Cap. 123 Art. 77Tax credits.

(1) The provisions of this article shall have effect where, under arrangements having effect under article 76, tax payable in respect of any income in the territory with the Government of which the arrangements are made is to be allowed as a credit against tax payable in respect of that income in Malta; and in this article the expression "foreign tax" means any tax payable in that territory which under the arrangements is to be so allowed and the expression "income tax" means tax charged on the chargeable income at the rates laid down in Part VII of this Act.

(2) The amount of the income tax chargeable in respect of the income shall be reduced by the amount of the credit: Provided that credit shall not be allowed against income tax for any year of assessment unless the person entitled to the income is resident in Malta for the year immediately preceding the year of assessment.

(3) The credit shall not exceed the amount which would be produced by computing the amount of the income in accordance with the provisions of this Act and then charging it to income tax at a rate ascertained by dividing the income tax chargeable (before allowance or credit under any arrangements having effect under article 76) on the total income of the person entitled to the income by the amount of his total income.

(4) Without prejudice to the provisions of the preceding sub-article, the total credit to be allowed to a person for any year of assessment for foreign tax under all arrangements having effect under article 76 shall not exceed the total income tax payable by him for that year of assessment, less any tax payable by him under the provisions of articles 40, 69 and 73.

(5) In computing the amount of the income -

(a) no deduction shall be allowed in respect of foreign tax (whether in respect of the same or any other income);

(b) where the income tax chargeable depends on the amount received in Malta the said amount shall be increased by the appropriate amount of the foreign tax in respect of the income;

(c) where the income includes a dividend and under the arrangements foreign tax not chargeable directly or by deduction in respect of the dividend is to be taken into account in considering whether any, and if so what, credit is to be given against income tax in respect of the dividend the amount of the income shall be increased by the amount of the foreign tax not so chargeable which falls to be taken into account in computing the amount of the credit.

(6) Paragraphs (a) and (b) of the preceding sub-article (but not the remainder thereof) shall apply to the computation of the total income for the purpose of determining the rate mentioned in sub-article (3), and shall apply thereto in relation to all income in the case of which credit falls to be given for foreign tax under arrangements for the time being in force under article 76.

(7) Where -

(a) the arrangements provide, in relation to dividends of some classes, but not in relation to dividends of other classes, that foreign tax not chargeable directly or by deduction in respect of dividends is to be taken into account in considering whether any, and if so what, credit is to be given against income tax in respect of the dividends, and

(b) a dividend is paid which is not of a class in relation to which the arrangements so provide, then, if the dividend is paid to a company which controls, directly or indirectly, not less than one-half of the voting power in the company paying the dividend, credit shall be allowed as if the dividend were a dividend of a class in relation to which the arrangements so provide.

(8) Credit shall not be allowed under the arrangements against income tax chargeable in respect of the income of any person for any year of assessment if he elects that credit shall not be allowed in the case of his income for that year.

(9) Any claim for an allowance by way of credit shall be made not later than two years after the end of the year of assessment to which the claim refers, and in the event of any dispute as to the amount allowable the claim shall be subject to objection and appeal in like manner as an assessment.

(10) Where the amount of any credit given under the arrangements is rendered excessive or insufficient by reason of any adjustment of the amount of any tax payable either in Malta or elsewhere, nothing in this Act limiting the time for the making of returns, assessment or claims for relief shall apply to any return, assessment or claim to which the adjustment gives rise, being a return, assessment or claim made not later than two years from the time when all such assessments, adjustments and other determination have been made, whether in Malta or elsewhere, as are material in determining whether any, and if so what, credit falls to be given.