S.L. 463.5 Art. 7Tax credits. Re-numbered by: L.N. 38 of 2015. Cap. 123. Cap. 123. S.L. 325.06

(1) An undertaking benefiting from tax credits in terms of these regulations and the respective Guidelines in respect of a year of assessment shall be entitled to deduct from the amount of income tax which is due on its chargeable income derived from its trade or business for that year of assessment the amount of the tax credit and, where the tax credit, for any year of assessment, exceeds the income tax payable by such an undertaking for that year, the excess shall be added to the tax credit for the following year and deemed to be part of that tax credit, or if there is no such tax credit for that year, be deemed to be the tax credit for that year and so on for subsequent years: Provided that such tax credit which is not so utilised at the end of any year and which is therefore carried forward to be added to the tax credit of the following year of assessment and deemed to be the tax credit for that year, shall be increased by such rate as may be prescribed in the Guidelines; and where any part of the tax credit as so increased is again not utilised, so much of it as is not utilised shall be further increased by the said percentage and carried forward to the following year and so on for subsequent years:

Provided further that a tax credit shall not give rise to a right to a refund of tax.

(2) When an undertaking has benefited from the provisions of these regulations, the tax credit shall be deemed to have relieved from tax so much of that undertaking’s chargeable income which, when multiplied by the rates of tax at which it was chargeable in that year, is equal to the tax credit, and where the undertaking or any subsequent undertaking distributes the income which is so deemed to have been relieved from tax, such undertaking or undertakings shall state in the dividend warrant pertaining to any such distribution that such income has been relieved from tax by a tax credit in accordance with these regulations; and the tax which has so been relieved shall not be available for refund for any purpose of the Income Tax Act.

(3) (a) The chargeable income which is deemed to have been relieved from tax in accordance with these regulations shall, for the purposes of the Income Tax Act, be allocated to the Final Taxed Account of the company in question and any dividends, or part thereof, distributed from such income shall be exempted from income tax in the hands of the members of the company on receipt of such distribution.

(b) Where the dividend referred to in sub-regulation (2) is distributed to a member which is also a company (hereinafter referred to as "the second company"), the said dividend shall likewise be distributed by the second company to its members in the form of dividends exempt from income tax in the hands of the recipients, and where a member of the second company is again a company, the preceding provisions shall apply as though references to mutatis mutandis the first company were references to the second company, and as though references therein to the second company were references to that member, and the principle set out in this sub-regulation shall continue to be applied for as long as such income or part thereof to which this regulation applies are distributed by way of dividends.

(4) Where for a year of assessment, an undertaking qualifies for a tax credit under regulation 5 of the Business Promotion

Regulations, and also under the provisions of these regulations, it shall avail itself of the tax credit due under the Business Promotion Regulations before any set-off is made in respect of the tax credit due under these regulations.

(5) No tax credit shall be due to an undertaking under these regulations for a year of assessment unless it is claimed in the appropriate section of a tax return submitted by electronic means by not later than the relative tax return date.