Income Tax Act (Cap. 123), article 27D

27D. (1)( a)The trustee of a trust that has been granted authorisation under article 43(3) of the Trusts and Trustees Act or that is not required to obtain such authorisation in terms of the provisions of article 43(6) of that Act, where such trustee is a person resident in Malta (hereinafter a resident trustee) may elect, in accordance with the provisions of this sub-article, to have the income attributable to a trust treated in the manner provided for in paragraph ( c). Such election, which shall be irrevocable, is to be effected on the date of the establishment of such trust, or the date of appointment of the said resident trustee, whichever is the later, and is to be made on such form and under such conditions as may be prescribed. The said trustee shall submit such form to the Commissioner not later than thirty days from the date of the establishment of such trust or the appointment of a resident trustee whichever is the later. (b) An election as provided for in this sub-article may only be made where the trust is established by a written instrument which specifically provides that the INCOME TAX [CAP. 123. 123 income attributable to a trust shall comprise only of income in the form of royalties, dividends, capital gains, interest, rents or any other income from investments. For the purposes of paragraph (c), such income shall not constitute income from a trade, business, profession or vocation. (c) Where an election has been made in accordance with the provisions of this sub-ar ticle, the trustee of such trust shall compute the chargeable income in relation to the income attributable to a trust for the relevant year of assessment as if such income was derived by a company ordinarily resident and domiciled in Malta. Tax thereon shall be charged at the rate specified in article 56(6) and payable in the same manner applicable to such companies. Distributable profits shall be allocated in the same manner applicable to such companies and distributions of such allocated profits to beneficiaries of su ch trust shall be treated as if they were dividends distributed to shareholders of such a company. For the purposes of this sub-article, distributable profits of a trust shall mean the total profits which would be available for distribution to the beneficiaries resulting from the income attributable to a trust. The trustee shall keep all records and submit all returns and documents to the Commissioner as is required in the case of such companies. Where the Income Tax Acts require documents which are to comply with the Companies Act , the trustee shall submit similar documents, certified by a certified public auditor, and which are either provided for under the Trusts and Trustees Act or, in the absence of such provision, which comply as far as is possible, with the Companies Act . Trusts of a temporary nature. Cap. 371. Cap. 376. (2) The trustee of a trust where such trustee is a person in possession of a valid licence issued in terms of the Banking Act or the Financial Institutions Act may apply to the Commissioner for a determination that property has been settled into such trust as a result or consequence of another transaction or set of transact ions, and that the duration of such trust is of a temporary nature la sting only until such time as is necessa ry so that the said transacti on or transactions may be effectively concluded. Such an application may be made on such form and under such conditions as may be prescribed. Where the Commissione r makes, at his discretion, su ch a determination - (i) no deduction or exemption contemplated by this Act shall be allowable or granted in relation to the income attributab le to a trust; and (ii) the said income shall be taxable at the rate specified in article 56(6); and (iii) the tax payable as provided for in this sub-article shall not be reduced whether by way of relief of double taxation or otherwise, and no set-off or 124 CAP. 123.] INCOME TAX credit shall be made or allowed in respect of such tax. The resulting ta x shall be payable by such time as may b e prescribed; and (iv) the trustee of such trust shall declare such income and property settled in trust on such form as may be prescribed and no further disclosure of such income shall be required by the beneficiaries of such trust; and (v) no further tax shall be payable on such income. Other trusts. (3) ( a) Where neither an electi on in accordance with sub- article (1) nor a determinati on in accordance with sub- article (2) has been made the provisions of paragraphs (b), (c), (d) and ( e) shall apply. (b) In the case where - (i) all the income attributable to a trust consists of income either arising outside Malta or income referred to in article 12(1)( c); and (ii) all the beneficiaries of the trust are persons who are either not ordinarily resident in Malta or not d o m i c i l e d i n M a l t a , o r a r e p e r s o n s w h o s e income is totally exempt from tax under the provisions of article 12, it shall be deemed that such income is not income attributable to a trust but is income derived directly by such beneficiaries, and that where the income arising outside Malta is received in Malta by the trustee of the trust, it shall be deemed to be received in Malta by such beneficiaries. The trustee shall notify the beneficiary of such income and shall inform him of his duties under the Income Tax Acts. Cap. 372. (c) In the case where the income attributable to a trust comprises solely income referred to in paragraph ( b)(i) or dividends distributed out of the profits allocated to the foreign income account or out of the profits of an international trading company which were derived by such company whilst it was an international trading company, or both such income and dividends, and all the beneficiaries of such trust are persons not resident in Malta, and the trustee of such trust provides the Commissioner with a certificate as referred to in a r t i c l e 5 ( 3 ) o f t h e Income Tax Management Act , it shall be deemed that such income does not constitute income attributable to a trust and that such income is derived directly by such beneficiaries: Provided that the income ref erred to in this paragraph shall also include dividends paid out of profits allocated to any of t he taxed accounts. (d) Without prejudice to the provisions of paragraphs ( b) and ( c), capital gains derived in accordance with the provisions of article 5 from the transfer of property INCOME TAX [CAP. 123. 125 settled in trust in the administration of such trust or in the distribution or reversion of such property shall form part of the income attributable to a trust. (e) The chargeable income in relation to the income attributable to a trust shall be computed as if the trust was a person that is ordinarily resident and domiciled in Malta but shall exclude amounts of income attributable to a trust allocated to beneficiaries as determined in accordance wi th the provisions of sub- article (4). Income attributable to a trust allocated to beneficiaries. (4) For the purpose of sub-article (3)( e) - (a) amounts of income attributable to a trust allocated to beneficiaries shall consist of - (i) amounts over which beneficiaries had a vested right in the year immediately preceding the year of assessment; and (ii) amounts over which an entitlement had been bestowed to beneficiaries other than in the manner referred to in subparagraph (i), and where such entitlement had been so bestowed by the end of the year immediately preceding the year of assessment; and (iii) amounts representing income attributable to a trust for the year of assessment which were distributed to beneficiaries by the end of the year immediately preceding the year of assessment, and which amounts do not form part of the amounts referred to in subparagraphs (i) and (ii). (b) In order that the amounts referred to in paragraph ( a) may be excluded in terms of sub-article (3)( e), the trustee must e nsure that - Cap. 372. ( i ) t h e r e t u r n r e f e r r e d t o i n a r t i c l e 2 4 A o f t h e Income Tax Management Act has been submit- ted in accordance with the provisions of that same article; and (ii) he has furnished the beneficiaries in question with a certificate indicati ng, for the relative year of assessment and where applicable, the relevant amounts referred to in paragraph ( a) on such form and giving such additional details as may be prescribed; and (iii) where the amounts referred to in paragraph ( a)(i) and (ii) were not distributed to the beneficiaries by the 31st March following the end of the year immediately preceding the relevant year of assessment, a payment of tax has been made on behalf of the beneficiaries equivalent to the tax which would result were the said amounts charged to tax at the rate specified in article 56(6). Where such distr ibution is not made by 126 CAP. 123.] INCOME TAX the said date, this tax becomes a debt due from the relevant trustee to the Commissioner payable by not later than the 30th June following the end of the said year. The tax so paid shall be available as a credit against the beneficiary’s tax liability, or for a refund as the case may be, for the relevant year of assessment. Rate of taxation. (5) Except as provided in article 56(4), tax shall be charged upon the chargeable income in relation to the income attributab le to a trust at the rate speci fied in arti cle 56(6). Foreign tax deemed to be paid by trust. (6) ( a) W h e r e f o r e i g n t a x h a s b e e n p a i d o n t h e i n c o m e attributable to a trust, such tax shall be deemed to have been paid by a trustee of such trust, whether it was paid by a trustee or a beneficiary of such trust. (b) A claim for relief of double taxation with respect to the tax referred to in paragraph ( a), may only be made through the provisions of articles 79 to 88. Any reference in these articles to a person shall, for the purposes of this sub-article, be deemed to be a reference to a trustee of a trust while any reference to income or income of a person, shall be deemed to be a reference to the income attributable to a trust. Tax on income attributable to a trust is final. (7) Unless otherwise provided for in this article, no person shall be charged to further tax under this Act in respect of in come attributable to a trust which has been charged to tax in accord ance with the provisions of sub-a rticles (1), (2) and (3). Taxation of beneficiaries. (8) ( a) Amounts allocated to beneficiaries referred to in sub- article (4)( a) shall be aggregated with other income of the said beneficiaries for t he purposes of article 4 and tax shall be charged accordingly for the year of assessment commencing on su ch date as the Minister responsible for finance may, by notice in the Government Gazette, appoint and for each subsequent year of assessment. (b) Amounts allocated to beneficiaries referred to in sub- article (4)( a) shall be treated as income derived by the beneficiary at the time it vests, or the beneficiary becomes entitled to it, or it is distributed, as the case may be. (c) Income distributed to beneficiaries shall retain its character as to type and country of source. A claim for relief of double taxation with respect to such income may be made in accordance with the provisions referred to in article 74 notwithstanding that foreign tax may have been paid by the trustee or the beneficiary himself: Provided that the provisions of this sub-article shall apply mutatis mutandis where none of the trustees of a trust is a person resident in Malta and the beneficiaries of the such trust inclu de persons that are - INCOME TAX [CAP. 123. 127 (i) ordinarily resident and domiciled in Malta; or (ii) ordinarily resident or domiciled in Malta and the relevant income is received in Malta. Interpretation. Cap. 331. (9) ( a) For the purposes of this arti cle the terms "beneficiary", "settlor", "trust" and "trustee" shall have the meaning assigned to them by article 2 of the Trusts and Trustees Act. Cap. 331. (b) Words and expressions used in this article and in other parts of the Income Tax Acts which relate to the income attributable to a trust, shall, in so far as their meanings are not defined by the Income Tax Acts, have the meaning assigned to them in the Trusts and Trustees Act and any rules and regulations made thereunder. (10) ( a) Where in the opinion of the Commissioner, transactions involving a tr ust are carried out with the sole or main purpose of reducing the amount of tax payable by a person, the Commissioner shall disregard such trust and the income of such person shall be determined as if it had been derived without the involvement of such trust. Cap. 372.(b) Article 57 of the Income Tax Management Act s h a l l apply mutatis mutandis in the circumstances relating to trustees. References in that article to - Cap. 331. (i) "warrant holder" shall be construed as references to any person acting as trustee as provided for under the Trusts and Trustees Act ; (ii) "Board" shall be construed as references to the Malta Financial Services Authority; Cap. 331. (iii) "article 14(1)( a)(i) of the Accountancy Profession Act " shall be construed as references to article 51 of the Trusts and Trustees Act ; (iv) "documents" shall be construed as references to any document required to be produced by a trustee in relatio n to a trust und er Maltese law; Cap. 331. (v) "1st January, 1998" shall be construed as references to the date of the coming into force of the Trusts and Trustees Act . Regulations in relation to tax treatment of a foundation. Added by: XIII. 2007.15.