Tax in same-sex civil unions
Sunday, November 17, 2013, 00:01 by Robert Attard
Article 4 of the Civil Unions Bill incorporates an important article: “...a civil union, once registered, shall mutatis mutandis have the corresponding effects and consequences in law of civil marriage contracted under the Act”.
The Interpretation Act defines the word ‘law’ as including “any instrument having the force of law and any unwritten rule of law”.
Does this mean that for tax purposes, civil unions are the same as marriage? Specifically, marriages are subject to a special tax regime – will this special tax regime apply to civil unions too?
The Income Tax Act grants estranged married couples a number of fiscal opportunities plus a special tax deduction. Will estranged partners in a civil union be eligible to such benefits?
Currently, the law provides for a property transfer tax exemption and equivalent capital gains as well as duty exemptions on transfers made as a result of separation or divorce. Transfers between spouses are tax exempt. In certain cases, child maintenance received by an individual from an estranged spouse is exempt from income tax. An individual paying an estranged spouse alimony can also claim it as a tax deduction.
The Civil Union Bill provides that legal concepts and instruments such as personal separation, maintenance, divorce, matrimonial home and financial assistance are also applicable to civil unions. The simple yet poignant question is clear. Does Parliament intend to grant tax concessions granted in a marriage/post-marriage context to partners in a civil union too?
For income tax purposes, spouses report their income in a particular way. The law provides for joint computations and a joint tax return. Will this joint tax return system apply to partners in a civil union as well? If so, by being treated like spouses, some partners in a civil union will end up paying more tax. Yet another simple, and perhaps more poignant, question arises. Is it time to abolish the joint tax return and have all taxpayers file their returns separately?
It seems that we have thought of sex but we need to think of tax. If Parliament intends to place partners in a civil union in a comparable tax position to spouses, our tax laws must be tweaked. We cannot afford ambiguity about such basic legal concepts. The institution of marriage is already being abused by individuals who marry for convenience to sidestep immigration law restrictions.
I am quite certain that there will be men and women who will use legislation to obtain tax benefits to which they are not entitled. Our tax laws must be changed to address such new realities and to include specific anti-avoidance safeguards against wholly artificial civil unions.
Robert Attard is a partner at EY Malta.