a person, other than a company, resident in
Malta in the year in which a dividend is received
by him or by any person on his behalf; or
(ii) a non-resident person (including a non-resident
company) who is owned and controlled by,
directly or indirectly, or who acts on behalf of, a
person who is ordinarily resident and domiciled
in Malta;
( b ) an "untaxed dividend" shall mean a dividend paid by a
company resident in Malta to the extent that it is paid
out of distributable profits allocated to its untaxed
account.
Tax on dividend 
from untaxed 
account. 
Added by: 
XVII. 1994.26.
62. (1) Every company shall, on payment of untaxed dividend
to a recipient, deduct therefrom tax at a rate of fifteen per cent.
(2) Every amount deducted under sub-article (1) shall be a debt
due from such company to the Commissioner payable not later than
the fourteenth day following the end of the month in which such
dividend was paid and shall be recoverable as such:
  Provided that the provisions of this article shall not apply in
respect of untaxed dividend payments to persons who are exempt
from tax.
Presumption of 
deduction. 
Added by: 
XVII. 1994.26.
63. It shall be presumed, so far as the tax liability of the
recipient of a dividend is concerned, that a deduction and payment
which ought to have been made pursuant to the provisions of article
62 have been made.
Where 
presumption 
applies. 
Added by: 
XVII. 1994.26.
64. Where the presumption referred to in article 63 applies:
( a ) a recipient of a dividend shall not be obliged to
disclose the dividend in any return made pursuant to
the provisions of this Act; and
( b ) subject to the provisions of article 65, no person shall
be charged to further tax under this Act in respect of
the dividend.
Option for 
recipient to 
declare. 
Added by: 
XVII. 1994.26. 
65. A recipient of an untaxed dividend may declare such
dividend on his tax return and where a declaration is made as
aforesaid any tax (or repayment) due shall be determined as if
article 64 did not apply, and any tax withheld pursuant to article 62
shall be credited against the recipient’s income tax liability and,
where applicable, shall be available for any refund which may be
due in respect of that tax for the relevant year of assessment.
  94        CAP. 123. ħ                INCOME TAX 
Untaxed dividend 
paid to non-
recipient. 
Added by: 
XVII. 1994.26.
66. Where an untaxed dividend is paid to a person, who is not a
recipient as defined under article 61, such dividend shall not be
charged to tax under this Act in the hands of such person and where
such person is not resident in Malta such person shall not be
obliged to disclose the existence of the dividend in any return made
pursuant to the provisions of the Income Tax Acts.
Payment of 
dividend out of 
taxed account or 
foreign income 
account. 
Added by: 
XVII. 1994.26.
67. (1) Where a company pays a dividend to a person resident
in Malta out of profits allocated to the Maltese taxed account or the
foreign income account and which profits have suffered tax at a
rate of tax which is less than the rate of tax chargeable applicable at
the time of the distribution, under article 56(6), only by reason of
the fact that a different rate of tax was applicable at the time the
profits being distributed were chargeable to tax, the company shall
deduct tax at a rate equivalent to the difference between the current
rate and that actually suffered as aforesaid on the amount of the
dividend before deducting any tax which it has suffered on the
profits so being distributed:
  Provided that the provisions of this sub-article shall not
apply in respect of such dividend payments to persons who are
exempt from tax.
(2) Every amount deducted under sub-article (1) shall be a debt
due from such company to the Commissioner payable not later than
the fourteenth day following the end of the month in which such
dividend was paid and shall be recoverable as such.
(3) The provisions of article 63 to 65 shall apply  mutatis
mutandis  as they apply to distributions from the untaxed account
and references in those articles to article 62 shall be construed as
references to sub-article (1).
(4) For the purposes of this article a person resident in Malta
shall include a non-resident person (including a non-resident
company) who is owned and controlled by, directly or indirectly or
who acts on behalf of a person who is ordinarily resident and
domiciled in Malta.
Profits distributed 
by a collective 
investment 
scheme. 
Added by: 
XVII. 1994.26.
67A. (1) Where a collective investment scheme, which is
constituted as a company, pays a dividend to a person resident in
Malta out of profits allocated to the foreign income account it shall
deduct tax at the rate of fifteen per cent on the net amount of the
dividend, that is after deducting any tax it is entitled to deduct
under article 59(1):
  Provided that the provisions of this sub-article do not apply
in respect of such dividend payments to persons who are exempt
from tax.
(2) Where a collective investment scheme, which is not
constituted as a company, distributes profits to persons resident in
Malta, there shall be deducted tax as if, for the purposes of this
article, such a collective investment scheme is constituted as a
company. In this respect tax shall be deducted from every
distribution of profits which, had the collective investment scheme
been constituted as a company, would have been allocated to either
the foreign income account or the untaxed account:
                 INCOME TAX                                   ġ CAP. 123.         95
  Provided that the provisions of this sub-article do not apply
in respect of such payments to persons who are exempt from tax.
(3) Every amount deducted under sub-articles (1) and (2) shall
be a debt due from such collective investment scheme to the
Commissioner payable not later than the fourteenth day following
the end of the month in which the distribution was made and shall
be recoverable as such.
(4) Every amount deducted under sub-articles (1) and (2) shall
be a debt due from such collective investment scheme to the
Commissioner payable not later than the fourteenth day following
the end of the month in which the distribution was made and shall
be recoverable as such.
(4) Articles 63 to 65 shall apply  mutatis mutandis  in the
circumstances set out in sub-articles (1) and (2) as they apply to
distributions from the untaxed account. References in those articles
to article 62 shall be construed as references to sub-article (1) or
(2), as the case may be, and references to dividend or untaxed
dividend shall be construed as a reference to profits distributed by a
collective investment scheme where the context so requires.
(5) For the purposes of article 61 and of sub-articles (1) and
(2), in the case of a collective investment scheme which is exempt
from tax under article 12(1)( s ), the profits which would be
allocated to the Maltese taxed account, had such a collective
investment scheme not been so exempt, shall, notwithstanding any
other provisions contained in this Act, be so allocated:
  Provided that if such profits would have been allocated to
the foreign income account had the collective investment scheme
not been exempt from tax and not been excluded from allocating
profits to its foreign income account, such profits shall, for the
purposes of this sub-article, not be allocated to the Maltese taxed
account but shall be allocated to the untaxed account.
(6) For the purposes of this article a person resident in Malta
shall include a non-resident person (including a non-resident
company) who is owned and controlled by, directly or indirectly, or
who acts on behalf of a person who is ordinarily resident and
domiciled in Malta.
No obligation to 
disclose. 
Added by: 
XVII. 1994.26.
68. (1) ( a ) Any person who is not resident in Malta or any
individual who is resident in Malta and who is in receipt of a
dividend paid out of the distributable profits allocated to the
foreign income account or to the Maltese taxed account shall not be
obliged to disclose the existence of such dividend in any return
made pursuant to the provisions of the Income Tax Acts.
( b ) No person shall be charged to further tax under this Act in
respect of the income referred to in paragraph ( a ). 
(2) ( a ) Any person, not being a company resident in Malta,
shall not be obliged to disclose in any return made pursuant to the
provisions of the Income Tax Acts those profits distributed by a
collective investment scheme not constituted as a company, where
such profits would have been allocated to the foreign income
  96        CAP. 123. ħ                INCOME TAX 
account or to the Maltese taxed account, had the collective
investment scheme been constituted as a company.
( b ) No person shall be charged to further tax under this
Act in respect of the profits referred to in paragraph ( a ).
Extent of liability. 
Added by:
XVII. 1994.26.
Cap. 372.
69. Where any person fails to deduct and pay tax in accordance
with the provisions of article 62, 67 and 67A, the provisions of
article 73(4) and the provisions of article 40(1) of the Income Tax
Management Act shall  mutatis mutandis  apply.
Chargeability of 
trustees, etc.  
Amended by: 
XLIX. 1975.10.
Renumbered by:
XVII. 1994.2.
Amended by:
IX.1999.14.
70. (1) A receiver, trustee, guardian, tutor, curator, judicial
sequestrator or committee, having the direction, control or
management of any property or concern on behalf of any person
shall be chargeable to tax in respect of income derived from such
property or concern in like manner and to the like amount as such
person would be chargeable if he had received such income, and
every such receiver, trustee, guardian, tutor, curator, judicial
sequestrator or committee shall be answerable for doing all matters
and things required to be done under this Act for the purposes of
determination, assessment and payment of tax:
  Provided that nothing in this article shall affect the liability
of any person represented by any such receiver, trustee, guardian,
tutor, curator, judicial sequestrator or committee to be himself
charged to tax in his own name.
(2) Any person who is entrusted with the management or
administration of any property referred to in article 30, or of any
foundation, bequest, trust, institution, or other organisation or body
of persons referred to in article 56(3)( b ), or who is in receipt of
income on their behalf, shall, for the purposes of sub-article (1), be
deemed to be a trustee in respect of that property or income.
Deceased persons. 
Amended by: 
XXV. 1960.10. 
Substituted by: 
XLIX. 1974.7.
Renumbered by:
XVII. 1994.2.
71. Where any individual dies during the year preceding the
year of assessment and such individual would but for his death
have been chargeable to tax for the year of assessment or where any
individual dies during the year of assessment or within five years
after the expiration thereof and he has not been assessed or has
been assessed at a lesser amount than that which ought to have been
charged for the year of assessment, the heirs or the legal
representative of such individual shall be liable to and charged with
the payment of the tax with which such individual would have been
chargeable and shall jointly and severally be answerable for doing
all such acts, matters and things as such individual if he were alive
would be liable to do under this Act. In the case of any individual
dying during the year preceding the year of assessment, if his estate
is distributed before the commencement of the year of assessment,
the heirs or such legal representative shall pay the tax at the rate or
rates in force at the time of his death.
Joint trustees.
Renumbered by:
XVII. 1994.2.
72. Where two or more persons act in the capacity of trustees
of a trust, they may be charged jointly or severally with the tax with
which they are chargeable in that capacity and shall be jointly and
severally liable for payment of the same.
                 INCOME TAX                                   ġ CAP. 123.         97
Income paid to 
non-resident. 
Amended by: 
XXIV.1961.4; 
XXVIII.1972.4; 
XXIV.1976.8. 
Substituted by: 
XXVI.1977.15. 
Amended by: 
XIII. 1983.5.
Renumbered by:
XVII. 1994.2.
Amended by:
IX.1999.14;
XI.2000.9.
Cap. 372.
73. (1) Where any person pays to a person not resident in
Malta, or to a person resident in Malta on behalf of such non-
resident person, any income chargeable to tax under the provisions
of this Act, he shall upon paying such income, unless he is himself
liable to pay tax thereon under the provisions of article 5 of the
Income Tax Management Act, deduct tax therefrom:
( a ) at the rate of twenty-five cents in the lira where
payment is made to or on behalf of any non-resident
person other than a company or a person to whom
article 56(18A) applies; 
( b ) at the rate chargeable under article 56(6) where
payment is made to or on behalf of a non-resident
company; and
( c ) at the rate chargeable under article 56(18A):
  Provided that the Commissioner may, by notice in writing
given to any person required to effect a deduction of tax in
accordance with paragraphs ( a ) and ( b ), authorise such person to
deduct tax at a rate lower than that hereinbefore mentioned, or to
pay such income without any deduction of tax:
Cap. 372.
Provided further that the provisions of this sub-article shall
not apply to income from which tax has been deducted under the
provisions of article 59 or under the provisions of article 23 of the
Income Tax Management Act.
(2) Any amount of tax deducted from income in accordance
with the provisions of sub-article (1) shall be a debt due to the
Government by the person effecting the deduction as aforesaid,
payable within thirty days from the making of the deduction, and
such amount shall be accounted for and remitted to the
Commissioner within the said period.
Cap. 372.
(3) Deductions of tax made under sub-article (1)( a ) and ( b )
shall, when paid to the Commissioner as provided in sub-article (2),
be set off for the purposes of collection against the tax charged on
the non-resident person in respect of the relative income. Any
excess shall be refunded in accordance with the provisions of
article 48 of the Income Tax Management Act.
(4) Where any person fails to deduct tax in accordance with the
provisions of this article or, after deducting such tax fails to pay it
to the Commissioner within the period mentioned in sub-article
(2)- 
( a ) such person shall be chargeable with the tax which
should have been deducted or paid as aforesaid and, in
addition, with twice the amount of such tax;
( b ) the tax and additional tax shall be recoverable from the
said person in the same manner as other tax charged
upon him under this Act;
( c ) a notice given by the Commissioner to any person and
stating the tax which was due to be deducted or paid
by him as aforesaid and any additional tax to which he
became liable for having failed to deduct or pay the tax
  98        CAP. 123. ħ                INCOME TAX 
shall, unless the contrary is proved, be sufficient
evidence that the amount shown in the said notice is
the amount due to be paid to the Commissioner by the
said person;
( d ) the Commissioner may in his discretion remit wholly
or in part any additional tax chargeable under the
provisions of this sub-article;
( e ) additional tax charged under this sub-article shall be
borne by the person required to deduct or pay the tax
and shall not be recoverable by such person, whether
wholly or in part, from the person receiving the
income;
Cap. 372.
( f ) additional tax charged under the provisions of this sub-
article shall not be deemed to be part of any tax paid or
payable for the purposes of articles 59, 76 and 89 and
articles 42, 51 and 52 of the Income Tax Management
Act.
Amended by: 
XVII. 1994.28.
PART X
RELIEF OF DOUBLE TAXATION
Four reliefs of 
double taxation. 
Added by: 
XVII. 1994.28.
74. There shall be four types of reliefs of double taxation,
namely: 
( a ) double taxation relief, as provided in articles 76 to 78,
both inclusive;
( b ) unilateral relief, as provided in articles 79 to 88, both
inclusive;
( c ) relief in respect of Commonwealth income tax, as
provided in article 89; and
( d ) a flat-rate foreign tax credit, as provided in articles 92
to 95, both inclusive,.
Interaction of the 
reliefs. 
Added by: 
XVII. 1994.28.
Amended by:
II. 2002.54.
75. In respect of any claim for relief of double taxation:
( a ) the provisions concerning unilateral relief shall be
applied in calculating a person’s tax liability in those
cases where double taxation relief and relief in respect
of Commonwealth income tax are not available to the
person making the claim; and
( b ) the provisions concerning the flat-rate foreign tax
credit shall be applied in calculating a person’s tax
liability only in those cases where double taxation
relief, relief in respect of Commonwealth income tax
and unilateral relief, as governed by articles 79 to 88,
are not available to the person making the claim.
                 INCOME TAX                                   ġ CAP. 123.         99
Double taxation 
arrangements. 
Added by: 
XLI.1961.3. 
Amended by: 
L.N. 4 of 1963; 
VIII.1969.10; 
XXVI.1977.33; 
XXXVI.1990.18.
Renumbered by:
XVII. 1994.2.
Amended by:
XVII. 1994.29;
II. 2002.55.
76. (1) If the Minister responsible for finance by order
declares that arrangements specified in the order have been made
with the Government of any territory outside Malta with a view to
affording relief from double taxation in relation to income tax and
any tax of a similar character imposed by the laws of that territory,
and that it is expedient that those arrangements should have effect,
the arrangements shall have effect in relation to income tax
notwithstanding anything in any enactment:
  Provided that no arrangement as aforesaid made after 1st
October, 1968 shall have effect in so far as it applies to tax paid or
payable in respect of gains or profits chargeable at the rate
provided for in article 56(13).
(2) On the making of an order under this article with respect to
arrangements relating to any territory forming part of the
Commonwealth, article 89 shall cease to have effect as respects
that territory except in so far as the arrangements otherwise
provide.
(3) An order made under this article may be revoked by a
subsequent order.
(4) The Minister responsible for finance may make rules for
carrying out the provisions of any arrangements having effect
under this article.
Tax credits.
Added by: 
XLI.1961.4. 
Amended by: 
V.1964.5; 
XXVIII.1972.6; 
XLII.1975.13; 
XXVIII.1978.28;
XXXVI.1990.19.
Renumbered by:
XVII. 1994.2.
Amended by:
XVII. 1994.30; 
XX.1996.18;
IX.1999.14.
77. (1) The provisions of this article shall have effect where,
under arrangements having effect under article 76, tax payable in
respect of any income in the territory with the Government of
which the arrangements are made is to be allowed as a credit
against tax payable in respect of that income in Malta; and in this
article the expression "foreign tax" means any tax payable in that
territory which under the arrangements is to be so allowed and the
expression "income tax" means tax charged on the chargeable
income at the rates laid down in Part VII of this Act.
(2) The amount of the income tax chargeable in respect of the
income shall be reduced by the amount of the credit:
  Provided that credit shall not be allowed against income tax
for any year of assessment unless the person entitled to the income
is resident in Malta for the year immediately preceding the year of
assessment.
(3) The credit shall not exceed the amount which would be
produced by computing the amount of the income in accordance
with the provisions of this Act and then charging it to income tax at
a rate ascertained by dividing the income tax chargeable (before
allowance or credit under any arrangements having effect under
article 76) on the total income of the person entitled to the income
by the amount of his total income.
(4) Without prejudice to the provisions of the preceding sub-
article, the total credit to be allowed to a person for any year of
assessment for foreign tax under all arrangements having effect
under article 76 shall not exceed the total income tax payable by
him for that year of assessment, less any tax payable by him under
  100        CAP. 123. ħ                INCOME TAX 
the provisions of articles 40, 69 and 73.
(5) In computing the amount of the income -
( a ) no deduction shall be allowed in respect of foreign tax
(whether in respect of the same or any other income); 
( b ) where the income tax chargeable depends on the
amount received in Malta the said amount shall be
increased by the appropriate amount of the foreign tax
in respect of the income;
( c ) where the income includes a dividend and under the
arrangements foreign tax not chargeable directly or by
deduction in respect of the dividend is to be taken into
account in considering whether any, and if so what,
credit is to be given against income tax in respect of
the dividend the amount of the income shall be
increased by the amount of the foreign tax not so
chargeable which falls to be taken into account in
computing the amount of the credit.
(6) Paragraphs   ( a )   and   ( b )   of the preceding sub-article (but not
the remainder thereof) shall apply to the computation of the total
income for the purpose of determining the rate mentioned in sub-
article (3), and shall apply thereto in relation to all income in the
case of which credit falls to be given for foreign tax under
arrangements for the time being in force under article 76.
(7) Where -
( a ) the arrangements provide, in relation to dividends of
some classes, but not in relation to dividends of other
classes, that foreign tax not chargeable directly or by
deduction in respect of dividends is to be taken into
account in considering whether any, and if so what,
credit is to be given against income tax in respect of
the dividends, and
( b ) a dividend is paid which is not of a class in relation to
which the arrangements so provide,
then, if the dividend is paid to a company which controls, directly
or indirectly, not less than one-half of the voting power in the
company paying the dividend, credit shall be allowed as if the
dividend were a dividend of a class in relation to which the
arrangements so provide.
(8) Credit shall not be allowed under the arrangements against
income tax chargeable in respect of the income of any person for
any year of assessment if he elects that credit shall not be allowed
in the case of his income for that year.
(9) Any claim for an allowance by way of credit shall be made
not later than two years after the end of the year of assessment to
which the claim refers, and in the event of any dispute as to the
amount allowable the claim shall be subject to objection and appeal
in like manner as an assessment.
(10) Where the amount of any credit given under the
                 INCOME TAX                                   ġ CAP. 123.        
arrangements is rendered excessive or insufficient by reason of any
adjustment of the amount of any tax payable either in Malta or
elsewhere, nothing in this Act limiting the time for the making of
returns, assessment or claims for relief shall apply to any return,
assessment or claim to which the adjustment gives rise, being a
return, assessment or claim made not later than two years from the
time when all such assessments, adjustments and other
determination have been made, whether in Malta or elsewhere, as
are material in determining whether any, and if so what, credit falls
to be given.
Dividends and tax 
credits. 
Added by: 
XLI.1961.5. 
Amended by: 
XXI.1980.13.
Renumbered by:
XVII. 1994.2.
Amended by: 
XVII.1994.31.
Cap. 372.
78. (1) Where the tax paid or payable by a company is
affected by double taxation relief the amount to be set off under
article 60 or to be repaid under article 48 of the Income Tax
Management Act, in respect of the tax deductible from any
dividend paid by the company, shall be reduced as follows:
( a ) if no tax is chargeable on the recipient in respect of the
dividend, the reduction shall be an amount equal to tax
on the gross dividend at the rate of double taxation
relief applicable thereto;
( b ) if the rate of tax chargeable on the recipient in respect
of the dividend is less than the rate of double taxation
relief applicable to the dividend, the reduction shall be
an amount equal to tax on the gross dividend at the
difference between those two rates.
(2) For the purpose of this article - 
( a ) if the income of the person chargeable includes one
dividend such as is mentioned in the preceding sub-
article, that dividend shall be deemed to be the highest
part of his total income;
( b ) if his income includes more than one such dividend a
dividend shall be deemed to be a higher part of his
total income than another dividend if the net Malta rate
applicable to the former dividend is lower than that
applicable to the latter dividend;
( c ) where tax is chargeable at different rates in respect of
different parts of any such dividend, or where tax is
chargeable in respect of some part of any such
dividend and is not chargeable in respect of some other
part thereof, each part shall be deemed to be a separate
dividend;
( d ) the expression "double taxation relief" has the same
meaning as in article 59 and the expression "the rate of
double taxation relief" means the rate which represents
the excess of the rate of tax deductible from the
dividend over the net Malta rate applicable thereto.
Unilateral relief. 
Added by: 
XVII. 1994.32.
79. In this Act the phrase "unilateral relief" means the relief
given pursuant to the provisions of articles 80 to 88, and in those
articles the phrase "income tax" shall have the meaning attributed
to it in article 77(1).
  102        CAP. 123. ħ                INCOME TAX 
Availability of 
unilateral relief. 
Added by: 
XVII. 1994.32.
80. Unilateral relief may be available in respect of a claim for
relief of double taxation where tax under this Act is computed by
reference to income which:
( a ) arises outside Malta; and
( b ) is subject to any tax of a similar character to that
imposed under the Income Tax Acts under the laws of
a territory outside Malta.
For the purposes of paragraph   ( b ), a tax shall not be
prevented from being of a similar character by reason only that it is
payable under the law of a province, state or other part of a country,
or is levied by or on behalf of a municipality or other local body.
Relief by way of 
credit. 
Added by: 
XVII. 1994.32.
81. The amount of the tax referred to in article 80( b ) which is
payable in a territory other than Malta is to be allowed as a credit
against the income tax chargeable in Malta in respect of the income
under article 80, and the amount of the income tax so chargeable
shall be reduced by the amount of the credit:
  Provided always that the credit shall not be allowed against
income tax for any year of assessment unless the person entitled to
the income is resident in Malta for the year immediately preceding
the year of assessment.
Credit for the 
underlying tax. 
Added by: 
XVII. 1994.32.
Substituted by:
IX. 2001.28;
II. 2002.56.
82. The provision concerning unilateral relief shall, when
applied to a company, hereinafter in this article referred to as "the
Malta company", and where the income under article 80 includes a
dividend distributed by a company not resident in Malta,
hereinafter in this article referred to as "the overseas company",
have effect so that tax not chargeable directly or by deduction in
respect of the dividend shall be deemed to fall under the provision
of article 80( b ) and shall be taken into account in computing the
credit to be given against income tax in respect of the dividend.
For the purposes of this article -
( a ) "tax not chargeable directly or by deduction in respect
of the dividend" shall include tax payable in respect of
a dividend distributed by a company not resident in
Malta which is related to the overseas company as
specified in paragraph ( b ), hereinafter referred to in
this article as "related company", where such dividend
forms part of a chain of successive dividends
distributed from one related company to another
ending in the dividend received by the Malta company,
or on the profits out of which such dividend was
distributed;
( b ) a company is related to the overseas company if the
overseas company controls, directly or indirectly, not
less than 10% of the voting power of the related
company.
Limitation on the 
credit. 
Added by: 
XVII. 1994.32.
83. The credit given under article 81 shall not exceed the
amount which would be produced by computing the income of a
person in accordance with the provisions of this Act and then
                 INCOME TAX                                   ġ CAP. 123.        
charging it to income tax at a rate ascertained by dividing the
income tax chargeable (before allowance of credit pursuant to
article 81) on the total income of the person entitled to it, by this
total income.
Amount of total 
credit. 
Added by: 
XVII. 1994.32.
84. Without prejudice to the provisions of article 87, the total
credit to be allowed pursuant to article 81 to a person for any year
of assessment shall not exceed the total income tax payable by him
for that year of assessment, less any tax payable by him for that
year of assessment under the provisions of articles 40, 69 and 73.
Computation of 
income. 
Added by: 
XVII. 1994.32.
85. In computing the amount of the income for purposes of
unilateral relief:
( a ) no deduction shall be allowed in respect of tax paid
and referred to in article 80( b ) in respect of the
income;
( b ) where the income chargeable depends on the amount
received in Malta the said amount shall be increased
by the appropriate amount of the tax paid and referred
to in article 80( b ) in respect of the income;
( c ) where the income includes a dividend and, in
determining the amount of credit to be given under
article 81, credit is given for tax which is not
chargeable directly or by deduction under article 82,
the amount of the income shall be increased by the
amount of that credit.
Applicability of 
article 85. 
Added by: 
XVII.1994.32.
86. The provisions of article 85( a )   and   ( b ) shall apply to the
computation of total income for the purposes of determining the
rate of tax referred to in article 83.
Dividends and tax 
credits, etc. 
Added by:    
XVII. 1994.32.
87. The provisions of article 77(8), (9) and (10) and of article
78 shall apply  mutatis mutandis  in relation to unilateral relief as
they apply to double taxation relief.
No relief without 
proof.  
Added by:   
XVII.1994.32.
88. Unilateral relief shall not be available to a person unless
that person has proved to the satisfaction of the Commissioner that
the income referred to in the provisions of article 80( a ) has borne
tax under the provisions of article 80( b ) and has proved the amount
of that tax.
Relief in respect of 
Commonwealth 
income tax. 
Amended by: 
XV.1960.15; 
V.1964.6; 
VIII.1969.11; 
XXVIII.1972.7; 
XXII.1976.4; 
XXVIII.1978.29; 
XXXVI.1990.20.
Renumbered by:
XVII. 1994.2.
Amended by:
IX. 1999.14.
89. (1) If any person resident in Malta who has paid, by
deduction or otherwise, or is liable to pay, tax under this Act for
any year of assessment on any part of his income, proves to the
satisfaction of the Commissioner that he has paid, by deduction or
otherwise, or is liable to pay, Commonwealth income tax for that
year in respect of the same part of his income, he shall be entitled
to relief from tax in Malta paid or payable by him on that part of his
income at a rate thereon to be determined as follows:
( a ) if the Commonwealth rate of tax does not exceed one-
half of the rate of tax appropriate to his case under this
Act in Malta, the rate at which relief is to be given
shall be the Commonwealth rate of tax;
( b ) in any other case the rate at which relief is to be given
  104        CAP. 123. ħ                INCOME TAX 
shall be half the rate of tax appropriate to his case
under this Act.
(2) If any person not resident in Malta who has paid, by
deduction or otherwise, or is liable to pay, tax under this Act for
any year of assessment on any part of his income, proves to the
satisfaction of the Commissioner that he has paid, by deduction or
otherwise, or is liable to pay, Commonwealth income tax for that
year of assessment in respect of the same part of his income, he
shall be entitled to relief from tax paid or payable by him under this
Act on that part of his income at a rate thereon to be determined as
follows:
( a ) if the Commonwealth rate of tax appropriate to his
case does not exceed the rate of tax appropriate to his
case under this Act, the rate at which relief is to be
given shall be one-half of the Commonwealth rate of
tax;
( b ) if the Commonwealth rate of tax appropriate to his
case exceeds the rate of tax appropriate to his case
under this Act, the rate at which relief is to be given
shall be equal to the amount by which the rate of tax
appropriate to his case under this Act exceeds one-half
of the Commonwealth rate of tax.
(3) For the purpose of this article, "Commonwealth income
tax" means any income tax or tax of a similar nature charged under
any law in force in any country of the Commonwealth, other than
Malta or the United Kingdom of Great Britain and Northern
Ireland, if the legislature of such country has provided for relief in
respect of tax charged on income both in that country and in Malta
in a manner which appears to the Commissioner to correspond to
the relief granted by this article.
(4) For the purposes of this article, the expression "rate of tax"
when applied to tax paid or payable under this Act means the rate
determined by dividing the amount of tax paid or payable for the
year (before the deduction of any relief granted under this article)
by the amount of the income in respect of which the tax paid or
payable under this Act has been charged for that year, except that
where the income which is the subject of a claim to relief under this
article is computed by reference to the provisions of this Act on an
amount other than the ascertained amount of the actual profits, the
rate of tax shall be determined by the Commissioner.
(5) Where a person is for any year of assessment resident both
in Malta and in a part, place or territory in which Commonwealth
income tax is charged, he shall for the purposes of this article be
deemed to be resident where during that year he resides for the
longer period.
(6) Any claim for relief under this article shall be made not
later than two years after the end of the year of assessment to which
the claim refers.
(7) The provisions of this article shall not apply to tax paid or
payable in respect of gains or profits chargeable at the rate
                 INCOME TAX                                   ġ CAP. 123.        
provided for in article 56(13).
Relief in respect of 
Bearer Accounts 
Levy. 
Repealed by: 
XXV.1960.16. 
Added by: 
XXXV.1972.14. 
Amended by: 
XXI. 1980.14.
Renumbered by:
XVII. 1994.2.
Amended by:
IX. 1999.14.
Cap. 219.
90. (1) If it be proved to the satisfaction of the Commissioner
that any person has paid levy in any year in respect of any bearer
account under the Bearer Accounts Levy Act, the tax chargeable
under this Act on the interest accruing or derived from such
account for that year shall be reduced by the amount of the said
levy.
(2) For the purposes of the reduction granted by sub-article (1)
hereof, the interest on any bearer account shall be deemed to be the
highest part of the total income for the year of assessment for
which such interest is brought to charge to tax.
Tax on part-time 
work.
Added by: 
I.1994.3. 
Substituted by: 
XX.1996.19.
Amended by:
V. 1998.8;
XI. 2000.10;
II. 2002.57.
90A. (1) With effect from the 1st day of January 1996, where
an individual is receiving full-time instruction at a university,
college or other similar educational institution or was serving an
apprenticeship with a view to qualifying in a trade or calling, or
where an individual has income in his own right falling under
article 4(1)( b ) or ( d ), and has during the year immediately
preceding the year of assessment other income from such part-time
work as may be prescribed, he shall subject to the other provisions
of this article pay tax at the rate of 15 cents on every lira of such
other income, and he shall not be required to declare any such other
income, in any return made pursuant to the Income Tax Acts:
Provided that where the other income derived from part-
time work is income as is described in article 4(1)( a ) and ( b ), the
provisions of this article shall apply with respect to that other
income only up to such limit as may be prescribed.
(2) Notwithstanding the provisions of sub-article (1), an
individual may declare all his income from part-time work together
with the rest of his income in his return made in accordance with
the Income Tax Acts, and he will be charged tax on all his income
in accordance with the provisions of paragraph ( a ) or ( b ) (as the
case may be) of article 56(1), and in any such case any tax paid on
such other income in accordance with this article shall be available
as a credit against the individual’s tax liability and where any tax
so paid is in excess of such liability, it shall be refunded.
(3) Notwithstanding the provisions of sub-article (1) an
individual, whose projected total income for a calendar year,
including income derived from part-time work, is not expected to
exceed such sum over which he would become liable to tax, may, if
the income from part-time work falls under the description in
article 4(1)( b ), at any time of the year by notice in writing on the
prescribed form, direct the employer with whom he is performing
part-time work not to deduct tax on his income from part-time
work.
(4) For the purposes of sub-article (3) hereof where an
individual’s annual wages or salary from his full time employment
exceed such amount over which he would become liable to tax, or
where in the previous year his total income rendered him liable to
tax, his projected total income for the relevant year will be
expected to exceed such sum over which he would become liable to
  106        CAP. 123. ħ                INCOME TAX 
tax.
(5) Where the total income of an individual who has given
notice as is provided in sub-article (3), during the year in which the
said notice has been given reaches such sum as would render such
individual liable to tax, such individual shall inform the
Commissioner accordingly on the prescribed form and if he elects
to pay tax on his other income derived from part-time work in
accordance with the provisions of sub-article (1) he shall direct his
employer to deduct tax at the rate of 15 cents in the lira, and
furthermore, where he elects to pay tax on his other income derived
from part-time work in accordance with the provisions of sub-
article (1) he shall either -
( a ) direct his employer to make such further deductions
from his income so that the tax due in accordance with
sub-article (1) on all income deriving from part-time
work as aforesaid is so deducted by the 31st December
of that year; or
( b ) pay such tax due, to the Commissioner by not later
than the 15th  February of the year following the relevant
year or such other date as may be prescribed .
(6) Where an employer who in accordance with this article is to
deduct tax at 15 cents in the lira fails for any reason to deduct such
tax, it shall be the duty of the individual from whose income such
deduction is to be made, to inform the Commissioner accordingly
and to make payment of the tax due directly to the Commissioner:
Cap. 372.
Provided that the employer shall still remain liable for any
liability under article 23(4) of the Income Tax Management Act.
Cap. 372.
(7) ( a )   Where the income from part-time work is income falling
under article 4(1)( b ), the person paying the income shall, at the
time of payment, unless otherwise directed in accordance with sub-
article (3) and in accordance with the provisions of article 23 of the
Income Tax Management Act, deduct tax at the rate of 15 cents in
the lira, and any tax so deducted shall be remitted to the
Commissioner accordingly.
Cap. 372.
( b ) Where the income from part-time work is income falling
under article 4(1)( a ), the individual shall pay to the Commissioner
an amount equivalent to 15 cents for every lira of the income from
part-time work in such manner as may be prescribed in accordance
with the provisions of article 42 of the Income Tax Management
Act, where applicable.
(8) Where an individual who is to pay tax on part-time work at
the rate of 15 cents in the lira as provided in sub-article (1), fails to
pay such tax on all his income from part-time work  subject to such
tax by the 15th February of the year following the relevant year or
such other date as may be prescribed,  all the income from part-time
work shall be added with the rest of the individual’s income and tax
shall be assessable thereon in accordance with the provisions of
article 56.
(9) In the case of a married couple the provisions of this article
shall apply to either or each of the spouses where such spouse is
                 INCOME TAX                                   ġ CAP. 123.        
receiving full-time instruction or is serving an apprenticeship or
has income in his or her own right as described in sub-article (1)
and has other income from part-time work as therein described.
(10) Where an individual declares that income is derived from
part-time work and the Commissioner has reason to believe that
such income was derived from an activity which is not on a part-
time basis, or is the individual’s normal activity or is ancillary
thereto, the Commissioner shall consider such income as not
qualifying to be subject to tax under sub-article (1) and shall assess
it as if the foregoing provisions of this article did not apply thereto,
and any tax remitted in respect of such income shall be available as
a credit against the individual’s tax liability for the relevant year of
assessment and where any tax so remitted is in excess of such
liability it shall be refunded.
Computation of 
certain tax 
reductions. 
Amended by:
XV.1958.2. 
Repealed by: 
XLI.1961.6. 
Added by: 
XXI.1980.15. .
Renumbered by:
XVII. 1994.2.
91. Where through the operation of the provisions of article 56,
78 and 90 a part of the income subject to tax falls to be deemed the
last part of the total income and the total income in respect of any
year of assessment includes more than one such part to be so
deemed, the provisions of article 78 shall have precedence over the
provisions of article 56 and the provisions of either of these two
articles shall have precedence over those of article 90, as the case
may be.
Flat-rate foreign 
credit.
Added by: 
XVII.1994.33.
Amended by: 
XX.1996.20.
92. For the purposes of the Income Tax Acts, the flat-rate
foreign tax credit shall be credit given in respect of income or
gains:
( a ) which are received by a company resident in Malta;
and 
( b ) which fall to be allocated to the foreign income
account as defined in article 2, but excluding profits
resulting from dividends paid out of the foreign
income account of another company resident in Malta;
and
( c ) in respect of which documentary evidence is available
which indicates to the satisfaction of the
Commissioner that such income or gains, as the case
may be, fall to be allocated to the foreign income
account as provided in paragraph ( b ). For the purposes
of this requirement, a certificate issued by a certified
public accountant and auditor shall be satisfactory
documentary evidence.
Amount of flat-rate 
foreign tax credit. 
Added by: 
XVII.1994.33.
93. (1) The flat-rate foreign tax credit shall be twenty-five per
cent of the income or gains receivable by the company within the
provisions of article 92, before any deductions or payments
whatsoever are made from the said income or gains.
(2) In the case of income comprising dividends, capital gains,
interest, royalties, rents and other income which are receivable by a
company resident in Malta and derived, where applicable, from
investments situated outside Malta, the flat-rate foreign tax credit
shall be computed on the amount receivable, after deducting any
  108        CAP. 123. ħ                INCOME TAX 
foreign tax (charged directly or by way of withholding) but before
any other deductions or payments whatsoever are made.
Operation of the 
flat-rate foreign tax 
credit. 
Added by: 
XVII. 1994.33.
94. (1) Where the flat-rate foreign tax credit is due in respect
of the income or gains referred to in article 92, it shall be added to
the said income or gains. The aggregate sum so obtained shall be
the amount that is chargeable to tax.
(2) For a year of assessment in respect of the income computed
in accordance with the provisions of sub-article (1), the amount of
tax payable under this Act shall be reduced by the amount of the
flat-rate foreign tax credit due in respect of that income:
  Provided that where the amount of the flat-rate foreign tax
credit exceeds eighty-five per cent of the tax payable computed by
taking the tax payable on those profits which are to be allocated to
the foreign income account and deducting therefrom any foreign
tax set-off under the double taxation relief, Commonwealth income
tax relief and unilateral relief provisions, the amount of such
exceeds shall not be available for set-off or refund for any purposes
of the Income Tax Acts.
(3) The provisions of article 77(8), (9) and (10) and of article
78 shall apply  mutatis mutandis  in relation to the flat-rate foreign
tax credit as they apply to double taxation relief.
Anti-avoidance 
provisions. 
Added by: 
XVII. 1994.33.
95. 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 by any person by reason of the operation
of the flat-rate foreign tax credit provisions as contained in articles
92 to 94, such a person shall be assessable as if the provisions did
not apply.
For the purposes of this article, a series of transactions shall
mean any two or more corresponding or circular transactions
carried out by the same person, either directly or indirectly, as the
case may be.
PART XI 
POWER TO MAKE RULES
Power to make 
rules. 
Amended by: 
XV. 1958.2; 
XVII.1961.3; 
XXV.1962.2,4; 
L.N. 4 of 1963; 
L.N. 46 of 1965.
Renumbered by:
XVII. 1994.2.
Substituted by: 
XVII. 1994. 34.
Amended by:
II. 2003.24.
96. (1) The Minister responsible for finance may from time to
time make rules generally for carrying out the provisions of this
Act and for such matters as are authorised by this Act to be
prescribed.
(2) Any guidelines, explanations or instructions relating to the
Income Tax Acts or of the rules referred to in subarticle (1)
contained in a publication or circular published by or under the
authority of the Commissioner and distributed or made available to
taxpayers in general, shall be read and construed as one with such
rules and shall have the same effect as the rules to the extent that
such guidelines, explanations or insturctions are not in conflict
with the Income Tax Acts on the said rules or with guidelines,
                 INCOME TAX                                   ġ CAP. 123.        
explanations or instructions published at a later date and to the
extent that -
( a ) they give a definition of any term or an interpretation
of any provision contained in the Income Tax Acts or
the rules;
( b ) they determine the manner in which any provision of
the Income Tax Acts or the rules is to be applied;
( c ) they determine any matter which in accordance with
the Income Tax Acts or the rules may be determined
by or is subject to the approval or the discretion of the
Commissioner.
Added by:
IX. 1999.14.
Amended by:
XI.2000.11;
II. 2002.58;
II. 2003.25.
SCHEDULE
Article 56(12)( c )
Additional tax chargeable under article 56(12)( c )
1. Additional tax chargeable under article 56(12)(c) for a
default by an individual  in furnishing a return in respect of the year
of assessment 2002 or any subsequent year of assessment shall be
calculated on the tax chargeable before taking into account the
additional tax itself on the total income of that individual for that
year at the rates and subject to the minimum and maximum
amounts as shown in Table A hereunder:
TABLE  A
2. Additional tax chargeable under article 56(12)( c ) for a
default by a person, other than an individual, in furnishing a return
in respect of the year of assessment 2002 or any subsequent year of
assessment shall be calculated on the tax chargeable  before taking
into account the additional tax itself on the total income of that
person for that year at the rates and subject to the minimum and
maximum amounts as shown in Table B hereunder:
Number of months from the date on 
which a return is required to be 
submitted in accordance with the 
relevant provisions of the Income 
Tax Management Act
Rate Minimum Maximum
Within 6 months 0% Lm5 Lm5
Later than 6 but within 12 months 3% Lm8 Lm50
Later than 12 but within 18 months 10% Lm20 Lm100
Later than 18 but within 24 months 15% Lm30 Lm200
Later than 24 months 20% Lm40 Lm300
  110        CAP. 123. ħ                INCOME TAX 
TABLE  B
3. ( a ) Subject to the provisions of the other items of this
Schedule, additional tax chargeable under article
56(12)( c ) for an omission from a return shall be:
(i) in the case of a first omission, three per cent per
month of the endangered tax;
(ii) in the case of a second omission, four per cent
per month of the endangered tax;
(iii) in the case of a third omission, five per cent per
month of the endangered tax;
(iv) in the case of a fourth or further omission, six
per cent per month of the endangered tax.
( b ) For the purposes of calculating the additional tax
under this item any omission for any year of
assessment preceding the year of assessment 1999
shall be disregarded.
( c ) For the purposes of paragraph ( a ) of this item all the
omissions in respect of any one year of assessment
shall be deemed to be one omission.
( d ) For the purposes of paragraph ( a ) of this item the
sequence of the omissions shall be established
according to the chronological sequence of the dates of
service upon a person of  the notice in writing by the
Commissioner that an enquiry will be conducted into
that person’s tax declarations and liabilities.
( e ) For the purposes of paragraph ( a ) of this item the
Minister responsible for finance may make rules
providing for the circumstances and the manner in
which the additional tax may be remitted in whole or
in part.
4. When an omission from a return is rectified by a person by
means of the delivery of a further return made in accordance with
article 13 of the Income Tax Management Act, before that person is
Number of months from the date on 
which a return is required to be 
submitted in accordance with the 
relevant provisions of the Income 
Tax Management Act
Rate Minimum Maximum
Within 6 months 0% Lm20 Lm20
Later than 6 but within 12 months 3% Lm40 Lm200
Later than 12 but within 18 months 10% Lm80 Lm350
Later than 18 but within 24 months 15% Lm100 Lm600
Later than 24 months 20% Lm120 Lm1000 .
                 INCOME TAX                                   ġ CAP. 123.        
notified in writing by the Commissioner that an enquiry will be
conducted into that person’s tax declarations and liabilities, the
additional tax chargeable under article 56(12)( c ) for that omission
shall be at the rate of zero point seventy-five per cent (0.75%) per
month of the endangered tax.
5. The maximum of the additional tax payable under items 3
and 4 shall in no case be more than sixty times the applicable rate
in the said items referable to such omission.
6. For the purposes of items 3 to 5 hereof -
( a ) "endangered tax" means the difference between the tax
declared to be chargeable by the taxpayer after taking
into account any exemption, relief, allowance or tax
credits to which he may be entitled and the tax actually
chargeable after considering the same, but shall not
include any additional tax;
( b ) subject to the provisions of item 5, the rate of
additional tax per month shall be calculated for every
month or part thereof, such period commencing with
the month during which the tax on the chargeable
income for that year was due and payable and ending
with the month during which the omission is rectified
by a further return made under article 13 or an
assessment is made.
7. The additional tax chargeable under article 56(12)( c ) shall
be in addition and without prejudice to interest chargeable under
article 44(2A) of the Income Tax Management Act, but no such
interest shall be charged on the said additional tax.
8. When a person files a declaration prescribed for the
making of an election under article 12 of the Income Tax
Management Act, and he is not a person to whom that article
applies and subsequently submits a full and correct return, he shall
be deemed for the purposes of article 56(12)( c ) and of this
Schedule to have omitted from his return all his income except for
that income referred to in article 12(2)( b ) of that Act and to have
rectified that omission when he submits the full and correct return.
9. When a person to whom article 12 of the Income Tax Act
applies files a declaration prescribed for the making of an election
under that article after the date prescribed therefor, he shall for the
purposes of article 56(12)( c)  and of this Schedule be deemed to
have made a default in furnishing a return and that default shall
continue until a return is furnished.
9A. ( a ) Where a person, whose amount of tax payable for a
year or years of assessment has been determined by the
Commissioner on the basis of an estimate made under article 31(3)
of the Income Tax Management Act, and who has been notified in
writing by the Commissioner that an enquiry will be conducted into
his tax declarations and liabilities, subsequently furnishes a return
of income in respect of the said year or years, then that person shall
be deemed to be subject to additional tax for an omission under
  112        CAP. 123. ħ                INCOME TAX 
paragraph ( a ) of item 3 in addition to any additional tax under
items 1 or 2 hereof.
( b ) For the purposes of calculating the endangered tax for an
omission to which the person referred to in paragraph ( a ) hereof
shall be subject, the said endangered tax shall be considered to be
equal to the tax calculated on the total income, deducting therefrom
any credits, as declared in the said return, subject to the rates under
paragraph ( a ) of item 3 hereof and to the maximum amount under
item 5 hereof.
( c ) Where an assessment or an additional assessment for a year
or years of assessment is made under article 31(5) of the Income
Tax Management Act on a person referred to in paragraph ( a )
hereof, for the purposes of calculating the endangered tax, the tax
calculated on the total income, deducting therefrom any credits, as
declared in the said return, shall be considered to be zero:
Provided that the additional tax for omission as resulting
from paragraph ( b ) above shall be deducted from the amount of the
additional tax as resulting from this paragraph.
10. ( a ) Notwithstanding the other provisions of this Schedule,
where the Commissioner is satisfied that a default in furnishing a
return was due to a reasonable excuse he shall remit the whole of
the additional tax otherwise due in accordance with the other
provisions of this Schedule:
Provided that:
(i) an insufficiency of funds to pay any tax due, or
(ii) when reliance is placed on any other person to
perform any task, the fact of that reliance or any
dilatoriness or inaccuracies on the part of the
person relied upon,
shall not constitute a reasonable excuse for the purpose of this
paragraph.
( b ) For the purposes of paragraph ( a ) of this item, the Minister
responsible for finance may make rules providing for the
circumstances and the manner in which the additional tax may be
remitted in whole or in part.
( c ) The use of the Commissioner’s discretion for the purpose of
this item shall not be questioned in any appeal.
