Updates to the Fringe Benefits Rules 2017
On the 8th of August 2017, LN205 of 2017 was published, updating and clarifying some schedules to the Fringe Benefits Rules (S.L. 123.55).
Clarifications
An associated company is also deemed to be a company from which a fringe benefit is issued or received.
- General Clarifications
- Category 1 – Car Benefits
- Category 2 – Use of Property
- Category 3 – Other Benefits
General Clarifications
An associated company is also deemed to be a company from which a fringe benefit is issued or received.
Category 1 – Car Benefits
The definition of a vehicle emphasise the words ‘any type of vehicle’.
No benefit shall arise with respect to the use of a vehicle by an employee who is required to use that vehicle wholly in the performance of his duties as a messenger or a driver.
Category 2 – Use of Property
With respect to accommodation, not constituting a benefit by reason of an employment or office, the following paragraph has been included; the creditor is a bank which is a debtor of an associated company but the bank’s debt in favour of that associated company is not for a long term loan and is not connected with the financing of the loan to the property owning company.
Category 3 – Other Benefits
With respect to beneficial loan arrangements, the words ‘the central intervention rate of the Central Bank of Malta’ were substituted by ‘the rate on the main refinancing operations as applied by the Central Bank of Malta’.
With regards to travelling between Malta and Gozo, travelling should include journeys by sea or by air.
Amendments
The first amendment to the principal rules relates to benefits arising by reason of an employment or office as an adjustment to today’s cross-border work relationships and geographically dispersed workforce. In terms of the updated legal notice, where a benefit is deemed to arise by reason of an employment or office, the income represented by the value of that benefit shall be deemed to arise in the country where the work is wholly or principally performed. If the benefit is deemed to arise by reason of a directorship in a company it shall be deemed to arise in the jurisdiction where that company is managed and controlled.
- Category 1 – Car Benefits
- Category 2 – Use of Property
- Category 3 – Other Benefits
Category 1 – Car Benefits
Private Use Value
The taxable benefit of the private use value of a car is calculated by adding the car value in use, the maintenance value and the fuel value multiplied by the percentage of private use. The percentage of private use depends on the value of the car; thus the higher the percentage, the higher the taxable benefit.
The percentage of private use was revised from 20% to 0% when the value of the vehicles is less than €16,310 and it is used for point to point services as approved by the Commissioner.
The list of vehicles which when used for private purposes do not give rise to a taxable fringe benefit now also includes vans as defined in the principal rules. In this regard, any value of a benefit consisting in the private use of a van is completely eliminated.
The private use of a mechanically propelled vehicle that is constructed or adapted as a means of land transport which is not included in the definition of vehicle in terms of the updated legal notice shall be deemed to have no value.
Category 2 – Use of Property
In determining the cost of immovable property, when property is held by a person under a title of perpetual or temporary emphyteusis the price for the acquisition thereof shall be deemed to be the price or premium, if any, paid or payable in accordance with the deed of emphyteusis, without the requisite to increase the amount by five times the annual ground rent payable.
When it comes to the annual value of the private use of immovable property, where the property is owned by the provider of the benefit or by a related person and where the property is held under a title of emphyteusis, the total taxable value shall be the higher of:
- 5% of the market value; and
- the total of 5% of the cost of the property and an amount equivalent to the relative annual ground rent.
In the case of movable property, the taxable value is 12% of the higher of the market value and the cost of the property.
Category 3 – Other Benefits
With reference to beneficial loan arrangements, the benchmark rate of interest on a loan set out in the Rules has now decreased by 2% to 6.5%.
The annual value of the benefit on loan arrangements is the interest that would be payable on the loan for the year in question if it were chargeable at the benchmark rate reduced by the interest paid on that loan by the beneficiary during that year, less any in-house benefit reduction. However, LN205 of 2017 also provides that the value of a loan by a company to a shareholder who holds more than 25% of the ordinary share capital and voting rights in that company shall be zero.
When it comes to the value of free or discounted transfer of property and provision of services, the following provision has been included: when the benefit consists in the transfer of a motor vehicle and the beneficiary had, before the transfer, made private use of that motor vehicle as provided in Category 1 of the Rules, the value determined shall be reduced by the total value of the fringe benefit that was deemed to have been provided to that beneficiary as a result of the private use of that motor vehicle; provided that the value so reduced shall not be less than zero.
When it comes to the applicability of the Act to transfers of property, the following provision has been included: when property is transferred by way of a benefit to which rule 32 applies and the beneficiary subsequently transfers that property, and where the cost of acquisition of that property is relevant in terms of the Act for the purpose of determining the tax chargeable in the hands of the beneficiary upon the said subsequent transfer, the said cost shall be deemed to be an amount equivalent to the consideration actually paid by the beneficiary for the acquisition of the property increased by the value of the said benefit.
In terms of the value of share option scheme benefit, now also includes share award schemes. The benefit shall be deemed to be provided on each date that shares are issued or transferred to the beneficiary in terms of the share award scheme in question. The value of the share option scheme benefit shall be the excess, if any, of the price which the shares in question would fetch if sold in the open market on the date when the benefit is provided over the price paid or payable by the beneficiary for those shares. The income represented by the value of the benefit shall be subject to tax at the rate of 15%.
With regards to business travel the following paragraphs have been included:-
"relocation costs" means costs incurred by or reimbursed to an employee in order to settle in a country, other than his country of residence, for the purpose of taking up a new employment or posting that lasts or is expected to last for at least twelve months, or to resettle in his country of residence upon the termination of that employment or posting, including the cost of the journey of the employee and of his spouse and dependent children and the cost for the transportation of furniture and personal effects but excluding accommodation costs;
"costs of journeys between work shifts" means the cost of the journey of an employee to his country of residence immediately upon the end of a work period and the cost of the journey of that employee from his country of residence to the country where he is required to report in order to resume his duties for the next work period;
and for this purpose "a work period" means a recurrent period that normally lasts for not more than four weeks, during which the employee is required to report daily for work, and that is followed by a period of rest that is normally at least one third of the work period: provided that the Commissioner may, in any particular case, recognise any other period as a work period for the purpose of this paragraph.
Fringe Benefits which are exempt from tax:
In respect of exempt Fringe Benefits, the list was expanded further and now also includes the following:
- The costs of traveling between Malta and Gozo for business purposes will now also include the relocation costs and costs of journeys between shifts;
- The costs of traveling between Malta and Gozo now also includes travel by air;
- The costs incurred by and charged in the name of an employee, as evidenced by receipts produced to the employer, or by his employer for the provision of fixed or mobile telephony services, now also includes the cost of a mobile phone or a facsimile machine, used by the employee for the purpose of the business of the employer;
- Health-related costs including:
(i) The cost of a medical examination, test or screening which an employee is required to undergo in order to take a new employment or to take up a new post with the same employer or to gain entry to a superannuation fund;
(ii) the cost of medical care, medicine and other medical treatment provided as a prevention against injury or illness related to an employment as part of a programme available generally to employees exposed to the same work-related health risks;
(iii) the cost of individual or group counselling relating to safe work practices, health, fitness, stress management or drug or alcohol abuse that is given as part of a programme available generally to employees exposed to the same work-related health risks.
Contact us
