Cap. 325 Art. 5Export incentive scheme.

(1) Where a qualifying company in any year of assessment increases its export sales over such sales during a base period by the percentages specified in subarticle (5), the additional export profits earned by the company in that year from the export sales resulting in such increase shall be exempt from income tax.

(2) The additional profits exempt from income tax in accordance with the provisions of subarticle (1) shall be calculated in accordance with the following formula: ("Y" x "X") - ("B" x "A")

("Z" - ) - ("C" - ) where: "A" = profits in base period "B" = export sales during base period "C" = total sales during base period "X" = profits earned in year of assessment "Y" = export sales in year of assessment "Z" = total sales in year of assessment For the purposes of computing the additional profits exempt from income tax in terms of this subarticle or the profits which are exempt from income tax or taxed at a reduced rate of income tax for the purposes of article 5A for any year of assessment (hereinafter in this subarticle referred to as the relevant year of assessment), where a qualifying company has changed the date on which its accounting period ends for the purposes of article 11 of the Income Tax Act and the profits of such accounting period fall to be charged to tax -

(i) in any year of assessment comprised in a base period; or

(ii) in any year relevant of assessment, the value of the total sales, export sales and profits of the accounting periods, or where applicable the accounting period, the profits of which fall to be charged to tax in the years of assessment comprised in a base period, shall be decreased or increased, as the case may be, by multiplying the actual value of the said total sales, export sales and profits by the number of days comprised in the accounting period the profits of which fall to be charged to tax in the relevant year of assessment and dividing the product thereof by the number of days comprised in the said accounting periods or period as the case may be.

(3) For the purpose of the computation set out at subarticle

(2) -

(a) there shall be excluded any income which does not accrue to the company from a trade or business and any sale or other component of its turnover which is not connected with its trade or business;

(b) "profits" and "income" shall in all cases be taken as comprised in the company’s chargeable income for income tax purposes after account has been taken, where appropriate, of any incentive or benefit obtained by the company under the provisions of this Act;

(c) a loss made in any year of assessment comprised in a base period shall be deemed to be zero profits;

(d) where a company was not in existence, or in the case of a qualifying company incorporated outside Malta, such company was not registered as an oversea company in accordance with the Companies Act, during a year of assessment comprised in a base period, the company shall be deemed to have had zero profits for that year of assessment.

(4) For the purposes of this article, profits and export sales during a base period shall be the average profits and export sales during a period of two consecutive years of assessment as follows: Year of Assessment Base Period 1989 to 1993 year of assessment:1987 and 1988 1994 1988 and 1989 1995 1989 and 1990 1996 1990 and 1991 1997 1991 and 1992 1998 1992 and 1993 1999 1993 and 1994 2000 1994 and 1995 2001 1995 and 1996: Provided that the base period for year of assessment 2002 and subsequent years of assessment shall be determined by increasing the years comprised in the base period for the preceding year of assessment by one year.

(5) Exemption from income tax under this article shall be due where the increase in export sales is of -

(a) ten per cent or more over the corresponding base period in the first year of exemption;

(b) fifteen per cent or more over the corresponding base period in the second year of exemption; and

(c) twenty-five per cent or more over the corresponding base period in the third and subsequent years of exemption:

Provided that a qualifying company may benefit from the provisions of this article for not more than ten years of assessment, which years need not be consecutive.

(6) The provisions of this article shall only be applicable to:

(a) a qualifying company constituted before 1st June 1987, and to

(b) a qualifying company constituted on or after that date, if that company, for any year of assessment, would have been entitled to benefit from an exemption contemplated in article 4 but for the provisions of subarticle (1)(b) thereof.

(7) 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 such 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 and which would have been entitled to benefit from the provisions of article 4 but for the provisions of subarticle (1)(b) thereof, and such companies shall continue to be so entitled to the incentive contemplated under this article up to and including the year of assessment 2021 or such other date as may be prescribed by the Minister.