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Double Tax Treaties in Malta

Updated on Sunday 04th October 2020

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Malta-Canada-double-tax-treatyMalta has signed double tax treaties with 70 countries and jurisdictions, in order to avoid the double taxation of income and provide lower withholding taxes on dividends, incomes and royalties for foreign companies that are non-residents but develop business activities in the country.  If you would like to know the tax benefits for companies in Malta, feel free to get in touch with our company formation specialists in Malta.

 

Information about the double tax arrangements signed by Malta

 

The double tax treaties encourage the foreign investors interested in company formation in Malta through all sorts of tax protection methods and many more. Here is information about the double taxation treaties signed by Malta with countries worldwide:
 
  1. Many treaties are currently in force and others are signed but have not yet entered into force.
  2. Examples of the latter include those with Curacao or Ukraine.
  3. Several treaties are being renegotiated, like those with Azerbaijan, Bosnia and Herzegovina or Oman.
  4. Malta has also signed tax information exchange agreements with other countries.

 

For in-depth information about the taxation in Malta and about the treaties signed by this country, you can address your questions to our company incorporation specialists in Malta.

 

Taxation under the double tax treaties in Malta

 

The way in which the rules of double tax treaties are applied are as follows:
 
  • if a non-resident entity holds at least 25% of a Maltese company’s capital and it has as residency country Albania, China, Finland, Germany, Hungary, Korea, Kuwait, Latvia, Luxembourg or the Netherlands, then the withholding tax on dividends is 5%, while in the rest of cases it is 15%;
  • a company which has at least 25% of the capital held by a Denmark resident won’t pay any withholding tax on dividends and 15% in the rest of the cases.
A Maltese company with at least 10% of the capital held by a resident of France, Poland, Sweden or Switzerland will have an exemption on the dividends’ tax. The withholding tax on interests and royalties doesn’t exceed 15% and in many cases it is not charged at all. The agreement for the avoidance of double taxation applies to those taxes levied on income and capital, imposed both by Malta or the other country with which the treaty is signed. In the case of Malta, these taxes are the income tax and surtax. 

 

 What is a Maltese resident?

As defined in a double tax treaty, a Maltese “resident” is a citizen of Malta or a legal entity, partnership or association incorporated in the country, under the applicable laws. In regard to companies, a permanent establishment, as defined in the double tax treaty, can be a place of management, a branch in Malta, an office, factory or workshop as well as other establishments like mines, oil or gas wells or quarries. Besides these provisions, the double tax treaties signed with Malta specify what are the conditions for making an exchange of taxpayers’ lists.

 

Double tax treaties in force

The countries and jurisdictions which have signed double tax treaties with Malta are the following: Albania, Australia, Austria, Bahrain, Barbados, Belgium, Bulgaria, Canada, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Greece, Guernsey, Hong Kong, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Jordan, Korea, Kuwait, Latvia, Lebanon, Libya, Liechtenstein, Lithuania, Luxembourg, Malaysia, Mauritius, Montenegro, Morocco, Netherlands, Norway, Pakistan, Poland, Portugal, Qatar, Romania, Russia, San Marino, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Syria, Tunisia, Turkey, United Arab Emirates, United Kingdom, United States of America, Uruguay. 

 

Malta – UK double tax treaty

The income tax, the corporate tax and the capital gains tax are covered by the double tax treaty signed by Malta with UK. It is important to know that there is no withholding tax imposed on dividends of British companies in Malta. As for withholding tax of 10% rate, this is imposed on royalties and interests, as mentioned by the provisions of the DTT signed between Malta and UK.

 

The provisions of the DTT signed by Malta with Switzerland

Swiss companies in Malta are subject to taxation in this country, mentioning that a tax relief is granted in the case of taxes which need to be paid in Switzerland, as agreed by a double tax treaty in this matter. The incomes derived from dividends, royalties, interests, salaries, capital gains, movable and fixed assets are entirely protected by the provisions of the double taxation agreements signed by Malta with Switzerland. It is important to know that there is no withholding tax imposed on dividends and royalties of Swiss companies associated to firms in Malta. In the case of Swiss residents in Malta, the taxation is made in this country, but the tax returns are made in the country of origin.

 

DTT between Malta and Malaysia

The double tax treaty signed by Malta and Malaysia in 2002 is applicable to incomes derived from dividends, business profits, royalties, interests, associated enterprises, shipping and air transport. The interests paid to enterprises controlled by the governments in Malta and Malaysia are exempt from taxation. Individuals living and working in Malta or Malaysia who generate incomes in these countries are protected by the double taxation agreement signed in this matter. If you would like to know more about the taxation of companies in Malta, feel free to get in touch with one of our consultants.
 

The provisions of Malta – Bulgaria double taxation treaty

 
The double taxation agreement between Malta and Bulgaria was signed in 1988 and it covers the income tax and also the total income, plus the profit taxes. Companies and individuals with residence in Malta and Bulgaria are subject to the double taxation treaty in terms of taxes on incomes. The profits of Maltese and Bulgarian companies will be levied in the country of residence where the business is registered and has operations, except the cases in which the activities of permanent establishments are undertaken elsewhere. There are no taxes imposed on dividends, and interests, yet, a 10% tax rate is applied on royalties payments. The double taxation treaty signed by Malta and Bulgaria also provides other tax facts that can be explained by one of our specialists in company formation in Malta.
 

The double taxation agreement between Malta and Croatia

 
Another important double taxation treaty is the one signed by Malta and Croatia in 1998 and enforced two years later. Just like other agreements, this one is also mentioned by the Income Tax Act in Malta. In matters of provisions, the avoidance of double taxation refers to companies from Malta and Croatia and the countries in which they activate and make profits. The same double taxation treaty covers the incomes of natural persons who are levied only on the income generated in one of the countries, whether in Malta or Croatia. In the case of real estate properties, the same treaty mentions that taxation is made in the country where the property is located. There are also tax exemptions or lower tax rates. For instance, there is no tax rate imposed on interests and royalties payments, while the dividend payments are subject to a 5% tax rate. We remind you that our team of specialists can tell you more about the tax rates in Malta and about the avoidance of double taxation.
 

Malta and Austria double taxation treaty – what you need to know

 
The economic and business relations between Malta and Austria are sustained by a series of conventions and agreements, and among these, the double taxation treaty signed by these two countries. The convention covers the inheritance tax, the income, and corporate taxes, the capital gains, the directors’ fees, the commercial and industrial enterprises tax, plus the land and agricultural and forestry activities where taxes are imposed. Companies and individuals with incomes in Malta or Austria are covered by the double taxation agreement signed by these countries. It is important to note that there are special taxes to consider. For example, the interest payments are subject to a 5% tax rate, while the royalty payments are levied with a 10% tax rate. The dividend payments are also mentioned by the treaty, and these are levied with a tax rate of 15%. There are also other important tax facts to consider, so please feel free to get in touch with one of our company formation agents in Malta.
 

Tax exemptions on royalties – What you need to know

According to the Maltese Income Tax Act and its recent modifications, royalties of Maltese and foreign companies established in Malta in research and development sectors are exempt from income tax. The intellectual property is protected in Malta and royalties from audiovisual, musical, literary and artistic works copyrights are not subject to taxation.
 

Tax minimization methods in Malta

 
Company owners must consider the tax minimization methods that might be optimal solutions for the business direction in the future. In most cases, such important financial tools might be on the list of entrepreneurs who want to cut the amount of taxes in the firm and direct the money in other sectors for future investments in the company. The right tax minimization tool can be selected with complete assistance provided by one of our specialists.  For example, paying the credits in advance can be subject to low taxes. Also, 6/7 of the income tax paid by companies in Malta is refunded if the company owners respect a few important conditions. Charities are also excellent tax minimization tools that might attract the attention of foreign entrepreneurs in Malta. Plus, the double taxation treaties signed by Malta with countries worldwide are advantageous from a taxation point of view. For a better understanding of the tax minimization tools in Malta, you can talk to our company formation agents. They can also set up a plan and provide complete assistance for choosing the proper tax minimization tool for your company in Malta.
 
 

Can I receive tax planning and advice in Malta?

Yes, foreign and local entrepreneurs interested in opening a company in Malta and wanting to know more about the taxes in this country may talk to one of our specialists in Malta. The corporate tax measures in Malta sustain in a large percent the foreign investors looking for a stable and appealing tax regime. The double taxation treaties signed by Malta with more than 60 countries, the withholding tax exemption on royalties, no wealth tax, no withholding tax on dividends paid to overseas investors are among the tax benefits in Malta which need to be considered for your tax planning and company formation in this country. Tax minimization methods can be offered to entrepreneurs in Malta if they want to reduce the amount of fees and taxes in the firm. In this case, a tax minimization plan is offered by one of our consultants who can also offer information about the benefits of having a holding company in Malta. Governmental encouragements can be offered to startups in Malta, so this might be an excellent option for international entrepreneurs wanting to open a business in this country. Here is information about the business, the economy and the investments in Malta:
 
  1. USD 4 billion is the FDI flow registered in Malta in 2018.
  2. 97% rate of the total investments made in Malta was directed to the financial and insurance sector.
  3. According to the 2019 Doing Business Report Malta ranks 84th out of 190 economies in the world.
  4. At the moment, there are more than 200 foreign companies registered in Malta.

 

Choosing our services in Malta

 
Entrepreneurs interested in starting a company in Malta are invited to talk to one of our specialists and find out all the details about the registration process. The formalities have been simplified in recent years in the insular state, still, the support of a company formation agent in Malta will prove extremely helpful. We can handle the company registration process, tax advice and planning, accounting, management cost control, and many more.
 
If you are interested in setting up a company in Malta and you need to know more about the double tax treaties, you may contact our team of company formation representatives in Malta.

 

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