Rulings on Income Tax and Duty

Rulings on Income Tax and Duty Treatment to apply to demergers, amalgamation and reorganizations as well By means of Legal Notice 410 of 2014, the Rulings (Income Tax and Duty Treatment of Mergers and Divisions) Rules have been amended so that these will not only apply to mergers and divisions but will also apply in […]

Written By ACT Team

On November 24, 2014
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Rulings on Income Tax and Duty Treatment to apply to demergers, amalgamation and reorganizations as well

By means of Legal Notice 410 of 2014, the Rulings (Income Tax and Duty Treatment of Mergers and Divisions) Rules have been amended so that these will not only apply to mergers and divisions but will also apply in the context of a demerger, amalgamation and reorganization.

In 2013, the Maltese tax authorities had introduced new rules which would give the possibility for anti-avoidance provisions not to come into play in the case of bona-fide mergers and divisions.  These rules will now also apply to demergers, amalgamations and reorganizations.

In terms of these rules, the Commissioner will notify his ruling in respect of any transaction/s carried out in the course of a merger, demerger, amalgamation, reorganization or division that: 

1.     The de grouping charge, value shifting provisions and general anti-avoidance provisions found in the Income Tax Act and in the Duty on Documents and Transfers Act will not apply to that transaction/s;

2.      The transaction/s will qualify for income tax and stamp duty relief even if the conditions for the exemption are not satisfied;

In granting his ruling, the Commissioner must in his absolute discretion be satisfied that the transaction/s are to be effected for bona fide reasons and do not form part of a scheme or arrangements, the main purpose of which is the avoidance of liability to duty or income tax.

In granting the ruling, the Commissioner shall impose such conditions as he may deem fit and reasonable, and such conditions shall apply to any company involved in the merger, demerger, amalgamation, reorganization or division, even if one or more of the companies are not in existence at the time of the ruling, and to any shareholder as may be indicated by the tax authorities in their ruling.  If such conditions are not complied with, the ruling shall be void.

The issue and notification are to be made in advance of the occurrence of the applicable transaction/s.  All applications must be made in writing and must contain all the relevant particulars of the transaction/s to be effected and shall include a copy of the latest audited financial statements of the companies involved in the merger, demerger, amalgamation, reorganization or division and which are in existence at the time of the application.

Each application must be accompanied by a non-refundable fee of €1,000.

Where the Commissioner requires further particulars for the purposes of enabling him to make a decision in respect of an application, he shall within 30 days of the receipt of the application require the applicant to furnish such further particulars, and if any such notice is not complied with within 30 days, or such longer period as he may allow, he will not proceed further with the application.

The Commissioner shall notify his ruling to the applicant and to any other company which is in existence and is involved in the particular merger, demerger, amalgamation, reorganization or division, within 30 days of receiving the application (and further information if applicable).

The ruling will not be effective unless it is signed by at least one director of each of the companies involved in the merger, demerger, amalgamation, reorganization or division.  If any particulars are furnished which do not fully and accurately disclose all facts and considerations material for the ruling of the tax authorities, the ruling shall be void.

The ruling in terms of these rules is final and shall not be questioned on appeal.

How can we help?  

For further information, please contact one of the firm’s tax partners, Stephen Balzan on [email protected] or Elaine Camilleri [email protected]. ACT can help you understand the changes to the tax rules and how these can impact your business.  

Apart from its offices in St. Julian’s Malta, ACT operates from a second office in Gozo, which is situated in the capital city of Victoria.  For an appointment in our Gozo office, please call on 00356 21378672 or send us an email on [email protected].