Income Tax Act (Cap. 123), article 27

27. (1) Where any person derives gains or profits wholly or in part from the business of insurance as insurer, then, so far as concerns the gains or profits derived by such person from the business of insurance, the total income of such person shall, a s from the year of assessment 20 00 be ascertained as follows: (a) in the case of a person carrying on general business, other than a person carrying on long term business, the total income shall be ascertained by taking for the year immediately preceding th e year of assessment - (i) technical provisions at the commencement of the year; (ii) the equalisation reserv e at the commencement of the year; (iii) gross premiums written; (iv) reinsurance recoveries received; (v) income from investments received and receivable and interest income earned; (vi) profits or gains from the sale or disposal of investments; (vii) capital gains subject to tax under the provisions of this Act; (viii) realised diffe rences on exchange; (ix) other technical income including commissions, allowances and fees r eceived and receivable; (x) profits or gains not falling under any of the foregoing sub-paragraphs, and deducting from the aggregate of the above the aggregate of the following: (xi) technical provisions at the end of the year; (xii) the equalisation reserv e at the end of the year; (xiii) the deductions allowable under Part IV of this Act, including: (1) claims paid; (2) reinsurance premiums paid; *Applicable from year of assessment 2019. 116 CAP. 123.] INCOME TAX (3) losses from the sale or disposal of investments; (b) in the case of a person carrying on long term business, either exclusively or in addition to general business, the total income derived from the general business shall be ascertained as provided in paragraph ( a) and the total income derived from the long term business shall be ascertained by taking for the year immediately preceding the year of assessment - (i) income from investments received and receivable and interest income earned, other than those of a long term fund; (ii) capital gains subject to tax under the provisions of this Act, not being gains derived from a long term fund; (iii) commissions, allowances and fees received and receivable not credited to a long term fund; (iv) profits or gains from the sale or disposal of investments not relating to a long term fund; (v) realised differences on exchange not relating to a long term fund; (vi) the surplus in a long term fund which shall be ascertained by taking - (1) technical provisions at the commencement of the year; (2) gross premiums written; (3) reinsurance recoveries received; (4) income from investments received and receivable and interest income earned, relating to the long term fund; (5) profits or gains from the sale or disposal of investments, which gains or profits shall, for the purposes of this paragraph, in all cases be deemed to be gains or profits falling within the purport of article 4(1)( a), so however that where any investments were capital assets as at the thirty-first (31st) day of December 2008, the cost of acquisition of such investments for the purpose of this paragraph shall be the market value applicable thereto as at that date; (6) capital gains subject to tax under the provisions of this Act and derived from the transfer of assets other than investments referred to in sub-paragraph (5) and realized differences on exchange relating to the long term fund; (7) other technical income including commissions, allowances and fees received and receivable; INCOME TAX [CAP. 123. 117 and deducting from the aggregate of the above the aggregate of the following: (8) the deductions allowable under Part IV relating to the income of the long term fund including - (i) claims, maturities and surrenders paid, including, for the avoidance of doubt, the tax paid by the insurer in respect of determinable amounts due in relation to contracts of long term business in terms o f sub-article (2); (ii) reinsurance premiums paid; (iii) other technical charges including commissions and allowances paid and payable; (9) losses from the sale or disposal of investments and other assets of the long term fund referred to in sub-paragraphs (5) and (6), so however that where any investments were capital assets as at the thirty-first (31st) day of December 2008, the cost of acquisition of such investments for the purpose of this paragraph shall be the market value applicable thereto as at that date; and (10) technical provisions at the end of the year; (vii) gains or profits not falling under any of the foregoing paragraphs not being gains or profits derived from a long term fund, and deducting from the aggregate of the above - (viii) the deductions allowable under Part IV of this Act and which have not been taken into account in the determination of the surplus in a long term fund; and (ix) any deficit arising out of the computation in sub- article (1)( b)(vi): Provided that where the person is not resident in Malta and the gains or profits accrue in part in Malta and in part outsid e Malta, the total income on which tax shall be payable shall - (a) in the case of a person doing general business, be ascertained as provided for in sub-article (1)( a)(i) to (xiii) on the business carri ed on in or from Malta; (b) in the case of a person carrying on long term business, be ascertained by taking the surplus in the long term fund computed in accordance with sub-article (1)(b)(vi) of the business earned in or from Malta; (c) in determining the total income as aforesaid, any income from investments held outside Malta to back Malta business, where such income cannot be readily ascertained, shall be computed by taking a proportion 118 CAP. 123.] INCOME TAX of the person’s worldwide investment income in the year preceding the year of assessment equal to the proportion which the investments as aforesaid bore to the person’s worldwide investments. (2) ( a) Where, in relation to a contract of long term business, a determinable amount becomes due by an insurer on or after the first day of January, 1999, and the policyholder is a person resident in Malta, the insurer shall pay tax at the rate of fifteen per cent (15%) on the profit attributable to such c ontract which profit shall be deemed to have accrued during the period from the first day of January, 1999, or the date when the contract was commenced, whichever date is the later, to the date on which th e amount becomes due. For the purposes of this sub-article "a determinable amount" means an amount payable by an insurer in the event of a maturity, surrender or in any other circumstance, other t han a death claim, or a claim referring to a critical illness or a permanent total disability, specified in the contract, as the case may be, where the total amount payable can be determined in whole or in part on the date it becomes due and whether payment is effected in one lump sum or otherwise. (b) (i) The profit referred to in paragraph ( a) shall be calculated by taking the total determinable amount due to be paid by the insurer and subtracting therefrom the total amount of premiums paid within the period referred to in paragraph (a), and in those cases where the contract commenced before the first day of January, 1999, subtracting also an amount equal to the actuarial valuation of the contract on this date. The profit so calculated shall not be affected by any other provision of this Act and no person shall be charg ed to further tax on such profits. (ii) An insurer shall, not later than the thirty-first day of March, 1999, forward in writing to the Commissioner a list of contracts of insurance relating to long term business, other than contracts of term insurance, outstanding on the first day of January, 1999, and indicating, in respect of each such contract, the actuarial valuation on that date. The list shall not specify the identity of the policyholder or the beneficiaries there under. For the purposes of this sub-article, "term insurance" means a contract of insurance which provides solely for the paym ent by the insurer of a sum of money or other consideration upon the happening of death within a term which is specified in the contract, INCOME TAX [CAP. 123. 119 and which is not extendible by any of the parties thereto. Cap. 372. (c) The insurer shall render an account to the Commissioner of all tax paid in accordance with the provisions of this sub-article, but shall not specify the identity of the policyholders or beneficiaries. Every amount of tax due to be so paid shall be a debt due from the insurer to the Commissioner payable not later than the fourteenth day following the end of the month in which the amount becomes due as aforesaid and shall be recoverable as such. Where the insurer fails to pay the above mentioned ta x, the provisions of article 73(4) and of article 40(1) of the Income Tax Management Act shall apply mutatis mutandis. (3) Notwithstanding the provisions of sub-articles (1) and (2), a non-resident person carrying on long term business of insurance who derives gains or profits accruing in part in Malta and in p art outside Malta and who has ceased to issue new contracts of long term insurance before the first day of January, 1999, may elect to have the chargeable income from the long term business of insurance computed by taking, for the year immediately preceding the year of assessment, the investment income relating to that business less the management expenses including commission incurred in relation thereto in a proportion which the premiums received in Malta bore to the t otal premiums received by such person in Malta and elsewhere: Provided that such election shall be irrevocable and shall be notified in writing to the Commissioner by not later than the 3 1st day of March, 1999: Provided further that wher e such a person issues new contracts of long term insurance on or after the 1st January, 1 999, the election shall cease to have effect in respect of the year of assessment following the year in which the first new contract i s issued and in respect of s ubsequent years of assessment. (4) ( a) For the purposes of computing the surplus or deficit arising out of the computation in sub-article (1)( b)(vi), no account shall be taken of income and deductions relating to linked long term business of insurance in so far as they relate to the linked portion of a contract of insurance. (b) Any tax payable under sub-ar ticle (2) shall, in the case of a linked long term contract of insurance, be computed by reference to the profit attributable to the unlinked portion of a contract of insurance and any references to "a determinable amount" and "premiums" shall be construed as references to the amount due and premiums paid on the unlinked portion of a contract of insurance. (5) ( a) Subject to the provisions of paragraph ( b), the provisions contained in Part IV shall apply to persons referred to in sub-article (1) provided that in 120 CAP. 123.] INCOME TAX determining what deductions are allowable under this article there shall be excluded any deductions allowed under any other Part of this Act. (b) Deleted by Act VII.2018.19. * (6) For the purposes of this article and of article 41, the term "linked portion of a contract of insurance" means the portion o f a linked long term contract of insu rance the benefits of which ar e determined by reference to the value of, or the income from, property of any description (whether or not specified in the contracts) or by reference to fluctuations in, or in an index o f, the value of property of any description (whether or not so specifi ed) and "unlinked portion of a contr act of insurance" means the por tion of a linked long term contract o f insurance the benefits of whi ch are not so determined. Cap. 403. Cap. 487. (7) Words and expressions used in this article and in other part s of this Act which relate to business of insurance, shall, in so far as their meanings are not defined by this Act, have the meanings assigned to them in the Insurance Business Act , the Insurance Distribution Act , and any rules and regul ations made thereunder. (8) Notwithstanding anything contained in the provisions of sub-article (1), the Minister may, by rules, prescribe the mann er in which the total income referred to in the said sub-article (1) should be determined, so as to take into account: (a) the provisions of any Directive of the European Union governing solvency requirements applicable to persons carrying on the business of insurance; (b) the provisions of any International Financial Reporting Standard (IFRS) as adopted by the European Union, governing accounting for contracts of insurance; (c) any modification of the provisions of any directive or financial reporting standard referred to in paragraphs (a) and, or ( b) may be permitted in terms of International Financial Reporting Standards (IFRSs) as adopted by the European Union. Tax treatment of mergers, divisions of companies, etc. Added by: II. 2003.13. Amended by: XII.2023.21.