S.L. 325.6 Art. 37Utilization of tax credits.

(1) With effect from year of assessment 2004, a company which is entitled to any of the benefits provided by regulations 32

to 35 as reduced by regulation 36 (hereinafter in this regulation collectively referred to as the "tax credits") shall be entitled to utilise the tax credits only as described below:

(a) where the company became so entitled by virtue of it having been entitled to the incentive provided by article 4 of the Act, it shall be entitled to deduct from the amount of income tax which is due on its chargeable income, derived from its trade or business, for the consecutive years of assessment, forming part of the original ten consecutive years of assessment referred to in article 4(1) of the Act, subsequent to year of assessment 2003, the amount of the tax credits and with effect from year of assessment 2004 and subsequent years of assessment where the tax credits exceed such income tax payable by such a company for any of such years, the excess shall be increased by the percentage referred to in the first proviso to regulation 5(12) and the amount so increased shall be the amount which the company shall be entitled to deduct from the amount of income tax which is due on its chargeable income, derived from its trade or business, for the remaining consecutive years of assessment above mentioned;

(b) where the company became so entitled by virtue of it having been entitled to the incentive provided by article 5 of the Act, it shall be entitled to deduct from the whole or a proportion of the amount of income tax due on its chargeable income, derived from its trade or business for the remaining years of assessment, the company is still entitled to benefit from the incentive provided by the said article 5 subsequent to year of assessment 2003, the amount of the tax credits and with effect from year of assessment 2004 and subsequent years of assessment where the tax credits exceed such income tax payable by such a company for any of such years, the excess shall be increased by the percentage referred to in the first proviso to regulation 5(12) and the amount so increased shall be the amount which the company shall be entitled to deduct from the whole or a proportion of the amount of income tax which is due on its chargeable income, derived from its trade or business, for the remaining years of assessment above mentioned; and the "whole or a proportion of the amount of income tax due" shall be determined by multiplying the total income tax due on the company’s chargeable income, derived from its trade or business, by a percentage which shall be calculated by dividing the income tax due in any year of assessment, as may be determined by the company, between year of assessment 1995 and year of assessment 2003, in respect of which the company qualified for the incentive provided by article 5 of the Act, by the income tax that would have been payable by the company in the absence of that incentive, and deducting the fraction so obtained from the integer one (1), and multiplying the result by 100: Provided that where a company demonstrates to the satisfaction of the Corporation that the percentage as calculated in accordance with the above provisions is materially different from that which the company reasonably expects, the Corporation may approve a different percentage based on the evidence provided by the company;

(c) where the company became so entitled by virtue of it having been entitled to the incentive provided by article 5A of the Act, it shall be entitled to deduct from the whole or a proportion of the amount of income tax due on its chargeable income, derived from its trade or business for the remaining years of assessment, the company is still entitled to benefit from the incentives provided by the said article 5A subsequent to year of assessment 2003, the amount of the tax credits and, with effect from year of assessment 2004 and subsequent years of assessment, where the tax credits exceed such income tax payable by such a company for any of such years the excess shall be increased by the percentage referred to in the first proviso to regulation 5(12) and the amount so increased shall be the amount which the company shall be entitled to deduct from the whole or a proportion of the amount of income tax which is due on its chargeable income, derived from its trade or business, for the remaining years of assessment above mentioned; and the "whole or a proportion of the amount of income tax due" shall be determined by multiplying the total income tax due on the company’s chargeable income, derived from its trade or business, by a percentage which shall be calculated by dividing the income tax due in any year of assessment, as may be determined by the company, between year of assessment 1995 and year of assessment 2004, in respect of which the company qualified for the incentive provided by article 5A of the Act, by the income tax that would have been payable by the company in the absence of that incentive, and deducting the fraction so obtained from the integer one (1), and multiplying the result by 100: Provided that where a company demonstrates to the satisfaction of the Corporation that the percentage as calculated in accordance with the above provisions is materially different from that which the company reasonably expects, the Corporation may approve a different percentage based on the evidence provided by the company: Provided further that the entitlement to the said deduction shall be conditional on the company satisfying the conditions set out in subarticle (1) of the said article 5A for that year of assessment;

(d) for the purposes of paragraphs (b) and (c) -

(i) a company which would have been entitled to benefit for the incentives provided by the said articles 5 and 5A in any year of assessment between year of assessment 1995 to year of assessment 2003 but did not so benefit solely due to the fact that it did not have any chargeable income, shall be deemed to be a company which qualified for the incentive provided by article 5 or 5A as the case may require and its chargeable income for that year of assessment shall be deemed to be €232.94;

(ii) for the purpose of determining the percentage referred to therein, the income tax due in any of the years of assessment between year of assessment 1995 to year of assessment 2003 shall be calculated on the basis that the base period profits referred to article 5(2) of the Act are deemed to be zero;

(iii) the remaining years of assessment in respect of which the company is entitled to benefit from the provisions of article 5 of the Act subsequent to year of assessment 2003 shall be consecutive years of assessment commencing from year of assessment 2004;

(iv) the remaining years of assessment in respect of which the company is entitled to benefit from the provisions of articles 5 and 5A subsequent to year of assessment 2003 shall, in the case of a company to which regulation 31(1)(c)(i) applies, be computed after deducting any years of assessment in respect of which such company benefitted from the provisions of regulations 4 or 5;

(e) where a company became so entitled by virtue of it having been entitled to the incentives provided by articles 18 or 20 of the Malta Freeports Act, it shall be entitled to deduct from -

(i) the amount of any duty payable by it in terms of the Duty on Documents and Transfers Act on or after the 1st January 2003, and which duty would not have been payable in terms of article 20 of the Malta Freeports Act; and

(ii) the amount of income tax due on its chargeable income, derived from its trade or business exercised in a freeport pursuant to the provisions of article 11 of the Malta Freeports Act, for the years of assessment subsequent to year of assessment 2003, the amount of the tax credits and where the tax credits, for year of assessment 2004 and subsequent years of assessment, exceed such duty and/or such income tax payable by such company in or for that year the excess shall be increased by the percentage referred to in the first proviso to regulation 5(12) and the amount so increased shall be the amount which the company shall be entitled to deduct from the amount of such duty and/or such income tax payable by it in subsequent years of assessments:

Provided that a company shall be entitled to the benefit provided by this paragraph for as long as it remains a company licensed to operate in a freeport in accordance with the Malta Freeports Act and provided that it satisfies the conditions, as set out in that Act, it would have been required to satisfy in order for it to qualify for the exemptions provided by the said articles 18 and 20 of the Malta Freeports Act;

(f) the entitlement to set-off the tax credits against the income tax payable by the company in the manner provided herein, shall be exercised after the application of any other benefits available to the company in terms of the Act and these regulations.

(2) The provisions of regulation 5(14) and (15) shall apply to the tax credits and references in those sub-mutatis mutandis regulations to investment tax credits shall be construed as references to tax credits.