Author: GMX USER

16 Sep 2019

Breaching public procurement rules axes fast-ferry tender

Court Case: Virtu Holdings Ltd v Gozo Channel Island Ferry

September 2019

The Facts

On 26 January 2018, the Ministry for Transport and Infrastructure issued the “Request for proposals for a Public Service Concession Contract for the provision of passenger and vehicle ferry services between Malta and Gozo”.   The request for proposals comprised transport services for passengers and vehicles between Cirkewwa and Imgarr, Gozo, by means of a conventional ferry and for the service of passenger transport between Valletta and Imgarr and other localities in Malta by means of a fast ferry.

On 9 February 2018, Gozo Channel (Operations) Limited issued the “Preliminary Market Consultation” with an invitation to economic operators to make their offers.  Virtu Holdings  Limited and Islands Ferry Network Limited participated in this offer.

By letter dated 13 April 2018, Gozo Channel (Operations) Limited informed Virtu’ Holdings Limited that its offer had not been accepted while Islands Ferry Network Limited’s offer had been accepted.

On 20 April 2018, Virtu’ Holdings Limited submitted an Objection to the decision of Gozo Channel (Operations) Limited in front of the Public Contracts Review Board (PCRB).   The decision of the PCRB was appealed.  [Virtu Holdings Limited (C30642) vs. Gozo Channel (Operations) Limited (C76704) u Islands Ferry Network Limited (C85742) ghal kull interess li jista’ jkollha l-Qorti ta’ l-Appell – Appell Numru 290/2018]* was appealed.

It also transpired that Gozo Channel (Operations) Limited signed an agreement with Islands Ferry Network Limited whereby the latter agreed to lease a fast ferry to Gozo Channel (Operations) Limited should Islands Ferry Network Limited be awarded the agreement.

The application submitted to the Public Contracts Review Board

In view of the above, on 22 June 2018, Virtu’ Holdings Limited filed another application before the PCRB, under Regulation 277 of subsidiary legislation 174.04, stating that the agreement between Gozo Channel (Operations) Limited and Islands Ferry Network Limited should be declared ineffective.  On 11 September 2018, the PCRB decided that it was not necessary to declare the agreement ineffective arguing that the suspensive condition of the agreement did not occur yet and that therefore the agreement was:

“[…] in actual fact not effective at present, as it will only come into force subject to Gozo Channel winning the award of the PSO Tender.

At the same instance, the Board notes that the Gozo Channel has in fact concluded a contract before a final decision has been given by the Public Contracts Review Board, however, due to the fact this board deems that he Agreement Is not effective at present and is operative only on condition that Gozo Channel wins the PSO Tender, this Board does not deem it necessary to declare it ineffective in terms of Regulation 277 of the Public Procurement Regulations”.

The decision of the Court of Appeal

The decision was appealed (Virtu Holdings Limited (C30642) vs. Gozo Channel (Operations) Limited (C76704) u Islands Ferry Network Limited (C85742) ghal kull interess li jista’ jkollha Appell Numru 292/2018) *,

The Court of Appeal rejected all the preliminary pleas of the defendant company for the same reasons and motivations in the decision  Virtu Holdings Limited (C30642) vs. Gozo Channel (Operations) Limited (C76704) u Islands Ferry Network Limited (C85742) ghal kull interess li jista’ jkollha Appell Numru 290/2018 .  With respect to the merits, the Court of Appeal held that it is not correct to state that an agreement with a suspensive condition is not conclusive yet and that it is inexistent.  It is the obligation which is non-existent before the condition occurs, but when it occurs the effect will be ex tunc in terms of article 1061(1) of the Civil Code;  the agreement will be existent and deemed conclusive as soon as there is the in idem placitum consensus.  The Court added that the offer was accepted, the choice of who will render the service for a monetary value had been made and that the agreement was signed..

Therefore, the Court of Appeal concluded that once that the public contract by the contracting authority has been made, the appellant company Virtu’ Holdings Limited could avail itself of the remedy under Regulation 277 of Subsidiary legislation 174.04.

Interestingly, the Court of Appeal noted that the PCRB, by its own admittance had agreed that “Gozo Channel has in fact concluded a contract before a final decision has been given by the Public Contracts Review Board”.  Therefore, through its own admittance, the PCRB was recognising the ineffectiveness of the agreement under the provisions of Regulation 277.

Therefore, the Court of Appeal upheld the appeal:

  1. Rejecting all the preliminary pleas;
  2. Revoking the decision of the PCRB; and
  3. Referred to the acts back to the PCRB for its decision.

Following the referral by the Court of Appeal (292/2018) as per decision dated 11 March 2019, the PCRB delivered its decision on 30 August 2019. 

The Outcome

The PCRB referred to Regulation 277(3)(a)(b) wherein it is stipulated that:

“a) When, notwithstanding an appeal is lodged before the Public Contracts Review Board, the Authority responsible for the tendering process concludes the contract before a final decision is given by the Public Contracts Review Board, or

b) when the contract is concluded by a Contracting Authority or the Authority responsible for the tendering process before the expiry of the period for the filing of an appeal as provided for in Regulation 271”.

The PCRB confirmed that Gozo Channel (Operations) Limited is to be considered as a contracting authority and that Gozo Channel (Operations) Limited entered into contractual obligations with Island Ferries prior to a final decision by the PCRB.

Regarding the “ineffectiveness” of the contract signed between Gozo Channel (Operations) Limited and Island Ferries Limited, the PCRB referred to Regulation 277(3)(a) whereby any tenderer may also request the PCRB to declare a contract ineffective when notwithstanding an appeal is lodged before the PCRB, the contracting authority responsible for the tendering process concludes the contract before a final decision is given by the PCRB.  Therefore, the PCRB confirmed that Gozo Channel (Operations) Limited did enter into a contractual obligation on the 13 April 2018, well before any decision was taken by the PCRB.   The PCRB referred also to Regulation 282(b) whereby applications for the ineffectiveness of a contract shall be deemed admissible if they are made in any other case before the expiry date of a period of at least six months with effect from the day following the date of the signing of the contract.

The PCRB decided that the application for the ineffectiveness of the contract signed between Gozo Channel (Operations) Limited and Island Ferries Limited is within the stipulated time frame of the Public Procurement Regulations and that therefore the agreement entered between Gozo Channel (Operations) Limited and Island Ferries Limited was concluded prior to the final decision of the PCRB and to this effect, the PCRB declared that the agreement is ineffective.

The GMX Commentary

This decision has confirmed the principle of “ineffectiveness” of a public contract which is not restricted through any conditional clause in the agreement; in this case a suspensive clause.   The Court of Appeal re-affirmed the principle that if the agreement is still concluded despite pending proceedings before the PCRB, then the agreement is tantamount to an “ineffective” agreement in terms of the Public Procurement Regulations, which reflect the EU’s Remedies Directives.  To this effect, the aggrieved bidder, Virtu’ Holdings Limited, could avail itself of the remedy under Regulation 277 of Subsidiary legislation 174.04, whereby an interested party or a tenderer may file an application before the PCRB to declare that a contract with an estimated value which meets or exceeds the threshold established under Schedule 5 of the Public Procurement Regulations is ” ineffective”.

Furthermore, in terms of the said Regulation 278, apart from the declaration for the ineffectiveness of a contract the applicant may request the PCRB to liquidate and order the authority responsible for the tendering process and the contracting authority to compensate him for actual damages suffered.

If the PCRB declares a contract to be ineffective, it should impose penalties on the authority responsible for the tendering process and on the contracting authority after assessing in its decision all relevant factors, including the seriousness of the infringement and the behaviour of those authorities. In this case, no penalties were imposed by the PCRB.

13 Sep 2019

Re-filing Trademarks: A Case of Déjà Vu?

Trade marks give a face to a product which enable us identify a brand. As consumers, we take them for granted even though they punctuate memories of our daily lives. How many of us ever think of the creative and strategic thinking that goes into their composition? In contrast, we are more familiar with trade mark infringement. And what is breaking news are the risks of re-filing new applications for the same trade mark that should not be glossed over. 

Why would a trade mark proprietor re-file for the same trade mark?

The proprietor of a European Union trade mark (EUTM) or of a locally registered trade mark should lose its rights in that trade mark if it is not put to genuine use, referred to as “non-use”. In effect, this entails:

  1. That the proprietor would no longer be able to prevent the registration of the same trade mark by others;[1]
  2. That others may file an application to the European Union Intellectual Property Office (EUIPO) or to the Civil Court, First Hall of Malta, as the case may be, for the revocation (from the date of request) of the proprietor’s rights;[2]
  3. That the proprietor would no longer be able to successfully sue for trade mark infringement since the infringer would always have the right to file a counterclaim for revocation of the proprietor’s rights.[3]

Nevertheless, proprietors are given a 5-year grace period since registration, to use their trade mark and it is only after the expiration of that term that the listed adverse consequences can take effect. Therefore, proprietors often file an application to register the same trade mark which they had previously registered so as to extend the grace period by an additional five years; and so on, for as many times as a new application is re-filed.


Is such a re-filing practice lawful?

In a recent case the Board of Appeal of the EUIPO invalidated (that is, removed from the trade mark register with retroactive effect) the EUTM ‘Monopoly’ precisely for being made within the context of this re-filing practice.[4] The toy and board game company Hasbro had successfully registered the ‘Monopoly’ trade mark on three previous occasions before the contested registration, each time for a different class of goods and/or services. On the fourth contested application, Hasbro filed to register the same trade mark for the same classes of goods and/or services as the three previous registrations as well as for additional classes not covered by any of the previous registrations.   


The Board of Appeal distinguished between re-filing for the same trade mark for the same class of goods and/or services, on the one hand, and re-filing for the same trade mark for new classes of goods and/or services on the other. With regards to the latter, the Board of Appeal held that simply expanding your trade mark to cover further goods and services in which the proprietor is interested to expand his business is an accepted commercial practice. After all, a business must be allowed to grow.[5] However, re-filing the same trade mark for the same goods and/or services as a previously registered trade mark, which has been renewed and is still actively used, cannot be made to circumvent the genuine use requirement.[6] Such a registration is made in bad faith and is therefore liable to be invalidated by the EUIPO, in the case of an EUTM, or by the Civil Court, First Hall of Malta in the case of a locally registered trade mark.[7]

On this basis, the Board invalidated the latest registration of the ‘Monopoly’ mark only for those goods and services for which an identical mark had already been registered. For those goods and services which had never been the subject of a registration, the ‘Monopoly’ mark remains valid.

How can a proprietor avoid invalidation of a trade mark?

As already considered above, if a proprietor intends to expand its business, it is perfectly legitimate to seek the registration of an existing trade mark for further goods and/or services which previous trade mark registration do not cover. Even so, a proprietor may be concerned with the administrative bother of having various registrations for the same mark but for different classes of goods and/or services, especially vis-à-vis licensing and enforcement. That a proprietor may want to group all the goods and services in respect of which it is operating or intends to operate under one registration is understandable. In this case; however, the proprietor should surrender all the previous trade marks so as to make clear that the re-filing is not done in bad faith but is solely motivated by reason of genuine business expansion and administrative reasons.

Is there any risk associated with rebranding?

There are various types of trade marks that can be registered. Arguably, the simplest form is a “word mark”, made up of letters or numerals. However, there are also “figurative marks containing word elements”, that is, combination of words and graphic features. What if a proprietor first registers a word mark, and then registers a new trade mark for the same goods and/or services containing the same word but adding a figurative feature, and then registers a new trademark with a new or different figurative feature but retaining the same word? Is this simply a case of rebranding or is it a case of re-filing essentially the same trade mark in bad faith?

Conclusion

 The EUIPO seems to have taken a tougher stance on trade mark proprietors attempting to “extend” the extent of their right in bad faith. The national intellectual property offices of the Member States are likely to follow suit. Therefore, some special consideration attention must be given to re-filing trade marks especially for proprietors who operate an expanding business and need to update their trade mark portfolio from time to time.

[1] Regulation (EU) 2017/1001, Art. 47(2); and Trademarks Act (Chapter 597 of the Laws of Malta), Art. 51.

[2] Regulation (EU) 2017/1001, Art. 58(1)(a); and Trademarks Act (Chapter 597 of the Laws of Malta), Art. 29.

[3] Regulation (EU) 2017/1001, Art. 58(1)(a); and Trademarks Act (Chapter 597 of the Laws of Malta), Art. 27.

[4] Decision of the Second Board of Appeal of 22 July 2019, Kreativni Dogadaji d.o.o. v. Hasbro, Inc. (R 1849/2017-2), <https://euipo.europa.eu/eSearchCLW/#basic/*///number/1849%2F2017>.

[5] Ibid, para. 63-64.

[6] Ibid, para. 66-74.

[7] Regulation (EU) 2017/1001, Art. 59(1)(b); and Trademarks Act (Chapter 597 of the Laws of Malta), Art. 5(2).

31 Jul 2019

Shipping Law Review – 6th Edition

Even in our instant click button access to a world of information, The Shipping Law Review remains an unbeatable publication in its collation of updates to maritime laws worldwide since it combines both a cross-jurisdictional and jurisdiction-specific approach. As a result, it enables readers to glean both an international and national perspective of the latest developments in competition and regulatory law, maritime disputes, decommissioning, sanctions, ocean logistics, piracy, shipbuilding, ports and terminals, offshore shipping, marine insurance and environmental issues.

For the second consecutive year GMX legal specialists have contributed exclusively to the chapter dealing with Malta – a major flag state actively sustaining its prestige as Europe’s largest shipping register and 6th position global ranking. Both Dr Jean-Pie Gauci-Maistre and Despoina Xynou share the breadth and depth of their expertise honed by over a decade of dealing in maritime and corporate law, ship registration, ship finance, mortgages and international taxation.


You may access the Malta Chapter through the link here.


To view the full publication please click here.

23 Jul 2019

FIAU publishes the Revised Implementing Procedures Part I





On the July 17, 2019, the Financial Intelligence Analysis Unit released a revised version of its Implementing Procedures Part I – guidelines in relation to Anti-Money Laundering Legislation effective from July 19, 2019. The guidelines aim to assist financial service providers as well as a number of professionals who meet the requirements of subject persons under the Prevention of Money Laundering and Funding of Terrorism Regulations (S.L. 373. 01) in implementing their AML/CFT obligations.





The amendments of the revised Implementing Procedures Part I are outlined as follows:

  • Risk Based Approach: Highlightsthe significance of the Risk Based Approach which subject persons are required to adopt, laying down detailed guidance on the carrying out of business and customer risk assessments. Given that the list of risk factors cannot be comprehensive, the FIAU notes that appreciation must be given to the nature, actives and size of the business;
  • Elaborates the topic regarding Virtual Financial Assets Agents;
  • More detailed Customer Due Diligence rules: Chapter 4 has been revamped so as to provide subject persons with a better understanding of Due Diligence obligations, emphasising on the importance of conducting appropriate and effective on-going monitoring;
  • Chapter 4 includes a new sub-chapter ‘Sanctions screening’ (no 4.11), highlighting the importance of cooperation and coordination with competent authorities;
  • Amendments to Chapter 8 clarify what constitutes dealing with  Non-Reputable Jurisdictions and High- Risk Jurisdictions.
  • A new section under the number 4.11 has been added to admonish subject persons of their sanction screening, freezing assets and reporting obligations emanating from the National Interest Act.
  • Outsourcing: AML/CFT outsourcing rules have been further clarified in Chapter 6. For example the FIAU has listed which AML/CFT obligations may be outsourced;

In conclusion, the above updates incorporate the EU guidelines issued by its competent authorities regarding the Prevention of Money Laundering and Terrorist Financing. Moreover, the detailed Implementing Procedures help gatekeepers as subject persons to fully understand the importance of the prevention of misuse of the financial system for the purpose of money laundering.

9 Jul 2019

Ship Arrested 16th annual members’ conference in Malta


The attending delegates in Mdina

The 16th annual Shiparrested members’ conference was successfully organised in Malta between 20th and 22nd June and Gauci-Maistre Xynou (Legal | Assurance) is proud to have participated in both the organisation as well as the conference as such.

Some 100 delegates from 30 countries attended the Shiparrested.com’s 16th annual members’ conference held in Malta. Shiparrested.com is a network of hundreds of worldwide maritime law practitioners who have collaborated over the last 20 years, utilising their combined knowledge and experience to provide assistance and services relating to swift ship arrests and releases.

The network also functions as a hub for up-to-date information on arrest procedures around the world with its annual Ship Arrests in Practice, a staple publication in the maritime industry.

The three-day event kicked off with drinks held at the Upper Barrakka Gardens in Valletta, introducing the seven organising Maltese firms: Fenech & Fenech Advocates, Gauci & Partners Advocates, Dingli & Dingli Law Firm, Ganado Advocates, Mifsud & Mifsud Advocates, Gauci-Maistre Xynou (Legal | Assurance) and Refalo Advocates.

A full-day conference followed at the Phoenicia Malta hotel, with various panels and speakers discussing the most recent updates in the maritime industry. The conference opened with a panel of local legal practitioners discussing the recent developments relating to arrests of vessels in Malta. Chaired by Kevin Dingli, interesting contributions were made by lawyers Larry Gauci, Cedric Mifsud and John Refalo. Robert Vassallo from Transport Malta also provided unique insight as the port authority’s representative.


The organising committee at the Palazzo De Piro dinner, from left: Jessica Curmi, Martina Farrugia, Adrian Attard, Chantalle Gauci, Amy Lee Micallef, Charlene Gauci, Despoina Xynou and Jan Rossi.

The subsequent items on the conference’s morning programme included a discussion on recent US jurisprudence on the possibility of piercing and lifting the corporate veil in shipping matters and an update on jurisdictional developments in Singapore, the UAE, Saudi Arabia and Russia respectively, keeping all participating delegates alert and interested.

After a lunch served at the Phoenix Restaurant, the afternoon sessions were led by a second panel composed of Maltese legal practitioners Louis Cassar Pullicino, Ann Fenech, Jean-Pie Gauci-Maistre and Tonio Grech discussing proceedings relating to judicial sales of vessels. Chaired by Amy Lee Micallef, the panellists drew from their considerable experience to highlight good practices in the industry and discussed the need for legislative amendments in response to challenges facing the industry.

The  panel was followed by three network members competing for the coveted title of ‘Strangest Arrests of the Year’ and drew to a close with diverse interventions relating to insurance cover for insect infestation under a cargo policy, a presentation on injunction procedures in Panama, and finally a legal update on Hong Kong as a maritime jurisdiction.


Amy Lee Micallef, Jean Pie Gauci Maistre, Ann Fenech, Tonio Grech and Louis Cassar Pullucino.


Delegate members were given the opportunity to network over dinner at Palazzo De Piro in Mdina, and a fun guided tour of Valletta the following morning. The three-day event closed off with lunch at the Chophouse in Sliema. Next year Jordan will be hosting the 17th edition of the conference.

The event was coordinated by Colours of Malta and partly sponsored by Transport Malta.

More information about the network can be found on www.shiparrested.com.

*To access the full article published on Times of Malta please visit the link here.

4 Jul 2019

Vacancy – Digital Marketing Assistant

The Digital Marketing Assistant role will be focusing on designing and delivering effective, modern, innovative digital marketing strategies with the sole aim of driving traffic to the company websites. The candidate will be utilising current technology and methodologies across all social media channels aiming at raising brand awareness

Duties & Responsibilities:

  • Develop the marketing strategy online
  • Design, develop and implement the company’s social media strategy across all channels
  • Develop engaging online content including videos, graphics, and blogs; monitor and analyse the content success
  • Design, develop and implement the advertising strategy of the company’s products
  • Work very closely with the marketing manager to articulate online the marketing strategy and targeting campaigns of the year
  • Design the SEO strategy of the company websites and monitor key metrics and KPIs
  • Create reports that prove effective strategy implementation
  • Forecast marketing campaign growth and return on investment for marketing campaigns
  • Manage email and social media marketing campaigns
  • Keep abreast with new technologies ensuring fluency in all social media sites, web technologies

Knowledge / Experience required / Person Specificities:

  • Fluent in social media, web technologies and google analytics
  • Successful proven record of translating marketing campaigns online
  • Marketing / advertising / SEO experience
  • Analytical with a passion for analysing data and coming up with trends
  • Creative flair
  • Driven and action oriented
  • Team player
  • Committed and dedicated
  • Push boundaries and think out of the box

To apply:

Interested candidates are to apply by sending their CV together with a cover letter to HR Manager: hr@gmint.com, quoting in the subject field “Digital Marketing Assistant GMX”.

20 Jun 2019

GMX at this year’s Ship Arrested Annual Conference June 20-22

Given its expertise in maritime legal matters, GMX is proud to be hands-on in both the organisation of and participation in this year’s conference being held at the Phoenicia Hotel in Malta.

Despoina Xynou has collaborated with the other seven participating law firms to structure the annual conference which this year marks the 16th edition and the first time convening in Malta. The conference offers an unmissable opportunity to discuss the latest developments in legal and commercial issues together with jurisdictional developments currently concerning and shaping the maritime industry with particular reference to the arrest and release of ships.

In fact, Dr. Jean-Pie Gauci Maistre will be debating the complexities pertaining to judicial sales as legal minds meet to discuss ‘hot topics’ in shipping and how various jurisdictions are responding to the challenges involved.

Access https://shiparrested.com/wp-content/uploads/2018/12/Final-Malta-Program.pdf for further details of the conference programme.

4 Jun 2019

Corporate Office Administrator

Gauci-Maistre Xynou is a boutique multi-disciplinary practice offering bespoke legal, audit and assurance services, as well as tax services to a large number of local and international clients. As Corporate Office Administrator, this is a full-time time role working Monday to Friday from 08.00AM to 17.00PM. The person would have experience in a similar role, and be of a mature disposition able to handle business requirements professionally in supporting, liaising and coordinating members of the management team, lawyers, accountants, auditors and other service providers on behalf of corporate clients.

Conversant with office routine, energetic and hardworking, the ideal candidate should have a pleasant and outgoing personality who is able to deal with requests in a timely and effective manner, while streamlining office operations.

Requirements:

  • Excellent written and communications skills in both English, Maltese and preferably Italian
  • Proficiency in MS Office applications (Word, Excel, Outlook, Powerpoint)
  • Excellent time management and organisational skills

Key accountabilities    

  • Performing basic filing, and clerical duties
  • Photocopying and binding of documents.
  • Supporting the Managing Director and the management team while assisting in the day-to-day office administration and coordination;
  • Handling travel plans/reservations, visas, accommodation, expense reports etc.;
  • Handling incoming calls, emails and correspondence and assisting in the preparation of business correspondence as required;
  • Scheduling, coordinating meetings and updating calendars, preparing agendas and presentations and taking minutes; assisting in organising of corporate events and special projects;
  • Greeting visitors upon arrival and professionally handling incoming phone calls;
  • Responsible for HR administration, including preparing of confidential documentation for employment and onboarding, ensuring upkeep of policies and procedures, and maintaining accurate record keeping and reporting (conditions of employment, work permits, vacation leave, sick leave, time sheets, HR files, correspondence etc.);
  • Data inputting, processing and reconciling monthly payrolls
  • Collecting and distributing parcels and other mail
  • Liaising with suppliers

Other duties as requested by HR and other departments on a day to day basis.

Personal Criteria

  • Proactive and go-getting approach
  • Good organisational skills an ability to prioritise tasks and meet deadlines
  • Ability to work under minimal supervision
  • Good multitasker
  • Good interpersonal skills
  • Attention to detail and accuracy
  • Experience of office systems including Word, Outlook, Excel
  • Basic understanding of bookkeeping
  • Basic understanding of payroll
  • Willingness to learn through formal / informal training

The successful candidate will be offered an attractive remuneration package and the benefits of working within an expanding organisation. If you would like to join our dynamic team of professionals, please submit your resume to by sending an email together with a detailed CV to the HR Manager HR@GMINT.COM.

3 Jun 2019

Fiscal unity rules introduced in Malta

By Legal Notice of 31 May 2019 – “Consolidated Group (Income Tax) Rules” (the Rules) fiscal unity has been introduced in Malta.

The Rules provide taxpayers with an option to create a consolidated group for income tax purposes. Unlike the VAT grouping rules, the income tax rules are applicable to all taxpayers, irrespective of the sector they operate in. 

Creation of a fiscal unit

A fiscal unit may consist of Maltese or foreign companies. The parent company (the principal taxpayer) should, at all times, be a company registered in Malta and hold at least 95% or more of any two of the following three rights:

  •  voting rights;
  •  right to profits; and
  •  right to assets available upon a winding up.

It is worth noting that under certain conditions trust and foundations too may be considered as companies for the purpose of the Rules.

Furthermore, all companies within a group should have the same accounting year for the entire duration of the group’s existence. In case of less than 100% shareholding, a minority shareholder’s approval is required for a subsidiary to join the unit. A subsidiary is referred to as ‘transparent subsidiary’. Indirect subsidiaries of the principal taxpayers may also form part of the group as long as the conditions mentioned above are met.

The rights, duties and obligations under the Income Tax Act of the transparent subsidiaries are suspended and are instead assumed by the principal taxpayer, who for instance, is liable for filing the tax return covering all companies in the group.
A consolidated Balance Sheet and Profit and Loss Account of the fiscal unit should be prepared and audited on an annual basis. However, there is no obligation to file the financial statements with the authorities.

The principal taxpayer is responsible for paying tax for the unit. Only when the transparent subsidiaries are 100% owned by the principal taxpayer, are all the companies jointly and severally liable to the payment of tax.

Benefits of a fiscal unit

The chargeable income of the unit should be computed as if it were derived by the principal taxpayer. All income derived and expenses incurred by companies forming part of the fiscal unit shall be deemed to be respectively derived or incurred by the principal taxpayer. Similarly, any foreign income tax incurred by a company within the fiscal unit, should be deemed to have been incurred by the principal taxpayer. While calculating the income tax due by the fiscal unit, intragroup transactions (except for transfers of immovable property located in Malta and transfers of property companies) are disregarded for tax purposes. Moreover, double taxation relief is still applicable in accordance with the Income Tax Act provisions.

The Rules allow for any refund due under the Income Tax Management Act to
a shareholder of a company forming part of a fiscal unit to be taken into account in determining the applicable tax rate of the fiscal unit. Hence, the lower effective tax rate may be immediately realised which does away with delays resulting from the refund application.

The Rules contain detailed anti-abuse provisions and apply with effect from financial periods starting on or after 1 January 2019.

20 May 2019

ECJ Rules on Social Security of Seafarers

The European Court of Justice (ECJ) ruled in the case C-631/17 SF v Inspecteur van de Belastingdienst[1] that in cases of seafarers who maintain their residence in their Member State of origin, whilst working for an employer established in a Member State on board a vessel flying the flag of a third State and travelling outside of the territory of the European Union, the applicable national legislation for social security matters is that of the Member State of residence of that person.

ECJ came to this conclusion after considering the case of a Latvian citizen, residing in Latvia who worked as a steward for an undertaking established in the Netherlands, while working on board a vessel flying the Bahamas flag for 6 months outside EU territory.

In the abovementioned judgement, the ECJ reiterated that EU rules relating to the free movement for workers are still applicable when the said employees are carrying out their professional duties outside European Union territory as long as there is a suitably close connection with EU territory.

Having considered that the employment relationship maintained a sufficiently close relationship with EU territory; the ECJ concluded that such cases should fall within the scope of the regulation on the coordination of social security systems and, more particularly, Article 11(3)(e) of Regulation (EC) No 883/2004 of the European Parliament and of the Council of 29 April 2004, as amended by Regulation (EU) No 465/2012 of the European Parliament and of the Council of 22 May 2012, and the national legislation of the Member State of residence of the worker should apply.

The effect of this judgment could possibly mean that employers established in the EU should register and comply with the social security legislation of every EU country where their employees reside even though they work in non-EU countries for a period of time given that the EU connection is upheld. It is also important to note that this ruling might affect sectors outside the shipping industry.

[1]http://curia.europa.eu/juris/document/document.jsf;jsessionid=93A9B342E448491EA857470C354272BB?text=&docid=213862&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1&cid=7800158