Cap. 325 Art. 4Tax holidays

(1) Where a qualifying company -

(a) is a company which:

(i) is constituted under Maltese Law on or after 1st

June, 1987; or

(ii) is a company incorporated outside Malta and has been registered as an oversea company in terms of the Companies Act registered on or after 1st June, 1987 but only in respect of its activities happening on or after 1st January, 1997; and

(b) subject to the provisions of subarticle (5), derives from export sales not less than ninety-five per cent of its total sales revenue; and

(c) carries on or carries out a trade or business which does not consist solely or mainly in the mere expansion, duplication or replacement of a trade or business formerly carried on or carried out in Malta by any person in any way directly or indirectly connected or associated with the said company through shareholding, voting or other ownership or controlling rights, irrespective of the person in whom such rights are or may have been vested, such company shall be exempt from income tax on the gains or profits from its trade or business made during ten consecutive years of assessment which years shall be comprised within the company’s first twelve years of assessment as may be determined by the company by way of an irrevocable notice in writing to the Corporation to be given not later than the end of the third year of assessment:

Provided that in the case of a company entitled to obtain the exemption contemplated in this subarticle, in terms of subarticle (3)(b), the twelve years of assessment referred to in this subarticle shall be the company’s twelve years of assessment immediately following the year in which its shares were acquired, and the ten consecutive years of assessment in respect of which the exemption from income tax may apply shall be comprised in these twelve years of assessment as may be determined by the company by way of an irrevocable notice in writing to the Corporation, which notice shall be given by not later than the end of the third year of assessment falling within the said twelve years of assessment.

(2) If a company in any year immediately preceding a year of assessment comprised in the ten consecutive years of assessment referred to in subarticle (1) derives from export sales less than ninety-five per cent of its sales revenue, the company shall for that year of assessment forfeit the exemption granted under the provisions of this article:

Provided that such forefeiture for any year as aforesaid shall not -

(a) affect the company’s right for exemption in any other year of assessment; or

(b) obtain for the company exemption under this article for any year not comprised in the original ten consecutive years of assessment.

(3) For the purposes of subarticle (1) -

(a) the acquisition by a company of any trade or business formerly carried on or carried out by any person not connected with the company as set out in paragraph (c) of the said subarticle shall not qualify the said company to obtain the exemption from income tax contemplated by this article;

(b) where on the 1st June, 1987, a company was controlled at least as to fifty per cent directly or indirectly by Government and not less than fifty per cent of the shares of the company were owned directly or indirectly by Government, if all such shares are acquired by any person not under Government control, such company shall be qualified to obtain the exemption contemplated in subarticle (1) if the company is a qualifying company and it satisfies the condition at paragraph (b) of the said subarticle.

(4) The income of any company for any year of assessment in respect of which exemption from income tax operates under the provisions of this article shall be computed in the manner set out in the Income Tax Act, and in accordance with its provisions: Provided that:

(a) the provisions of the said Act shall be superseded or replaced as may be necessary by the provisions of this Act;

(b) any entitlement to a deduction under the provisions of article 12 for any year of assessment in respect of which exemption under the provisions of this article is due, shall be deferred to the first year of assessment next following the ten consecutive years of assessment referred to in subarticle (1);

(c) any unabsorbed losses or unabsorbed capital allowances (including the allowances contemplated by this Act) at the end of any year of assessment exempt from income tax under the provisions of this article shall be carried forward strictly in the manner set out in the Income Tax Act, notwithstanding that such carry forward is from an exempt year into a year when no such exemption is operative: Provided further that, if, during any one year falling within the ten consecutive years of assessment referred to in subarticle (1), a qualifying company fails to qualify for the incentive under that subarticle, any entitlement under paragraph (b) may, at the option of the company, be utilised as a deduction against its chargeable income of the first or any subsequent years of assessment in respect of which the company does not so qualify.

(5) The words "not less than ninety-five per cent" in subarticle

(1) shall be substituted by the words "substantially the whole" and subarticle (2) shall be construed accordingly in any particular line of production, manufacture or service as may be determined by the Minister by notice published in the Gazette and in that case the words "substantially the whole" shall mean that percentage higher than ninety-five per cent as the Minister may mention in the same notice:

Provided that such substitution shall, in respect of any qualifying company, be applicable only as from its first accounting period commencing on a day subsequent to that on which notice is published as aforesaid.

(6) With effect from such date as may be determined by the * Minister by order in the Gazette , the provisions of this article shall only be applicable to:

(a) qualifying companies which existed on the day immediately preceding that date and, in the case of companies incorporated outside Malta and which had been registered as oversea companies in terms of the

Companies Act, were so registered on the day immediately preceding such date;

(b) qualifying companies incorporated in Malta or registered as oversea companies after that date which carry on or intend to carry on a trade or business which relates to a project in respect of which the Corporation has, prior to such date, approved the granting of any assistance in terms of this Act:

Provided that, as from the aforementioned date, no company shall qualify for the benefit provided by this article in terms of subarticle (3)(b).

*1st November, 2000 - see Legal Notice 135 of 2001.