| 22/11/2008 |
Bil-Malti
HOME
SERVICES
HELP
SEARCH
|
| Collective Investment Schemes |
|
| CIS guide |
7. Surrender or Maturity of Unit-Linked Products |
Index |
|
|
| 7.1 |
The treatment of gains accruing on the surrender or maturity of units and such like instruments that are wholly linked to securities in collective investments schemes is parallel to the treatment of income or gains derived by persons holding such securities directly. Consequently, any gains accruing on the surrender or maturity of unit linked products are subject to withholding tax only to the extent that they are determined by reference to the value of securities held in non-prescribed funds, but otherwise remain exempt.
|
| 7.2 |
The determination of the taxable gains involves the following stages:
- Upon the surrender or maturity of the policy the insurance company must determine which part of the proceeds relates to the linked portion of a contract of insurance12;
- Any gains attributable to the unlinked portion are regulated by article 27 of the Income Tax Act;
- The part of the proceeds relating to the linked portion is to be analysed into proceeds attributable to prescribed funds and proceeds attributable to non-prescribed funds. This analysis is to be determined in accordance with the value of the relevant units or shares in prescribed and non-prescribed funds at the time of surrender or maturity, as the case may be;
- The proceeds that relate to the non-prescribed funds are taxable to the extent that they exceed the relative cost of acquisition. This cost consists of two portions: the portion corresponding to the benefits accrued up to the 28th February 2001 and the portion corresponding to the benefits that accrued after that date -
- The cost corresponding to the benefits accrued up to the 28th February 2001 is deemed to be the price at which the units in non-prescribed funds to which the policy was linked were quoted on the Malta Stock Exchange on 28th February 2001 or the price of such units on the date when the contract of insurance was concluded, whichever price is the higher.
- The cost corresponding to the benefits accrued after the 28th February 2001 is equal to the premiums paid after that date, to the extent that they relate to that part of the policy that was linked to non-prescribed funds.
- Any gains attributable to prescribed funds remain exempt from tax.
|
| 7.3 |
A simple illustration of these stages is given in Table 5.
|
| 7.4 |
The resulting taxable gains will be subject to withholding tax at 15% and for this purpose the insurance company has the obligations imposed on payors.
|
| 7.5 |
The insurance company itself is not subject to withholding tax as it is not a recipient as defined in paragraph 41(c) of the Income Tax Act.
|
|
|
|
|
|
|