Malta: Malta’s Tax Treaty With Liechtenstein

General definitions:

Personal scope: The term 'person' includes, inter alia, an investment fund, a pension fund, a trust, a partnership and a Liechtenstein dormant inheritance. Additional details with respect to the personal scope of the Treaty may be found in the protocol to the Treaty.

Resident:

In addition to the definition of the term 'resident of a Contracting State' in line with the OECD Model Convention on Income and Capital, in terms of the protocol to the Treaty a person is also considered 'liable to tax' in a contracting state if it is subject to the tax laws of this state but exempt from tax provided that all requirements for exemption are satisfied. The protocol to the Treaty further provides that the residence of a trust is determined either by reference to the residence of its trustee/s but only if in one of the contracting states (and none of them being resident in the other or both) or, should this not be the case, by reference to the place where the decisions concerning the administration of the trust are taken.

Dividends, interest and royalties:

The Treaty allocates the taxing rights with respect to outbound dividend, interest and royalty payments exclusively to the state of residence of the recipient.

Capital gains:

The source state may tax gains derived by a resident of the other contracting state from the alienation of shares deriving more than 50% of their value, directly or indirectly, from immovable property situated in the source state.

Directors' fees:

The source state may tax directors' fees and other similar payments derived by a member of the board of directors (or a board set up for a similar purpose) of a company or a trust where the source is determined by reference to the residence of this company or trust.

Elimination of double taxation:

Liechtenstein generally applies the exemption method with progression with a switch-over to the ordinary credit method for items of income referred to in article 14 ('Income from employment'), article 15 ('Directors' fees'), article16 ('Artistes and sportsmen') and article 17 ('Pensions'). Malta generally applies the ordinary credit method.

Entry into force:

The Treaty will enter into force on the date of the second country giving a notice that its internal ratification procedures have been completed. The Treaty will apply:

• In respect of taxes withheld at source, to income derived on or after 1 January of the calendar year next following the year in which the Treaty enters into force;
• In respect of other taxes on income and taxes on capital, to taxes chargeable for any taxable year (any calendar year or accounting period, as the case may be) beginning on or after 1 January of the calendar year next following the year in which the Treaty enters into force.