S.L. 123.189 ст. 6The chargeable income of the fiscal unit. Cap. 372. Cap. 372.

(1) The chargeable income of a fiscal unit for a year of assessment shall be computed as if such income was derived by the principal taxpayer and shall be chargeable to tax in the name of the principal taxpayer at the rate/s applicable thereto:

Provided that in computing such chargeable income:

(a) all transactions occurring between two or more companies forming part of the fiscal unit (including any receipts, payments, revenues, expenses, transfers of assets, distributions, accruals or otherwise) in the year preceding the year of assessment (hereinafter "ignored transactions") shall be deemed not to have occurred, so however that transactions falling within the purport of article 5A of the Act or transactions involving the transfer of shares in a property company shall in no case fall within the purport of such ignored transactions:

Provided that dividends distributed by a transparent subsidiary to its parent company out of taxed profits that it derived prior to it becoming a transparent subsidiary shall not be considered to be an ignored transaction and shall be deemed in terms of paragraph (b) to be dividend income derived by the principal taxpayer of the fiscal unit of which the transparent subsidiary forms part;

(b) all income derived by companies forming part of the fiscal unit in the year preceding the year of assessment and which are not ignored transactions shall be deemed to be derived by the principal taxpayer:

Provided that any such income shall retain the same character and shall be deemed to have been derived from the same source and the same country and be allocated to the same tax account as if the said income was received by the said principal taxpayer;

(c) all outgoings and expenses incurred by companies forming part of the fiscal unit in the year preceding the year of assessment and which are not ignored transactions shall be deemed to be incurred by the principal taxpayer:

Provided that such outgoings and expenses shall be deductible against income attributable to the principal taxpayer in accordance, mutatis mutandis, with articles 14 to 26 of the Act, so however that in such case it shall be deemed that activities or transactions carried on by any person comprised within the fiscal unit are carried out by the principal taxpayer:

Provided further that, without prejudice to the generality of the preceding proviso, where any outgoings or expenses would have been deductible, save for the application of these rules, against income which is deemed not to have arisen as a result of the application of the provisions of paragraph (a), such outgoings or expenses shall be deductible against income attributable to the principal taxpayer as set out in paragraph (b), if, in the absence of a fiscal unit:

(i) such outgoings or expenses would have been deductible against income derived by a company, and

(ii) the expense resulting from the income generated by the company referred to in sub-paragraph

(i) would have been deductible in another company:

Provided also that if the income referred to in sub-paragraph (i) consists of a dividend, the provisions of sub-paragraph (ii) shall be deemed to be satisfied;

(d) any industrial building, structure or plant and machinery used or employed in acquiring income by a company forming part of the fiscal unit shall be deemed to be so used or employed by the principal taxpayer in acquiring the said income:

Provided that where a company forming part of the fiscal unit ("the transferor") sells or transfers under an onerous title any property to another company forming part of the fiscal unit and such company is required, but for the provisions of this paragraph, to render a balancing statement in terms of articles 5A(12B) or 24 of the Act, such sale or transfer of property shall be deemed not to have occurred and the transferor shall not be required to render such a balancing statement:

Provided further that deductions in respect of the wear and tear of the property that was sold or transferred shall continue to be calculated as though such sale or transfer did not occur;

(e) where any property in respect of which deductions under paragraphs (f) and (j) of article 14(1) of the Act have been claimed by the principal taxpayer or any company forming part of the same fiscal unit of the principal taxpayer is transferred under an onerous title to another company that does not form part of the fiscal unit, or to another person, as the case may be, or on the occurrence of the events set out in article 5A(12B) or in paragraphs (b) and (c) of article 24(1) of the Act, and the said transfer or event occurs while the company which owns the said property forms part of the fiscal unit, the obligation to render a balancing statement in terms of articles 5A(12B) or 24 of the Act, as the case may be, shall fall upon the principal taxpayer. In rendering such balancing statement, it shall be deemed that:

(i) the property had been acquired by the principal taxpayer for a cost equal to the original cost at which such property had been acquired by a company forming part of the fiscal unit, and

(ii) the deductions claimed by the principal taxpayer under paragraphs (f) and (j) of article 14(1) of the Act shall equal the total of any such deductions claimed in respect of the property by it and any other company forming part of the fiscal unit, irrespective of whether or not such company still forms part of the fiscal unit.

(f) any income or gains derived by a transparent subsidiary that is not resident in Malta shall be deemed to be attributable to a permanent establishment of the principal taxpayer situated outside Malta:

Provided that such transparent subsidiary maintains sufficient substance in terms of physical presence, personnel, assets or other relevant indicators, as is commensurate with the type and extent of activity being carried out in the relevant jurisdiction;

(g) where any income or gains are derived by a transparent subsidiary resident in Malta, or a transparent subsidiary not resident in Malta derives income or gains arising in Malta, where the principal taxpayer is a person to which any of sub-paragraphs (i) or (ii) of the proviso to article 4(1)(g) of the Act applies, the following shall be attributable to the principal taxpayer:

(i) all of the income and gains derived by the transparent subsidiary resident in Malta, which income and gains shall be deemed to arise in Malta:

Provided that where the transparent subsidiary resident in Malta is a person to which any of sub-paragraphs (i) or (ii) of the proviso to article 4(1)(g) of the Act applies, the income and gains attributable to the principal taxpayer shall be such income and gains as arise in Malta and such income as arises outside Malta but which is received in Malta; and

(ii) all of the income and gains arising in Malta of the transparent subsidiary which is not resident in Malta;

(h) any interest held by a transparent subsidiary in any body of persons not forming part of the fiscal unit shall be deemed to be held directly by the principal taxpayer;

(i) for the purposes of claiming a deduction in terms of paragraph (o) of article 14(1) of the Act and any rules made thereunder, the risk capital of the principal taxpayer shall be deemed to be:

(i) where the principal taxpayer is resident in Malta, the share capital, any share premium, positive retained earnings, loans or other debt borrowed by the undertaking which do not bear interest, and any other reserves resulting from a contribution to the undertaking, and any other positive balance which is shown as equity in the consolidated balance sheet prepared in terms of rule 11; and

(ii) where the principal taxpayer is not resident in Malta, that part of the risk capital, as defined in sub-paragraph (i), of that principal taxpayer that is attributable to the fiscal unit.

(2) Where the provisions of sub-articles (4) or (4A) of article 48 of the Income Tax Management Act (hereinafter in this sub-rule referred to as "the relevant sub-articles") would have applied to a shareholder of a company that forms part of a fiscal unit upon a receipt of a dividend from such company and such shareholder is specifically empowered to consolidate its results pursuant to Maltese law, the chargeable income of the fiscal unit shall be fully subject to tax at a rate determined by deducting from the rate referred to in sub-rule (1), that resulting from dividing the total amounts claimable by all members of the fiscal unit and, or persons entitled to receive distributions from the principal taxpayer in terms of the provisions of the relevant sub-articles, by the chargeable income of the fiscal unit.

(3) The provisions of sub-articles (4) or (4A) of article 48 of the Income Tax Management Act shall not apply in respect of profits relative to which the provisions of sub-rule (2) are claimed.