| 21/8/2008 |
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| Court of Appeal - Decisions in Income Tax Cases |
| Case No: 54 |
Decided on 17 September 1963 |
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Non-Resident Ship Owners. Reciprocity Arrangewments To Achieve Exemption
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The taxpayer in this case was a non resident shipping company registered in Italy. The Maltese Income Tax Act exempts: "The profits of non-resident ship owner ... provided that the country to which such non-resident ship owner belongs extends a similar exemption to ship owners who are not resident in such country but who are resident in Malta ...". The Italian legislation granted exemption to all non resident companies which traded in Italy but did not have a permanent establishment in that country. No particular arrangements regarding shipping appeared to have been made.
The Revenue held, and the Board of Special Commissioners agreed, that for reciprocity as contemplated in the Maltese I.T.A. to exist, the foreign country to which the ship-owner belonged had to grant exemption to non-resident shipowners in the same way that Malta did. The fact that actually non-resident ship-owners may be exempt in Italy was not sufficient. (The Board also seemed to get somewhat confused by submissions made by taxpayer regarding residence, all of which it rejected).
The Court of Appeal disagreed. The reciprocity required for exemption is not reciprocity in the legislation, but reciprocity as a matter of fact. The Italian non-resident ship-owning company was trading in Malta without having a permanent establishment in Malta. Under Italian law, any Maltese company (including, obviously a shipping company) trading in the same way in Italy was exempt in Italy. Reciprocity therefore applied and the exemption claimed was due.
Note: apart from all other merits, the Court's decision solved what would have almost been the impossible requirement of expecting precisely the same legislative measures in totally unconnected countries.
BSC Case No: 16/60
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