S.L. 123.101 Art. 3Profits allocated to the final tax account.

(1) With effect from year of assessment 2008 and subsequent years of assessment an amount of distributable profits resulting from the following shall be allocated to the final tax account:

(a) profits after tax resulting from income which has been charged to tax under the investment income provisions, and where such investment income is that referred to in article 41(a)(viii) (2), (3), (4) and (5) of the Act such income shall be allocated to the final tax account of the company only when such company has actually received that income;

(b) profits which have been exempt from tax under the provisions of any Maltese law and where the distribution of such profits by the company is exempt from tax in the hands of the shareholders;

(c) the amount of chargeable income the tax chargeable on which has been relieved from payment by any tax credits where the distribution of such profits is exempt from tax in the hands of the shareholders;

(d) dividends paid out of profits allocated to the final tax account of another company;

(e) the profits after tax derived from the transfer of property chargeable to tax under article 5A of the Income Tax Act, hereinafter referred to as "the Act", such profits to be determined as prescribed in terms of article 5A(10)(d);

(ee) gains or profits chargeable to tax in accordance with the provisions of article 23 of the Act;

(f) any profits after tax which under the provisions of Maltese law are not subject to tax when such profits are distributed by a company to any person and where upon such a distribution no person is entitled to claim any tax credit in respect of any tax paid on such profits;

(g) the amount of chargeable income after tax of a company which has exercised the option referred to in article 48(4A)(b)(i)(1) of the Income Tax Management Act earned while it was not an international trading company;

(h) the amount which should be allocated to the Maltese Taxed Account computed in accordance with rule 13 of the Sale of Agricultural Produce Rules;

*

(i) profits after tax resulting from transfers in accordance with the provisions of article 27G of the Act;

(j) profits resulting from any grant or subsidy where the distribution of such profits is exempt from tax in the hands of the shareholders;

(k) profits after tax resulting from rents to which articles 31A to 31D of the Act is applicable;

(l) the amount of the chargeable income the tax chargeable on which has been relieved from payment by any tax credits under any of the following rules or regulations:

(i) the Business Promotion Regulations;

(ii) the Reinvestment Tax Credit (Income Tax)

Regulations;

(iii) the Deductions and Tax Credits (Research and Development) Rules;

(iv) the Tax Credit (Back Office Operations) Rules;

(v) the Tax Credits (Owners and Operators of

Warehouses Situated in Free Zones) Rule;

(vi) the Tax Credit (Electronic Business) Rules;

(vii) the Reinvestment Tax Credit (Income Tax) Rule;

(viii) the Deductions and Tax Credits (General and

Specific Qualifications) Rules;

(ix) the Tax Credit (Audiovisual Infrastructure)

Regulations, made under the Malta Film Commission Act;

(m) profits referred to in any of the preceding paragraphs which as at the end of the accounting period ending in the year preceding year of assessment 2007 have not been distributed: Provided that with effect from year of assessment 2015 the provisions of paragraphs (c) and (l) shall no longer be applicable and the amount of chargeable income the tax on which has been relieved from payment by any tax credits shall after deducting the tax chargeable thereon and adding the amount of tax credits utilised to relieve the payment of such tax be allocated to the Maltese taxed account.

(2) Where profits of a company are relieved from tax through the deduction referred to in paragraph (o) of sub-article (1) of article 14 of the Act, or any rules issued in terms of that paragraph,

*Shall be applicable from the year of assessment 2020. an amount corresponding to one hundred and ten per cent (110%) of the amount of profits which are so relieved from tax shall be allocated to the company’s final tax account in the following manner:

(a) an amount corresponding to one hundred per cent (100%) of the amount of profits which are so relieved from tax shall be allocated directly to the final tax account (hereinafter referred to as the "direct allocation"); and

(b) an additional reallocation of profits of an amount corresponding to ten per cent (10%) of the relieved profits, out of the tax account to which such relieved profits would, ignoring the provisions of this sub-rule, otherwise fall to be allocated (hereinafter referred to as the "additional reallocation"): Provided that if the amount of the additional reallocation exceeds the total profits of the undertaking for the particular basis year that would have, ignoring the provisions of this sub-rule, been allocated to the tax account to which such profit would otherwise have been allocated, any such excess shall be ignored for the purposes of the additional reallocation: Provided further that:

(i) the additional reallocation shall be effected subsequent to any tax account reallocation required in terms of sub-rules (4) and (7) of rule 5; and

(ii) the direct allocation and the additional reallocation shall not be effected in respect of deemed interest that is claimed as a deduction in terms of sub-rule (1) of rule 3 of the Notional Interest Deduction Rules against interest income deemed to be received by the shareholder or partner of the undertaking in terms of rule 5 of the Notional Interest Deduction Rules.