Budget Measures Implementation Act, 2023

The Act contains a number of amendments to several laws, including the Income Tax Act (herein referred to as ‘ITA’), for which the main salient changes are included herein.

Proposed amendments to the Income Tax Act

Personal Income tax deduction regarding sports fees and cultural activities

The ITA provides for a deduction with respect to fees incurred by an individual relating to certain sport activities and cultural courses attended by children under the age of sixteen years. Articles 14E and 14F have been amended to increase the maximum allowable deduction from €100 to €300.

Mergers and divisions of companies

Article 27A relating to the tax treatment of companies and their members and other similar bodies or persons concerning mergers and divisions of companies, transfer of assets between companies and exchange of shares concerning companies has been amended to also include a transfer between a company and a person who is related to it in such manner as may be prescribed.

Taxation on royalties on qualifying literary works

With effect from 1^st January 2023, royalty income derived by authors of a qualifying literary work by virtue of their title to the copyright on that work conferred by the Copyright Act is taxable at a reduced rate of 7.5% (previously 15%) on the gross amounts of royalties.

Proposed amendments to the Income Tax Management Act (ITMA)

The second and third provisos to Article 43(b) of the ITMA have been amended such that provisional tax payable on a transfer of securities and on a transfer of value of securities constituting a controlling interest is applicable also in case of a transfer of an interest in a partnership as well as on a deemed transfer of an interest in a partnership as provided for in Article 5(1)(a)(v) Applicability of a lower rate of tax in case the gain from transfer is less than 20% of the consideration or of the value of the donation calculated on the higher of the market value and the consideration is also now available in case of a transfer of an interest in a partnership.

Articles 44 and 45 of the ITMA shall be amended such that the monthly interest rate applicable to non-payment of tax falling due on or after 31^st August 2022 is 0.6% to state that when tax is payable in terms of the Income Tax Act by the 31^st of August 2022 or a later date and such tax is not paid, an interest at the rate of 0.6% for every month or part thereof during which the tax remains unpaid shall be charged.

Article 48 of the ITMA relating to the repayment of tax by the CFR shall be amended to provide that in the case of tax refunds due by the Commissioner for any period or part thereof due on or after 1 September 2022, and which are not repaid within the prescribed period, interest shall be charged at the rate of 0.6% instead of 0.75% previously charged. Furthermore, the Article now shall include a proviso allowing the Commissioner to extend the refund period of 14 days by an additional 12 months, if the Commissioner requires to carry out further verifications for due diligence purposes.

Proposed amendments to the Value Added Tax Act

Sub-article (2) of Article 38 has been amended to specify further the amount of administrative penalties for default in the furnishing of a tax return or other declarations and statements. In particular, the amendment concerns:

The administrative penalty imposed on default in submitting recapitulative statements. Such penalty shall amount to €50 for every month or part thereof that elapses from the date by which the statement should have been furnished, however capped at €600.
The administrative penalty imposed on default of furnish any information required in terms of Article 55A of the VAT Act whereby such penalty shall also amount to fifty euro €50 for every month or part thereof that elapses from the date by which such information should have been furnished, again capped at a maximum of €600.

Previously, the above penalties amounted to €10 for every month or part thereof, capped at €120.