Cap. 123 ст. 5Capital gains.

(1) (a) Capital gains derived by a person from the transfer of a capital asset shall be charged under article 4(1).

Notwithstanding anything contained in any other part of this Act, such gains shall be ascertained as laid down in this article and in such manner as may be prescribed. The capital gains to which the provisions of this article shall apply are:

(i) gains or profits arising from any transfer of the ownership or usufruct of any immovable property or the assignment or cession of any rights over such property;

(ii) gains or profits arising from the transfer of the ownership or usufruct of or from the assignment or cession of any rights over any securities, business, goodwill, business permits, copyright, patents, trademarks and trade-names and any other intellectual property; and

(iii) gains or profits arising from a transfer of the beneficial interest in a trust in accordance with the provisions of sub-article (19). For the purposes of this subparagraph, "transfer of the beneficial interest in a trust" shall include a transfer of a full or partial beneficial interest in a trust and any alienation of any such full or partial interest as a result of a disclaimer of such interest or as a result of a person not remaining a beneficiary of such trust;

(iv) gains or profits arising from a transfer of securities as provided for in sub-article (9A) and from a transfer of value in securities as provided for in sub-article (13)(b)(ii); and

(v) gains or profits arising from the transfer of the ownership or usufruct of or from the assignment or cession of any rights over any interest in a partnership. For the purposes of this subparagraph "transfer" shall mean:

(a) a transfer of a full or partial interest and any alienation of any such full or partial interest in a partnership; and

(b) a deemed transfer of an interest in the partnership. Where a person acquires or increases a partnership share there is a deemed transfer of an interest in the partnership to that partner from the other partners;

(b) In this article -"partnership" means -

(a) any partnership constituted under the Companies

Act or under the Commercial Partnerships Ordinance, being either a commercial partnership or a commercial en nom collectif partnership the capital of which en commandite is not divided into shares;

(b) except for the purposes of sub-paragraph (v)(b), any other partnership having a legal personality distinct from that of its members constituted, incorporated or registered under any other law in force in Malta;

(c) any body of persons constituted, incorporated or registered outside Malta, and of a nature similar to the aforesaid partnerships;

(d) a European Economic Interest Grouping (EEIG) formed pursuant to the provisions of the Companies Act (European Economic Interest

Grouping) Regulations; "partnership share" means the share to which a person is entitled in the income of the partnership and to assets available for distribution on a winding up of the partnership; "transfer" includes any assignment, sale, emphyteusis or sub-emphyteusis, partition, donation, settlement of property on trust, distribution and reversion of property settled on trust, sale by instalments, and any alienation under any title including any redemption, liquidation or cancellation of units or shares in a collective investment scheme as defined in article 2 of the Investment Services Act and maturity or surrender of linked long term policies of insurance, and any occurrence that is deemed to be a transfer in accordance with the provisions of sub-articles (9A) and (13)(b), and for the avoidance of doubt includes any transfer of an asset by a company to its shareholders, or by a commercial partnership or en nom collectif commercial partnership en commandite the capital of which is not divided into shares to its members, in the course of winding up the company or partnership or in the course of a distribution of assets to its shareholders or partners pursuant to a scheme of distribution, but does not include a transfer or a transfer of property by causa mortis, the trustee of a disability trust or disability foundation to any one or more of the remaining beneficiaries of such trust or foundation or the heirs of the disabled beneficiary upon the death of the disabled beneficiary of such trust or foundation and where such remaining beneficiaries or heirs comprise only persons referred to in sub-article (2)(e)(i); for the purposes of this article, the expressions ''disability trust'' and ''disability foundation'' shall have the meaning assigned to them in article 12(1)(z); and "securities" shall mean shares and stocks and such like instrument that participate in any way in the profits of the company and whose return is not limited to a fixed rate of return, units in a collective investment scheme as defined in article 2 of the Investment Services Act, and units and such like instruments relating to linked long term business of insurance.

(2) For the purpose of ascertaining the gains or profits arising from any transfer of immovable property in terms of sub-article (1)(a)(i) -

(a) there shall be deducted in such manner and amount as may be prescribed, the cost of acquisition, the inflation element, any ground-rent paid on the property and for which a deduction is not due to the taxpayer under any other provision of this Act, maintenance, improvements, other expenses that have increased the value of the immovable property since it was acquired and other expenses directly related to the transfer;

(b) any transfer of immovable property by means of a deed of exchange shall be considered as if separate deeds of transfer were taking place between the parties to the deed;

(c) where immovable property is granted on emphyteusis or sub-emphyteusis for a period exceeding fifty years, or extendable to such periods, the following rules shall apply:

(i) where the premium exceeds the cost of acquisition in accordance with paragraph (a) hereof, such excess shall be deemed to be gains or profits;

(ii) where the cost of acquisition in accordance with paragraph (a) hereof exceeds the premium such excess shall be deductible from the gains or profits arrived at in accordance with sub-paragraph (iii) hereof;

(iii) no account shall be taken of any ground-rent or increase in ground-rent involved in the transfer unless and until such ground-rent or increase in ground-rent is redeemed, or the directum or as the case dominium sub directum dominium, may be, is transferred and in such case the gains or profits shall be deemed to be the price of redemption or sale less any deduction in accordance with sub-paragraph (ii) hereof;

(d) (i) a transfer shall not include a contract of partition where no owelty is due to any of the co-partitioners, and upon a transfer of any property by a co-partitioner the cost of acquisition shall be deemed to be the cost of acquisition of the property in question at the time of acquisition by the co-partitioner;

(ii) for the purposes of this paragraph only the immovable property held in common and partitioned shall be taken into account, and where money or other movables held in common is assigned to a co-partitioner in consideration for the reduction in the share of immovables assigned to him the partition shall be deemed to be one where an owelty has been paid;

(iii) where a person receives an owelty on a contract of partition he shall be deemed to have made capital gains as is equivalent to as much of the increase in the value of the property between the time of the acquisition by the co-partitioners and the time of partition, so however that tax on capital gains shall only be payable at the time of partition on such part of the capital gains made as is not included in the increase in the value of the property assigned to that co-partitioner between the time of acquisition by the co-partitioner and the partition, and where such co-partitioner transfers the property assigned to him the cost of acquisition shall be deemed to be the cost of acquisition of the immovables when acquired by the co-partitioners before the partition;

(iv) where a co-partitioner pays an owelty at the time of the partition, he shall be deemed to have made no capital gain at the time of the partition, and where such co-partitioner transfers any immovable property assigned to him in the partition, the cost of acquisition shall be deemed to be such portion of the sum of the cost of acquisition of the co-partitioner’s share of all the immovables partitioned together with the owelty paid on the contract of partition, as is equivalent to the portion of the value of the immovable transferred to the total value of immovables assigned to the co-partitioner in the deed of acquisition;

(e) a donation shall be considered as a deemed sale made at the market value of the property at the time of transfer. Provided that no tax shall be payable where the donation is made by a person to:

(i) his spouse, descendants and ascendants in the direct line and their relative spouses, or in the absence of descendants to his brothers or sisters and their descendants, or

(ii) philanthropic institutions approved for the purposes of article 12(1)(e);

(f) without prejudice to the provisions of article 12(1)(e), where the property referred to in paragraph (e) is disposed of by the donee within five years of the donation, the donee shall be charged on the gain ascertained in accordance with the provisions of this article by taking into account the cost of acquisition of the property at the time it was acquired by the donor; where the property is sold by the donee after the lapse of five years the cost of acquisition shall be deemed to be the value of the property as declared in the deed of donation;

(g) gains and profits relating to a transfer by donation, settlement of property in trust, or distribution or reversion of property settled in trust means the difference in the market value of the property at the time of the donation, settlement, distribution or reversion and the cost of acquisition of the property at the time of acquisition of the property by the donor, settlor or trustee as the case may be. The relevant instrument pursuant to which the said transfers were effected shall include a declaration of the said market value.

(3) For the purpose of ascertaining the gains or profits arising from any transfer of property in terms of sub-article (1)(a)(ii):

(a) the acquisition cost of shares acquired before the 25th November, 1992 shall be valued either on the Equity method of share valuation (net asset value) based on the last accounts submitted to the Commissioner by the 18th December, 1992 by taking into account the value of immovable property existing in the said accounts and adjusted in terms of sub-article (2)(a) or on the actual purchase price, whichever is the higher;

(b) listed shares quoted on a stock exchange on the 25th November, 1992 shall be valued at the price existing on that date; and in the case of shares quoted in foreign currency, the rate of exchange (middle rate of the Central Bank) on that date shall be used;

(c) shares acquired after the 25th November, 1992, shall be valued on the cost of acquisition: Provided that with respect to shares acquired under a share option scheme the cost of acquisition shall be established in accordance with such rules as may be made by the Minister responsible for finance: Provided further that where an amount standing to the credit of any of a company’s reserve accounts, other than a capital redemption reserve and profits available for distribution, is applied in paying up to any extent any shares allotted by the company, the cost of acquisition of such shares shall be zero: Provided also that the acquisition cost of shares resulting from a conversion of a partnership into a company as referred to in article 45B shall be the cost of acquisition of the interest (representing those shares) held in the partnership that had been converted into the said company;

(d) where on a share transfer the rights pertaining to those shares are changed in any way, the transfer value of the shares shall be taken as if no such change has been made;

(e) any transfer consisting of an exchange shall be considered as if two separate transfers were taking place; and

(f) the provisions of sub-article (2)(d), (e), (f) and (g) shall apply to this sub-article; mutatis mutandis

(g) in the case of a transfer of shares listed on a stock exchange recognised by the Commissioner for the purpose of this provision not being securities in a collective investment scheme and not being exempt from tax under the provisions of sub-article (6)(b):

(i) the transfer value shall in no case exceed the market value of the said shares immediately upon being admitted to listing, and

(ii) the cost of acquisition taken into account shall be the cost of acquisition of the original shares: For the purpose of this paragraph "original shares" shall have the same meaning assigned in sub-article (6)(b).

(3A) For the purpose of ascertaining the gains or profits arising from any transfer of property in terms of sub-article (1)(a)(v):

(a) the acquisition cost in each of the circumstances mentioned in this paragraph shall, subject to any adjustments that may be prescribed, be determined as follows:

(i) the acquisition cost of an interest acquired from an existing partner shall be the actual purchase price;

(ii) the acquisition cost of an interest acquired causa mortis shall be the lower of the value declared in a deed of transfer and the price causa mortis which that interest would have fetched had it been sold on the open market on the date of that acquisition;

(iii) the acquisition cost of an interest acquired by way of a capital contribution made to the partnership shall be the amount or value of such contribution;

(iv) the acquisition cost of an interest resulting from a conversion of a company into a partnership as referred to in article 45A shall be the cost of acquisition of the shares (representing that interest) held in the company that had been converted into the said partnership: Provided that where the said shares consist of shares whose return is limited to a fixed rate of return the acquisition cost shall be taken to be zero; and

(b) any transfer consisting of an exchange shall be considered as if two separate transfers were taking place; and

(c) the provisions of sub-article (2)(d), (e), and (f) and shall apply mutatis mutandis to this sub-article.

(4) The provisions of sub-article (2)(d) shall apply mutatis mutandis where the assets partitioned include both assets under sub-article (1)(a)(i) and (ii).

(5) The provisions of sub-article (1)(a)(i) shall not apply to gains or profits relating to transfer of immovable property:

(a) where a copy of the relevant deed of transfer dated prior to the 25th November, 1992 or of the relevant promise to transfer or acquire also dated prior to the 25th November, 1992, made in favour of the transferee, has been duly registered with the Inland Revenue Department by the 1st December, 1992 and a certificate to that effect has been issued by the Commissioner or, in the case of a deed of transfer, the deed has been duly enrolled in the Public Registry by the 1st December, 1992;

(b) where the Commissioner is satisfied that the property or undivided part of the property has been owned and occupied for a period of at least three years as the transferor’s own residence immediately preceding the date of transfer and provided that the property is disposed of within twelve months of vacating the premises;

(c) for the purposes of paragraph (b) "own residence" means the principal residence owned by the taxpayer or his spouse being a dwelling house which has been the owner’s only or main residence, including land, transferred through the same deed with the principal residence, which the owner has for his own occupation and enjoyment with that residence as its garden or grounds consisting of an area which, regard being had to the size and character of the dwelling house, is required for the reasonable enjoyment of it as a residence. A garage attached to or underlying a house or a block of flats, or a garage of not more than seventy square metres situated within five hundred metres of the dwelling house, and transferred through the same deed with the principal residence shall be deemed to be included as part of the residence. The period of residence includes the physical occupation of the premises and any absences from Malta such as on account of foreign employment, holiday or study as well as any absences due to illness, or care in a hospital or home for the elderly, provided that the premises in question are not being used or employed for any other purpose during such absence. Any part of the house, garden or grounds which is used exclusively for commercial purposes for any time within two years of the transfer, or which is not required for the reasonable enjoyment of it as a residence shall not be considered as "own residence" and this part shall be apportioned on the basis of the area occupied for this purpose as a proportion of the whole area of the relative dwelling house, garden or grounds:

(d) where the property was taken over by Government and in respect of which a declaration by the President of Malta has been issued in terms of the Land Acquisition (Public Purposes) Ordinance before the 25th November, 1992;

(e) where the property is assigned between spouses consequent to a judicial or consensual separation or a divorce;

(f) where the property formed part of the community of acquests between the spouses or was otherwise owned in common between them and is assigned to one of the spouses on the dissolution of the community or is partitioned between the spouses, or the surviving spouse and the heirs of the deceased spouse;

(g) where the property is assigned on emphyteusis for fifty years or less.

(6) The provisions of sub-article (1)(a)(ii) shall not apply to gains or profits relating to:

(a) (deleted by Act II. 2009.10.);

(b) transfer of shares listed, or in consequence of a listing, on a stock exchange recognised by the Commissioner for the purpose of this provision not being securities in a collective investment scheme;

(c) transfer of securities listed on a stock exchange recognised by the Commissioner for the purpose of this provision being securities in a collective investment scheme held in a prescribed fund as defined in article 41A(b);

(d) transfer of units and such like instruments relating to linked long term business of insurance where the benefits are wholly determined by reference to the value of, or income from, securities to which either paragraph (b) or (c) applies;

(e) property transferred in the circumstances listed in sub-article (5)(e) and (f).

(6A) The provisions of sub-article (1)(a)(v) shall not apply to gains or profits relating to property transferred in the circumstances referred to in sub-article (5)(e) and (f).

(7) Where a person is entitled to capital allowances under article 14(1)(f) and (j) in respect of a capital asset which is sold at a price exceeding its cost of acquisition and any improvements made thereto, the cost of acquisition shall be computed on the cost of acquisition and the cost of any improvement made thereto.

(8) Where an asset referred to in sub-article (1)(a) used in a business for a period of at least three years is transferred and replaced within one year by an asset used solely for a similar purpose in the business, any capital gains realised on the transfer shall not be taxed but the cost of acquisition of the new asset shall be reduced by the said gain. When the asset is disposed of without replacement, the income, whether chargeable under this article or under article 4(1)(a), shall take into account the transfer price and the cost of acquisition reduced as aforesaid: Provided that, unless otherwise authorised by the Commissioner, provisional tax as provided in article 43(1)(b) of that Act shall be payable on any transfer to which this sub-article applies:

Provided further that if the capital gain exceeds the cost of acquisition of the replacement property any excess is to be taxable in the year in which the replacement property was acquired and the cost of acquisition of the replacement property to be taken into account on a subsequent transfer will be zero.

(9) (i) Where an asset is transferred from one company to another company and such companies are:

(a) deemed to be a group of companies for the purposes of article 16, or

(b) controlled and beneficially owned directly or indirectly to the extent of more than fifty per cent by the same shareholders, it shall be deemed that no loss or gain has arisen from the transfer. In ascertaining the income, whether chargeable under this article or under article 4(1)(a), where such an asset is subsequently transferred by a company to another company which does not fall within the provisions of paragraphs (a) or (b), or to another person, as the case may be, the base cost and the date of acquisition of the asset that would be considered shall be the original cost and the date when it was acquired before the transfer from the first company, being the company within the group, took place: Provided that the Minister may by rules prescribe conditions for the relief envisaged in this sub-article that are different from those provided for in this paragraph, and those rules shall apply to transfers that are made after such date as may be prescribed.

(ii) Where an asset falling under the circumstances referred to in paragraph (i) is in the form of immovable property which is transferred by a company to another company that falls within the provisions of sub-paragraphs (a) and (b) of the said paragraph, or of rules prescribed in accordance with the said paragraph, or where the said immovable property is subsequently transferred to another company which does not fall within the said provisions, or to another person, as the case may be, the notary publishing the relative deed of transfer shall attach to the said deed a notice made in such manner and containing such details as may be prescribed by the Minister.

(iii) Where the asset referred to in paragraph (i) consists of immovable property situated in Malta or shares in a property company, the provisions of this sub-article shall only apply where the individual direct or indirect beneficial owners of the companies referred to in paragraph (i) are the same and each such individual holds, directly or indirectly, substantially the same percentage interest in the nominal share capital and voting rights in each of the said companies. For the purpose of this paragraph the proviso to the definition of ''property company'' in article 2(1) shall not apply:

Provided that for the purpose of this paragraph an individual is deemed to hold substantially the same percentage interest in the nominal share capital and voting rights in each of the said companies where the difference between the percentage interest held in each company does not exceed twenty percent: Provided further that where an individual holds, directly or indirectly, less than twenty percent of the nominal share capital and voting rights in only one of the said companies, such individual shall, for the purpose of this paragraph, not be taken into account in determining whether the individual direct or indirect beneficial owners of the said companies are the same:

Provided also that if more than one individual holds, directly or indirectly, less than twenty percent of the nominal share capital and voting rights in only one of the said companies, the previous proviso shall not apply where together such individuals hold, directly or indirectly, twenty percent or more of the nominal share capital and voting rights in that company: Provided also that the whole of this paragraph shall not apply, where the companies referred to in paragraph (i) are directly or indirectly owned as to eighty percent or more by a company whose securities are listed on a stock exchange recognised by the Commissioner for the purpose of this provision.

(iv) Where an asset, qualifying for tax relief under this article, is transferred from one company to another company and the company acquiring the asset issues shares in exchange for the acquired asset, whether to the transferring company or to any other person, the cost of acquisition of the said shares shall, for the purpose of calculating the gains or profits derived from the subsequent transfer of the said shares, be reduced (but not below zero) by an amount determined by deducting from the transfer value of the asset its cost of acquisition to the transferring company:

Provided that this paragraph shall not apply where the said asset is charged to tax under the provisions of sub-article (9A) of this article or article 5A(12A).

(9A) (a) If a company ("the chargeable company") holds shares in a company, which had been acquired from another company, and such acquisition was exempt from tax under sub-article (9), this sub-article shall apply if the chargeable company ceases to be a member of the original group before the lapse of six years from the date of the said acquisition. References in this sub-article to a company ceasing to be a member of a group do not apply to cases where a company ceases to be a member of the original group by being wound up or dissolved or in consequence of another member of the original group being wound up or dissolved: Provided that where a company ceases to be a member of the original group by being wound up or dissolved, for the purpose of determining whether the chargeable company ceases to be a member of the original group under paragraph (b), such company shall be deemed to have remained in existence.

(b) The chargeable company shall cease to be a member of the original group, if such company and the company from which it had acquired the shares referred to in paragraph (a) no longer satisfy the provisions of sub-article (9)(i) and (iii) and such determination shall be made by reference to the same individuals referred to in paragraph (iii) of the said sub-article taken into account in determining whether the two companies referred to in this paragraph satisfied the provisions of sub-article (9)(i) and (iii) on the date of the acquisition referred to in paragraph (a): Provided that where the acquisition referred to in paragraph (a) took place before the 1st January 2010, sub-article (9)(iii) shall be disregarded for the purpose of determining whether a company ceases to be a member of a group: Provided further that where the chargeable company ceases to be a member of the original group, solely as a result of a change in the direct or indirect individual shareholders of the company from which it had acquired the shares referred to in paragraph (a), the chargeable company shall, for the purpose of this paragraph, not be treated as ceasing to be a member of the original group as a result of such change, so however that for the purpose of determining whether the chargeable company ceases to be a member of the original group it shall be deemed that such change had not taken place and such determination shall be made by reference to the same individuals referred to in sub-article (9)(iii) taken into account in determining whether the chargeable company and the company from which it had acquired the shares satisfied the provisions of sub-article (9)(i) and (iii) on the date of the acquisition referred to in paragraph (a).

(c) For the purpose of this sub-article the term "original group" shall mean the two companies referred to in paragraph (b), and the individual direct or indirect beneficial owners of the said companies who were taken into account in determining whether the provisions of sub-article (9)(i) and (iii) had been satisfied on the date of the acquisition referred to in paragraph (a): Provided that where the two companies referred to in this paragraph are directly or indirectly owned as to eighty percent or more by a company whose securities are listed on a stock exchange recognised by the Commissioner for the purpose of this provision the term "original group" shall mean the two companies referred to above and the company whose securities are listed on the said stock exchange as existing on the date of the acquisition referred to in the paragraph (a): Provided further that where an individual acquires shares in terms of a donation exempt from tax under the provisions of sub-article (2)(e), or a transfer causa such individual shall be deemed for all the mortis, purposes of this sub-article to have held such shares from the date such shares were previously acquired in an acquisition preceding the date of the donation or the transfer causa mortis.

(d) When the chargeable company ceases to be a member of the group it shall be treated for all the purposes of this article as if, immediately after its acquisition of the shares referred to in paragraph (a), it had transferred and immediately re-acquired the shares at that time.

(e) The base cost and the date of acquisition of the shares that is taken into account for the purpose of determining any gain or loss shall be the original cost and the date when the shares had previously last been acquired by a company by means of a transfer that did not qualify for an exemption in terms of sub-article (9) or by means of an allotment, which ever is the later.

(f) (i) For the purpose of ascertaining the gains or profits arising under this sub-article, the acquisition cost of shares acquired before the 25th November, 1992 shall be valued either on the Equity method of share valuation (net asset value) based on the last accounts submitted to the Commissioner by the 18th December, 1992 or on the actual purchase price, whichever is the higher.

(ii) Shares acquired on or after the 25th November 1992, shall be valued on the cost of acquisition: Provided that where an amount standing to the credit of any of a company’s reserve accounts other than a capital redemption reserve and profits available for distribution, is applied in paying up to any extent any shares allotted by the company, the cost of acquisition of such shares shall be zero.

(g) Any gain or loss on the transfer referred to in paragraph (d) shall be treated as accruing to the chargeable company immediately before the company ceases to be a member of the group in accordance with paragraph (b).

(h) For the purpose of paragraph (a) the term "shares in a company" shall mean shares in a company which, on the date of the acquisition referred to in the said paragraph owned, directly or indirectly, any immovable property situated in Malta or any real rights thereon and the said property or any part thereof is still, directly or indirectly, owned by such company on the date it ceases to be a member of the group in accordance with the provisions of paragraph (b). For the purpose of this paragraph a company is treated as indirectly owning immovable property if it holds, directly or indirectly, shares or other interests in any entity or person, which owns immovable property situated in Malta or any real rights thereon where five percent or more of the total value of the said shares or other interests so held is attributable to such immovable property or rights.

(i) Where in accordance with paragraph (d) the chargeable company is treated as having transferred and immediately reacquired the shares, and a chargeable gain or a capital loss accrues to the chargeable company on the deemed transfer, the chargeable gain or capital loss accruing on the deemed transfer shall be treated as accruing not to the chargeable company but to a related company ("company A") if -

(i) at the time of accrual, company A was incorporated in Malta, and

(ii) a joint election under this paragraph is made by the chargeable company and company A to treat the chargeable gain or capital loss as accruing to company A, and

(iii) such joint election is made by notice given to the Commissioner not later than twelve months after the end of the accounting period of the chargeable company or company A (whichever is the earlier) in which the time of accrual fell, and

(iv) provisional tax payable in accordance with article 43 of the Income Tax Management Act, is paid by company A at a rate of thirty-five percent of the market value of the shares deemed transferred within the period prescribed in the said article. For the purpose of this paragraph company A is related to the chargeable company if both companies form a group for the purposes of sub-article (9) at the time of accrual and "time of accrual" means the time at which, by virtue of paragraph (d), the gain or loss is treated as accruing to the chargeable company.

(10) (a) A capital loss shall be computed in the same manner as a capital gain.

(b) Any loss resulting from the transactions falling under sub-article (1) shall not be set off against other income for the year of assessment but shall be carried forward and set off against capital gains in respect of subsequent years of assessment until the full loss is absorbed.

(c) Bad debts incurred in relation to the said transactions proved to the satisfaction of the Commissioner to have become bad during the year immediately preceding the year of assessment, notwithstanding that such bad debts were due and payable prior to the commencement of the said year, shall be allowed as a deduction against the capital gains in the year in which they were incurred and if there are no gains for that year shall be carried forward and set off against future gains:

Provided that all sums recovered in respect of amounts previously allowed as bad debts shall be treated as gains for the purposes of this article and charged accordingly for the year in which they are recovered.

(11) The gains or profits from any transaction chargeable under paragraph of article 4(1)(a) shall not be chargeable again as capital gains in relation to the same transaction under this article.

(12) (a) The market value of an asset shall be the price which that asset would fetch if sold on the open market at the time of transfer;

(b) where the market value of an asset is required to be determined by the Commissioner he may seek the opinion or assistance of any appraiser, architect or other valuer; and

(c) the person making the appraisement or valuation on behalf of the Commissioner shall for the purpose of carrying out the task so entrusted to him be deemed to be a person serving in the Department of the Commissioner and as having an official duty under this Act.

(13) (a) Where a person transfers an asset which, at the time of acquisition, formed an undivided part of a larger asset (hereinafter in this paragraph referred to as "the whole asset"), the deductions allowable in ascertaining the gain arising from that transfer shall be equivalent to such proportion of the cost of acquisition of the whole asset and of the other deductions that would be due in terms of this article had that person transferred the whole asset, as the consideration for the transfer bears at the time of the transfer to the market value of the whole asset.

(b) (i) A reduction of the share capital of a company shall be deemed to be a transfer of such proportion of the holding of the owner as is equal to the proportion of the reduction of the capital of the company and shall constitute a gain or loss for the purpose of this article in the year in which such reduction is effected: Provided that where there is a proportionate reduction in the shareholding of all the shareholders, such that the proportion of the shareholding of each shareholder with respect to number, type, class, voting rights and value of shares is equal before and after the reduction is effected, it shall be deemed that no loss or gain has arisen from the transfer.

(ii) Where the market value of shares held by a person ("the transferor") in a company has been reduced as a result of a change in the issued share capital of such company, or a change in voting rights attached to such shares, and such value passes into other shares in or rights over the company held by any other person ("the transferee"), the transferor shall be deemed to have made a transfer of such value so reduced to the transferee. Any gains or profits shall be calculated by taking into account the difference between the market value of the shares held immediately before and after the said change: Provided that this paragraph shall not apply where the change in the issued share capital or change in voting rights does not produce any change in the individual direct or indirect beneficial owners of the said company and in the proportion in the value of the said company represented by the shares owned beneficially directly or indirectly by each such individual: Provided further that this paragraph shall not apply where the change in the issued share capital consists of an allotment of shares in a company as a result of an exchange of shares on a restructuring of holdings exempt from tax under the provisions of sub-article (14): Provided also that this paragraph shall not apply where the said company is a company whose securities are listed on a stock exchange recognised by the Commissioner for the purpose of this provision: Provided also that this paragraph shall not apply where the transfer of value is made by the transferor to a person referred to in sub-article (2)(e)(i): Provided also that this paragraph shall not apply where the said company is not a "property company" and it can be shown to the satisfaction of the Commissioner that the said change is effected for commercial reasons and bona fide does not form part of a scheme or arrangements of which the main purpose, or one of the main purposes is avoidance of liability to tax. For the purpose of this paragraph the proviso to the definition of ''property company" in article 2(1) shall not apply.

(c) On any subsequent transfer of the shares referred to in paragraph (b)(i), the cost of acquisition shall be deemed to be the residual part of the cost of acquisition not taken into account on the reduction of capital.

(14) Where a transfer involving the exchange of shares on restructuring of holding upon mergers, demergers, divisions, amalgamations and reorganisation takes place it shall be deemed that no loss or gain has arisen from such transfer and the cost of acquisition upon a subsequent transfer of the original shares or the new shares shall be deemed to be the cost of acquisition of the original shares. For the purposes of this sub-article -

"original shares" means shares held before and involved in the restructuring, and

"new shares" means, in relation to any original shares, the shares in the company which, as a result of the restructuring, represent the original shares: Provided that the provisions of this sub-article shall only apply in such manner and in such circumstances as may be prescribed by the Minister: Provided further that the first proviso hereof shall not apply to divisions and mergers where the draft terms of the said divisions and mergers had been forwarded to the Registrar of Companies for registration in terms of the provisions of the Companies Act on or prior to the 24th November, 2003 and the Registrar had published the relevant statement in the Government Gazette in terms of the said Act on or prior to the 31st December, 2003, provided that a copy of the relative publication is attached to the relative deed.

(15) Where a business or a partnership as a en nom collectif, going concern is incorporated into a limited liability company, which is beneficially owned to the extent of not less than seventy-five per cent by the same person who owned the business or the partnership and there is a transfer of assets it shall en nom collectif be deemed that no loss or gain has arisen from the transfer. Provided that where such assets are subsequently transferred by the company, the base cost and date of acquisition of the assets that would be considered, whether chargeable under this article or under article 4(1)(a), shall be the original cost and the date when it was acquired before the first transfer took place: Provided further that this article shall apply only where an individual or a partnership transfers to a company en nom collectif a business as a going concern, together with the whole assets of the business, or together with the whole of those assets other than cash, and the business is so transferred wholly in exchange for shares issued by the company to the person transferring the business: Provided also that for the purpose of computing any chargeable gain accruing on the disposal of the said shares, the cost of acquisition taken into account shall be reduced by any chargeable gain that would have resulted on the transfer of the said business had this sub-article and article 5A not been applied.

(16) For the purposes of this article the value of the usufruct and of the nuda proprietas shall be computed in accordance with the provisions set out in the Duty on Documents and Transfers Act.

(17) The Minister may make rules making provision for the purpose of removing the effect of any scheme made for the purpose of avoiding, reducing or postponing any tax due under this article, and in addition the Minister may make rules providing that any transfer of any right referred to in sub-article (1) shall only be valid if it is made by agreement in writing and if payment of such portion of the provisional tax on the capital gains due thereon is made as may be prescribed and if the said agreement is registered in such manner as may be prescribed with such authority as may be prescribed.

(18) On the settlement of property on trust, where the trust is established or evidenced by means of a written instrument it shall be deemed, for the purposes of this article that -

(a) no transfer had taken place where the sole settlor is also the sole beneficiary of such trust;

(b) such property had been donated directly by the settlor of such trust to the beneficiaries that are persons other than the settlor himself: Provided that -

(i) the relevant trust instrument specifically provides that the beneficiaries have an irrevocable vested right to receive all the property settled in trust as specified in the said written instrument; and

(ii) the relevant trust instrument specifically provides that the beneficiaries are, in relation to each settlor, persons referred to in sub-article (2)(e)(i), whether they are in existence or not at the time of such settlement, or are persons referred to in paragraph (e)(ii) of the said sub-article in each case, such persons being either alone or with the settlor himself; and

(iii) the beneficiaries include persons who are in existence at the time of the settlement of such property on trust;

(c) no loss or gain had arisen: Provided that -

(i) the relevant trust instrument specifically provides that the beneficiaries of such trust comprise only persons referred to in sub-article (2)(e)(i), whether they are in existence or not at the time of such settlement, in relation to each settlor and may also include the said settlor himself; and

(ii) the beneficiaries of such trust include at the time of such settlement a person who by reason of an interdiction, incapacitation, or of a physical or mental impairment, or by reason of an irregular or dissolute lifestyle is substantially limited in his ability to administer or manage the property settled in trust, or include at the time of such settlement a person who by reason of a physical or mental impairment is or may become unable to fully provide for his own maintenance, and where the trustee of such trust provides the Commissioner with the necessary evidence proving such interdiction, incapacitation, impairment or inability in the form of medical certificates, court orders or any other relevant documents which the Commissioner may deem necessary; and

(iii) the beneficiaries of such trust include persons who are in existence at the time of the settlement of such property.

(19) (a) For the purposes of the provisions of sub-article

(1)(a)(iii), gains or profits shall be deemed to arise on the date of the execution of a written instrument (hereinafter in this sub-article referred to as "transfer instrument") whereby there is a transfer of the beneficial interest in a trust which includes taxable trust property. For the purposes of this sub-article "taxable trust property" means property referred to in sub-article (1)(a): Provided that this phrase includes only such property, the transfer of which, had it been carried out directly by the relevant beneficiary, would have given rise to gains or profits chargeable to tax in accordance with the provisions of this Act.

(b) The gain or profit arising from the transfer of the beneficial interest in a trust which has taxable trust property shall be equal to the consideration for the said beneficial interest as declared in the relevant transfer instrument. No deductions shall be allowable against the consideration payable to the transferor.

(c) The gain or profit that is determined in accordance with paragraph (b) shall be taxable at the rate specified in article 56(6). No relief, reduction, credit or set-off of any kind shall be made in respect of such tax.

(d) In addition to the requirements laid down in Sub-Title VII of Title VI of Part II of Book Second of the Civil Code, any person transferring the beneficial interest in a trust which includes taxable trust property shall, within forty-five days of the date on which the transfer instrument was executed, provide the trustee of such trust with an authenticated copy of the said transfer instrument and shall require the trustee to collect an amount of tax equal to the tax determined in accordance with the provisions of paragraph (c) for onward payment to the Commissioner.

(e) The tax so collected by the trustee from the transferor in accordance with the provisions of paragraph (d) shall be a debt due from the trustee to the Commissioner payable by not later than the fourteenth day following the end of the month in which the trustee had collected the tax. Together with this payment, the trustee shall provide the Commissioner with -

(i) an account of the gains or profits together with a list of all the assets making up the taxable trust property on the date the transfer instrument was executed on such form as may be prescribed;

(ii) an authenticated copy of the relevant transfer instrument; and

(iii) a copy of the last financial statements of the trust.

(f) The trustee of the relevant trust shall, by not later than fifteen days from the date when he receives acknowledgement from the Commissioner of receipt of the tax and documents referred to in paragraph (e), furnish the parties to the transfer instrument with a certificate evidencing that the tax has been paid and that his obligations under paragraph (e) have been fulfilled.

(g) Notwithstanding the provisions of Sub-Title VII of