| 17/5/2012 |
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| Board of Special Commissioners - Cases |
| Case No. 39/65 |
Decided: 17 March, 1966 |
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Salary and allowances earned by non-resident artiste in Malta deemed to be limitedly chargeable to Maltese tax in terms of the provisions of articles 5 and 9, now 4 and 13, Income Tax Act
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Appellant, a foreigner duly employed by an Italian firm, was carrying out duties in Malta in terms of a plant installation agreement entered into by his employers with a company registered and operating in Malta. The company in Malta was distinct from the Italian firm and was not its subsidiary. He contested the Commissioner's decision that his earnings were wholly "arising in Malta", once he was tendering his services in Malta and the salary he was earning consisted of the fees paid for such services.
The Board noted that the Commissioner had based his decision on the decision of the Board in cases no. 30/55 and 31/55. The Board pointed out that the merits of those cases were not analogous to the present one. In that instance the Board had observed that "appellants are tendering their services to the local company as much as the locally recruited personnel. The duties performed by appellants form part of the ordinary routine of the subsidiary company".
The Board also disagreed with the Commissioner's contention that the principle that income by way of salary arises in the country where the duties are being performed, is absolute. Though this was normally the case, one had to take other matters into consideration, such as the residence and domicile of the employer. Once taxpayer's employment relations were exclusively with the foreign firm and his salary was actually paid in Italy by the Italian firm, it could not be concluded that his income was arising in Malta.
Chargeability to tax in such instances is determined in the light of the provisions of article 9 of the Act. It was a fact that taxpayer was "in the Island for some temporary purpose only and not with any intent to establish residence therein...." During the first basis year under dispute he did not reside in Malta "for a period equal in the whole to six months in the year", so his income was wholly tax exempt. Once he extended his period of residence in Malta, the income earned during the second basis year was not exempt on the basis of this article. In such circumstances chargeability was governed by the provisions of article 5 and, in this case, limited to the amount actually received in Malta to which appellant agreed.
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