The Investment Registration Scheme, launched in 2013, allows persons, who hold eligible assets that were derived from income (including realised capital gains) that has not been declared to the tax authorities, to regularise their position under the Income Tax Act. This Scheme shall run until the end of September 2014.
Advantages of the Scheme
When one does not declare income, and thus does not pay income tax on that income, one will expose oneself to prosecution under the Income Tax Act. Through registration under this Scheme, all individuals and companies are exempted from any action which may be taken against them for past breaches under all relevant laws.
Upon registration, the individual or company is exempted:
- From tax on income derived from eligible assets prior to date of registration;
- From tax on a qualifying asset that represents an accumulation of undeclared income derived by the applicant during the year immediately preceding any year of assessment commencing on or before 1 January 2013.
It is important to note that the tax exemptions apply only if the registered income has not been declared in a tax return and no tax has been assessed in relation to such declaration.
The term ‘eligible assets’ is defined by the Investment Registration Scheme Regulations as including:
- deposits as defined in the Banking Act;
- securities including shares and stock in the capital of a company;
- debentures, certificates of deposit, bonds, notes and any other similar instrument acknowledging indebtedness;
- units in a collective investment scheme, life and annuity long term insurance policies, whether index-linked or not (N.B. the insurance policies may be of various types, but non-life or general insurance policies are not eligible for registration);
- precious metal bullion (this extends to gold, platinum and silver bullion);
- warrants, options, futures and other derivatives as well as any other financial instruments entered into for investment purposes;
- loans to a non-resident company; and immovable property situated outside Malta.
The registration process requires the registrant to furnish the appointed registration agent with original documentary evidence confirming that the assets to be registered were held by the registrant or else have originated from that person if held by a fiduciary in a trust on the applicable date, 4 November 2013. Other special rules may apply depending on the case in question.
The submission by the applicant of false statements and/or documentation shall nullify the registration certificate and render the applicant ineligible for the benefits and exemptions granted under the Scheme.
It is important to note that the Central Bank of Malta may request other documentary evidence as it deems sufficient on a case by case basis.
Part of the registration process includes a declaration by the registrant, which constitutes the actual registration certificate itself. The original certificate is held by the registrant, a copy is held by the agent and a third copy is sent by the agent to the Central Bank of Malta as Central Registration Certificate Depository.
The declaration form consists of five sections:
- Section 1: Details on each type of the eligible assets to be registered;
- Section 2: Basic details on the applicant;
- Section 3: Details related to the value of the registered assets, registration fee and the commission of the agent. This section is to be filled in by the agent himself;
- Section 4: Registrant’s declaration;
- Section 5: Appointed Registration Agent’s declaration.
The registration of eligible assets is subject to a fee, which is equivalent to:
- In the case of immovable property, 7.5% of the original cost on date of purchase of the property;
- In the case of all other eligible assets, 7.5% if the current market value of the registered eligible assets. Under certain circumstances, the applicant may opt to register the assets at the acquisition cost instead of the Current Market Value.
The Current Market Value is established by a qualified professional within 3 months preceding the date of registration and presented to the appointed registration agent. The fee is payable to the agent, who is then obliged to forward the fees to the Government.
Service Fee Payable to the Agent
The appointed registration agent may charge a service fee in respect of the registration services, which shall amount to 5% of the registration fee paid by the applicant.
Apart from that, the agent may charge additional fees for ancillary services rendered to registrants over and above the normal registration services, ex: valuation services.
Position of Application Through Registration
Once a person registers eligible assets derived from undeclared income, there is no risk that such person would have to pay all past tax due on it. It is important to note, however, that breaches of VAT law are not covered by this Scheme, and thus they cannot be regularised through it.
The Investment Registration Scheme is open to foreign settlers who have a permanent residence permit. Since they are considered ordinarily resident but not domiciled in Malta, they are not taxed on all income arising worldwide. They must declare all income arising in Malta and all income arising from overseas sources and received in Malta.
The same conditions apply to those with a temporary residence permit. To the extent that such temporary residents are remitting to Malta undeclared income arising from overseas sources, or have undeclared income arising in Malta, they are entitled to regularise their position by registering the eligible assets derived from such undeclared income.
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