17 July 2009 To: IFSP Members (cc Malta Institute of Taxation, Malta ...

Memo
17 July 2009
To:
IFSP Members
(cc Malta Institute of Taxation, Malta Institute of Accountants, Chamber
of Advocates)
From: IFSP Tax Committee
Subject:
Meeting with Malta Inland Revenue (International Tax Unit) i.c.w.
certain ITU procedures
__________________________________________________________________________
The IFSP was recently called to a meeting with the International Tax Unit (ITU) of the
Malta Inland Revenue with a view to discussing operational difficulties which the ITU
was encountering on certain ITU procedures and which require the co-operation of
members.
The purpose of this Memorandum is to communicate the above matters to IFSP
members and also those of the above mentioned Institutes, members of which are in
regular contact with the ITU on tax related matters.
Timely presentation of DDT10 form (Art 47(3) Duty on Documents and Transfers Act)
ITU have informed us that they are regularly receiving M&As of new companies
which are not accompanied by the relevant DDT10 form.
The absence of the timely submission of a DDT10 form, at the time of registration of
a Maltese company with the ITU following incorporation, or earlier upon incorporation
if registration with the ITU is sought on incorporation, is hampering procedures within
ITU in regard to the proper administration of the company ‘tax file’ at the Malta Inland
Revenue. Whereas, the ‘old regime’ had somewhat ‘rigid’ distinctions between ITU
companies (FIA, ITC) and classification was fairly straightforward, this is no more the
case following the 2007 tax amendments and the only manner by which the Inland
Revenue can categorise a company, firstly, as being an ITU company, and,
secondly, as to type of company, is through the submission of the said DDT10 form.
The DDT10 form, and which currently incorporates the Article 47 Duty on Documents
and Transfers Act (DDTA) exemption determination, the registration of the relevant
company for income tax purposes and requests for changes in accounting date plays
a crucial role for the Inland Revenue to determine the category of company being
registered for Malta income tax purposes, and consequently, whether or not the said
Address: P.O Box 37, Valletta, VLT 1000
Tel: 2569 6352 Fax: 2144 9212
E-mail: info@ifsp.org.mt Website: www.ifsp.org

company falls under the responsibility of the Inland Revenue ITU Mriehel offices or
Floriana offices.
The advantages of a timely submission of the DDT10 form together with the relevant
M&A or other document indicating shareholders’ details and the company’s objects
facilitate –
a. immediate categorisation as an ITU company;
b. immediate categorisation of type (without this categorisation, the 18
month period for tax payment does not apply);
c. immediate application of accounting date (which means that a NIL return
will not need to be submitted for the first default year of assessment).
In view of the above, and the current operational problems that the ITU are
encountering from the non-timely submission of DDT10 forms, and in order to avoid
problems in the future (e.g. issues where the 18 month period for tax payment is not
recognised by the Inland Revenue in view of the fact that the Inland Revenue would
not have been informed of the status of the company through a DDT10 form), the ITU
have given instructions not to register companies for tax purposes unless the DDT10
form has also been submitted. The mere production of an M&A is not sufficient for
this purpose. The proper documentation for this purpose (i.e. the DDT10 form
complete with the relevant Form U where applicable) needs to be presented.
Companies that do not fall within the scope of article 47 of the Duty on Documents
and Transfers Act will only be considered to be ‘ITU Companies’ if they need to
register their shareholders for the purposes of refund claims for the purposes of the
provisions of Article 48(4A) of the Income Tax Management Act once such
registration (of the relevant shareholders) is effectively made.
Accordingly, all member practitioners are urged to ensure the timely
presentation of the DDT10 form to the ITU at the time of registration of a
company with the ITU.
Member practitioners should also take note of the following:
(i) The DDT10B form (in respect of an Article 47(3)(e) DDTA exemption
determination) requires to be accompanied by a copy of the duly
registered ROC Form U (Notice of claim for extension of period allowed for
laying accounts by company carrying on business or having interests outside of
Malta). In the absence of the submission of an ROC Form U, the company
is required to provide evidence of its interests outside of Malta (for
example: details of the company’s activities; its assets situated outside of
Malta; business counterparts situated outside of Malta etc)
(ii) The ROC Form U should be sent to the Registry of Companies for registration
and not to the ITU. ITU should receive from the company only a copy of
the duly registered Form U.
(iii) The accounting reference period cannot exceed (not even by a day) an 18-
month period from the date of incorporation of the company, or the date of
the end of the previous accounting reference period.
Address: P.O Box 37, Valletta, VLT 1000
Tel: 2569 6352 Fax: 2144 9212
E-mail: info@ifsp.org.mt Website: www.ifsp.org

(iv) Full details of the company declarant (including the full name of the individual
signing, telephone number and email address) should be provided in Part
V “Declaration” of the DDT10 Form
(v) The DDT10 Form may be accompanied by copies of the first part of the
Memorandum and Articles (with registration details and objects) together
with documents showing details of Directors, Shareholders and currency.
We have been informed by the ITU that it is intended to provide an electronic
submission process for DDT10 forms in the future. The ITU are also considering
merging the DDT10A and DDT10B forms into one form and widening the scope of
the form to also include applications by Malta resident and non-Malta domiciled
entities.
Registration of Shareholders for purposes of Art. 48(4) and Art. 48(4A) ITMA tax
refunds
The ITU have requested that we remind member practitioners that any change in the
details to a previously submitted Shareholder Tax Refund Registration form only
requires a change to the existing registration form and not the re-submission of a
new form afresh.
Furthermore, all Shareholder Tax Refund Registration forms need to be checked as
‘finalised’ before submission to the ITU.
It is expected that legislative amendments will be made to Legal Notice 80/2008 (Tax
Refunds and Registration Procedure Rules, 2008) and wherein the registration of a
shareholder for tax refunds will not be required to be made annually. However, until
such amendment is effected, practitioners are reminded that the shareholder
tax refund registration process in terms of LN80/2008 remains an annual
requirement. Accordingly, practitioners are reminded to effect timely
registration of shareholders for the purposes of tax refunds for Y/A 2010.
Tax Refund claims
The ITU have informed us of the following difficulties being encountered with claim
forms that are submitted:
(i) Tax refund claims are often received utilising old versions of the claim form.
The current version of the claim form should be utilised for all claim forms.
A copy of the current version of the claim form is attached to this
Memorandum.
(ii) The ITU will not accept unsigned tax refund claim forms. Practitioners should
ensure that tax refund claim forms are completed with all information
requested and duly signed by the shareholder / authorised representative
before submission to the ITU, failing which the said tax refund claim form
will not be processed by the ITU.
(iii) Claims have been received by the ITU for a 6/7ths refund (in terms of Art.
48(4A) ITMA) for ‘International Trading Companies’ (ITCs) – Practitioners
are reminded that, in terms of the ITMA, the applicable tax refund
Address: P.O Box 37, Valletta, VLT 1000
Tel: 2569 6352 Fax: 2144 9212
E-mail: info@ifsp.org.mt Website: www.ifsp.org

provisions in respect of tax on profits distributed by an ITC to its
shareholder are the 2/3rds refund as set out in Art. 48(4)(a) of the ITMA
and the refund (7.5%) resulting on assessment of the shareholder of the
ITC at 27.5% in terms of 56(8) of the ITA. In no circumstances is the
shareholder of an ITC entitled to claim a 6/7ths refund (in terms of
Art. 48(4A) ITMA). Claims for a 6/7ths refund by shareholders of an ITC
will continue to be rejected by the ITU. Likewise, practitioners are being
reminded to make sure that submitted claims for refunds (whether in
relation to an ITC or otherwise) are in line with current legislation.
(iv) Income tax returns of shareholders of ITCs (for the purposes of the 7.5% tax
refund on assessment) and ITC shareholder tax refund claims (in terms of
Art. 48(4)(a) of the ITMA) should be sent to the Inland Revenue ITU
Mriehel offices and not the Inland Revenue Floriana offices.
Currently, the ITU are unable to accept tax payments through internet banking and all
member practitioners are requested to resort only to international SWIFT bank
transfers for payment of tax.
Use of international bank drafts for payment of tax is also discouraged by the ITU.
A list of the current Inland Revenue bank accounts to be utilised for the purposes of
tax payments is attached.
Finally, it needs to be pointed out that in practice, the ITU do not wait for the 14 days
from the end of the month in which the refund claim is submitted before processing
the relevant claim and effecting the relevant payment of tax refund. Therefore,
practitioners are being encouraged not to send refund claims towards the end of a
month as currently, the ITU are facing bottleneck situations every end of the month.
This is placing a huge strain on this Unit. In view of these persistent bottleneck
situations, ITU are considering a change of the relevant legislation as a way out.
Certificates of Tax Residency
The ITU are regularly receiving requests for Certificates of Tax Residency without the
use of the IRD Form RCTR01. The content of this Form was agreed with the IFSP in
order that the ITU may be able to process such requests in the shortest possible
time.
Use of the IRD Form RCTR01 should be considered as mandatory for all
requests for Certificates of Tax Residency. A specimen copy of the IRD Form
RCTR01 is attached to this Memorandum.
Deduction of expenses for income tax purposes
ITU have requested that members be reminded that, in terms of Art. 14 of the ITA,
outgoings and expenses incurred by a taxable person are deductible for income tax
purposes only to the extent that the said outgoings and expenses were wholly and
exclusively incurred in the production of the income.
Address: P.O Box 37, Valletta, VLT 1000
Tel: 2569 6352 Fax: 2144 9212
E-mail: info@ifsp.org.mt Website: www.ifsp.org

ITU are concerned that claims for deductions have lately been made by holding
companies which are out of line because they are unrelated to the business income
of the taxpayer or disproportionate thereto.
As a consequence, ITU intends issuing guidelines on the deductibility of expenses for
income tax purposes which will be communicated at a later date.
Chris Curmi
Chairman
IFSP Tax Committee
Address: P.O Box 37, Valletta, VLT 1000
Tel: 2569 6352 Fax: 2144 9212
E-mail: info@ifsp.org.mt Website: www.ifsp.org