Page 179 - Group Insurance and Retirement Benefit IC 83 E- Book

Chapter 9: Taxation Treatment of provisions for Retirement
Benefits-I:

Guidance Note on Benefits from Retirement Schemes

Guidelines on the Malta tax treatment of Retirement Benefits arising from Retirement
Funds or Schemes

This guidance note applies to any benefit derived from a retirement fund or scheme that
is licensed under the provisions of the Special Funds (Regulation) Act or any Act

replacing the said Act. It applies from 1 January 2012 onwards and constitutes a
guideline for the purposes of Article 96(2) of the Income Tax Act. It is intended to

provide guidance to practitioners, retirement fund administrators licensed/recognised by

the Malta Financial Services Authority and beneficiaries of such funds or schemes that
are administered in or from Malta.
A. Taxation of the Retirement Fund or Scheme

In accordance with the provisions of Article 12(1)(d) of the Income Tax Act, the income
of any retirement fund or retirement scheme that is licensed, registered or otherwise

authorised under the Special Funds (Regulation) Act or any Act replacing the said Act is

exempt from income tax provided that this income is not derived from immovable
property situated in Malta.
B. Taxation of the Benefits derived from a Retirement Fund or

Scheme

Given that under the provisions of the Special Funds (Regulation) Act, the principal
purpose of any such funds or schemes is to provide retirement benefits, these retirement

benefits are to be characterised as a pension for the purposes of Article 4(1)(d) of the
Income Tax Act. Any capital sum received by way of commutation of a pension remains

exempt in accordance with the provisions of Article 12(1)(h) of the Income Tax Act.

These benefits are considered to be arising in Malta and taxable accordingly. In
determining the tax treatment of such benefits, due consideration needs to be given to any

relevant provisions found in any applicable double tax treaty.