All Maltese governments have sought to provide a beneficial environment for foreign investors setting up companies in the country which is why they have concluded over 70 double taxation agreements with other countries. Until now Malta has enforced over 60 of its double taxation treaties, the rest of them pending ratification. Once concluded, a double tax treaty will override the imposition of a Maltese tax. For details about Malta double tax treaties you can ask our Maltese lawyers.
The content of Maltese double taxation agreements
Most of Malta’s double tax treaties follow the OECD standards and provide for the following:
- the taxes which fall under the double taxation agreement in both countries;
- how the residency of the individuals or companies covered by the double tax treaties is established;
- the mechanism under which the avoidance of double taxation will occur (tax credits, exemptions or refunds);
- other special provisions such as the enforcement and termination of agreement.
Also, most of the double tax treaties signed by Malta have been amended in order to provide for the exchange of tax information.
Permanent establishments under Malta’s double tax conventions
The following entities are considered permanent establishments according to the conventions on double taxation in Malta:
- fixed business places, such as branches, offices or management places;
- factories, construction sites, workshops, and other facilities of this type;
- gas and oil wells, mines and quarries can also be deemed as permanent establishments;
- land plots used for agricultural and pastoral activities are also considered permanent establishments.
These sites must function at least 183 days in a calendar year in order to be permanent establishments in Malta. The foreign citizens who want to immigrate to Malta and benefit from these treaties may contact our immigration lawyers who will offer legal advice and information.
Tax rates under Maltese double taxation treaties
Most of Malta’s double taxation agreements employ similar tax rates and exemptions. Also, all double taxation treaties cover the same taxes. Under Maltese double taxation treaties, foreign investors from countries that have concluded such agreements will benefit from:
- reduced tax rates when repatriating profits,
- tax exemptions on certain incomes when distributed by Maltese subsidiaries or branches.
Under most Maltese double taxation agreements, the following reduced tax rates apply:
- the taxation of dividends ranges from 0% to 15% depending on the agreement signed,
- the taxation of royalties ranges between 0% and 10%, however certain exemptions apply;
- the taxation of interests ranges from 0% to 15%, just like in the case of dividend payments;
- other types of incomes can also be subject to reduced tax rates.
For information related to the country’s taxation system you can refer to our law firm in Malta. Foreign business owners can rely on us for applying for EORI numbers in Malta.
If you want to buy a house in Malta, you can contact our lawyers with confidence. They have the necessary experience to make the required checks and can also recommend real estate due diligence to know if there are any disputes on the respective property. You can buy lands, hotels, residential properties, villas, and office spaces without restrictions regarding foreigners, as long as they are not owned by the state. Get in touch with us for all legal aspects.
Countries Malta has signed double tax treaties with
Among the countries Malta has signed double tax treaties with are:
- in Europe: Austria, Belgium, Bulgaria, Croatia, Cyprus, Denmark, Finland, France, Germany, Greece, Italy, Latvia, Luxembourg, Netherlands, Switzerland;
- in the Middle East: Bahrain, Hong Kong, Singapore, Qatar, Saudi Arabia, The United Arab Emirates.
Malta has also signed double taxation agreements with Russia, China, the United States of America, Canada, Australia and few African and South American countries. More about US-Malta tax treaty can be found by getting in touch with our specialists.
Facts about US-Malta tax treaty
The US-Malta tax treaty was signed in 2008 to improve international tax compliance and to facilitate the exchange of information on taxes imposed in various areas in these countries. Thus, this agreement is intended to avoid tax evasion, respecting FACTA or Foreign Account Tax Compliance. Let’s review the following provisions mentioned by the US-Malta tax treaty:
- Reciprocity is mentioned in the US-Malta double tax treaty and refers to the US government which recognizes the need for an automatic reciprocal exchange of information with the Maltese government. The United States will also work in full transparency to improve the exchange relationship with Malta, to be able to adopt various regulations, and to promote the relevant legislation.
- The agreement is addressed to individuals and entities in the two countries, Malta and United States, respectively. You can discuss more about Malta double tax treaties with our specialists.
- The double tax treaty between Malta and USA covers the income tax in the case of Malta and federal income taxes in the case of the USA.
- Place of permanent establishment refers to the place where the company is registered, either in Malta or in the USA. This is where the branch, factory, place of management, workshop, office, mine, etc. come into play.
- A resident of a contracting state referred to in the double taxation agreement who is liable to tax on income in immovable property situated in the other contracting state may choose to calculate the tax on that income on a net basis.
- 5% is the tax on dividends if they are paid by a company resident in USA to a company resident in Malta.
- Interest tax is set at 10% and imposed in the contracting state in which it arises. The same is available for royalties.
These are some of the provisions mentioned by the US-Malta tax treaty that you should consider if you have a business or intend to open a company in Malta or the USA. We remind you that the formalities in this regard can be managed by our team of lawyers. You can also discuss more about Malta double tax treaties with our experts.
Facts about Canada-Malta tax treaty
Canada-Malta tax treaty is another important agreement signed in order to avoid tax evasion and extra taxation of profits. Signed in 1986, the Canada-Malta tax treaty covers income taxes and the manner in which those taxes are applied in each country, for companies operating in the market, but also for individuals earning money in one of these countries. Here are some features about the Canada-Malta tax treaty:
- Malta tax refers to income tax applied to Canadian companies with establishments in Malta.
- Canadian tax implies income tax applicable to Maltese companies with establishments in Canada.
- The double tax treaty between Malta and Canada covers various taxes, and countries are required to announce any changes in legislation.
- The contract between the two countries also defines the term “permanent establishment” which can be branch, factory, office, place of management, mine, workshop, etc.
- Canada-Malta tax treaty stipulates that the profits of a company are taxed in the country where the company is registered or where it has a permanent establishment. Therefore, a Canadian company established in Malta will be taxed in Malta.
- Dividends are taxed in the country where the company pays, and the tax is 15%.
- Interest and royalties are levied in the contracting state in which they arise, and the tax cannot exceed 10%.
We invite you to discuss more about the Canada-Malta tax treaty and Malta double tax treaties, to get an idea about the tax system for the company you want to set up.
Malta, an extremely popular business destination
Although a small island state, Malta is a highly valued business destination due to the conditions and business climate offered. The tax system is an advantageous one, as well as varied incentives offered to foreign investors for encouragement and business development. Political and economic stability, an attractive workforce, and being an extremely important financial center are some of Malta’s advantages over foreign players. Here are some statistics in this direction:
- Approximately USD 241 billion was the total FDI for Malta in 2020.
- According to the 2020 Doing Business report, Malta ranked 88th out of 190 global economies in terms of optimal business conditions and climate.
- Most foreign investments are absorbed by financial and insurance activities in Malta.
If you want to know more details about Malta double tax treaties you can contact our lawyers in Malta. You can also request our Maltese lawyers’ services if you want to set up a company in this country.