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COVID-19: Emergency Measures | Update 23

Contents

1. International News

  1. European Commission approves €11.5 million Maltese scheme to support investments in the production of coronavirus-relevant product
  2. OECD provides update on BEPS 2.0 developments

2. Legal Notice

  1. Legal Notice 191 of 2020 (Assignment of Rights Acquired under a Promise of Sale Agreement Rules, 2020)
  2. Legal Notice 192 of 2020 (Companies Act (Company Reconstructions Fun), Regulation, 2020

3. Administrative Notices

  1. Appointment of Special Controllers in terms of article 329B of the Companies Act. 
  2. Establishment of the COVID-19 Voluntary Organisations Emergency Fund

1. International News

1. 1 European Commission approves €11.5 million Maltese scheme to support investments in the production of coronavirus-relevant products

The European Commission has approved a Maltese aid scheme of €11.5 million to support investments in the production of products that are relevant to the coronavirus outbreak, including vaccines, ventilators and personal protective equipment. The Scheme was approved under the State Aid Temporary Framework adopted by the Commission on 19 March 2020, as amended on 3 April and 8 May 2020.

Under the scheme, the public support will take the form of direct grants, repayable advances and tax advantages. The scheme is open to all enterprises of all sectors capable of increasing production of coronavirus-relevant products or of diversifying existing production to be able to produce and manufacture such products.

The aim of the scheme is to enhance and accelerate the production of products directly relevant to the coronavirus outbreak. The aid will cover a significant share of the investment costs necessary for the creation of new production facilities. Furthermore, under the scheme, investment projects will have to be completed within six months after the date of granting the aid.

Source

1.2  OECD provides update on BEPS 2.0 developments

During a call held on 4 May 2020, the OECD reported that progress is being made toward the objective of reaching agreement with respect to Pillar 1 and Pillar 2 of the BEPS 2.0 project, which is aimed at addressing the tax challenges of the digitalisation of the economy. However due to COVID-19, the meeting of the Inclusive Framework on Base Erosion and Profit Shifting, which comprises the 137 jurisdictions participating in this project, that was planned for July 2020, together with the interim target of agreement on key policy features of new rules, has been postponed to October 2020. It was also noted that work on the project will continue into 2021.

Source

2. Legal Notices

2.1 Legal Notice 191 of 2020 (Assignment of Rights Acquired under a Promise of Sale Agreement Rules, 2020)

This Legal Notice regulates the taxation of assignments of rights acquired under a promise of sale agreement made on or after 1 January 2020, in line with the changes announced in the Budget Speech for 2020.

In terms of this Legal Notice in computing the income derived from an assignment, deductions shall only be allowable in respect of the following expenses if a number of conditions are satisfied:

  1. brokerage fees in respect of the said assignment;
  2. where the assignor acquired his rights from another person in terms of a previous valid assignment, the consideration, if any, which may have been paid by the assignor.

When the consideration for such an assignment does not exceed €100,000, the income derived from that assignment (less any deductible expenses, if any), shall be subject to tax at a final rate of 15%, payable within 21 days of the relative assignment.

When the consideration for an assignment exceeds €100,000, the first €100,000 shall constitute the ‘final tax portion’ and any amount over and above shall constitute the ‘excess portion’. In case that the assignor has incurred deductible expenses, the deductible expenses shall be apportioned between the final tax portion and the excess portion in line with the relevant rules, with the resulting tax base in each case being brought to charge as follows:

  1. in case of the final tax portion, the residual will be subject to tax at a final rate of 15%; and
  2. in case of the excess portion, the residual will constitute article 4(1)(a) income and must form part of the assignor’s chargeable income for the year of assessment in question and brought to charge at the appropriate rate or rates in terms of article 56 of the Income Tax Act. In determining the settlement tax due, the assignor should be able to claim a credit of the provisional tax of 7% payable by the assignor within 21 days of the relative assignment.

Anti-abuse provisions apply and other considerations are envisaged where the final rate is applied.

The Legal Notice also amends two Subsidiary Legislations, namely the Capital Gains Rules and the Tax on Property Transfers Rules, in order to reflect the above.

2.2 Legal Notice 192 of 2020 (Companies Act (Company Reconstructions Fund) Regulations, 2020

This Legal Notice creates and regulates the administration of the Company Recovery Fund, a fund intended to facilitate company recoveries instituted in accordance with article 329B of the Companies Act.

The Company Recovery Fund will be funded by the Malta Business Registry and will be utilised by the Official Receiver in the manner provided for in this Legal Notice, for the remuneration and expenses of a Special Controller appointed to take over, manage and administer the business of a company in respect of which a company recovery application has been made to the Court.

This Legal Notice also provides for the keeping of a list of persons eligible to act as Special Controllers for the purposes of article 329B of the Companies Act.  

3. Administrative Notices

3.1  Appointment of Special Controllers in terms of article 329B of the Companies Act

Further to Legal Notice 192 of 2020, MBR have issued a notice providing that the Official Receiver is receiving applications from individuals interested in being appointed as Special Controllers to assist Companies facing financial difficulties. More details in this regard are available here.

3.2  Establishment of the COVID-19 Voluntary Organisations Emergency Fund

The Malta Council for the Voluntary Sector (MCVS) with the support of the Parliamentary Secretary for Youth, Sports and Voluntary Organisations has launched the COVID-19 Voluntary Organisations Emergency Fund (COVID-VOEF) with the intention of providing financial support of up to €5,000 to registered and compliant Voluntary Organisations (VOs) working in the voluntary section in case of predicament or exceptional situations arising locally as a direct result of the COVID-19 pandemic.

The COVID-VOEF’s main objectives are to support VOs

  • whose operation is related and essential for the COVID-19 pandemic.
  • which, due to the COVID-19 pandemic, may suffer irreparable damage to their organisation which may result in the closure of the same organisation.
  • which, due to the COVID-19 pandemic, may face difficulties to retain and restart the operation at post pandemic stage.

The COVID-VOEF has been allocated with an initial budget of €125,000, with the amount be increased in case of support from third parties, and funds will be disbursed on a first-come-first served basis.

The MCVS has also published a set of guidelines and these may be accessed through this link.