Individual Savings Account Rules 2014

Introduction

Recently a new exemption from income tax has been added to list of exemptions.  The new exemption was introduced by means of Act XXXVII of 2014 which amended the Income Tax Act Cap. 123, whereby a new section was introduced in Article 12, namely Article 12(1)(x).

The new exemption from income tax seeks to exempt interest received by an individual from:

1.      A person carrying on the business of banking in accordance with the laws of any EU MS in respect of a sum of money deposited into a special individual saving account as recognized by the Commissioner; and

2.      A Government of an EU MS, any of its agencies or a corporation or authority established by law, or in respect of a public issue by a company, entity or other legal person, where the interest bearing securities are credited for the benefit of an individual to a special individual saving account recognized by the Commissioner.

The aggregate deposits into such accounts and the value of the interest bearing securities credited for the benefit of the individual into such account should not exceed €1,000 p.a.

The new rules

By means of LN 469 of 2014, the Maltese tax authorities have published new rules to define what an Individual Savings Account (ISA) is and to establish new compliance requirements for payors of investment income.

What is an ISA?

An account shall qualify as an ISA if:

1.      The account holder is an individual who is at least 18 years old, and is ordinarily resident in Malta; and

2.      The account holder declares in writing to a payor of investment income that he does not hold any other ISA and that he will not open a new ISA so long as the ISA with such a payor remains open in his name; and

3.      The account holder elects in writing to be paid investment income from such an ISA gross of tax i.e. without deduction of tax; and

4.      The payor of the investment income shall identify the relevant account as an ISA; and

5.      The income from such an ISA consists exclusively of:

a.      Interest payable by a person carrying on the business of banking in accordance with the laws of any EU/EEA member state in respect of a sum of monet deposited into the ISA; and

b.      Interest payable to an individual in his own name by any EU/EEA Government or by any agency thereof, by a corporation or authority established by law, or in respect of a public issue by a company, entity or other legal person, whether resident in Malta or otherwise; and

6.      Deposits by the individual into the ISA and the value of the interest bearing securities credited for the benefit of the individual into such account does not exceed €1,000 in any year. 

New compliance requirements for payors of investment income

Payors of investment income arising from an ISA must file an annual return with the Commissioner for Revenue by not later than 31st January of the following year in which the investment income is paid.  The annual return shall include the following details:

1.      Account numbers of all ISAs opened, maintained or closed by such payor during the year;

2.      Name, address and income tax registration number of each person who held an ISA account with such payor at any time during that year;

3.      The gross amount of investment income paid to each ISA account holder;

4.      Date of opening of each ISA; and

5.      Date of closure of any ISA during that year.

For further information please contact the firm’s tax partners:

Stephen Balzan – sbalzan@act.com.mt

Elaine Camilleri – ecamilleri@act.com.mt

Disclaimer 

This article contains general information only and is not intended to address the circumstances of any particular individual or entity. ACT, by means of this article is not rendering any accounting, business, financial, investment, legal, tax, or other professional advice or service. This article is not a substitute for such professional advice, nor should it be used as a basis for any decision or action that may affect your finances or your business. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. Before making any decisions or before taking any action that may affect your finances or your business, you should consult a qualified professional adviser. ACT shall not be responsible for any loss whatsoever sustained by any person who relies on this article.

Information as at 20th December 2014

 

 

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