S.L. 325.6 ст. 4Reduced rates of income tax.

(1) Where a company, throughout a relevant accounting period, satisfies the conditions set out in this regulation, the profits derived by such company from its trade or business carried out in

Malta shall -

(a) with effect from the year of assessment from which the provisions of this regulation become applicable and the six subsequent years of assessment, be subject to income tax at the rate of 5%;

(b) for the six years of assessment immediately following the years of assessment as determined in accordance with paragraph (a), be subject to income tax at the rate of 10%;

(c) for the five years of assessment immediately following the years of assessment as determined in accordance with paragraphs (a) and (b), be subject to income tax at the rate of 15%: Provided that the last year of assessment in respect of which the provisions of this regulation shall be applicable shall be year of assessment 2021: Provided further that, subject to the immediately preceding proviso, the Corporation shall confirm to each company qualifying in terms of this regulation the minimum number of years of assessment, which shall not exceed ten years of assessment, in respect of which the provisions of this regulation shall be applicable to that company; and the Corporation may, not earlier than twelve months prior to the expiration of such period, renew such confirmation for a further period not exceeding five years: Provided further that, without prejudice to a company’s rights with respect to any period confirmed by the Corporation in terms of the immediately preceding proviso, the Minister may by notice in the Gazette determine that the last year of assessment in respect of which the provisions of this regulation shall be applicable shall be a year of assessment prior to year of assessment 2021: Provided further that companies referred to in sub-regulation (2)(a) shall only be eligible to be taxed at the rates stipulated in paragraphs (b) and (c) of this sub-regulation, and in such case the rate of tax referred to in paragraph (b) shall be applicable for six years of assessment with effect from the year of assessment from which the provisions of this regulation become applicable and the rate of tax referred to in paragraph (c) shall be applicable for the following five years of assessment.

(2) For the purposes of sub-regulation (1), the year of assessment from which the provisions of this regulation shall become applicable is -

(a) year of assessment 2002, or any of the subsequent two years of assessment in the case of -

(i) a company incorporated in Malta and which existed on the day immediately preceding the date of the coming into force of this regulation; and

(ii) a company incorporated outside Malta and which was registered as an oversea company in terms of the Companies Act on the day immediately preceding the date of the coming into force of this regulation, as shall be determined by the company by notice to the Corporation by not later than 30 April 2003;

(b) any of the first three years of assessment of the company in the case of any other company as shall be determined by the company by the end of its third year of assessment, so however that, if no such notice is given by the aforementioned dates, the earlier year from the available years of assessment shall be the first year of assessment from which the provisions of this regulation shall be applicable: Provided that where a company as is referred to in paragraph (a) carries on a trade consisting of a project in respect of which the Corporation has, prior to the date referred to in the said paragraph (a), granted its approval, conditional or otherwise, that a company which undertakes the said project shall qualify for any of the incentives provided by articles 4, 5 or 5A of the Act, such company shall, if it has not started utilising the said incentive, be deemed to be a company falling under paragraph (b). A certificate issued by the Corporation, to the effect that a company is deemed to be a company falling under paragraph (b), shall constitute conclusive evidence of the facts stated therein for all purposes of law and a copy of any such certificate shall be forwarded by the Corporation to the Commissioner of Inland Revenue: Provided further that a company to which the preceding proviso refers shall be deemed to be a company falling under paragraph (b) as long as it satisfies such of those conditions contained in the aforementioned Corporation’s approval as the Corporation may specify in the certificate referred to in the preceding proviso.

(3) Subject to the provisions of sub-regulation (4), a company shall qualify for the benefit provided by sub-regulation (1) if its trade or business, in Malta, consists solely of one or more of the following qualifying activities:

(a) any one or more of the activities set out in the Schedule, which is published in the English language only;

(b) the repair, improvement or maintenance of any of the following:

(i) yachts or motor boats having a length of at least eight metres which are not used in a trade or business consisting of the transportation of passengers or goods but including yachts or motor boats, which although used in such a trade or business, are so used for the transportation and accommodation of passengers in yachts or motor boats not having more than thirty berths, aircraft, engines or equipment incorporated or used in such vessels or aircraft; or components of such engines or equipment;

(ii) turbines;

(iii) gantry cranes, quay cranes, reach stackers, tug masters and large fork lifters (or their equipment) which are used to handle containers in a port;

(iv) containers which are fifteen feet or more in length and which are used for the transportation of merchandise;

(v) goods the manufacture of which would fall within any one or more of the activities referred to in paragraph (a), and which goods have been manufactured by the company;

(c) repair, maintenance, installation and commissioning of marine electrical and electronic systems;

(d) software development, including debugging of software and the installation, implementation, support and maintenance of the software, and the provision of training on the use of the software where the installation, implementation, support, maintenance or training is carried out by the company which has developed the said software in Malta or, with respect to a specific project, is mainly carried out in relation to software developed by the company in Malta;

(e) development and maintenance of information and content mainly for international dissemination through electronically accessed media including the internet, the world wide web, WAP services, interactive television, compact discs and intranets;

(f) research and development, including the design or development of goods or the development of production processes or methods;

(g) waste treatment;

(h) the activities set out in article 11 of the Malta

Freeports Act and carried on mainly in a freeport as defined by that Act, by a company licensed under that Act;

(i) the production of audio visual productions consisting of feature films, television films, advertising programmes or advertisements, and documentaries;

(j) biotechnology, comprising:

(i) the production or development of intellectual property or goods; or

(ii) the rendering of services; resulting from, or related to, the study, research, discovery, application, modification or development of living organisms or materials derived from them: Provided that a company carrying out the activities set out under paragraphs (g), or (j) shall only qualify for the benefit provided by this regulation if the project is approved by the Corporation and, in giving its approval, the Corporation may impose such conditions as it deems fit.

(4) A company shall not qualify for the benefit provided by sub-regulation (1) if -

(a) the company sells by retail and, for this purpose, a company 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 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; or

(ii) a person, other than an individual, who uses those goods or services for the purpose of an undertaking carried on by such person;

(b) the company’s trade or business includes any one of the following activities:

(i) dividing, sorting, packaging, mixing without changing the character of the good, drying, labelling, or other similar processes or any combination of such processes to goods which are acquired in bulk merely to prepare those goods for sale or distribution, excluding goods in respect of which the said company carries on any other activity referred to in sub-regulation (3)(a);

(ii) the assembly of any goods where -

(1) the final assembled good is clearly recognisable from the individual components or parts from which it is assembled without regard being had to any exterior casing of the good; and

(2) the components and parts from which the good is assembled are such that the good is nearly complete and the assembly work and the supervision of such assembly work only require the employment of almost exclusively unskilled workers, such that the assembly operation is of a spurious nature when considered in the light of manufacturing activities;

(iii) without prejudice to sub-regulation (3)(b) and (c), the repair, maintenance, preservation, improvement, reconditioning, refurbishing or restoration of any good or any combination of such activities where such activities do not impose on such goods a change in their character;

(iv) without prejudice to sub-regulation (3)(c), the installation, commissioning or assembly of goods on site, where the said goods have not been manufactured by the company which is installing, commissioning or assembling the goods on site: Provided that the provisions of this paragraph shall not be applicable to a company which carries on only any one or more of the activities set out in sub-regulation (3)(b) to (j): Provided further that the provisions of this paragraph shall not be applicable to a company which carries on any assembly work as, or as part of, the activities referred to in sub-regulation (3)(h);

(c) the company, being eligible for the benefits provided by articles 4, 5 or 5A of the Act, has not, in terms of article 34(2) of the Act, waived its right to be eligible for the benefits provided by those articles for the year of assessment in question and for subsequent years of assessment: Provided that a company which has not waived its right to be eligible to the benefits provided by articles 4, 5 and 5(a) of the Act as aforesaid may make its determination pursuant to sub-regulation (2) by notifying the Corporation.

(5) (a) A company shall be eligible to qualify for the benefits provided by this regulation if it has been determined that it is so eligible by the Corporation.

(b) For the purpose of making a determination pursuant to paragraph (a), the Corporation shall consider whether, given its activities, the company satisfies the conditions set out in sub-regulations (3) and (4).

(c) For the purposes of paragraph (b), the Corporation may request such information and explanations as it deems fit and may visit the premises of the company.

(d) On being satisfied that a company satisfies the conditions set out in sub-regulations (3) and (4), the Corporation shall provide the said company with a certificate signifying the accounting period from which the company does satisfy the said conditions, and the company’s entitlement to the benefit provided by this regulation shall be conditional on the production of this certificate by the said company. A copy of any such certificate shall be forwarded by the Corporation to the Commissioner of Inland Revenue.

(e) The certificate referred to in paragraph (d) shall constitute and not conclusive, proof that prima facie, the company qualifies for the benefit provided by this regulation.

(f) The Corporation shall communicate its decision as to whether a company satisfies the conditions set out in sub-regulations (3) and (4) within sixty days from the receipt of all information requested by the Corporation for the purpose of making its determination.

(g) The Corporation may, as and when it deems fit, request information and explanations from a company which has been furnished with a certificate pursuant to paragraph (d), and may visit the premises of such a company in order to determine whether the company is still eligible to qualify for the benefits provided by this regulation.

(6) A company wishing to avail itself of the benefits provided by this regulation shall apply for a determination referred to in sub-regulation (5) by submitting an application to the Corporation.

(7) A company shall only be entitled to benefit from the provisions of this regulation if, with the submission of its income tax return for every year of assessment in respect of which it claims a benefit in accordance with this regulation, it submits -

(a) a declaration, signed by all the directors of the company or by the company secretary where such declaration is approved by the board of directors of the company, confirming that throughout the relevant accounting period the company’s trade or business consisted solely of the activities referred to in sub-regulation (3) and that the company is not disqualified from benefiting from the provisions of this regulation by virtue of sub-regulation (4). Where the declaration is signed by the company secretary it shall also state:

(i) whether all the directors of the company were present at the meeting approving the declaration and, if not all the directors were present, whether the meeting was properly convened as required by the company’s memorandum and articles;

(ii) whether the declaration was unanimously approved by all the directors present at the meeting and, if approval was not unanimous, the number of votes against and the number of votes for the motion; and

(b) a declaration, signed by the auditor of the company for the accounting period in question, confirming that, to the best of his knowledge and belief, the declaration referred to in paragraph (a) is correct.

(8) Where a company (hereinafter in this sub-regulation referred to as the "relevant company") carries on a trade or business which consists solely or mainly in the mere expansion, duplication or replacement of a trade or business formerly carried on in Malta by any company in any way directly or indirectly connected or associated with the relevant company through shareholding, voting or other ownership or controlling rights, irrespective of the person in whom such rights are or may have been vested, the following provisions shall apply:

(a) where such other company is a company to which sub-regulation (2)(a) applies, the relevant company shall, even if it is incorporated in Malta or registered as an oversea company after the date referred to in that sub-regulation, be deemed to be a company to which the said sub-regulation applies; and the years of assessment referred to in sub-regulation (1)(b) and (c) shall, with respect to the relevant company, commence from year of assessment from which the provisions of this regulation became applicable in respect of the other company in accordance with the provisions of sub-regulation (2);

(b) where such other company is a company to which sub-regulation (2)(b) applies and the relevant company is also a company to which the said sub-regulation applies, the years of assessment referred to in sub-regulation (1)(a), (b) and (c) shall, with respect to the relevant company, commence from the year of assessment from which the provisions of this regulation became applicable for the other company in accordance with the provisions of sub-regulation (2): Provided that the provisions of article 25(3), (4) and (5) of the Act shall be applicable to this condition in like manner as they are applicable to article 4(1)(c) of the Act.

(9) Profits which are taxed at a reduced rate of income tax as provided by sub-regulation (1) shall, for the purposes of the Income

Tax Act, be allocated to the Maltese Taxed Account and article 67 of that Act shall not be applicable to any distribution of such profits whether or not such distribution is made by the company qualifying from the benefit provided by this regulation or by any other company which, directly or indirectly, receives dividends which include the profits which have been taxed at a reduced rate in accordance with the provisions of this regulation.

(10) The provisions of article 25 of the Act shall, as far as they are applicable, apply to the incentive provided by this regulation and, for this purpose, references in that article to a qualifying company shall include references to a company qualifying for the benefit provided by this regulation; and subarticles (1) and (2) thereof shall apply with respect to the years of assessment as determined in accordance with sub-regulations (1) and (2).

(11) In this regulation "relevant accounting period" shall mean the accounting period as determined in accordance with article 11 of the Income Tax Act which ends in the year preceding year of assessment 2002 and subsequent years of assessment, as the case may require.