INCOME TAX. The Reform continues... A benefit for thousands of taxpayers. No need to fill in any more income tax forms. DEPARTMENT OF INLAND REVENUE

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1 INCOME TAX The Reform continues... A benefit for thousands of taxpayers. No need to fill in any more income tax forms. DEPARTMENT OF INLAND REVENUE

2 The self-assessment system introduced during 1999 is being enhanced by new initiatives that will undoubtedly benefit many taxpayers who are annually bound to file the income tax return and self - assessment ( the green form) or the simple declaration (the blue form). This year the Department has identified a number of taxpayers who may not be required to file their income tax return and self assessment form. These taxpayers will not be required to fill in their income tax return. Instead they will be served directly with the tax statement based on information available at the Department. The information that is being used for the purpose of this exercise includes: Income arising from employment; Income arising from local pensions and / or British Services pension; Income arising from local interest which has not suffered the final withholding tax of 15%; Income arising from transfers of immovable property that was subject to a final tax; Income arising from dividends paid out by companies quoted on the Malta Stock Exchange. Furthermore the department will use information on hand regarding payments of school fees to independent private schools, as well as tax at source on dividends paid out by listed companies. Eligible taxpayers will not be bothered to file their income tax form. In past years many taxpayers resorted to assistance to fill in their income tax return by using the services offered by the department or by private individuals. With this new initiative taxpayers will now put aside all this trouble. These taxpayers will be able to comply with their tax obligations in a less costly and less time consuming manner and without the risk of incurring penalties for late filing of their tax return. This leaflet is intended to help all those taxpayers identified by the Department to benefit from these new measures.

3 1. What do these new measures consist of? This year the Department has identified a number of taxpayers who may not need to file their income tax declaration or return. Instead, a tax statement showing the taxable income will be issued according to information already available to the Department. 2. To whom do these measures apply? Taxpayers identified to qualify under these new measures are mainly employees, students and pensioners about whom the department holds income information provided by their payors. 3. What information is held by the Department? The Department gathers information from various sources including: Income from employment; Income from local pensions and / or British Services pension; Income from local interest which has not suffered tax at 15%; Income from transfers of immovable property which was subject to a final withholding tax; Dividend income and tax paid at source from companies listed on the Malta Stock Exchange. Payment of school fees to independent private schools. 4. How do I know that I am eligible under this initiative? If your income during the year consisted only of employment, pension or stipend and the Department already has all the necessary information, you are not going to receive an income tax return to fill in. Instead you will be served directly with a tax statement. 5. Is it possible that although I qualify under these new measures I still receive an income tax return to fill in instead of receiving a tax statement? Yes. Although, the Department made every effort to gather as much information as possible, it may still leave out some taxpayers from the new arrangements if the Department lacks complete and accurate information from the source providers. Hence, if you receive a tax return you should always complete it and send it to the Department.

4 6. What shall I do in the case of income earned during the year that does not feature in the tax statement? When you receive the tax statement you should check that the income shown in the statement and the tax due for the year are correct. If you have any other income which is not included in the tax statement or if you have any other deductions which you would like to claim, you should fill in the bottom part of the tax statement requesting the Department to issue an income tax return. 7. Can there be instances where after I receive the tax statement, the department still requests the income tax return? Yes. There may be circumstances where the Department receives information regarding your income after the tax statement has been issued, and the new information requires a taxpayer to send an income tax return. Therefore it is in your own interest to check properly the tax statement when you receive it to ensure that it reflects the exact chargeable income for the year. If the statement does not reflect your actual chargeable income for the year it is in your interest to request immediately the income tax return and send it back to the department, properly filled in by the

5 return due date to avoid any additional tax for late filing. In cases where the chargeable income for the year has been increased further tax may be payable by 30th June after which date, interest on late payments will be charged. 8. If I need to fill in the income tax return because my statement does not reflect all my income, how much time shall I have to fill in and send the income tax return? In this case, you should make an immediate request for the income tax return so that this may be filled in and sent by not later than 30th June which is the prescribed date for filing the income tax return. Any other payments due to the department are also to be made by the same date, that is, by 30th June. 9. What happens if I do not send the income tax return in time? If the income tax return is submitted late, you will incur additional tax as contemplated by the law. Late tax payments also attract interest at 1% per month. 10. What are the consequences if I do not inform the Department of any other income that I had received during the year? As soon as the Department is aware that you had other income, you will be required to submit an income tax return. This may render you liable to pay additional tax for late filing. Interest may also be charged at 1% per month on any outstanding tax balance that has not been fully paid by 30th June. 11. Are there any other taxpayers who are obliged to send the income tax return? Yes. There are a number of taxpayers who will be issued with an income tax return straightaway. The return must reach the Department by not later than 30th June, Such taxpayers include persons who: were in receipt of trade or business income; were in receipt of rental income;

6 had income from capital gains during the year, on which provisional tax was paid; were in receipt of foreign pensions; had income from overseas employment; derived income from foreign investments; received or paid alimony. Taxpayers whose income is derived from these sources are excluded from the new initiatives and must therefore fill in and send the income tax return. The same applies to any taxpayers who qualify for fiscal incentives or who would like to claim back any form of tax credit. You should always send the income tax return properly filled in, if such a return has been issued by the Department, even though it appears that you are eligible under the new arrangements. 12. What shall I do if I overpaid tax and I would like to claim it back? In the tax statement that you receive, the amount of overpaid tax will be shown. What you have to do is to confirm, in the appropriate part of the statement, the amount of tax due to you. The detachable part of the tax statement, provided for this purpose, must be signed and returned to the Department immediately.

7 13. What shall I do if I have a refund of tax but I do not agree with the amount shown on the tax statement? You must first check and ensure that the income shown in the tax statement corresponds to your actual income earned for the year. If the chargeable income figures differ you must always request and file the income tax return. The request for the return may be done by filling in and sending the appropriate part of the tax statement designed for this purpose. If the chargeable income figure is correct, but you disagree with the amount of tax due as indicated on the tax statement, check that your tax calculation is correct. You can ask for guidance on the tax calculation from the Department. If the amount indicated as overpaid tax differs from your workings, you should fill in and send the appropriate part of the tax statement indicating that you are owed a tax refund from the Department but you disagree with the amount shown. You will later be contacted by an officer who will guide you depending upon the particular merits of the case. 14. What happens if I do not inform the Department to confirm the refund? You should immediately inform the Department whether or not you agree with the amount of overpaid tax indicated by filling in and sending the appropriate perforated slip, provided within the statement. If the Department does not receive the slip which confirms the refund, a cheque corresponding to the amount indicated as overpaid will be issued. However, if subsequently it transpires that the amount refunded was not due, penalties and interest will be imposed as contemplated by the law. 15. Where can I get further information on these new measures? In the case of difficulty about these new measures or should you require further information, you can call personally at Taxpayer Service, Block 4 or contact them on telephone number or free phone Note: This leaflet is meant to serve as a guide to help you and is not a legal document.

8 In the case of difficulty about these new measures or should you require further information, you can call personally at Taxpayer Service, Block 4 or contact them on telephone number or freephone Designed and Printed: Printwell Ltd, Paola