Legal Notice 382 of 2014, published on October 14, has extended the Investment Registration Scheme by two months, from its original September 30, 2014 deadline until November 30, 2014, thus giving the afore-mentioned persons a further opportunity to register any such holdings of eligible assets.

The Investment Registration Scheme Regulations, 2014 are aimed to provide Malta resident individuals and corporate entities, subject to tax in Malta, with the possibility to regularise their position when it comes to their holdings of eligible assets derived from income which has not been declared to the Maltese tax authorities for income tax and/or stamp duty purposes.

The legal notice not only amended the scheme when it comes to the extension of its duration but also made a number of other additional amendments, essentially broadening the range of assets that now qualify to be registered under the scheme.

In terms of the previous regulations, in order for eligible assets to be registered under the scheme, applicants must have had to provide documentary evidence showing that they held the eligible assets in question on November 4, 2013, the date on which the scheme was originally announced in the 2014 Budget.

Valuation computation of immovable property has been amended in order to ensure a level playing field

The regulations have been amended to now permit the registration of assets where no such documentary evidence is available, subject to their conversion into a one-year fixed deposit at a local bank prior to registration.

Hence, through such amendment, persons who on November 4, 2013 held assets that did not qualify as eligible assets, or have held such eligible assets but are not in possession of the relative documentary evidence, will now be able to register for the scheme provided that such assets are liquidated with the resultant liquidation proceeds then deposited in a one-year fixed account with a local bank.

Such fixed deposit account would be eligible for registration. Prior to the amendments there appeared to have been an anomaly in the Regulations with regard to the valuation of immovable property, specifically in relation to the computation of the valuation of the registered eligible asset and the resultant relative registration fee.

Pre-amendments, in instances where an applicant had immovable property registered in his own name or held such immovable property by virtue of a trust, this property had to be registered at the original price as per acquisition contract. On the other hand, in the case of an applicant holding shares in a company having assets consisting of immovable property, it was the current value of the shares of the company which had to be considered, specifically the current net asset value of the company.

The valuation computation of immovable property has been amended in order to ensure a level playing field, irrespectively of whether such property is owned directly in the name of an individual, or of a trust or of a company.

Prior to the publication of Legal Notice 382 of 2014, shares in a company had to be valued on the basis of the current net asset value of the company. This valuation can easily be carried out in jurisdictions where companies are statutorily obliged to draw up audited accounts; however, it can prove to be very problematic in the case of shareholdings in companies incorporated in jurisdictions where the preparation and filing of audited accounts is not mandatory.

The regulations were amended so that for companies registered in such latter jurisdictions, the applicant is allowed to register the current value of the assets held in the name of the company in question under a mechanism where the company is deemed to be acting as fiduciary of the applicant.

A further amendment brought about the inclusion of loans from one individual to another, which loans are explicitly intended to be advanced entirely to a company, as eligible assets. Previously, it was only shareholder loans and other advances extended directly to companies which were eligible to be registered.

Following the successful registration under the scheme, a person would be considered as not having committed any offences under all relevant laws covered by the scheme in relation to such registered assets. As a result, the taxpayer would not only be exempt from any action which may be instituted against him for past breaches, but also be exempted from all tax that would have been due on the accumulated undeclared income and gains derived from such eligible assets.

www.fenechlaw.com

Sarah Scicluna works at Fenech & Fenech Advocates, specialising in tax law.

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