| 21/8/2008 |
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| Court of Appeal - Decisions in Income Tax Cases |
| Case No: 93 |
Decided: 16 December, 1980 |
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Chargeability Of Body Of Persons Being A Foreign Firm. Parties Carrying On A Trade Or Business Jointly. Income Arising In Malta. Double Taxation Arrangement With The U.K.
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The taxpayers were a U.K. partnership of estate agents. They entered into an arrangement with a similar firm of Maltese individuals for the sale of property in Malta to U.K. residents. The operation of the two parties were necessarily inter-twined, but it was stipulated that no partnership was to exist between them.
Appellants claimed that: (a) they were partners and should therefore be taxed individually and not together as a body of person; (b) they had no income arising to them in Malta as their part of the operation was solely carried out in the U.K.; (c) if they did have a trade in Malta, they were entitled to an exemption under the U.K./Malta, double taxation arrangement as they did not have a permanent establishment in Malta.
The Court rejected all pleas. The Act brought to charge "persons" and this term included "body of persons", whether corporate or not, which appellants were. Normally, the partners in a partnership are brought to charge individually and that it is not normal for an assessment to be raised on the partnership itself, but there is nothing in the Act which prohibited the raising of assessments on a body of persons. As regards the second plea, the income arising to appellants consisted of commissions on the sale of property situated in Malta. The Court held that such income arose in Malta.
The Double Taxation Arrangement between Malta and the U.K. had a very wide definition of what constitutes a permanent establishment. While the two parties could not be held to be agents of each other, they in fact did split the commission income between them and appellants had repeatedly advertised that they had an office in Malta. This was fatal to their argument. Moreover, the local firms, although not agent of appellants, could be deemed to be authorized to conclude contracts for the appellants. This again brought appellant within the definition of a permanent establishment.
BSC Case No: 18/69
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