Cap. 123 Art. 31DTaxation of rental income derived from the letting of a tenement.

(1) Notwithstanding any other provision of the Income Tax Acts or any regulations made thereunder, the provisions of this article shall apply where, during a relevant year, any person rents a tenement.

(2) The tax chargeable in the circumstances mentioned in sub-

article (1) shall, at the option of the person referred to in the said sub-article, be at the rate of fifteen cents (0.15) on every euro of the gross rental income received. Such tax shall be final and notwithstanding any other provision of the Income Tax Acts, no set-off or refund shall be granted to any person in respect of the tax so charged: Provided that the tax chargeable on rent derived from a long private residential lease shall be abated in such circumstances and by such amounts as may be prescribed.

(3) Where the option referred to in sub-article (2) has been exercised, such income shall be deemed to constitute separate chargeable income for the purpose of the Income Tax Acts and shall not form part of the chargeable income of the person exercising the said option and where such person is an individual he shall not be required to declare such income, in any return made pursuant to the Income Tax Acts.

(4) Where a person, in a relevant year, derives rental income from the letting of more than one tenement and the option referred to in sub-article (2) has been exercised for such year, the said sub-article shall apply to the total rental income received in the said year from all the tenements let out by such person.

(5) Irrespective of whether the option referred to in sub-article

(2) is exercised or not, where an enquiry has been conducted and the Commissioner determines that any rental income which should have been declared was not so declared, such income shall be charged to tax at the rate of 35 cents (0.35) on every euro of the gross rental income received and such tax shall be in addition to any interest and additional tax payable under the Income Tax Acts. Such tax shall be final and notwithstanding any other provision of the Income Tax Acts, no set-off or refund shall be granted to any person in respect of the tax so charged.

(6) Every company resident in Malta shall allocate the distributable profits resulting from income to which this article applies, and on which tax is payable in accordance with this article, to the final tax account.

(6A) Where an individual has failed to declare rental income derived from a tenement leased as a residence or garage during the relevant period in any return and such individual opts to declare such rental income in the relevant form referred to in article

42(4)(c) of the Income Tax Management Act, which is required to be submitted by not later than the 30th June 2015, and pays the tax referred to in sub-article (2) of this article on such rental income, it shall be deemed for the purpose of the Income Tax Acts that such rental income was received during basis year 2014. The individual exercising the said option shall pay to the Commissioner the tax in such manner as may be prescribed in accordance with the provisions of article 42 of the Income Tax Management Act:

Provided that where an individual exercises the said option and declares rental income for more than one year, the total amount subject to the tax referred to in sub-article (2) of this article shall not exceed an amount determined as follows: Y = (a / b) x 2 Where -

(a) "Y" represents the amount to be determined;

(b) "a" is the total rental income declared in the said relevant form;

(c) "b" is the number of years comprised in the relevant period in respect of which rental income is declared: Provided also that where following an enquiry there is evidence that an individual who exercises the option referred to in this sub-article has overstated the amount of rental income declared in the relevant form for the purpose of obtaining a tax advantage, the preceding proviso shall not apply and the total amount of rental income declared in the said form shall be subject to tax at the rate of 15%. For the purpose of this sub-article "relevant period" means the period of eight years preceding basis year 2013.

(7) The person exercising the option referred to in sub-article

(2) shall pay to the Commissioner the tax referred to in the said sub-articles in such manner as may be prescribed in accordance with the provisions of article 42 of the Income Tax Management

Act.

(8) For the purposes of this article:

(a) "tenement" means -

(i) a tenement, not being a commercial tenement as defined in article 1525 of the Civil Code, which consists of either a dwelling house or part thereof which is to be occupied or is occupied as a home or residence by the occupier or a garage; or

(ii) a "commercial tenement" or a "club", both terms having the meaning assigned to them respectively in article 1525 of the Civil Code, when the property is not rented to or from a related body of persons, and for the purpose of this sub-paragraph -

(A) a body or persons is related to an individual if it is owned or controlled, directly or indirectly, as to more than twenty-five percent by that individual; and

(B) two bodies of persons are related if they are owned or controlled, directly or indirectly, as to more than twenty-five percent by the same persons;

(b) "relevant year" means the calendar year during which the gross rental income is received:

(c) "rents" shall include ground rents, whether from an urban or rural tenement.