The taxation of companies under the income tax acts

Abstract

This thesis is mainly a study of the application of the Income Tax Act to a company as a separate tax payer in its own right and the interaction of company taxation with that of its shareholders. Before dealing in detail with the actual provisions of the Income Tax Act, the introductory chapter discusses the role of the company in the business world as well as the rationale underlying the taxation of companies. The same chapter also gives a general overview of the Maltese income tax system. Chapter 2 then focuses on the business entities which are considered as companies for income tax purposes and on the jurisdictional principles which determine the income tax liability of a company. The chapter attributes particular importance to the notion of domicile and residence of companies. Chapter 3 goes into the main general principles of company taxation with particular emphasis being placed on the tax base of a company as well as on the administrative machinery set out in the Income Tax Management Act, employed by the authorities for an efficient collection of revenue. The same chapter also shows that despite the well-rooted principle of the company's separate legal personality, the taxtreatment of its shareholders is intimately connected with the taxation of corporate profits. Chapter 4 discusses the group relief provisions which enable companies in a group to utilise their tax losses efficiently. Foreign source income is the subject of a separate discussion in Chapter 5 with its tax treatment differing from the treatment of company profits arising in Malta due to the constant underlying aim of the law to preventthe double taxation of this income. Indeed Chapter 5 considers the different mechanisms of double taxation relief available under Maltese law and attempts to demonstrate how one may build upon them to create tax planning opportunities. The final chapter recognises the important role of companies as vehicles for industrial and economic development, particularly in the light of the incentives and benefits granted in the Merchant Shipping Act, the Malta Freeports Act and the Industrial Development Act. Lastly, in view of Malta's application to become a full member of the European Union, this Chapter considers the likely impact of European Union legislation upon Maltese incentive legislation and upon the entire Maltese corporate tax system.