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ATX Flashcards

1
Q

Investment Income Provision Requirements (taxed under 4(1)(c)))

A

a) The income must constitute investment income
b) The investment income must be paid by a payor; and
c) The investment income must be received by a recipient

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2
Q

Payor under IIP

A

Person liable to make payment of investment income

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3
Q

Recipient under IIP

A

1) Person resident in Malta during the year in which income is payable to him, other than bank or insurance company
2) Receiver, guardian, tutor etc. acting on behalf of person
3) Trustee or foundation

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4
Q

IIP Final Withholding Tax %?

A

15%

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5
Q

Rental income deductions under Article 4(1)(e) and other option under Article 31D

A

1) Interest allowable
2) Rent, ground rent, or similar burden
3) License fee payable
4) 20% Deduction (not counting license fee)

31(D) allows for a 15% FWT

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6
Q

Property Company Conditions

A

a) Company that owns immovable property in Malta
b) Shares in company that owns immovable property in Malta, where value of immovable property exceeds 5% value of shares held

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7
Q

Property Company Exception

A

a) Property is an office, factory, showroom or warehouse used for carrying on the business
b) Property is only used for carrying on the business
c) Value of immovable property does not exceed 50% of Net Asset Value
d) Person carrying on trade or business does not derive rental income in Malta

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8
Q

Equity Holding Requirements

A

A holding of share capital in a company that is not a property company, when the shareholding gives the holder 2/3 rights:
a) Voting rights
b) Profit rights
c) Right to assets upon winding up

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9
Q

Participating Holding (Exemption) Requirements

A

a) 5% Equity ownership of shares in a company giving 5% of 2/3 of voting, profit and asset upon winding up rights
b) Company is an equity shareholder in a foreign and is entitled to sit on the board of directors or elect a director
c) Company is an equity shareholder in a foreign company with an investment of at least EUR1,164,000 and held for over 183 days consecutively

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10
Q

Participation Exemption Dividends Anti-Abuse Provisions

A

1) Foreign company is tax resident in an EU member state
2) it is subject to any foreign tax of at least 15%
3) Not more than 50% of its income is derived from passive income or royalties

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11
Q

Passive Income or Royalties for PEX

A

a) Income not derived directly or indirectly from a trade or business
b) Less than 5% tax applied to them

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12
Q

Participation Exemption Dividends Anti-Abuse Provisions (Fallback provisions)

A

1) Equity holding in foreign company must not be a portfolio investment
2) Foreign company or its passive income or royalties have been taxed at least 5%

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13
Q

4 Steps for PEX

A

1) Is MT CO a company?
2) Is it a PC?
3) Is it an EH?
4) Is it a PH?

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14
Q

Permanent Establishment Rules for PEX

A

No tax on income, gains, gains on transfer of ownership in a foreign permanent establishment
Requires arm’s length attribution of the permanent establishment

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15
Q

General Rules for Tax Deductability

A

Expenses incurred wholly and exclusively in the production of the income may be deducted from chargeable income, otherwise apportion.
1) Deductible expenses must be an outgoing real amount
2) Expenses of a capital nature (Article 5) are generally not deductible
3) Expenses of a revenue nature (Article 4) are generally deductible

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16
Q

Pre-trading expenditure deductibility

A

Only when:
1) Incurred within 18 months before trade commences
2) It would have been deductible after the trade had commenced

Only applicable to:
Staff training
Advertising
Wages

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17
Q

Specific deductible expenses

A

Still following general rules
1) Borrowing costs, if they have been wholly and exclusively incurred in the production of the income, or on capital employed for the purpose of deriving income
2) Rent paid on land or buildings occupied for the purpose of acquiring income.
3) Repairs of premises, plant or machinery. Renewal, repair or alteration of any implement, utensil or article so employed
4) Bad debts incurred during trade or business, if proved to the satisfaction of the commissioner
5) Pensions, allowable deduction capped at EUR2000 per qualifying employee (tax credit of 25% or EUR750 applicable)
6) Capital allowances in respect of wear and tear of any plant, machinery and industrial buildings or structures, as long as employed in the production of the income.

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18
Q

Industrial Building or Structure for tax deductibility purposes

A

Building used as hotel, car park or office.
For offices, they have to be:
1)Occupied after 2016
2) More than 2500m2

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19
Q

Capital allowances are based on?

A

The original cost of the asset (ignore revaluation)

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20
Q

Motor Vehicles Capital Allowances Rule

A

For commercial (used for instruction, carrying on the business, transport of the public) no capping
For non-commercial, leases: capping at EUR 14,000 for both cost of asset & lease expense

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21
Q

Initial Allowance for Industrial Buildings or Structures

A

10% + usual 2% capital allowance can be claimed in first year.

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22
Q

Definition of Group for Group Relief Provision Conditions (Surrendering losses)

A

Group: Two companies are members of a group if:
1) One company is at least 51% subsidiary of the other
2) They are both at least 51% subsidiaries of a third company tax resident in Malta

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23
Q

Group Relief Provision Conditions

A

1) Companies must form part of a group
2) Surrendering company and claimant company must have the same accounting year (unless incorporated/dissolved during the year)
3) Losses have to be surrendered in currency of claimant company
4) Trading losses that have been incurred during the year only
5) Surrendering of losses have to be made at tax return date, or 12 months from accounting year end.

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24
Q

Group Relief Provisions Tax Account Rules

A

Losses that, if profits, would have been allocated to the MTA or IPA, can be allocated to the claimant company’s MTA or IPA Accounts. For FIA, FIA only.

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25
Q

Employer Childcare Deduction Cap?

A

EUR 935 per child per year

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26
Q

Annual Market Rent

A

EUR250*m2 and allocate to IPA.

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27
Q

5 Fundamental Ethics Principles

A

Integrity, Objectivity, Professional Competence, Confidentiality, Professional Behaviour

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28
Q

Capital Gain Formula (General)

A

Transfer Value - Cost of Acquisition

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29
Q

What tax account is priority when performing a distribution (& what is refund available?)

A

IPA if available, no refund available on distribution from IPA

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30
Q

FIA Rates of Refund

A

100%, 2/3rds,5/7ths,6/7ths

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31
Q

MTA Rates of Refund

A

5/7ths, 6/7ths

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32
Q

Name of dividend distribution mechanism

A

Refundable Tax Credit System

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33
Q

Transfers of securities by non-residents

A

Gains or profits exempt under Article 12(1)(c)(ii) on the transfer of Shares or Securities in a company that is NOT a property company (provided beneficial owner of the person is a person also not-resident)

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34
Q

Basic Property Transfer Tax Rates

A

8% General Rate
5% when the property will be transferred within 5 years
10% if property has been acquired before 2004
2% Rate (Failed engagements) if immovable property is transferred by an individual who wanted establish his ordinary sole residence at acquisition, and transfers it within 3 years of acquisition

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35
Q

Tax on Inherited Property Transfer

A

Inherited Before 25 November 1992 = 7% of TV
Inherited after 25 November 1992 = 12% (TV-AV)

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36
Q

Duty on Immovable Property

A

5% of transfer value (Higher of Consideration & Real value derived from architect’s valuation)

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37
Q

Duty on Acquisition of Intellectual Property

A

Outside scope of DDTA

38
Q

DDTA Exempt Qualifying persons

A

1) Collective investment schemes under Investment Services Act
2) Companies who satisfy the following conditions:
a) The commissioner has determined that the majority of their business takes place outside Malta (90% or more)
b) More than half the share capital, voting rights and profit rights are held by a person non-resident in Malta
c) More than 50% of the Profits were allocated to FIA in PY and no assets owned by the company are in Malta
3) Companies that satisfy 2b & have more than 90% of their business outside Malta

39
Q

Rental Income under OECD Model Convention

A

Country where the property is located has right to tax rental income without any limitation, it can then be taxed in Malta and will be subject to double taxation relief (Credit Method).

40
Q

3 Options for DTR

A

1) Ignore DTR, take 6/7 refund (Chargeable income is gross of foreign tax)
2) Double taxation relief, 2/3rds refund (Chargeable income is gross of foreign tax)
3) FRFTC 2/3rds refund on amount after DTR (Chargeable income is net of foreign tax)

41
Q

Trading income from Permanent Establishment under OECD Model Convention

A

Country containing a permanent establishment has right to tax without limitation

42
Q

Distribution from untaxed account

A

15% to a recipient “INDIVIDUAL resident in Malta”

43
Q

Dividends paid by a company resident outside Malta according to OECD

A

Dividends may be taxed in Malta. If law in foreign country allows taxing of dividends, that state has the right to tax up to 5% if beneficial owner is resident in Malta and owns at least 25%. Otherwise, up to 15% can be taxed.

44
Q

Capital Gains on transfer of shares

A

Capital Gain = Transfer Value - Cost of Acquisition
If non-controlling interest, transfer value = Consideration
If controlling interest = Transfer value is the higher of consideration and market value.

45
Q

Controlling Interest in Company

A

25% Share capital or Voting rights or profit rights or appointed director or can appoint director

46
Q

Market Value of Shares of a controlling Interest Calculation

A
  1. NAV of Company
  2. Adjustments
    a. Investment in subsidiary adjustment - 10% or more investment in another company, replace book value of investment by market value (repeat all steps) of that company
    b. Investment property adjustment - replace book value of property by market value
    c. Goodwill adjustment - 2* AVG profits of last 5 years. if in year 1 or 2, ignore. If in year 3, 2* avg profits of last 2 years etc.
    d. Remove fixed rate of return liabilities
47
Q

Market Value of shares

A

Market Value * Y
Y = (0.4 * A (share capital)) + (0.2 * B (voting rights)) + (0.4* C (profit rights))

48
Q

Cost of Acquisition of shares

A

Purchase Price + Inflation adjustment (If company owns property)

49
Q

Yd and Ya in terms of inflation adjusment

A

Yd is index for the year immediately preceding transfer, Ya is index for the year immediately preceding acquisition.

50
Q

Fiscal Unit Registration Requirements

A

A parent and subsidiary, parent (principal taxpayer) is resident in Malta.
95% ownership of 2/3 rights
Same accounting year end
No income tax, VAT or FSS due by the companies when they are registering

51
Q

Effective Tax Rate of Fiscal Unit

A

35% - (Refunds available to fiscal unit/total chargeable income of fiscal unit)

52
Q

ATAD Interest Limitation Rule

A

Exceeding borrowing costs (Interest expense>Interest income). 30% of EBITA deductible only

53
Q

Interest Expense Taxability Exception

A

1) Loan is used to finance immovable property in Malta
2) Interest is paid to a non-resident person
3) Payor and recipient are related persons

54
Q

GAAR

A

General Anti Abuse Rules - Ignore an arrangement which is put into place with its main purpose is to obtain tax advantage. GAAR not triggered if event potentially triggering is exempt from tax.

55
Q

Share Option Scheme

A

Taxable only if employee exercises the option. Fringe benefit is Market Value - Price Paid. 15% Tax

56
Q

OECD Residence Tie-Breaker Rules

A

1) Permanent abode
2) Centre of vital interests
3) Nationality

57
Q

Subsequent Transfer of shares

A

Market price - Market price when they were acquired

58
Q

Agency PE

A

Applicable if the person acting on behalf of the company habitually concludes contracts or plays the principal role leading to the conclusion of contracts, and the contracts are:
a) In the name of the agency; or
b) for the transfer of property or right to use property of the company; or
c) For services offered by the company

59
Q

CFC - ATAD

A

Triggers (on undistributed profits):
a) Ownership test: Maltese company has at least 50% ownership, profit or voting rights
b) Low tax-test: Income tax paid by subsidiary is less than 50% of tax payable if it was resident in Malta.
c) Significant people function in Malta.
CFC de minimis exemption: CFC does not apply if accounting profits are less than 750K or accounting profits are less than 10% of operating costs
If CFC is applicable, income from subsidiary will be taxable in Malta.

60
Q

Woman returning to work tax credits

A

5000EUR credit: Employment income shall constitute first part of the income
2000EUR credit: 2000 per child for a number of years equal to child+1

61
Q

A Resident person paying a non resident in Malta for a service (ITA)

A

25% Withholding tax, for entertainment it is 10% if shorter than 15 days

62
Q

Donations of shares to descendants, ascendants, spouses & philanthropic institution (in terms on ITA and DDTA)

A

Exempt from Income Tax (no similar exemption for DDTA)

63
Q

Duty on Donations of shares

A

Value is higher of market value and real Value. Rate to be used is 2%, unless immovable property exceeds 75% of other fixed assets and current assets relating to immovable property, then it is 5%.

64
Q

Real value of marketable securities being transferred

A
  1. NAV of Company
  2. Adjustments
    a. Investment in subsidiary adjustment - 10% or more investment in another company, replace book value of investment by market value (repeat all steps) of that company
    b. Investment property adjustment - replace book value of property by market value
    c. Goodwill adjustment - 2* AVG profits of last 5 years. if in year 1 or 2, ignore. If in year 3, 2* avg profits of last 2 years etc.
    d. Remove fixed rate of return liabilities
    e. Excess liabilities adjustment - Total Liabilities - Bank loan on immovable property/registered debt - assets except immovable property
    If different share classes are present - Y = (0.4*A) + (0.2 *B) + (0.4 *C)
65
Q

Steps to determine income taxability under capital gains

A
  1. Is the transaction considered a transfer?
  2. Is the capital asset mentioned within Article 5?
  3. Are there any exemptions?
66
Q

Private School Fees Reimbursement Fringe Benefit Taxable/Deductions?

A

Yes taxable, no Deductions

67
Q

Car cash allowance

A

Taxable fringe benefit - Up to 50% or EUR 1170 is deductible

68
Q

Highly Qualified Persons rules & requirements

A

15% Flat Rate
1. Person must have a managerial role
2. Employed at a financial institution licensed under the financial institutions act
3. Salary minimum of 93,669, maximum of EUR 5M
4. Non-domiciled in Malta
5. Valid documents & health insurance for himself and family
6. Required qualifications & competence (5 years experience)
7. Appropriate residence for his family

69
Q

Reimbursement of mobile phone bills fringe benefit taxable?

A

Non-taxable fringe benefit

70
Q

Annual training fringe benefit taxable?

A

Non-taxable fringe benefit

71
Q

Risk Capital Definition

A

Items of Equity including positive retained earnings, reserves and interest free loans

72
Q

Invested Risk Capital

A

Capital Invested in Other Entities, investment in subsidiaries, interest free loans provided to other companies (as long as it was not used by the parent in the production of the income, or if it was it would be exempt)

73
Q

NID Rules

A

Y = A * B
Y = NID
A = Reference Rate (Given)
B = Risk Capital - Invested Risk Capital

74
Q

Direct Attribution

A

If a part of risk capital is used for a specific source of income, the NID must be attributed to that specific source of income, and it will be deductible against that source of income only.

75
Q

Prescribed fund requirements?

A

At least 85% of assets are based in Malta

76
Q

Prescribed fund monitoring time?

A

Value of assets in Malta/total asset value is monitored daily, over 90 days. If average goes above/below threshold for 30 days, it can apply with the commissioner to change.

77
Q

Changed in status of collective investment scheme considerations

A

1) gains derived by investors upon transfer of units in collective investment scheme
2) tax implications at the level of CIS

78
Q

Income of CIS exemption

A

1) Except for income immovable property
2) Investment income to which Article 41A(a) refers:
Income at the level of CIS that is :
From prescribed fund; and
From another CIS

79
Q

Tax rate at level of CIS for investment income

A

Investment income under 41A1) bank interest income 15% tax
Other investment income 10%

80
Q

Invest Regluations (tax credits) Rules & Formula

A

1) Eligible undertaking
2) qualifying economic activity
3) eligible investment project

If all 3 are met: investment aid = Qualifying expenditure * aid intensity

81
Q

Eligible undertaking

A

Small, medium and large undertakings
1) Operates from Malta or
2) registered within EU and
3) does not participate in gambling or financial activities

82
Q

Eligible investment project for incentives legislation

A

For SMEs: An initial investment in intangible or tangible assets for:
1) setting up a new establishment
2) extension of capacity of an existing establishment
3) fundamental change in overall production process
4) diversification of output of establishment into new products not previously produced

OR

5) The acquisition of an asset from a company closed down or that would have closed down, as long as not a related party.

For Large undertakings: it must fall within the criteria 1 or 4 or 5 above AND must be employed in favor of a NEW economic activity (new NACE code)

83
Q

Eligible projects for investment aid legislation will be considered for aid if

A

1)Qualifying economic activity will be retained in Malta for 3 years (5 for large enterprises)
2) entity must finance at least 25% of costs from their own resources or external funding, not from public
3) the entity did not relocate the establishment for which aid was requested in the two years before application and must commit that it wont for 2 years after investment

84
Q

Qualifying expenditure (assets)

A

1) value of assets: tangible assets (for large enterprises they must be new, for SMEs they must be at least first time used in Malta. Also, they cannot be replacements of previously owned assets)
Asset must be kept for 3 years (5 for large) after investment project (does not apply if quickly outdated). If not kept, reverse tax credits.
Specific rules for land & buildings & machinery:
Must relate to qualifying activities
Intangible assets up to 50% of cost aid

85
Q

Qualifying expenditure for aid (wages)

A

Full time jobs directly created from investment project and filled within 3 years.
1) amount of wage cost to be used is wages of new employees over 2 years
2) each job must be retained for 3 years (5 for large) if not reverse credits

86
Q

%of expenditure to be used for aid

A

1) size of undertaking
2) area where project is being carried out
3) see table

87
Q

Partner enterprise

A

An enterprise has a holding of 25% (capital or voting) or more but not exceeding 50%
When determining size thresholds, take their data prorata to ownership

88
Q

Linked enterprise

A

Majority control, control over entity
When determining size thresholds, take 100% of linked enterprise

89
Q

Transfer pricing rules

A

Refer to definitions of partner and linked enterprises

90
Q

Large investment project

A

Over 50m euro
Maximum aid= R * (A +0.5 * B)
R is rate available
A - First 50M
B - between 50M and 100M

91
Q

Tax credits usable during year

A

Income that can be relieved is calculated as:
Tax credit/applicable tax rate
Income relieved from credit should be allocated to MTA

Tax (1 decks)

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