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Malta Tax Treaties: Increasing Bilateral Relationships

30 Apr 2013
2013 has been an active year for Malta in terms of discussing and signing tax treaties with other countries. In March alone Malta signed 4 separate agreements. Taxand Malta explores the main highlights in each treaty.

Malta published the new tax treaty with Norway which replaces the treaty which was signed in 1975. The new tax treaty provides for better reduced withholding tax rates on dividends, interest and royalties. Dividends received by a Maltese company from a holding of more than 10% (in a Norwegian company) which is held for more than 2 years is exempt from any Norwegian withholding tax. In all other cases, the reduced withholding tax rate on dividends remains at 15%. Interest and royalties are no longer subject to a withholding tax in Norway.

This tax treaty is based on the OECD model and provides for reduced withholding tax rate of 5% on dividends paid by a company resident of Uruguay to a Maltese shareholder, provided the latter is a company which has a 25% interest in the company in Uruguay. In all other cases, the reduced withholding tax rate on dividends is 15%. Malta does not impose any withholding taxes and therefore none apply on the payment of dividends by a Maltese company.

The tax treaty provides that no withholding taxes will apply on dividends, interest and royalties. The article with respect to capital gains provides that capital gains arising on the transfer of shares in a company which has immovable property will be subject to tax in the country where the immovable property is situated, only if the shares derive more than 50% of their value from the property. In other cases, the gain is subject to tax in the country where the shareholder is resident. The treaty provides that any double taxation is eliminated by using the credit method.

This agreement covers income tax for Malta and direct taxes of every kind and description in Bermuda. The Memorandum of Understanding between the two countries provides that Bermuda is not considered to be engaging in any harmful tax practices and is not considered to be a tax haven.

Your Taxand contact for further queries is:
Walter Cutajar
T. +356 2730 0045

Taxand's Take

Multinationals with operations in any of these jurisdictions should research into the applicable Tax Treaty and ensure their organisation is compliant. These Tax Treaties will encourage bilateral investment and will be welcomed by all parties.

Taxand's Take Author